The Marine Insurer. Issue 13. April 2023

The Marine Insurer

MARKETS

Triple whammy hits marine world: Brexit; The Russian invasion of Ukraine; Coronavirus

l Rogue vessels: Ships going dark to break sanctions

l Engine failure: Risks of problems post-yard

l Cargo liquefaction : Mitigating the risk for vessels and crew

l Digitilisation: Ground work essential in finding the right solutions

l Hygiene: Keeping your vessel safe and healthy essential

Examining why a vessel’s engine

Cup half full?

I AM in general an optimist but that can be a hard thing to maintain, particularly if you are a marine insurer working in 2023.

Launched as a new entity on the P&I industry’s 20 February renewal date, with an enhanced rating from S&P Global

As our authors explain, the triple whammy of Brexit, the Ukraine war and Covid-19 has turned the world that we know upside down. Whether it be waves of sanctions, soaring inflation or supply chain challenges, the insurance markets have been hit from all sides. We also take a look at that bleak dark world of rule-breakers and the way that the industry is using technology to track vessels which have deliberately gone dark to avoid the sanctions ruled being applied to Russia.

However, as an optimist, I would like to think the green shoots of recovery may appear this year. There are small signs that the inflation rates are falling and also that the supply chain disruption is diminishing. Sadly, it seems we are also getting used to the new normal of a war in Europe and the sanctions environment that has erupted around it.

So, how do we look ahead with optimism? It seems that insurers are also recognising a wealth of emerging opportunities. The renewables space continues to be a hotbed of innovation – wind power is hardly new for the marine world but the latest applications are none the less intriguing.

There is also a concerted effort to improve casualty rates through prevention – and in this issue we take another look at liquefaction and how to prevent the problem occurring. We also take a look at engine failure, after a spell in a repair yard. This problem is all too frequent but can lead to long and costly disputes – another event best avoided wherever possible.

Technology overall continues to play its part in the evolution of the market but, as we hear, without the proper ground work it is never going to be the solution that truly delivers. Technology no doubt will be playing its part as two giants of the P&I world come together and start work as a new combined entity, promising some stability and resilience for their clients in the years ahead.

Finally, we hear the importance of keeping your vessel clean and safe – something that surely should be obvious but is clearly not. A simple message that insurers can share with their insureds and potentially prevent yet another claim.

In all, it seems there is plenty of good work going on….I think I can remain a cup half full type for now.

Enjoy the read

Liz Booth Editor, The Marine Insurer

Evolution: The time is now

With a four year lead up to the UK’s trading withdrawal from Europe it was reasonable to expect that the necessary preparations would have been made for the fundamental change in the UK/EEA relationship as of 23:00hrs on 31 January 2020. Regrettably it did not seem like they had. The UK government appeared to pay little (if any) heed to the financial services industry (of which insurance is a part, and London is a global centre) leaving it to fend for itself in an evolving environment which struggled to identify the operating parameters.

Everybody muddled through with various ad hoc measures to enable the flow of business both from and to Europe. The basics have become more established as both parties identify the boundaries and despite early confusion the framework has settled into place.

Some brokers have yet to create the bridge between Europe and the UK, and perhaps some will not bother and no longer participate, but the bulk of the market is fully able to transact.

Has it been a seamless transition? Absolutely not. Are we still trading with Europe? Yes, and we always will.

RUSSIAN AGRESSION

The strength of Russia’s action towards Ukraine in late February 2022 caught many by surprise. While aggression between the two countries has been ongoing since 2014, the crossing of the border and aerial engagement took matters on to an international stage.

The conflict that has ensued, and the reaction of the Western world and other countries sympathetic to Ukraine’s plight, has brought about sanctions. These have required careful policing since trade with Russia continues.

Much activity has ensued within the shipping world/markets. Methods to release trapped vessels were examined and corridors established through which the Ukrainian exports can occur, as well as allowing non-sanctioned cargoes to still be carried into certain Russian ports.

With the conflict ongoing the markets have settled into established patterns of cover for permitted maritime trades. Or so it seemed until the end of 2022 when the reinsurance market reacted with restrictions designed to reduce their aggregated exposure.

Turmoil resulted and many marine markets no longer

Covid-19, the Russian invasion of Ukraine and Brexit have all combined to force the pace of evolution at Lloyd’s. Patrick Jordan , Managing Director, Head of Marine, at Ed Broking says the market has adapted well but still has some big defining decisions to make

have the breadth of reinsurance cover they previously enjoyed. Smaller participating lines are now normal and, while cover can still be assembled, the feeling is that our market is no longer as deep as it previously was.

The London market’s USP has always been the size of capacity it can bring to complex risk. Even in the current form the capacity remains large. But if the trend of declining covered risks continues then how long will it be before the London capability mostly mirrors that of it’s US, European and Far East competitors? At which point will it still hold a primary position in the wider world?

PANDEMIC RAMIFICATIONS

The ramifications of the pandemic on an industry so focused upon face-to-face discussion were always going to be sorely felt.

The closure of the Room in Lloyd’s for long stretches tested broker and underwriter relationships. These have survived well, carrying the business with them.

There is great pleasure in once again being in front of someone and the cut and thrust of negotiation is absolutely the better for it. As is so often the case, the testing of

relationships has strengthened them. The common bond forged through maintaining the business under extreme circumstances has led to a greater appreciation of the personal touch.

Difficult conversations still occur and always will, but the joint experience of talking from remote locations has increased the goodwill between parties now that the camera is not the only means of visual contact. Long may that continue.

An essential part of the structure which got us through the office closures has been our systems.

Pre-existent trading platforms (PPL, Whitespace, ECF), communications (E-mail, WhatsApp, SMS) and the old-fashioned telephone have allowed us to prove to our clients’ satisfaction that the market is not quite as 19th century as it might have pretended to be.

Tales of quills being used to sign slips at the box in Lloyd’s will always bring a smile, but the truth is that the market has been digital in so many ways as everyone has moved forward at a rate of knots.

The very fact that the same problem confronted all parties at exactly the same time invested everybody in finding and quickly adopting the solution. Thus, what might have taken two or three decades of fractured steps between parties with differing agendas has actually occurred in two years and the market now has the most solid electronic base it has ever had.

HYBRID WORKING

With a return to the Room and face-to-face representation has come an intense discussion of what hybrid working should be. The cry of “Everybody Back!!” has gone up in

“If underwriting seats are adjusted to reflect modern use then what is to stop Lloyd’s offering brokers and other associated companies desk and workspace on floors two and three? If successful, then maybe the break clause would not need to apply and the thinking can extend beyond 2031 since this would reinforce the idea of Lloyd’s as the epicentre.’’

many quarters. Which prompts two particular questions: How and why?

Few companies have maintained their office space in a fashion which is untouched since 2019. Understandably, many cut back on space during lockdowns. There is no obvious prospect of more lockdowns and so views need to be taken on how to accommodate a workforce returning to the City.

If office and desk space have been shrunk by meaningful percentages then there is a need to increase both to provide the required workspace. Not all companies seem willing to engage with this and real estate savings achieved since 2020 are hard to let go from balance sheets.

Something has to give though. Either provide the desks or stop pushing the office agenda so loudly. Hot desking might look and sound like the answer but experience suggests that it really isn’t unless planned with military precision.

One obvious exception to this is, of course, the Room. Here there are desks in abundance (many of them noticeably still empty) and a lease signed through to at least 2026.

If underwriting seats are adjusted to reflect postpandemic use then what is to stop Lloyd’s offering brokers and other associated companies desk and workspace on floors two and three?

If successful, then maybe the thinking can extend to and beyond 2031 with Lloyd’s re-established as the epicentre. This would surely also be useful given the notable exodus to the company markets of late.

If the “How” can perhaps be answered, then the “Why” still remains.

Remote working has been an almost universal success. Unlike some other industries it is hard to bring to mind any core businesses within ours that have had to close their doors due to pandemic issues.

Most would admit to having seen productivity increase because employees are less constrained by commutes and less distracted by office environments. The laptop at home has somewhat re-defined traditional working hours.

Ultimately, the employer has benefitted. The employee has had wins also with greater balance between home and the office. As familiarity and trust in the systems has embedded, so have efficiencies. The understanding has thus grown that a desk in the Square Mile is no longer an essential requirement for work interaction and productivity.

DIVIDED OPINION

Is a wholehearted return to the City required? It appears to depend on who is asked.

The senior and junior groups tend towards “Yes”, with the middle (larger) group more in the “No” camp.

From the senior perspective this seems to predominantly represent the indoctrinated view that it was always done this way and always should be. The younger view appreciates the benefits of in-person contact and the ability to learn faster

that way, including by osmosis.

The middle group’s view is mainly born from the comfort of having already gained a better sense of their place in the industry and working with established relationships, along with certain family pressures which inevitably arrive at that stage of life.

Is it impossible to accommodate all? Surely not, but for that to succeed the decision-making must be vested across all the participants rather than laying squarely in one group. While a recent EY report showed good progress with female board representation it also confirmed that there were no board members under 40 in any of the UK’s top financial services firms.

And here we return to the title. As referred to in the comment on the speed of development of electronic platforms, the industry is confronting potentially rapid evolutionary changes.

Are we willing to fully address them? We stand in a moment which presents an opportunity to re-engineer some parts of how we do what we do. The decisions made in this time will affect the path towards the next 30 years. Who should make them?

“Remote working has been an almost universal success. Unlike some other industries it is hard to bring to mind any core businesses within ours that have had to close their doors due to pandemic issues.”

Patrick Jordan, Ed Broking

Conflict in Ukraine: Lessons for the marine insurance market

acknowledge the evolving risk landscape and note that what is required for the market’s ability to function successfully both today and in the future may be markedly different to what worked in the past.

More than a year into this tragic war, and after just one annual reinsurance renewal cycle, there are already lessons to be learnt in how we can improve as a (re)insurance marketplace to help future-proof our products so that they remain able to meet the challenges thrown up by any future conflicts.

Fourteen months since the start of Russia’s invasion of Ukraine, the effects on global supply chains have been felt across the world, from the industrialised west to Africa and other emerging markets.

With 90% of traded goods transported by sea, the marine insurance market has been impacted but has also assisted in global efforts to keeping trade moving.

While focusing on the wider repercussions of this war we must remember that the harshest effects by far are being felt by the people of Ukraine. As Olena Zelenska, Ukraine’s first lady, commented in a BBC interview six months into the fighting, while the UK’s population is “counting pennies” as energy costs soared, Ukraine is counting casualties.

The response of countries indirectly affected by war is a challenging balance for leaders who must weigh up humanitarian considerations with potential political and economic consequences abroad and at home. However, the importance of sustainable global financial markets, including (re)insurance, that can absorb the shock of war and provide the hope of economic viability in more peaceful days ahead, is a measure of a mature and well-functioning economic system.

COGS OF GLOBAL TRADE

The London insurance market is in many ways at the heart of the machine, with a responsibility to help keep the cogs of global trade moving by ensuring that coverage is available to protect assets when stakes are high and to be there to pay claims when losses occur.

For marine (re)insurers to continue doing this, we need to

The time to adopt better data and analytics is now. We all know the major role that data and digital tech will play in improving our understanding of risk, but as a market, whether that be as a (re)insurer, (re)insurance broker or customer, we need to knuckle down and harness it sooner rather than later.

Through the past decade there has been undoubted progress with many of the above parties and insurtechs developing technology in this sphere. However, as a market, have we moved fast enough in adopting data driven solutions?

The squeeze in (re)insurance capacity for exposures in the Black Sea and other areas because of the Ukraine conflict should be the wakeup call for the market to reinvigorate itself.

Further research, investment and adoption of data and technology so that underwriters can accurately track vessels and cargoes in real time would free up capacity in restricted areas and allow the market to better service its customers.

IMPROVED COMMUNICATION

There are obstacles to overcome, particularly to do with managing proprietary data, but none are insurmountable with good communication.

Insurers need better communication with customers. As the need grows, greater use of automated technology that enables (re)insurers to extract more data to help them model and price risk more accurately is unlikely to be too far into the future.

In the meantime, customers and their brokers that are prepared to work with underwriters to adopt new working practices to provide enhanced, and more timely information, ultimately will allow the market to provide better solutions for their particular needs.

John Owen , Head of Marine & Political Risks, AXIS, identifies some of the key lessons learnt from the ongoing conflict in Ukraine and what the (re)insurance market needs to focus on to help keep the cogs of trade moving

At all points in the (re)insurance value chain, the new working practices will need all parties to communicate their requirements and have the confidence to challenge and ask difficult questions.

This may become even more pressing if escalation of geo-political tensions elsewhere in the world leads to a contraction in (re)insurance supply in more areas than already face a shortage of available reinsurance. Insurers need to improve communication with their reinsurers. After a particularly challenging 1/1 renewal season many insurance carriers are now in a position from which they will have different outwards insurance coverage – and presumably different pricing – from their reinsurance panels, particularly for exposures in Russia, Ukraine and Belarus (RUB).

