Major hull claims and ro-ro fires are on the rise again, warn Norway’s Cefor insurers
by James Brewer
With total and major merchant ship losses on the rise, the first half of 2015 brings the impact of these claims back to the expected level, Cefor (the Nordic Association of Marine Insurers) has reported in its latest analysis. By contrast, the partial claim cost per vessel has stayed stable since 2009, said the association.
Overall claims frequency continued a positive downward trend, but the exception was the frequency of fires on car/passenger/roll-on roll-off vessels, with eight new fires reported in the first half of 2015. Cefor had expressed concern about the numbers in this category of incident in its 2014 annual report. Now it is highlighting continuing worries at the halfway stage of 2015, with the eight fires comparing to a total of 10, 20 and 15 in the years 2012 to 2014.
Data from Cefor’s comprehensive Nordic Marine Insurance Statistics database are released twice a year, to reflect the latest hull claims trends.
The world’s marine insurers will be paying close attention to the trends when representatives gather for the annual meeting of the International Union of Marine Insurance, which in 2015 will be in Berlin, from September 13-16. Cefor provides vital input into IUMI statistics.
Cefor said that while the partial claim per vessel has been quite stable since 2009, in 2015 the number and cost of total and major losses increased. For the whole of 2014, only seven claims exceeding $10m were registered. For 2015, already by end of June a total of 10 claims above this level were reported (of which five were total losses). Among these, the most severe was a fire on a passenger/ro-ro type.
Of the market as a whole, Cefor said: “The average cost of fire/explosion claims has been high in recent years, even when taking into account the typical volatility of this type of claim.”
The absence of claims in excess of $30m in 2014 was within a statistical variation to be expected, said Cefor. The more surprising fact was that in 2014 the number of claims in excess of $10m and $5m was significantly lower than the 2009-2013 average.
The statisticians said: “2015 brings the frequency of such claims back to the level one would expect, given the risk exposure represented by increasing vessel sizes and values.
Based on the number of claims reported in the first half of 2015, the overall claims frequency is expected to continue its downward trend for the year as a whole.
There has been a substantial drop in the total loss frequency. For most types of claims, the frequency has shown a long-term positive trend, only interrupted by the peak in 2008.
The frequency of machinery and navigational-related losses in excess of $500, 000 is substantially down since 2008. “However, it may be treacherous to believe that we thus can identify a trend towards a reduced number of major claims. The risk exposure continues to be high due to the inflow of high-value vessels, ” said the authors of the half-yearly analysis. “In addition, the occurrence of major losses is often due to special circumstances rather than rationally identifiable causes alone.”
The inflow of high-value vessels to the portfolio continues. In recent years, major claims represented an increasing share of the total claims cost. In the first half year of 2015, losses exceeding $10m accounted for 41% of the total claims cost. With increasing exposure values, the underlying risk of expensive losses is not expected to decrease, said the report.
Cefor managing director Helle Hammer has warned that with more high-value vessels being insured, the market can expect to see expensive total losses and partial loss claims ahead.