IUMI president warns of challenges of insuring billion dollar ships

Insurers face huge challenges with the advent of what amounts to the billion dollar (in terms of risk exposures) cargoship, IUMI president Dieter Berg warned as he opened the organisation’s 2016 conference in Genoa.

Mr Berg spoke of the vogue for ultra-large container vessels: 43 are being built with more than 17,000 teu capacity, and 18 larger than 21,000 teu.

He reminded the 142nd annual meeting of the International Union of Marine Insurance that $800m worth of cargo could be on board a vessel of $200m hull value, added to which in the event of a serious casualty there could be substantial costs for removal of wreck, bringing the total at stake to far beyond $1bn.

He recalled the MOL Comfort casualty and the questions of stability raised,, going on to pose the question whether there was a limit where the ships were just unable to carry more because of structural problems.

Mr Berg said that there were 12 serious accidents involving car carriers in the last 15 years,  said to emanate from problems in loading cars correctly.

Porto Antico, Genoa.

Insurers had to be equally vigilant over potential accumulation of insured losses when, for instance, at the ports of Zeebrugge and Bremerhaven some 120,000 new cars were stored ready for export. There had been an increasing number of insured losses caused by hailstorms, driven by climate change. In another disturbing instance, melting snows and saltwater had corroded the electronics of 3,000 cars in Canada.

An explosion at Tianjin port, China, in August 2015 hit 68,000 cars, while superstorm Sandy in 2012 damaged 16,000 new cars and 3,000 trucks.

There had meanwhile been a tenfold increase in the number of wind farm installations: “they are going into deeper water and we will have to cope with it.”

Decomissioning of oil and gas platforms was a further area for close attention: in the North Sea 140 oilfields would be decomissioned over the next five years, and each operation would take four to five months.

Several giant cruiseships were berthed in the Italian city’s Porto Antico as Mr Berg delivered his address.

Mr Berg said that insurance pricing was getting “really complex,” and insurers were having to come up with underwriting solutions that “we are not able to expain to our clients.”

Portfolio profiling was vital for control against accumulation of losses, when the value of the goods was going up and the quantity was going down, as insurers “are faced with growing cargo exposures on fewer vessels. Basically it is about staying relevant for our clients. This is a key exercise going forward.”

The IUMI chief sounded an alert over the need to support the fight against maritime piracy. Off the east African coast, lobbying activities of IUMI and others had been successful in terms of attracting a deterrent naval presence, but the mandates of the European Union and Nato were due to run out at the end of 2016. With 20 naval ships involved, it had been a very expensive exercise, and other problems including Syria, Iraq and terrorism generally were calling for resources. Despite this, the importance of the piracy threat had to be emphasised.

In a subsequent session of the IUMI agenda, it was revealed that global marine premium fell 10.5% in 2015 to $29.9bn, although an element of the drop was the result of a stronger US dollar, with the German market disproportionately hit.

He referred to the technology changes being seen in mega-construction projects.  Are we able to understand these complex technologies our clients use for these projects?”