LEADERSHIP CHALLENGES

Indeed, the 2023 reinsurance renewals saw a new issue emerge in the marine world – the move away from the historic norm of reinsurers coalescing around one leader who sets the wording and pricing. This is obviously not ideal for primary insurers but perhaps it is a scenario that could have been predicted a few weeks or indeed months in advance of January 1.

The magnitude of the exposures and potential claims brought to light by the Ukraine conflict, in several specialty insurance lines and not just marine, mean that many reinsurance underwriters are having to adhere to board mandated edicts regarding current and future assumed

exposures and contract wordings.

While contract language on sanctions matters needs to be watertight, in previous years there has been latitude granted to reinsurers’ line underwriters to negotiate individual clauses. For 2023 that has seemingly been taken away from many for RUB clauses.

While in most cases there is negligible difference in coverage afforded by the wordings, inevitably in certain scenarios carriers may find a potential for discrepancies in coverage afforded by different reinsurers on the same panel.

Perhaps in more certain times ahead, we can hope for discrepancies in respect of RUB exposures to lessen. However, with sadly no prospect of an imminent end to conflict in Ukraine and given the rise of global geo-political tensions elsewhere, primary insurers are now acutely aware that when reinsurers’ boards issue underwriting edicts there is minimal room for their underwriters to negotiate wordings. Greater clarity in communication within the market will help all parties to continue to keep global trade flowing.

“More than a year into this tragic war, and after just one annual reinsurance renewal cycle there are already lessons to be learnt in how we can improve as a (re)insurance marketplace to help future-proof our products so that they remain able to meet the challenges thrown up by any future conflicts.’’

Maritime sanctions

Charles Cormack , Intelligence Analyst at Synmax, explains how Theia,

firm’s maritime domain awareness platform, is tackling sanctions breakers at sea

Synmax founded in 2021 by energy trader Bill Perkins and quantitative analyst Eric Anderson, has a vision to bring transparency and accountability to the energy and maritime industries by combining the objective proof afforded by satellite imagery with the scalability of machine learning and artificial intelligence (AI).

Currently in operation is the Synmax Energy product Hyperion, launched in May 2022, while Theia, a maritime domain intelligence product is due to go live in the first half of 2023.

To say that recent years have seen a redistribution in the balance of regional and global power would be an understatement.

A symptom and a driving factor is the reshuffling of oil flows between producers and consumers. States have been forced to shore up energy supplies and infrastructure in the face of market and geopolitical turbulence, with east and west using oil as an economic weapon to project power.

UNINTENDED CONSEQUENCES

Sanctions have been levied in response to political, economic and security concerns by the US and the European Union against Russia and Iran, among others, and the entities with which they do business.

An unintended consequence of sanctions is the large-scale expansion of shadow fleets of ‘grey’ (AIS switched off, some trackable signals such as radio frequencies transmitted) and ‘dark’ oil tankers (all emitted signals turned off, only trackable at scale via Theia).

Industry experts estimate the size of this shadow fleet at approximately 600 vessels, or roughly 10% of large tankers globally.

To carry out trade with pariah states such as Iran and Russia, these shadow vessels employ clandestine tactics to escape the vigilance of regulatory bodies.

By going dark and ‘spoofing’ their locations (illegally turning off and synthetically projecting their automatic identification system (AIS) locations, akin to using a VPN to mask an IP address), vessels have, until now, been able to carry out illicit oil pick-ups, transfers and drop-offs obscured by the vastness of the oceans and without overview or reprisal.

MILITARY-GRADE ANALYTICS

Theia, Synmax’s maritime domain awareness platform, however, sees through spoofing attempts by using proprietary machine learning and AI in conjunction with daily global satellite imagery and military-grade analytics.

By drawing on whole earth observation data, AIS and other signals intelligence, Theia can automatically identify and attribute any vessel over 30 meters regardless of its emission state and visually track its journey at scale.

On March 8 2023, Theia placed and tracked 22,000 vessels in the South China Sea alone, bringing unparalleled and otherwise unimaginable capacity to analysts and regulatory bodies.

In addition to live tracking, Theia can retrospectively view a vessel’s historical movements, ensuring that past infractions are exposed and can be used evidentially in a court of law.

China’s importance as an oil consumer in influencing global power dynamics cannot be overstated. Wherever oil sanctions have been imposed, and legal trade throttled back, China has swooped in to fill the gap, taking advantage of artificially low prices.

Iran is China’s third largest oil provider, after Russia and Saudi Arabia. In the three months leading up to January 2023, it is estimated that it increased its oil exports by more than 1.2 million barrels per day.

Since the imposition of the G-7 price cap on Russian oil following the invasion of Ukraine, Russian oil sells for at least $25 less than Brent crude (as of January 6 2023), with Iranian oil selling for even less.

Indeed, an economist at the Vienna Institute for International Economic Studies stated: “China benefits at least by 25% of Brent oil in terms of discount, which is enormous in the scale of 1.2 million barrels per day only for Iran’s oil.”

In doing so, China maintains an enormous economic advantage compared to countries that do abide by sanctions. However, they must pay a premium to vessels engaged in sanctions running, massively incentivising oil tankers to run the gauntlet of reprisals.

One vessel that was identified as breaking Iranian sanctions by Theia, at the request of a private client, was the BERG 1.

On August 27 2022 the vessel was observed via satellite imagery transiting north into the Persian Gulf, where she began to spoof her AIS data in an attempt to conceal her true position.

According to AIS data, the BERG 1 stayed in a 20m x 20m box at Lat: 29.3166, Lon: 49.6000 from approximately 27th August 2022, 21:45 UTC until 29th August 2022, 06:38 UTC (see Fig 1). However, an inspection of satellite imagery reveals

the

by

this to be a fabrication (see Fig 2).

The BERG 1’s true location was observed via satellite imagery at the Kharg Island Oil Terminal in Iranian waters approximately 67.5km east of its transmitted location on both August 28 at 06:23 UTC and August 29 at 06:20 UTC (see Fig 3).

On August 29, at 06:57 UTC, BERG 1 was seen transiting south from Kharg Island Oil Terminal, where it resumed transmitting its true AIS location at approximately 10:47 UTC. At 11:58 UTC the vessel’s draught increased from 11m to 20.5m, leading to the assessment that oil product had been onboarded during its time alongside Kharg Island.

On leaving Kharg Island, BERG 1 transited to the Eastern Outer Port Limits (EOPL). She remained at the

EOPL anchorage point from September 15 until October 31 2022, when she began her voyage to Qingdao Oil Port, China (see Fig 4). She arrived on November 20, where she is assessed to have offloaded product, with her draught decreasing from 20m to 16m.

US AWARENESS

The US is aware of increased levels of trade in oil between Iran and China. US Secretary of State Blinken stated in March that the US is: “Committed to significantly reducing Iranian energy exports and will sanction those facilitating Iran’s petroleum and petrochemical trade.”

To that end, US Special Envoy for Iran Robert Malley reported that the US has “been in contact with Chinese authorities, and we will continue to sanction those who are involved in the import of Iranian oil.”

By identifying sanctions breaches using objective, evidential data capable of being used in a court of law with no possibility of bias or manipulation, vessel operators can be financially penalized and illicit behaviour disincentivised.

Theia is not only a new tool in the arsenal of regulatory bodies, but can also be employed by insurers and other industry bodies as part of their proper due diligence, ensuring they are not inadvertently implicated and penalized as a result of sanctions breaches.

20m box.

Fig 4: On leaving Kharg Island, Iran, BERG 1 transited, after a short stop-over, to Qingdao Oil Port, China, arriving on 20th Nov 2022. Imagery provided by Planet Labs.

Fig 2: However, as is made clear by satellite imagery of the area at the time, BERG 1 is nowhere to be found. Imagery provided by Planet Labs.

Fig 3: BERG 1 located at Kharg Island Oil Terminal approximately 67.5km east of its transmitted location. Imagery provided by Planet Labs.

The problem of ‘going dark’

Marine of global broker Lockton explain

Recent press reports have suggested that vessels may be switching off the automated tracking system (AIS) to disguise the vessel’s location to cover up illegal fishing activity or to breach sanctions. Such actions present a safety risk for the marine sector.

The AIS displays other vessels in the vicinity with information on identity, type, position, speed, navigational status and other safety-related information.

It also enables the exchange of data with shore-based facilities as coast stations can use the AIS channels to send information on tides, notice to mariners (NTMs) and local weather conditions.

THE IMO RULES

Regulation on the use of AIS is very clear. The IMO Convention for the Safety Of Life At Sea (SOLAS)

Regulation V/19 requires all vessels of 300 gross tonnage (GT) and upwards engaged on international voyages (500 GT for cargo ships not engaged on international voyages) and all passenger ships, irrespective of size, to carry AIS

onboard.

Furthermore, the IMO Resolution A.1106(29) adopted on 2 December 2015 states that AIS should always be in operation when ships are underway or at anchor except where international agreements, rules or standards provide for the protection of navigational information.

This means that the AIS may be switched off if the master believes that the continual operation of AIS might compromise the safety or security of their ship or where security incidents are imminent.

However, there are very few legitimate reasons for an AIS signal to ‘go dark’ —protection against piracy in notorious areas being one of them — and the master should restart the AIS as soon as the source of danger has disappeared.

Actions of this nature should always be recorded in the ship’s logbook together with the reason for doing so, as well as passed on to the competent authority unless this could compromise the ship’s safety or security.

Deliberately turning off the transmitter signal without legitimate reason represents a breach of SOLAS and puts the ship in breach of flag state regulations.

The automatic identification system (AIS) is a tried and tested tool to reduce the risk of collisions. The insurance market should make it clear that its use, as mandated by the International Maritime Organization (IMO), is a pre-condition for cover and challenge clients that switch it off without valid reason or manipulate the data.

Stephen Hawke, (top left) Managing DirectorLondon, Lockton PL Ferrari and Tom Midttun, (left)Head of Production - Lockton

AIS IN INSURANCE POLICIES

The current Nordic Plan’s position is that AIS is a safety precaution and therefore a seperate usage warranty is a requirement of cover.

As a result, a separate warranty is not deemed required. However, insurers must prove that illegal activity was occurring at the time of an event to refuse a claim.

Inference of illegal activity from AIS usage remains untested in the courts. Unless criminality is proven, the cover remains in place for any claim where there is no causality between switching off the AIS and the claim.

Arguably, a UK style warranty mandating AIS usage would be more effective. But this would still not address the wider issue of potentially providing coverage for criminal actors, rather than specific incidents of criminality, where of course, if proved, an insurance policy would not respond. Commercial expulsions from shipping registrations would facilitate broker and insurer client due diligence in this respect.

BREACHING THE RULES

The International Group of P&I Clubs has not only warned

about the practice of turning off the AIS signal to breach sanctions but also about the ability to manipulate the AIS data.

While AIS transponders have built-in security features to prevent them from transmitting falsified data, these can sometimes be circumvented for example to breach sanctions. Furthermore, a user can purchase multiple AIS transponders, creating more than one digital AIS identity for a single vessel.

Switching the AIS off or tampering with the AIS system impacts the safety of the maritime world. To end issues of illegal fishing and sanction breaches it may be necessary for the insurance industry to view switching off the AIS system itself as an illegal act, thus denying cover regardless of any loss causation unless the insured can offer a valid reason.

Ships that need to switch off the AIS system temporarily for legitimate safety and/or security concerns should be obliged to notify insurers as soon as practically possible with the justification thereof.

Tampering with the AIS system is not acceptable under any circumstances. AIS data is used for a variety of other purposes beyond sanctions and territorial compliance orders, such as the calculation of CO2 emissions.

In addition to promoting the safety of the sector, AIS also helps create the operational transparency that is so critical to maintaining trust and support in the sector.

“While AIS transponders have built-in security features to prevent them from transmitting falsified data, these can sometimes be circumvented for example to breach sanctions. Furthermore, a user can purchase multiple AIS transponders, creating more than one digital AIS identity for a single vessel.’’

Navigating choppy waters

The average cost of a hull claim between 2010 and 2020 didn’t change a great deal. In 2020, however, it increased by 10% — the same again in 2022. The main reasons given for the inflation were:

> The rising cost of raw materials. Steel has risen sharply in cost, which had a huge impact on the price of structural repairs;

> Covid-19. The pandemic restricted movement of ships and seafarers. That, together with quarantine and closures, resulted in heightened costs;

> The closure of China. China was always the most cost-effective place to go for repairs. Its closure meant repairs had to be done in other, more expensive, regions; and,

> Cuts in manpower. Shipowners’ efforts to reduce costs led to them cutting down on manpower. Lack of competent crew led to more accidents and more severe damage of vessels.

Due to these issues and the continued conflict in Ukraine, the prediction for 2023 is a further 15% in claims inflation.

While claims frequency has reduced, the costs of like-for-like claims are likely to have increased by 40% compared to 2020.

WAR AND CONFISCATIONS

The Ukraine war has likely changed the market permanently. Notably, the confiscation of aircraft, while foreseeable as a risk, very much caught the market by surprise and has led to significant losses.

This led the market to look for other assets that could also be confiscated such as vessels. The reinsurance market has reacted by increasing rates, reducing (or in some cases removing) cover and demanding visibility of risks written directly and via facilities.

From a cargo perspective, Chris McGill from Ascot Group recently highlighted a collaboration with Marsh, to provide cover for grain shipments out of Ukraine. This was contemplated by the market anticipating that a safe corridor would likely open. As soon as this was the case Marsh and Ascot were able to react and offer an insurance product in a few short weeks. While this was entirely retained in the insurers in the early days, this has now become a more

It would be no overstatement to say that the current conditions facing the marine insurance industry are unprecedented. The sea of issues is contributing to feelings of insecurity and unpredictability. Russia shows no signs of relenting in its war against Ukraine, and increasing tensions in Southeast Asia are causing nervousness throughout the industry. Add to that declining freight rates, low cargo volumes and slower vessel turnarounds, and the outlook does seem somewhat bleak. Here, Andrew Yeoman , CEO of Concirrus, looks at the current issues concerning the market and how rapidly evolving digitised solutions can help organisations best manage them

widespread product.

This proactive and swift action belied the media’s prediction that the insurance industry would be the last to respond, potentially scuppering any benefits of the deal.

INCREASED VISIBILITY

Lack of transparency of exposures remains a sticking point across the industry, and some in the profession believe that more pressure should be put on the customers and the wider market to share their data.

Digitalisation is seen as the answer to improving the transparency issue.

Recent 1/1 reinsurance renewals have irrevocably changed the market in terms of visibility with reinsurers now demanding to know the risks associated with vessels.

It is difficult to look back and understand why we could not do that before. However, the switch has now flipped and it [1/1] will certainly change some of the facilities and how they operate.

As technology marches on, the challenge is for insurance products to keep up. Data is going to drive visibility, which will force innovation in the insurance/reinsurance product to speed up.

ESG - DATA DRIVING VISIBILITY

Many would say that signing up to the Poseidon Principles was a leap into the unknown, however, the framework is a good foundation on which to build an environment, social and governance (ESG) strategy.

The greatest challenge the industry is seeing when it comes to collating data on CO2 emissions and vessel locations, is the time it takes to gather it directly from shipowners – certainly an exercise in customers’ willingness to cooperate.

Another hurdle was the efficiency in dealing with the data and what to do with it once gathered.

Questions have been raised over the extent of regulations the insurance industry may face when it came to the carbon output of their portfolio and whether tricky decisions would have to be made on profit versus principles.

Motivations for signatories included accepting that change was inevitable. This was a good place to start and then onto a stage where measurements could ultimately help customers reduce their carbon to secure more favourable benefits and pricing.

IMPROVEMENTS IN INSIGHT

Better insights through digitalisation are the only way that the marine insurance market will achieve its goals of maximising visibility, vastly improving risk assessment capabilities and meeting ESG requirements.

Investments in digitised products are leading to vast improvements in the volume of meaningful data, outcomes and visibility not to mention the reliability of predictions and analyses.

Spending time lamenting the negatives facing our industry will do nothing to help us counteract the challenges we face nor ensure we are in a place to meet the future head-on. Instead, we must look at digital progressions and how they will help put our market in a stronger position. Technology must be at the beating heart of the future if this industry is to flourish.

“The greatest challenge the industry is seeing when it comes to collating data on CO2 emissions and vessel locations, is the time it takes to gather it directly from shipowners – certainly an exercise in customers’ willingness to cooperate.’’

Andrew Yeoman, Concirrus

The Ukraine war (inset) has likely changed the market permanently. Notably, the confiscation of aircraft. This led the market to look for other assets that could also be confiscated such as the cargo ship above in the Port of Odessa.

The customer remains King

Ronny Reppe , CEO of Noria,

Many leaders in the insurance space know that they need their organisation to be more customer-centric, but are failing to undertake the operational groundwork required to make it a success as the customer journey becomes increasingly digital.

Attempting to create a traditional customer-centric culture or mindset is important, but these efforts will be a lot less effective unless you also deliver a customer-centric digital experience. Without the right digital foundation in place, your customer-centricity initiatives will ultimately be ineffectual and provide little added value.

Before we explore how to create a customer-centric architecture, let’s review the meaning and benefits of traditional customer-centricity in insurance.

TRADITIONAL CUSTOMER-CENTRICITY

A customer-centric approach will improve customer loyalty because customers will feel that their insurer truly understands their needs. In turn, this leads to improved customer satisfaction and increased revenue through positive referrals and repeat business.

The satisfaction goes both ways – employees who feel they are making a positive difference for customers will feel more engaged, motivated and invested in their work.

Here’s what the research has found:

> 66% of customers expect companies to understand their needs (Salesforce);

> Customers will spend an average of 10% more for a good experience (Forbes); and,

> Customer-centric companies are 60% more profitable than companies that are not (Brightlocal).

Done well, customer-centricity can become your organisation’s competitive advantage and enable you to stand out in a crowded marketplace.

A sharp focus on the needs of customers can also help insurers identify new opportunities for innovation, leading to new revenue streams and continued growth.

explains how insurers could and should pursue and achieve true digital customer-centricity to the benefit of all

WHAT DOES CUSTOMER-CENTRICITY LIKE IN INSURANCE?

Customer-centricity in insurance involves a focus on meeting the needs and expectations of policyholders and providing excellent customer service. Here are some specific examples of what traditional customer-centricity looks like in insurance:

> Understanding customer needs: Insurers need to have a deep understanding of their customers’ needs, pain points, and risk profiles. They collect feedback and use data analytics to identify trends and offer tailored insurance solutions that meet each customer’s unique requirements.

> Making insurance easy to understand and purchase: Customers should be able to manage their policies and make claims quickly and easily.

> Offering customised solutions: Recognising that every customer has unique needs and providing tailored insurance solutions that meet their specific requirements.

> Providing exceptional customer service: Providing a personalised, responsive service and being available to answer customers’ questions and concerns promptly.

> Being transparent: Transparency is critical to building trust with customers. Insurers should be transparent about their policies, pricing and claims processes.

> Offering value-added services: Insurers can differentiate themselves by offering additional valueadded services beyond traditional insurance coverage such as offering risk-management advice or providing educational resources.

DIGITAL CUSTOMER CENTRICITY

But as the customer journey moves to the digital realm at an accelerating pace, insurers that lack the data and tools required to drive digital customer-centricity will struggle to provide the services listed above beyond the most basic level.

In other words, claiming to have a “customer-centric culture” without the right architecture in place is nothing more than an empty promise. Does your organisation:

> Provide customers with the option to use self-service portals with excellent UX?

> Have a 360-degree view of the customer to provide great service and value-add?

> Leverage the power of a cutting-edge solutions back-office?

If not, it is clear that your customer-centric approach must evolve to meet the needs of the digital customer journey. But where should insurers begin? With the data.

CUSTOMER-CENTRIC DATA MODELLING

Without having your structured data in a single source, it is impossible to undertake a 360-degree analysis of each

“There’s an unfortunate mindset among some insurers that make it complex for customers to contact the helpdesk, often making it very difficult to even find a phone number. For me, that’s digitisation gone wrong. You need to be immediately available to solve any customer need manually if their digital experience fails to deliver.’’

customer. Larger insurers often have customer data spread across several different core systems (administrative systems, spreadsheets, emails) and have a significant task ahead of them to remove siloes and unify this data into a single view.

The single data source should not only involve your own customer data, but, incorporate external data from various sources that can be matched up with your internal data on the customer.

Having a unified data source enables you to equip your solutions back office with the tools they need to take customer-centricity to the next level.

Most of us have experienced the frustration involved in calling a helpdesk and having to spend half an hour explaining who we are, what we’re trying to do and the challenge we’re facing.

A customer-centric data model will provide the visibility needed to remove this step. For example, if the policy-holder was filling out an online form and became stuck at a certain point, the helpdesk should have the visibility to see this straight away and provide a solution without the need for any lengthy explanation.

Imagine that a policyholder calls your helpdesk. Is your employee able to:

> Access a single view of the customer without having to dig into several data sources?;

> See a summary of all the different conversations held with the customer?;

> See all the solutions offered to the customer in the past?;

> See all the historic and current insurance products they have with you?;

> See historic claims, transactions, documentation and email history?;

> Access customer-specific analytics/insights?; and,

> Understand the customer’s challenge without the need for lengthy explanation?

At Noria, we have created that 360-degree view. Our customer-centric platform enables insurers to proactively leverage their collected customer data and lessens their dependency on external resources to prepare and hand over data when they need it fast.

SELF-SERVICE AND CUSTOMERCENTRICITY: MUTUALLY EXCLUSIVE?

One of the misconceptions about customer-centricity is that it requires a high-touchpoint approach with bigger helpdesks and more time on the phone with customers.

This can be difficult to reconcile with the accelerating trend towards digitisation and the key part that self-service plays in the digital customer journey.

How can we provide customer-centricity if we are leaving the customer to help themselves?

The answer is to balance the digital customer journey

with being available to provide personalised, expert help when needed. There’s an unfortunate mindset among some insurers that make it complex for customers to contact the helpdesk, often making it very difficult to even find a phone number. For me, that’s digitisation gone wrong. You need to be immediately available to solve any customer need manually if their digital experience fails to deliver.

Providing a seamless digital customer journey and a self-service approach frees up more time for your team to talk with and assist customers. Having the right architecture in place means they will also have the tools to help them efficiently and effectively while providing highly personalised service. If you can get it right, “customer centricity by design” is where the magic happens in balanced digitisation.

“Attempting to create a traditional customer-centric culture or mindset is important, but these efforts will be a lot less effective unless you also deliver a customer-centric digital experience.

Without the right digital foundation in place, your customer-centricity initiatives will ultimately be ineffectual and provide little added value.”

Ronnie Reppe, Noria

Opportunities and new risks

Gard was founded in 1907 by shipowners who were unwilling to expose themselves, through a mutual insurance arrangement, to the perceived new risks of steam propulsion. Now the wheel is turning full circle and increasingly shipowners are looking to retrofit or buy newbuilds incorporating wind propulsion technology. But what risks might that new equipment pose and how will marine insurers react to them?

Shipowners are operating under a host of regulations and market pressures to reduce CO2 emissions. There is the IMO target of a 50% reduction in total CO2 emissions by 2050 as compared to 2008, that may be amended to net zero at the forthcoming MEPC 80.

On 1 January 2023, the Carbon Intensity Indicator came into force. It will rank vessels from A-E, based on the carbon intensity of their operations. Negotiations at IMO-level to introduce a carbon-based fuel levy are progressing.

It is likely that from 1 January 2024 vessels calling in Europe will need to purchase carbon credits under the EU Emissions Trading Scheme (ETS). More generally, there is increasing pressure from companies to reduce their Scope 3 emissions, including those from transportation.

Aside from the promise of alternative fuels in the future, there are a range of efficiency measures that can be implemented right now. These include rerating of engines, air lubrication, more frequent hull cleaning, fitting redesigned propellers and wind propulsion.

Neil Henderson, (left) Industry Liaison, and Paul Grehan , (right) Senior Underwriter, Gard (UK) review the

huge potential offered by wind propulsion for the shipping sector and challenges faced by marine insurers as they support the sector in the transition

Kite sails involve tethering a large kite to the bow of a vessel, similar in design to those used by kiteboarders. Pic: SkySails

It is only wind propulsion that offers an entirely new and carbon-free form of propulsion once installed on the vessel. In their Maritime Decarbonisation Strategy 2022, the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping identified that wind propulsion is a key part of the decarbonisation of the global fleet, with a potential overall ‘efficiency gain’ of 1%-8% per ship.

These efficiency gains mean significant reductions in operating costs, as well as an improved carbon footprint. It is no wonder therefore that shipowners are looking at these options seriously.

There are three principal types of wind propulsion technology: the Flettner rotor, the kite sail and the vertical deck-mounted sail, of which the wing sail is probably the most well-known.

THE TECHNOLOGY

The Flettner rotor is a large cylinder mounted vertically and mechanically rotated around its axis, creating thrust through the so-called Magnus Effect. The technology was invented in the 1920s but has had limited use since then. More recently interest has revived.

An example is the bulk carrier Afros (2018-built, 64,000 dwt), delivered as a newbuild with four moveable rotors fitted by Anemoi Marine Technologies. These showed a 12.5% fuel savings on a return voyage between Nantong and Vancouver. Rotors fitted by Norsepower to a variety of different ship types, have shown fuel consumption savings of 5%-20%.

Kite sails involve tethering a large kite to the bow of a vessel, similar in design to those used by kiteboarders. An early prototype was the MS Onego Duesto (2007-built, 9,831 dwt), equipped with a 160m2 kite. It showed an average fuel saving of 5%, increasing to 10%-12% on North Atlantic and North Pacific routes.

This year, testing of a 500m2 kite began on the Airbus chartered, Louis Dreyfus Armateurs operated RORO vessel Ville de Bordeaux (2004-built, 5,200 dwt) on its monthly transatlantic route.

Wing sails are solid aeroplane-like wings, mounted vertically and trimmed depending on the wind direction. High oil prices in the early 1980s sparked interest in this technology but never adopted beyond prototypes. It is now being actively developed.

One such company is BAR Technologies, a UK-based spin-out of the British Americas Cup Team run by Ben Ainslie. The company and Yara Marine Technologies are working with MC Shipping and their charterer, Cargill, and with Berge Bulk to instal wing sails on their respective bulk carriers, the Pyxis Ocean (2017-built, 80,962 dwt) and the Berge Olympus (2018-built, 210,000 dwt). BAR Technologies anticipates a daily fuel saving of approximately 1.5 mt per wing sail.

Although the equipment has a high degree of automation, alongside the physical fitting of the new equipment the master and crew will require additional training on the navigational software to optimise efficient sailing, as well as on the safe operation of the systems installed.

INSURANCE PERSPECTIVE

What does this new technology mean from a marine insurer’s perspective?

For H&M insurance, the installed equipment will be considered part of the vessel’s equipment. H&M and loss of hire insurers will be concerned with the loss or damage of equipment, and consequential damage to other parts of the vessel.

The specialist nature of the repairs and the scarcity of spare parts will likely lead to higher value claims and longer repair periods.

There are currently 23 large commercial vessels fitted with wind propulsion equipment.

To mitigate against extended periods of repair, shipowners may look to take out extended loss of hire insurance, as they did with early exhaust gas cleaning systems. Likewise, shipowners may consider cyber insurance for the risks associated with the software-dependent operation of the equipment.

From a P&I perspective, the equipment may affect the risk of collision with other vessels and port infrastructure, or injury to crew during its operation.

Ordinarily, insurers rely heavily on classification societies and flag state inspection regimes to assess the risks associated with the build quality and the standard of maintenance of vessels they cover, only surveying only a sample of vessels.

Mandatory class approval is only required for the fastening of wind propulsion equipment to the vessel’s hull, but the assured can request voluntary class approval for the equipment itself.

There is already some general guidance, such as Bureau Veritas’s NR206 Wind Propulsion Systems notation. The more widespread deployment of Flettner rotors means there is specialist guidance; for example, Lloyd’s Register has specific Guidance Notes for Flettner Rotor Approval (2015).

But real-world experience of fitting wind propulsion equipment to large merchant vessels is still limited.

Until more operational experience and claims data becomes available and class societies have developed more detailed requirements and guidelines, marine insurers will need to be more hands-on in assessing the risks.

This will mean engaging with manufacturers of the equipment at the design and testing stages and assessing the training received by crews in the operation of the equipment and how to respond if problems occur.

While marine insurers may be cautious about embracing these new risks, the reality facing shipping is that wind offers an inexhaustible carbon-free means of propulsion. It is inevitable that shipowners will increasingly adopt this technology to reduce their carbon emissions and they will need the support of their insurers in their transition to a decarbonised future.

“The Flettner rotor is a large cylinder mounted vertically and mechanically rotated around its axis, creating thrust through the so-called Magnus Effect. The technology was invented in the 1920s but has had limited use since then. More recently interest has revived. An example is the bulk carrier Afros (2018built, (above) 64,000 dwt), delivered as a newbuild with four moveable rotors fitted by Anemoi Marine Technologies.”

Cargo Liquefaction – Mitigating the risk

Jessica Ng, specialist in cargo liquefaction at global forensic investigation company Hawkins, Hong Kong office, explains how to prevent and mitigate the risk of cargo liquefaction

Cargo liquefaction takes place when a dry bulk cargo with high moisture content loses its strength and transforms from a solid dry state to an almost fluid state. As the cargo starts to behave like a liquid when the ship is moving, it can shift rapidly in the hold of a ship, making the ship unstable (Fig 1) and causing it to capsize resulting not only

in the potential loss of a vessel but also the loss of life. Cargo can be exposed to agitation through loading from a height, during a voyage because the vessel encounters rough seas, or merely because of vessel vibrations resulting in compaction of the cargo, which in turn, can lead to liquefaction. Commonly known cargoes that pose this type of hazard are iron ore fines and mineral concentrates.

Main image and (inset) shows liquefaction has occurred.

Source; https://www.amsa.gov.au/vessels-operators/cargoes-and-dangerous-goods/dynamic-separation-cargoes

GOVERNING LEGISLATION

A ‘Group A’ cargo is one which may liquefy if shipped at a moisture content (MC) more than its transportable moisture limit (TML) and mitigation measures are required to reduce the risk of liquefaction. The International Maritime Solid Build Cargoes provides information and instructions that should be followed to help facilitate the safe stowage and transport of these Group A cargoes.

The IMSBC Code is mandatory and provides specific guidance on how cargo should be stored, loaded and transported. Key requirements include:

> The shipper shall provide the master with a signed certificate of the TML, and a signed certificate or declaration of the MC, each issued by an entity recognised by the competent authority of the port of loading;

> The certificate of TML shall contain, or be accompanied by, the result of the test for determining the TML; and,

> The Code requires that the time between testing for the MC and loading shall be no more than seven days.

The testing date and raw data to evidence the tests should also be disclosed, as, without this, it is not possible to determine the accuracy of the results and whether the requirements of the IMSBC Code have been complied with.

THE CAN-TEST

The Can-test is a supplementary ad-hoc test that can be conducted on board or at the dockside to help determine if a cargo might be unsafe or if the cargo might “flow”. The test is to put some cargo in a can, bang it on the ground or on the side of the can and then check to see if the contents start to flow. To assist the crew/surveyor in determining the above, it is prudent that the Can-test is conducted on samples regularly.

Masters should be familiar with the Can-test and whilst a simple process, the IMSBC Code provides instruction on how to conduct this correctly for accurate results.

RISK MITIGATION

The most effective way to reduce the risk posed by Group A cargoes is to follow the Code accordingly. Owners should also take the initiative to request additional information from Shippers to ensure that they are fully aware of the condition of the cargo when it is loaded on to the ship.

Sampling/testing

According to the IMSBC Code, the test to determine the TML of the cargo should be conducted within six months prior to the date of loading and the test to determine the MC should be carried out no more than seven days prior to the date of loading. To ensure that the TML and MC values are reliable it is crucial that representative samples are taken from the stockpiles where the cargo is being stored and that the sampling/tests are carried out by an

“As the cargo starts to behave like a liquid when the ship is moving, it can shift rapidly in the hold of a ship, making the ship unstable (Fig 1) and causing it to capsize resulting not only in the potential loss of a vessel but also the loss of life.’’

Jessica Ng, Hawkins

Fig 1: Liquefaction impact on a vessel

accredited third-party laboratory.

The certificates issued by the laboratory should provide details of:

> when and how the samples were taken (including any internal sampling report);

> details of when and how the TML test was undertaken;

> details of when and how the MC was determined;

> raw data supporting the results.

Weather logs for the anchorage/stockpile/mine and loading port should also be provided for the seven days prior

to loading and if precipitation or rain was noted during this period, then the cargo should be re-sampled and tested prior to loading. Owners should also request that shippers have provisions to protect the cargo from rain during loading and ensure that the barges carrying the cargo have proper water-draining facilities.

Loading cargo

Owners should appoint a reputable and competent surveyor to oversee the loading process and an expert to supervise and provide technical support to the surveyor throughout loading.

Prior to loading, the Code requires that the bilge wells are clean, dry, and covered as appropriate, to prevent ingress of the cargo. The bilge system should be tested to ensure that it is working, and the crew should also sound the bilges during loading for evidence of water draining. During loading, the surveyor should perform regular Can-tests of the cargo. The surveyor should describe in detail how the tests are being undertaken and take videos of the tests to ensure that they are being conducted according to the Code.

The surveyor should also take high-resolution photographs of the sample before and after conducting the test to allow comparison of the results. If loading takes place through the night, the surveyor should also designate a crew member to assist as Can-tests need to be conducted periodically.

Warning signs are:

> A Can-test showing a pancake appearance with a glossy surface or free water;

“Cargo can be exposed to agitation through loading from a height, during a voyage because the vessel encounters rough seas, or merely because of vessel vibrations resulting in compaction of the cargo, which in turn, can lead to liquefaction.”

Fig 2: Cargo must be adequately protected from the elements prior to loading

> Following the Can-tests, the cargo clumps together instead of crumbling apart; and,

> The cargo can be moulded by hand like a modelling clay and retains a compressed shape. (Fig 3)

The surveyor should look for signs of splattering during loading, and instances where the cargo sticks to the grab’s jaws (if loading uses a grab).

Special attention should be given if the grabs are lowered to the bottom of the hold before the jaws are opened as this is a common practice when loading wet cargo.

The surveyor should note down all instances of cargo wetting by rain and ensure that no loading takes place when it rains. The cargo on the barge or in the stockpile should be covered with tarpaulins and the crew should close the hatch covers during rain and beforehand if sufficient weather data is available to indicate the likely onset of rain.

If the cargo has been exposed to rain, it is prudent that further laboratory tests rather than Can-tests are conducted to ensure that the MC is still below the TML. Until a new MC (from an accredited laboratory) has been provided by shippers, the master should ensure that no loading operations take place. Owners should also ensure that shippers provide a new MC certificate if the testing date on the certificate initially provided has exceeded seven days.

The voyage

Following loading, the cargo should be trimmed to reduce the likelihood of the cargo shifting.

The Code also requires that the appearance of the surface of the cargo is checked regularly during the voyage. As such, it is highly recommended that the crew conducts daily voyage inspections of the cargo (weather permitting), takes photos of the cargo, and keep records of the cargo condition.

The crew should also take daily cargo hold bilge records and ensure that water is drained from the hold if the bilge wells become full.

To protect owners from any cargo shortage claims which may be presented by receivers, it is recommended that a record is made of the amount of water pumped from the bilges during the voyage.

If the cargo appears to liquefy during the voyage, then the master should inform owners immediately and then either the master or owner should take the following steps:

> contact the nearest coastal state authority;

> contact their P&I Club; and,

> consider calling at the nearest port or place of refuge.

In the meantime, the master should also consider reducing the ship’s motion/vibration.

Cargo liquefaction continues to be a major concern for the shipping industry. However, the risk can be minimised greatly if attention is paid to the guidance of the Code and appropriate action is taken prior to and during the loading of Grade A cargoes.

HELP AT HAND

At Hawkins, we can provide advice on suitable sampling methods and appropriate laboratory conduct, both of which will assist in determining whether the cargo is safe for loading.

We can attend onboard vessels to witness the sampling and at laboratories to witness the testing of the samples. If attendance is not possible (for example due to Covid-19 and its associated travel restrictions), we can also liaise with local surveyors and help supervise the whole loading process remotely to ensure that Can-tests are performed regularly and accurately.

“The most effective way to reduce the risk posed by Group A cargoes is to follow the Code accordingly. Owners should also take the initiative to request additional information from shippers to ensure that they are fully aware of the condition of the cargo when it is loaded on to the ship.”

Fig 3: An example of a Can-test showing cargo which has retained a compressed shape

Calmer waters ahead?

Shipping companies, their customers, insurance brokers and insurers are hoping for calmer waters in 2023 after several years of high seas. Neil Atkinson , Head of Marine, UK Company, CNA Hardy, looks at the key challenges in the marine sector and outlines how the industry is collectively responding

In recent months an unprecedented combination of events has made global trade harder, with the war in Ukraine, soaring inflation and the Omicron variant of Covid which have led to supply chain disruption. This in turn has led to an increase in delays and risk of deterioration of sensitive cargoes, further compounded by an increased fire hazard on board vessels.

This year some pressure points appear to be easing, though there is no end to geopolitical and economic turmoil in sight.

For insureds and their brokers, the good news is that new capacity in the $18.9bn global premium cargo market has kept rates in check, for the moment.

However, the fly in the ointment is reinsurance, with global reinsurance capital falling by 17% or $115bn in 2023 according to Aon. Many risk players are pulling capacity altogether or hardening their stance with exclusions and tougher conditions. Insurers are likely to be left with higher retentions and additional costs to bear.

Physical capacity for cargo is a different story. For almost

three years, securing slots on container ships has been challenging and expensive, with breakbulk expanding in response. The latter is a riskier method of transport and comes against a backdrop of rising damaged-goods claims. Will the container capacity squeeze continue? Moody’s in October predicted that container supply would exceed demand as it downgraded its shipping sector forecast to negative.

However, Reuters recently suggested that freight rates will not normalise for months, even though spot rates as of early January were down 80% from a September peak above $20,000 for a 40-foot container. Rates continue to be above pre-pandemic levels boosted by higher labour costs and continued Covid in China .

New ship orders, including from Mediterranean Shipping and A.P. Moller-Maersk, will help. However, if demand falls shipping companies will adjust capacity accordingly.

UKRAINE AND SUPPLY CHAIN

The Ukraine war has trounced the pandemic as the major global trade disrupter, triggering port closures, stranded vessels and, most notably, surging commodity prices. Many manufacturers, meanwhile, have been forced to find new suppliers in a hurry or to stockpile goods, both of which have insurance ramifications.

Brokers have been monitoring the supply chain disruption closely. Distribution upsets - what AJG last spring called a “chain of chaos” - have highlighted shortcomings of standard 15-day duration provisions, created instances of significant under insurance and made monitoring goods’ location harder.

AJG has also noted a rise in attritional losses around perishable goods.

Another major issue on the radar of brokers has been increased value accumulation, as stockpiles up at ports and other hubs.

Worried shippers chartering vessels or huge swathes of them to ensure capacity are also increasing values at risk, while ever larger vessel sizes – such as the 400m long, 61.5m wide Ever Ace – and mammoth single port sites exacerbate such concentrations.

EASING SUPPLY-CHAIN PROBLEMS

Sea-Intelligence, the marine-focused data analytics firm, found that global schedule reliability in November, at 56.6%, was well up on the same period in 2021 and 2020. The company predicted a return to normal levels of shipping congestion in March.

The Ukraine conflict is clouding the outlook, as is Covid in China, home to seven of the world’s 10 largest ports. China recently eased Covid-related port restrictions, and infection rates are surging.

Navigating sanctions against Russia has created difficulties for insurers and the recent G7/EU/US oil price

“Mis-declared cargo and the transport of lithium-ion batteries are among the drivers. It is possible that Lithium-ion batteries were responsible for the fire and sinking last year of the Felicity Ace, (left) which was transporting several hundred million dollars-worth of electric vehicles.’’

Finding the fault

Bruce Swales , Managing Director –

Asia-Pacific, Envista

Forensics, asks the key question of why did this vessel’s engine fail right after an overhaul

Picture this, a vessel owner seeking to overhaul the engine in a vessel engages a shipyard to carry out the overhaul. The engine is overhauled and during post-overhaul sea trials the engine fails. The vessel is returned to the yard, and the vessel owner is up for either the repair of the engine (best case) or worst case, the replacement of the engine.

Vessel owners and insurers frequently ask: Why did this vessel’s engine fail right after an overhaul? Because of that, Envista has investigated such failures multiple times.

In Envista’s experience, there are two common reasons for the above scenario frequently playing out. The first is using non-OEM parts (third-party manufactured parts, often referred to as spurious parts) and the second is poor workmanship by the workers carrying out the overhaul work.

USE OF NON-OEM PARTS

Non-OEM manufactured spare parts can seem financially attractive as they typically cost significantly less than genuine OEM parts. However, it is important to note that the quality and reliability of these parts can vary greatly and may not be held to the same standards as genuine OEM parts. The risks when using non-OEM parts include the following:

a) Lack of compatibility and poor fit;

b) Potential for lower quality and reliability, as well as reduced durability;

c) Lack of OEM support;

The owner now faces extended vessel downtime and accuses the yard or the yard’s subcontractor of causing damage to the engine. The yard (or subcontractor) notifies their insurer that there may be a claim made against them by the vessel owner or insurer, and so it goes.

d) Warranty concerns;

e) Potential for decreased engine performance; and,

f) Compatibility with future upgrades/repairs.

Point a), lack of compatibility and poor fit, has been the cause of several engine failures that Envista has investigated. Typically, a main or big end bearing does not have the correct tolerances. Often, the part is manufactured from inferior quality materials, which can cause it to wear out much quicker or fail outright.

POOR WORKMANSHIP

Poor workmanship is a common occurrence seen by Envista, not just with third-party overhaul companies but also with OEM service technicians.

Common problems include bolts not being torqued to the correct tightness, wrong tolerance parts installed, incorrectly installed bearing shells, dirt on bearing surfaces and defective or leaking injectors re-installed.

Surprisingly, even very basic workmanship issues occur. A good example of this is a failure Envista investigated in Asia involving oil starvation caused by service technicians forgetting to remove rags pushed into oilways during engine disassembly to stop foreign particles from entering the oilways.

The engine was reassembled, started and left idling. Not long after, the engine shut down because of a low oil pressure alarm, but not before damage occurred to bearings and journals. Investigations found rags still in the oilways.

This happened not just on one engine but on two simultaneously being overhauled in the same vessel. This case was particularly surprising because service technicians from the OEM carried out the overhaul work.

FIVE WAYS TO MINIMISE THE RISK OF FAILURE

First, while cost is important, one of the factors associated with such failures is the push to carry out overhauls at a very low cost. Unfortunately, this carries significant risks associated with workmanship and the use of spurious parts.

Second, engage only reputable shipyards to carry out the overhaul and vet their overhaul team or subcontractor if a subcontractor is being used regarding their specific experience with your engine model. Better still, engage the OEM or the OEM’s authorised service agent to carry out the overhaul (although, as per the oilway rag example above, even OEM service teams can make fundamental mistakes).

Third, specify that only genuine OEM parts are to be used. Demand receipts verifying genuine parts that were purchased or consider purchasing the required parts directly from the OEM. Spurious parts may be very tempting as they usually cost far less. However, they are lower cost for some obvious reasons, such as poor quality control or inferior materials used.

Fourth, consider directly supervising overhauls being

carried out. While the cost of having a supervisor onsite during the overhaul may be high, the cost of your vessel’s extended downtime, if a problem occurs, will likely be far more.

Fifth, ensure purchase orders or contracts clearly state the full scope of work to be carried out and clarify the specific responsibility of each party involved (for example, the vessel owner, shipyard and overhaul contractor).

WHAT CAN INSURERS DO?

As a vessel insurer, to assist with recovery from the third-party responsible for causing the damage, it is essential to engage a reputable causal expert to confirm the precise root cause of failure and the party or parties responsible for that. The earlier an expert is engaged after a failure, the better, as there is a greater chance of the expert obtaining all necessary evidence before it is lost.

As the insurer of the party allegedly responsible for the damage, defending a recovery claim, it is also important to engage a causal expert to allow for the best opportunity to understand the facts surrounding the failure and resultant damage and whether the insured was indeed responsible and to what degree.

Vessel engines failing quickly following overhaul is certainly not uncommon. It happens reasonably frequently. The causes of such early failures usually boil down to either poor workmanship from the overhaul team or the use of spurious parts that are substandard. The reason behind this is often the vessel owner wanting to minimise overhaul costs perhaps a little too much.

As multiple parties are usually involved in the overhaul process, subrogation is common in these cases. As in any recovery attempt, insurers and their legal teams need to arm themselves with as much factual information about causal factors and responsibilities as they reasonably can to maximise their chance of a successful recovery.

“Common problems include bolts not being torqued to the correct tightness, wrong tolerance parts installed, incorrectly installed bearing shells, dirt on bearing surfaces, and defective or leaking injectors re-installed.’’

Bruce Swales, Envista Forensics

Marine Master’s Henk Smith pulls back the curtain to highlight the factors that salvors must consider when costing wreck removal projects and pinpoints possible avenues for cost saving

Managing wreck removal costs

Removal of a ship that has been declared a loss can be a complex process with many unknown factors that may emerge during the wreck removal process.

Weather, topography, location, situation, availability and reliability of local personnel, equipment and, of course, risks associated with an individual country can all impact cost.

As the parties responsible for the physical loss or damage of ships and their cargo, it is understandable that marine underwriters would look to have clarity on costs and limit their exposure.

Salvage companies do their best to prepare a competitive proposal once a tender for a wreck removal has been issued.

Most underwriters request an all-inclusive proposal that includes considerations of delays. This is the most secure approach for the underwriter as it transfers all liability to the salvor.

ESTIMATING FIXED COSTS

A popular option is the BIMCO Wreckfixed contract, which

requires the salvor to finance the whole removal operation. It is worth noting that, while this will provide a fixed cost to the underwriter, it will automatically increase costs to prevent an financial undue burden on the salvor.

When estimating the cost, a salvor must consider the size of a vessel. Large vessels will likely require more time for cargo and wreck removal than smaller ones.

Salvage companies must also factor in the removal of bunker oil and cargo - keeping in mind environmental considerations.

The location of a wreck will also play a large role in estimated costs, with remote locations being priced as more expensive given difficulties in accessing the site.

Salvors must also consider the possible damage to the economy or environment that will likely necessitate liaising with local and national authorities.

Of course, local circumstances such as weather and soil conditions must be considered, as must disposal costs in the region.

The skills available in the region via local contractors will impact pricing as certain cases will require experts to be

flown in and accommodated for the length of the project.

As you can see, although this type of contract offers fixed costs, it may not provide the best value for money for underwriters.

AGILITY IS KEY

We have found that the best approach when tendering for a vessel is to match the type of contract to the case. We work with the Lloyds Open Form (LOF), Wreckfixed, Wreckhire and Wreckstage contracts - or even bespoke contracts. Furthermore, we have found ways to identify potential reductions in pricing.

Whenever possible, we try to work with local subcontractors and suppliers to secure salvage equipment and personnel.

This approach not only reduces the mobilisation and demobilisation costs, but is also likely to result in a reduced day rate for the equipment and personnel. We also try to hire equipment and personnel through the shipowner where possible as this increases the transparency and reassures the owner.

We believe that an agile approach is key and in cases where mobilising heavy lifting vessels will be costly and time consuming, we use alternative methods such as barges and winches to lift, deploying shore-side cranes, engaging mobile cranes on barges, pressurising tanks and void spaces, or a combination of the above.

The big advantage of developing such methods is that this equipment is readily available in most regions and is extremely cost effective.

In some cases underwriters and/or their appointed consultants have not invited salvors without heavy lifting capabilities to bid for the removal of a wreck. We feel that this is a shame as it not only drives up costs for the underwriter, but, ignores evidence from multiple cases where wrecks have successfully been removed without using heavy lift equipment, using non-traditional methods that are extremely safe.

Admittedly, this requires a more hands on approach and an in-depth understanding of the proposed salvage method so that risks can be mitigated. But salvors such as ourselves are more than able to demonstrate our technical and operational capabilities.

COMMUNICATION BUILDS TRUST

Wreck removal can be stressful, particularly in the case of delays caused by inclement weather or problems with permits, licenses and transporting equipment.

We believe that open, proactive communication that puts our stakeholders in charge of the decision-making process (albeit with access to our expert opinion) is the best way to manage any project.

Perhaps the biggest saving we bring as contractors is peace of mind. Our experts are willing to explain the reasons at the heart of our approach and ensure that the trust placed in us to correctly handle a technically complex and expensive project is well deserved.

To quote the slogan of a famous credit card company, control combined with peace of mind during a salvage process is simply priceless!

“The location of a wreck will also play a large role in estimated costs, with remote locations being priced as more expensive given difficulties in accessing the site.’’

SPONSORS:

this live, in-person event is set for 27th April 2023! Now in its 4th year, taking place at the Raffles City Convention Centre, Fairmont Singapore, Marine Insurance Asia is the leading global marine insurance conference and all brokers, insurers, ship owners and third parties should attend this event to help shape the future of the industry in the region.

Taking place at The InterContinental Houston – Medical Center on 16th May 2023, Energy Insurance Americas is specifically designed to bring together all the key players in the energy insurance market in the Americas, the agenda featured a range of senior speakers discussing, debating and offering actionable insights into the issues affecting the region.

To find out more contact Daniel Creasey on +44 (0)7702 835 831 or email daniel@cannonevents.com

GLOBAL PARTNERS:

www.energyinsuranceamericas.com

The InterContinental Houston – Medical Center, 16th May 2023

07:50 - 9:00 : Delegate Registration and Refreshments

09.00-09.30: KEYNOTE ADDRESS: State of the Insurance Market – A Post-Mortem of 2022

Inflation was considered a big threat as we launched into 2022, so this session will explore what really happened with rates and claims numbers through the year. We will analyze the latest statistics to gain a realistic picture of what the numbers are.

Presenter: Michael Kolodner, Global Renewable Energy and US Power Leader, Marsh

09.30-10.15: PANEL DISCUSSION: What on Earth is the World up to Next?

Moderator: George Lugrin IV, Managing Partner, Hall Maines Lugrin

Panelists: Christopher Guith, Senior Vice President, US Chamber of Commerce Global Energy Institute, Jim Krane, Wallace S. Wilson Fellow for Energy Studies, James A. Baker III Institute for Public Policy, Rice University, Jason Feer, Head of Business Intelligence, Poten Partners/BGC Partners

10.15-10.45: ONE-TO-ONE CHAT: Re-Insuring the Market in 2023, and Beyond

This session will look at what happened during the last set of renewals. Our experts will reveal whether the insurance market faced rate hikes, freezes or declines, and what they are predicting going forward. They will also explore whether the risks are changing, and how that is changing insurer appetite.

10.45-11.15: NETWORKING BREAK

11.15-12.00: PANEL DISCUSSION: ESG – A Case of the Emperor’s New Clothes?

Moderator: Steve Laino, Global Head of Environmental Solutions, Poten & Partners/BGC Partners

Panelists: Steven Weiss, Consultant, Steven P Weiss Consulting LLC, Patty Errico, Partner, Global Commercial Lead, Corporate Governance and ESG Advisory, Aon

12.00-12.45: WORKSHOP: Managing Weather Risk for Renewables Projects

Presenters: Roderick Rennison, Vice President, Rimkus

12.45-13.45: LUNCH BREAK AND NETWORKING

13.45-14.10: PRESENTATION: The Insurance Market –Renewables 2023

Presenter: Kris Williams, Underwriter Renewable Energy, AXIS

14.10-15.00: PANEL

DISCUSSION: Main Risks to the US Offshore Wind Market

Panelists: Lionel Kpoze, Senior Underwriter Onshore Construction –Offshore Wind, Scor, Eileen Miller, Senior Project Risk Advisor Natural Resources – Renewable Energy and Power Team, Aon, Frank J. Gonynor, Senior Claims Adviser/Lawyer, Gard (North America) Inc.

15.00-15.30: NETWORKING BREAK

15.30-16.15: PANEL

DISCUSSION: The Claims Experience – Onshore Renewables

Moderator: German Torres, Underwriter, Renewable Energy, AXIS

Panelists: Pandora Wilson, Claims Advocate, Energy and Power, Marsh, Roderick Rennison, Vice President, Rimkus, Matthew Senn, Senior Project Engineer Lead – Renewable Energy, Envista Forensics, Darren Askari, North American Claims Manager, GCube

16.15-17.00: PANEL

DISCUSSION: The Claims Experience –Offshore Wind Cable Losses

Moderator: Manny Morrell, Director Renewable Energy, Origin and Cause Panelists: Matthew Yau, Director, Lloyd Warwick

13.45-14.10: FIRESIDE

CHAT: Latin America –The Next Big Thing?

Participants: Manuel Taratino, Head of Offshore and EGA, Charles Taylor

14.10- 14.35:

PRESENTATION: Presentation: Sanctions –Challenges of Maintaining Compliance

Presenter: George Chalos, Partner, Chalos Law Firmv

14.35-15.00:

PRESENTATION: Opportunities and Challenges from the Inflation Reduction Act (IRA)

Presenter: Tom Dickson, Chief Executive Officer, New Energy Risk

15.00-15.30: NETWORKING BREAK

15.30-16.15: PANEL

DISCUSSION:

Carbon Capture –Revitalizing the Oil and Gas Sector

Moderator: Bobby Galindo, Director, Technical and Engineered Risk; National Energy Loss Control Leader, IMA Corp

Panelists: Glenn Legge, Partner, HFW, Bruce Crager, President – Energy Advisory Group, Endeavor Management

16.15-17.00: PANEL

DISCUSSION: The Claims Experience – Oil and Gas

Panelists: Lynette Wachuku, Senior Vice President, Energy and Power Claims Advocate, Marsh, Gary Mawditt, Chief Executive Officer and Global Head of Upstream Claims, MatthewsDaniel, Brad Nehring, Director, Energy, RB Jones

Thumbs up for new P&I powerhouse

Immediate validation greeted the launch of NorthStandard last month, after the marine mutual formed by merging North P&I and Standard Club secured an enhanced ‘A’ stable rating from S&P Global for its competitive position and ‘AAA’ for capital adequacy and sound balance-sheet risk management.

“This assessment demonstrates how NorthStandard is being recognized as having the financial resilience to meet the shipping world’s challenges and opportunities, in 2023 and beyond,” said Jeremy Grose, who leads the new organisation with fellow managing director Paul Jennings. Grose and Jennings were respectively previously CEOs of Standard Club and North.

Driven by an overwhelming vote in favour of the merger by members last year, NorthStandard becomes one of the world’s largest providers of mutual cover in the maritime market, with more than 390 million GT of owned and chartered tonnage on its books. The number is thought to have increased in the days after 20 February, as ships still being confirmed on renewals day were formally entered.

As an organisation consolidating annual premiums of

around US$800m, NorthStandard brings together more than 300 years of P&I heritage and employs more than 700 people worldwide, managed from twin UK headquarters and with offices throughout Europe, Asia, Australasia and the Americas.

For the 2023/2024 policy year, members were renewed with certificates retaining Standard Club and North branding. Common NorthStandard policies are anticipated from 20 February 2024.

In their final renewal statements as separate entities, North P&I and Standard Club reported resilient performances through another extraordinary year of challenge for maritime industries. Both clubs foresaw positive combined ratios and stable levels of capital, notwithstanding losses across their investment portfolios amid financial market turbulence in the last year.

UNDERLYING STABILITY

North’s diversification strategy continued to generate positive returns, with Sunderland Marine and North Hull experiencing further growth in market share and premium income.

Formally launched as a new entity on the P&I industry’s 20 February renewal date, NorthStandard opened for business with an enhanced rating from S&P Global and confirming the team leading the merged organisation into a new era for marine insurance, writes Rob McInally , Global Director of Marketing and Communications, NorthStandard

North’s total premium income for 2022/23 rose to more than US$445m, with combined renewed tonnage on 20 February 2023 estimated to be approximately 240million GT. Standard Club saw premiums rise to US$350m and combined owned and chartered renewed tonnage on 20 February 2023 of approximately 155M GT.

Its extension into coastal and inland vessels in Asia continued to attract new business, while strike and delay activities delivered strong year-on-year premium growth.

As well as an unusually benign year for claims on the International Group pooling arrangements, North and Standard benefitted from their efforts to adjust premium rates to sustainable levels, as well as continued diversification.

“Building on scale, comprehensive services and the depth of our talent pool, NorthStandard is the P&I partner that members need to navigate the challenges ahead, and a fresh and dynamic force in marine insurance with a proactive approach to opportunities,” said Grose.

“By combining our unparalleled depth of knowledge and breadth of expertise, we will deliver better service, support and cover than ever,” he added.

For global shipping organisations and the clubs that protect their freedom to trade, navigating the sanctions that are increasingly used to accomplish foreign and economic policy goals has proved especially challenging and time consuming over the last year, according to fellow NorthStandard managing director, Paul Jennings.

“However, NorthStandard also needs to help shipping meet other challenges, including decarbonisation and digitalisation, the progressive requirement to improve safety and welfare standards, protection against cyber threats, while ensuring that the maritime sector attracts and retains the best talent,” he added.

LEADERSHIP IN POSITION

The NorthStandard launch coincided with a series of senior management appointments, forming what Jennings, described as “the leadership team entrusted with ensuring that members worldwide experience greater value, certainty, choice, responsiveness and easier access to unrivalled expertise.”

Key appointments include Nick Jelley, as chief financial

officer. Standard Club CFO since 2013 (and previously Club finance director from 2008), Jelly’s role includes managing financial and regulatory affairs, and financial risks for the new organisation, as well as monitoring cash flow and liquidity, and overseeing NorthStandard investment portfolios.

Thya Kathiravel, appointed as chief underwriting officer, takes up his position after four years in the equivalent role at North, and following 27 years with the Club. Kathiravel will represent NorthStandard on the International Group’s reinsurance committee and is the current chair of the pooling agreement committee.

“NorthStandard is a leading member of the International Group of P&I Clubs (IG) and is fully committed to upholding the shared objectives of its 12 independent member clubs,” said Kathiravel. With the IG providing liability cover for approximately 90% of the world’s ocean-going tonnage, the NorthStandard team believes it can help the grouping “unlock its full potential,” he added.

Within the new structure, Ed Davies has been appointed chief strategy officer. His workload is expected to have a significant impact in realising the new entity’s ambitions, with the former North CFO developing, communicating and implementing strategy and strategic performance management, as well as identifying, planning and executing key initiatives across the business.

The merged organisation’s comprehensive global, local market and sector knowledge will be underpinned by continuous investments in market-leading digital technologies, a point emphasised with the appointment of Laura Linturn as chief information officer, NorthStandard.

“Our aim is to see NorthStandard become the most technologically advanced P&I club, enabled by a highly engaged, empowered and fully integrated technology team,” commented Linturn. “Through continuous innovation and modern ways of working, we will deliver a market-leading shipowner and broker experience through best-in-class digital capabilities.”

Other senior appointments which have already been announced include

> Chief claims officer – Sam Kendall-Marsden.

> Global director (people & culture) – Alex Miell.

> Group general counsel – Chris Owen.

> Chief operating officer - Dipo Oyewole.

> Chief risk officer – Lee Williamson.

> Global head of FD&D claims – Katherine Birchall.

> Global head of mutual underwriting - Mark Collins.

> Global head of P&I claims – Matt Moore.

> Head of external affairs – Mike Salthouse.

“We believe this is a truly exciting moment for service-led P&I,” concluded Jennings. “NorthStandard anticipates becoming the P&I mutual of choice as an employer because its unique blend of service scope, influence, flexibility and innovation will co-exist with the caring ethos and culture on which both North and Standard Club built their reputations.”

Jeremy Grose, (right) who leads the new organisation with fellow Managing Director Paul Jennings. Grose and Jennings were respectively previously CEOs of Standard Club and North.

Forward Thinking™ Foreign Exchange

Mind the gap

Builders’ risks insurance traditionally comes within the marine definition of risks even if most of the ship’s construction process starts and develops on shore, just as with an ordinary building such as a housing project, a bridge, a dam or a factory.

The marine aspect of shipbuilding only becomes fully apparent when the hull is completed (generally already fitted with propulsion and auxiliary machinery), the structure is launched and begins floating and the process of construction then goes ahead with the addition of superstructures (if not already built before launch) and fitting out of all the components in accordance with the design.

The result of the construction process is the ship ready

Gian Piero Priano , Global Head of Claims at leading Italian marine insurance broker Cambiaso Risso Marine advises that builders’ risks coverage offers the widest ranging English conditions but with some key limitations

to be delivered to her buyers and the aim of the builders’ risks insurance is to protect the interests of the builders against loss or damage occurring during the period of construction, from the beginning of the building “since the first steel slab has been laid” on the construction platform till the moment the vessel is delivered to her buyers, after completion of all necessary tests and sea trials.

Among the many clauses produced by the Institute of London Underwriters (ILU) to cover ships, the Institute Clauses for builders’ risks have the unique feature of covering the subject interest against “all risks”, whereas all other marine clauses are usually on “named perils” basis.

LATENT DEFECTS

Clause 5 (Perils) reads: “...this insurance is against ALL RISKS

of loss of or damage to the subject-matter insured caused and discovered during the period of this insurance including the cost of repairing replacing or renewing any defective part…” due to latent defect.

The “all risks” concept is further expanded by Clause 8 (faulty design) which includes “loss of or damage to the subject-matter…arising from faulty design of any part or parts thereof …” but excluding “the cost or expense of repairing, modifying, replacing or renewing such part or parts, nor any cost or expense incurred by reason of betterment or alteration in design.”

In addition to the traditional marine cover, ICBR includes also protection and indemnity risks such as, for example, damages to or raising, removal, destruction of any fixed or movable object, removal of the wreck, loss of life, personal

“Builders’ risks insurance covers only “loss or damage” but does not cover lack of performance such as the vessel not achieving certain contractual requirements (particularly speed or fuel consumption).’’

Gian Piero Priano, Cambiaso Risso

injuries, fines and the like.

Hence, it is submitted that these conditions are the widest among the Institute London Clauses, with the main exclusions being only “war and strike risks” and “earthquake and volcanic eruption”.

LIMITATIONS TO COVER

There are some limitations to cover as is to be expected - one example is that any loss or damage should have been “caused and discovered” during the period of the insurance. In this regard, problems may arise in respect of damage discovered, or fully assessed, after the expiry of the policy, which usually terminates when the new build is delivered to buyers.

Based on previous cases, an example might be that very minor leakages from piping systems of a large passenger ship were found during final tests. After delivery to buyers, it developed into extensive corrosion damage to piping because of errors made during construction. It was undisputed that the damage was caused during the period of insurance but was unclear if it was also discovered during that period. As the buyers made specific reservations on this particular issue, although it was minimal at time of delivery, builders risks cover was found to apply. Otherwise, the outcome might have been different.

In general, there is a presumption that the buyers have been admitted to the necessary pre-delivery inspections and that a check list of any remarks has been exchanged between builders and buyers.

If any of these remarks could give rise to a “claim” under the builders’ risks insurance, then a notice of claim should be sent to the insurers, possibly prior to delivery to buyers. Otherwise, the builders might remain bound to perform the necessary repairs or replacements at their own cost, under the builder’s guarantee unless a specific extension of cover is agreed with the insurers for the guarantee period. This is possible, sometimes, under payment of an extra premium. Occasionally similar problems could instead arise at the inception of cover. Again, by referring to previous cases, the construction of newbuilding involving extensive prefabrication of blocks, welding of plates and structures (begun before the commencement of the policy) were damaged because of errors in the welding process. The same damage was discovered during the insurance period but was not covered as it was caused before the inception of risk.

FAULTY DESIGN

Another important limitation might be found in respect of “faulty design”.

Only consequential losses or damages are covered but not the alteration or betterment of the design itself. This distinction is not straightforward in practice.

In a past case, a propeller line was designed wrongly so that, when tested during sea trials, excessive vibrations to

the propeller line and to the ship’s stern were noticed. The cost for correcting the design and for re-building the propeller line to eliminate vibrations were not covered. However, the repairs of the ship’s structures and some components of the line (damaged by the vibrations experienced during sea trials) were covered.

LOSS OR DAMAGE COVER

Builders’ risks insurance covers only “loss or damage” but does not cover lack of performance such as the vessel not achieving certain contractual requirements (particularly speed or fuel consumption).

The spirit of the policy behind this is that such kind of problems are usually caused by errors in design. In fact, a faulty design might result in a ship to be heavier than expected, so unable to comply with the agreed contractual speed.

There is no physical damage to the newbuild, but, it is simply unable to satisfy the agreed contractual terms and therefore there is no basis to claim under the builders’ risks policy.

However, in practice, the clear distinction between faulty design and error in construction, or between mere lack of performance and loss or damage, are not always easy to be drawn.

“The result of the construction process is the ship ready to be delivered to her buyers and the aim of the builders’ risks insurance is to protect the interests of the builders against losses or damage occurring during the period of construction.”

Gian Piero Priano, Cambiaso Risso

Navigating court actions against insurers in Turkey

Turkey for avoiding direct actions.

The right of direct action against insurers contained in TCC did not bring the jurisdiction of Turkish courts automatically. When the jurisdiction of Turkish courts was challenged, this objection became a strong procedural defence because Turkish law requires that insurers would be sued where they are domiciled or where their branch or agent is located.

PROCEDURAL LAW

Article 1478 of the Turkish Commercial Code (TCC) provides “A (third party) person who suffers from damages may claim its loss up to the insured sum directly from the insurer provided that the claim is brought within the time bar period applicable to the insurance contract.”

The foregoing amendment under Turkish law was a great concern to the P&I Clubs and liability insurers as to whether claimants would enforce their claims where there was no security for their claims.

Prima facie, the Article 1478 was a perfect solution for claimants whose claims are not secured where the defences available to insurers seemed limited and there was little prospect to defend claims in merits.

The P&I Clubs and the liability insurers were reluctant to appear before Turkish courts because appearance would have been taken as acceptance of the jurisdiction of Turkish courts.

However, technicalities saved the day for insurers that were domiciled in a foreign country without any branch in

On the other hand, Turkish procedural law does not give any right for a special appearance for procedural objections. Therefore, the P&I Clubs and liability insurers would raise a jurisdictional objection together with other defences in response to claims with reply submissions to protect their rights. Submitting defences over jurisdiction objection only would have had negative impact if the jurisdiction objection had been dismissed.

Despite all the uncertainties, jurisdiction objection succeeded in court cases where direct legal actions against insurers by third party claimants were dismissed over this procedural objection if such insurer is not domiciled or has no branch in Turkey.

The jurisdiction objection must be submitted in reply petition in Turkey where the defendant should properly indicate the court having jurisdiction over the dispute. Otherwise, it is not possible to bring this defence in later stages of litigation. Should the jurisdiction objection be made improperly, the Turkish court would assume jurisdiction and would hear the court case against the insurer.

Jurisdiction objection saved liability insurers in direct actions, but, an unexpected door was opened for the insured to bring legal action in Turkey when they have a dispute with their insurers.

COINSURANCE IMPLICATIONS

It is not uncommon that risks are insured by a group of

It has been more than 10 years since the Turkish Commercial Code (TCC), which came into force on 1 July 2012, allowed direct legal actions against insurers. The good news for insurers that are domiciled outside of Turkey is that the current precedents mostly protect P&I Clubs and liability insurers from being liable before Turkish courts Caglar Coskunsu , partner at Cavus & Coskunsu Law Firm, explains

insurers in an insurance policy where underwriters share the risks based on the proportion that they agree to cover.

One of the insurers may be given the power as a claim leader to decide any matter relating to the demands being made under the insurance policy on behalf of all insurers so that the claims leader would be the one deciding for claims.

It is possible that the location of the claim leader may affect the applicable law and jurisdiction clause in an insurance policy while the main terms of insurance policy may be another strong reason for governing law and jurisdiction.

For example, in marine insurance policies, we may frequently see a jurisdiction clause providing that English, Norwegian or German courts would have jurisdiction to hear disputes. The foregoing is mostly due to who is the leader under the policy and/or what main terms of insurance policies are, and/or where the risks are placed.

What if a dispute arises under the policy and an insurer or a group of insurers are sued in another jurisdiction? In Turkey, the jurisdiction clause contained in the insurance policy may not be as strong as expected. Therefore, the insured may commence a legal action in Turkey despite a jurisdiction clause under the insurance policy against its insurers.

DOMESTIC JURISDICTION

The general rule in Turkey is that the jurisdiction shall be decided in accordance with the domestic jurisdiction laws where normally jurisdiction clauses providing jurisdiction of courts outside of Turkey are respected.

But, there are specific rules that help the liability insurers to avoid claims in direct actions against insurers, working against insurers in a dispute with its insureds under insurance policy.

JURISDICTION AGREEMENTS

As noted above, jurisdiction agreements are allowed under Turkish Law if they are made in writing. Jurisdiction clauses are thus well respected under Turkish law but not without exceptions.

It is very common to include a jurisdiction clause in insurance policies especially those that are underwritten by multiple insurers.

However, if insurers are sued in Turkey under the insurance policy, it may not be possible to rely on the jurisdiction clause in the policy to dismiss the case, even if such policy is signed, accepted or confirmed by the insured. The exception arises from the specific regulations for a dispute arising from insurance contracts.

When the direct actions are dismissed by the courts, the legal formula was that insurers can be sued in Turkey:

> If the actual workplace of the insurer is in Turkey or

>If the branch office or agency that concluded the insurance contract is located in Turkey.

In addition, any jurisdiction clause against the above would be invalid in accordance with Turkish law. Turkish courts have an equal and fair approach in applying the above rules.

In a dispute between a Turkish insurance company and foreign reinsurers (under the reinsurance policy providing the jurisdiction of Turkish courts) the court dismissed the court action on the basis that the reinsurers would be sued where they are domiciled because the jurisdiction clause found the jurisdiction of the Turkish court invalid.

The approach of the Turkish courts is therefore just to enforce the rule of law equally without any protection for nationality including Turkish persons and insurance companies.

Insurers should therefore be aware that any jurisdiction clause that they may plan to rely on in a potential dispute would be invalid if the insurers are sued by insureds in Turkey.

This does not automatically mean that a foreign insurer can be directly sued in Turkey or insurers do not have any remedy to avoid a legal action in Turkey. But, in any case, one of the two conditions above must have been met for a foreign insurer to be sued before Turkish courts.

It should be mentioned though, that it is very important to submit a correct jurisdiction objection as advised above in explaining direct action against insurers. This is because, under Turkish law, the defendants are required to submit any objections against the jurisdiction or the competency of the court under certain conditions and in their first submissions.

If the conditions are not met, the court assumes its jurisdiction. Therefore, the claimants take their chances in Turkey on the prospects of a wrongful objection to be submitted by the defendants.

In summary, in disputes arising from insurance policies, a Turkish court may seize jurisdiction regardless of whether there is an exclusive jurisdiction agreement in the relevant policy or may dismiss a court case even if the jurisdiction clause provides Turkish jurisdiction.

However, it should be noted that the jurisdiction would not affect the choice of law which may continue to apply even before a Turkish court.

In practice, insurers may choose to initiate a preventive action in order to avoid legal action in a place other than a court contained in the jurisdiction agreement.

Some countries have remedy of injunction orders. However, such an order has no binding affect for the Turkish courts. The insured may simply proceed with its legal action if preferred and the strength of anti-suit injunction depends on whether insured/claimant would be affected by such order.

In some areas of business, insureds may choose to disregard such preventive actions. Another reasonable question would be whether the insured may enforce a judgement of a Turkish court.

Global business and the international nature of the insurance market may make the enforcement possible where insurers may have premiums in Turkey and other jurisdictions where premiums would be available to attach. Therefore, each case should be carefully reviewed by insurers if they are sued in Turkey and such cases may be avoided with procedural objections.

Compared with other types of disputes, insurers and insureds rarely take the matters to the courts. Therefore, remedies under Turkish law mostly work in favour of insurers, particularly for the P&I Clubs and liability insurers.

“The P&I Clubs and the liability insurers were reluctant to appear before Turkish courts because appearance would have been taken as acceptance of the jurisdiction of Turkish courts.”

Caglar Coskunsu Cavus & Coskunsu

A healthy ship is a happyship

Avoiding the risks of air duct contamination

There is a misconception regarding the air quality that mariners are exposed to while on board a vessel. The common belief is that merchant mariners spend almost all their time breathing fresh sea air when onboard. But nothing could be further from the truth. The reality is that nearly all their time is spent inside a closed environment.

This includes sleeping and relaxing in staterooms, having a meal or doing laundry, the gym, or watching a movie or TV, then working inside the wheelhouse, galley or engine room for 12 or more hours a day, seven days a week, for weeks or months at a time.

To simplify the above explanation, all merchant mariners have breathed a lot of “indoor air.” Studies conducted by the US Environmental Protection Agency (EPA) indicate that indoor air pollution may be two to five times worse than outdoor pollution in a large city.

DANGEROUS DUST

During Belfor Restoration Services’ inspections on ships, we have observed dust accumulating under the ventilation system diffusers or air vents and, in many instances, the diffusor itself covered with dust. We have observed this in common areas and staterooms and pretty much all over the accommodation areas, bridge and engine control room.

The dust not only accumulates in the vents but also inside the HVAC system like motors, blowers, heat exchangers and ducting.

If you were to inspect the dust closely with a microscope, you would be shocked at what you would find.

Particles such as flakes of dead skin, hair and insectsremains make up the dust. This eventually creates a dense, mat-like environment in which bacteria, mould, dust mites and allergens can flourish.

No wonder the indoor air quality, in many cases, is so much worse than the outside air pollution of a busy city. This is not good news for mariners who spent most of their time indoors, despite breathing the fresh air outside.

Statistics also have shown that mariners are more likely to have impaired lung function and are more likely to have asthma, fatigue and heart disease because of long term exposure to poor indoor air quality.

In addition to these health hazards, there is a high risk of fire hazards as a result of dust and grease build-up in the galleys’ exhaust ducting pipes. It can lead to devastating

consequences if a fire occurs because it will cause the fire and smoke to spread to other parts of the vessel.

ESSENTIAL MAINTENANCE

To ensure the safety of your crew members and vessels, it is essential to maintain the air ducts properly at regular intervals. Belfor Restoration Services has the expertise, personnel and the right equipment to provide the proper solutions to keep the risk as low as possible.

Mould remediation is a complex process involving much more than simply spraying and wiping clean the affected surfaces.

Large-scale mould removal requires expert knowledge and specialised equipment to carry out the remediation work. Certain situations require mould removal specialists to guarantee effective remediation, regardless of the size of the impacted area.

In addition to mould remediation, reducing the fire hazards associated with the contamination of exhaust pipes from galleys is also a task that requires trained personnel, equipment and the right chemicals.

The process of decontamination and removal of fire hazards from exhaust ducts on galleys is very different to the decontamination of air ducts.

Belfor Restoration Services has developed methods and trained personnel to carry out the decontamination of air ducting and exhaust systems successfully at short notice when required. We have worked in cruise ships, oil tankers, container ships, FPSO vessels, oil rigs and accommodation such as in the US, Europe, Australia, Korea, Japan and Singapore.

Guido Gavio , Asia Complex Loss Director, Belfor Restoration Services explains how to ensure that crews live, work and breathe healthily while onboard

“Statistics also have shown that mariners are more likely to have impaired lung function and are more likely to have asthma, fatigue and heart disease because of long term exposure to poor indoor air quality.’’

Guido Gavio, Belfor Restoration Services

SPONSORS:

Asia 27 April 2023

SINGAPORE

Co-located with Singapore Maritime Week, this live, in-person event is set for 27th April 2023! Now in its 4th year, taking place at the Raffles City Convention Centre, Fairmont Singapore, Marine Insurance Asia is the leading global marine insurance conference and all brokers, insurers, ship owners and third parties should attend this event to help shape the future of the industry in the region.

GLOBAL PARTNERS:

Thursday 27th April 2023, Singapore

09.00-09.30: KEYNOTE ADDRESS: Staying Focused in a Fragmented World

Presenter: Rolf Thore Roppestad, Chief Executive Officer, Gard AS

09.30-10.15: PANEL DISCUSSION: Why Insure in Singapore?

Moderator: Ramachandran Radakrishnan, Head of Marine Asia, QBE

Panellists: Chris Coupland, Head of Marine, Singapore, Marsh, Colin Fordham, Director – Asia, Markel, Ju-Ann Lee, Head of Marine – Asia, Berkley Insurance Company, Bozidar Ljubisavljevic, Regional Marine Practice Leader, Howden Insurance Brokers (Turkey, the Middle East & Africa region)

10.15-11.00: PANEL DISCUSSION: How Recent Political Conflict and Sanctions are Changing the Marine Insurance Landscape

Moderator: Mabel Ng, Assistant Manager, Ed Broking

Panellists: Lars Lange, Secretary General, International Union of Marine Insurance, Nick Shaw, Chief Executive Officer, International Group of P&I Clubs, Mike Salthouse, Head of External Affairs, NorthStandard

11.00-11.30: NETWORKING BREAK

11.15-11.45: FIRESIDE CHAT: The True Cost of Claims

Presenters: Jeremy Maynard, Head of Marine Claims Asia, Marsh, Tan Hui Tsing, Partner, Advocate and Solicitor, DennisMathiew, Capt. Mathiew Christophe Rajoo, Partner, Advocate and Solicitor, DennisMathiew

11.45-12.15: PRESENTATION: Fueling Future Ships

Presenters: Taylor Wamberg, Regional Maritime Commercial Markets Manager – SAMEA, Lloyd’s Register, Mark Lee, Commercial Manager, Yara Clean Ammonia

12.15-12.35: PRESENTATION: How Will Insurers React to the Recent Renewals?

Presenter: Nicholas Ng, Senior Vice President, Guy Carpenter

12.35-13.00: FIRESIDE CHAT: Going Green on Shipping

Lanes

Participants: Line Dahle, Chief Customer Officer, Gard AS, Dr. Sanjay Kuttan, Chief Technical Officer, Global Centre for Maritime Decarbonisation

13.00-14.00: LUNCH BREAK AND NETWORKING

14.00-14.20:

PRESENTATION: Reducing Emergency Response and Wreck Removal Costs

Presenter: Wouter Breel, Commercial Account Manager, Marine Masters

14.20-15.00: PANEL

DISCUSSION: Ablaze at Sea!

Moderator: Alexander Gray, Head of Marine P&I, Lockton Singapore

Panellists: Laurence Biard, Senior Claims Specialist – Hull, Asia Pacific, Allianz Global Corporate & Specialty, Jacob Damgaard, Associate Director Loss Prevention, Britannia P&I, Ajay Sadana, Head of Department, Marine Hull, Cargo and Energy, India International Insurance Singapore

15.00-15.30: NETWORKING BREAK

15.30-15.50:

PRESENTATION: When Your Engine Room Turns into a Swimming Pool

Presenter: Guido Gavio, Asia Complex Loss Director, BELFOR Restoration Services

15.50-16.20:

PRESENTATION: Engine Room Damage Assessment Following Fire

Presenter: Bruce Swales, Managing Director, Asia Pacific, Envista Forensics

16.20-17.00: PANEL

DISCUSSION:

What’s the Future for Salvage?

Moderator: Capt. John Silberberg Consultant Master Mariner, TMC Marine

Panellists: Indu Chitran, Deputy Claims Manager, Shipowners’ Club, Leif Olav Sætenes, Senior Vice President –Marine Claims Bergen, Norwegian Hull Club, Cedric Declercq, Practice Leader and Claims Manager, AXA XL

14.00-14.20: PRESENTATION

Presenter: Ronny Reppe, Chief Executive Officer, Noria

14.20-15.00: PANEL

DISCUSSION: Pushing the Limits?

Moderator: Paul Hackett, Head of Short Tail, APAC and MENA, Canopius

Panellists: Elisabeth Baker, Head of Ports and Terminals and Marine Liabilities, Asia, Aon, Alicia Leong, Marine Liability Underwriter, Munich Re Syndicate Singapore, Harry Taylor, Head of Marine Singapore, Zurich, Prakaash Silvam, Partner, Oon & Bazul LLP

15.00-15.30: NETWORKING BREAK

15.30-15.50:

PRESENTATION:

Liquefaction, From Instruction to Resolution – A Material Girl’s Point of View

Presenter: Dr. Sophie Parsons, Principal Associate, Hawkins & Associates

15.50-16.20:

PRESENTATION: Crew Claims and Supporting Seafarers

Presenter: Capt. Hari Subramaniam, Regional Head – Business Relations, Shipowners’ Club

16.20-17.00: PANEL

DISCUSSION:

Nurdling Along: Cleaning Up New Forms of Pollution

Moderator: Dimitris Seirinakis, Managing Director, Shanghai Office, The American P&I Club

Panellists: David Campion, Senior Technical Advisor, ITOPF, Darren Waterman, Regional Director Asia Pacific, Oil Spill Response, Suzanne Byrne, Group Claims Director, West of England P&I Club

A perfect match

events faced by companies’ supply chains in the past few years – Covid-19, Brexit, war in Ukraine to name a few - the exposures and risks associated with moving and storing goods globally have evolved.

It is important to understand the challenges that businesses face when it comes to managing their risks associated with the shipment of goods. In today’s global marketplace, delays in the delivery of goods can have a significant impact on a business’ operations, sales and revenue.

Historically, the marine cargo market has provided insureds with the peace of mind that, wherever their goods are in the world, in the event of a covered claim they are insured against physical loss or damage.

More recently, the increased popularity of “cradle to grave” stock throughput coverage, as a product of the same market, has furthered clients’ ability to ensure that no gaps in coverage occur when protecting their goods in transit or in storage.

With the significant global challenges and geopolitical

This also has a knock-on effect on any other businesses the insured trades with including their first, second and third tier supply network.

This is where parametric insurance products come in, offering a unique and innovative solution for businesses seeking to manage their risks associated with the shipment of goods.

PARAMETRIC EXPLAINED

Parametric insurance products can be customised to meet the specific needs of each business, providing flexibility and customisation that traditional insurance products may not offer.

Will Ripley , head of commercial at independent wholesale broker GAWS of London, asks whether parametric insurance products can coincide with marine cargo policies to offer a full supply chain insurance solution

These insurance products work by using a pre-defined set of parameters to trigger coverage, allowing for a faster and more efficient claims process.

For mid-market companies that do not have the size and scale of their Fortune 500 contemporaries, cash flow is hugely important and the speed in which claims are triggered and settled makes a significant difference to how an organisation is able to operate.

Parametric insurance products can cover a wide range of risks associated with the shipment of goods, including weather-related events and the level of congestion at a particular port. This allows businesses to manage their risks more effectively and protect their operations from unexpected events.

Physical loss or damage insurance is essential for businesses shipping goods. But, to truly help protect clients against loss, we need to begin building quick, easy parametric delay insurance products. These products can be designed to meet the specific needs of each business, providing a more tailored solution that can help businesses manage their risks more effectively.

We have seen an increasing number of insureds purchasing parametric delay products. We work closely with companies such as Anansi, a recent Lloyd’s Lab cohort offering a parametric delay product.

BLACK SWAN CHALLENGES

One of the challenges with parametric delay products is around aggregation and ‘sideways’ exposures to insurers in the event of a black swan event such as Covid-19, extraordinary weather events or a Suez Canal blockage. Thus understanding the right route to market for such products is fundamental. Should such products be embedded in internal systems or freight forwarders’ platforms when arranging individual transportation of shipments?

The challenge to such a model is deselection and therefore only covering the most challenged routes or products. If these are to be annualised policies, aggregation of events really does become a concern for a client. Smart AI rating and amendable AI driven deductibles are imperative to accommodate such events.

A further challenge is around basis of valuation and marine insurances being policies of indemnity where insureds are required to quantify a loss value in the event of a claim.

If an insured is looking to sell Christmas jumpers and the goods do not arrive on time to be sold for the Christmas period, the jumpers do still have a value, though a greatly diminished one to the assured that is selling them.

In this instance, as with many others, building a framework for subrogation and understanding and covering an insured’s costs or loss of sale are crucial.

TRADITIONAL LINES

Insurance products across the marine sector have been hugely

beneficial to insureds for a number of years. Examples of current products available to clients include;

> Trade disruption (TDI) policies that cover delays. For larger exposures these have a very valuable place in a robust insurance programme. However, speed of payment, named exclusions and cost of coverage prohibit many smaller insureds from purchasing.

> Cargo delay in start up (DSU) products cover consequential loss to a project’s delayed completion when critical goods do not arrive on time. This is a specific niche within cargo insurance and for more industrial project-based insureds.

> Cargo/stock throughputs (STP) do cover elements of delay and costs associated with supply chain losses. Further, on rare occasions and for specific interests, they can also be extended to cover delay. But, the challenge once more is the time to recover a loss, breadth of coverage and cost make these products unobtainable for most insureds.

All above are useful tools in an assured’s risk management operations, though ultimately, each has their own deficiencies and specialties that could make them inaccessible to a potential assured.

PERFECT COMBINATION

In today’s world in which digitisation and the availability of data has never been more prevalent there must be ways to build products that cover insureds for physical loss or damage to goods alongside parametric pay outs for delays within the supply chain.

For the marine cargo market to continue to evolve, remain relevant and at the forefront of protecting an insured’s supply chain exposures, this marriage of new and old products will be vitally important.

To enable insurers to become comfortable enough to build out this additional offering, brokers and insurtechs will have to demonstrate how historical data can be assimilated to understand exposures and aggregations to black swan events and how proactively systems can understand the data for future events.

If this marriage can happen then the marine cargo market will be providing a truly unique offering for clients with evolving, dynamic and responsive coverage for the challenges insureds face today and in the future.

“Parametric insurance products can be customised to meet the specific needs of each business, providing flexibility and customisation that traditional insurance products may not offer.’’

Shipowners’ Club doesn’t like surprises

The Shipowners’ Club is pleased to be stable, consistent and even boring in a world of

“Shipowners’ Club is now the most boring club to review, although this is for all the right reasons” read the 2022 report from P&I insurance broker, Tysers. “High praise!” according to the Club CEO, Simon Swallow. “If boring means stability, continuity and ensuring peace of mind for our membership, then we are all doing our jobs properly.”

When the Club’s board met on 31 October 2022, it was noted that the Club was in a market leading underwriting position, but potentially faced some headwinds because inflation was running at higher than historic levels.

“The big unknown is inflation and given that the 2022 policy

year was relatively benign year for claims, especially to the International Group Pool, we haven’t seen the impact of inflation. This may change, but the key thing is that we only ever ask members for what we need” explained the Club’s director – underwriting, Ian Edwards.

“We don’t like surprises and neither do our members and their brokers,” he added. Sticking to that promise and mindful of increases in premium requested through general increases in recent years, the board resolved that no general increase would be applied across the membership for policy year 2023.

With the exception of a 10% increase in the yacht sector

uncertainty, volatility and ever-rising rising risk levels

The team from Shipowners’ Club

and increases for some members operating dry cargo vessels, the decision meant the Club was one of the only clubs in the International Group (IG) not to apply a general increase.

DISCIPLINED UNDERWRITING APPROACH

How do Shipowners’ do it? Edwards believes experience is key “Between myself, Simon [Swallow] and Steve [Randall, CEO of the Club’s Singapore branch] we have more than 100 years of industry experience in the small and specialist vessel sector…we like to think we know what we’re doing!”

While steady growth remains a key strategic goal, the Club is committed to doing so without compromising its underwriting discipline. “We want to grow steadily like everyone else. But, we don’t seek to write new business for anything other than what we believe is the right premium, as after all we are all sharing risks together,” explains Edwards

This is something that impressed the Club’s chief financial officer, Simon Peacock, when he joined the organisation in 2016. “It has stood us in such good stead. That underwriting

discipline has paid dividends and has not led to those high combined ratios others have suffered,” he said.

The Club’s members also have the benefit of a much larger spread of risk. With more than 34,000 vessels underwritten, the Club has the largest membership of any IG Club with more than 8,000 members.

However, Edwards recognises that the Club cannot afford to rely on its reputation as the go-to club for smaller and specialist vessels.

“Renewal is never easy, it’s an open opportunity for people to shop around. Particularly with our smaller clientele there has historically been a lot of options for them. We’re the only club that doesn’t apply release calls so they’re free to shop around,” he explained.

Yet consistently the Club has reported retention numbers in excess of 95% and this year’s renewal on 20th February was no exception, with retention levels achieved of 99%.

HONESTY AND INTEGRITY

“The role of the broker is hugely important”, explains Swallow. “They are our business partners. The building of trust between insurer and assured is essential and that is achieved through the broker who remains at the heart of our

relationships with so many of our members,” he adds.

Testament to Shipowners’ commitment to its broking partners is its network of more than 600 brokers. In recent research conducted by the Club, 98% of brokers surveyed said they would recommend the Club to clients and 96% said they were satisfied with all aspects of the Club’s service.

Maintaining those levels of service is no mean feat for a club with such a large membership particularly when it comes to renewal. “We need to make sure renewal is as efficient as possible,” confirms Edwards. “Hence our investments in technology. We know how important it is for members to receive their documentation accurately and on time”.

Perhaps the best example of this investment is the Club’s new P&I online portal. A one-stop shop for brokers’ evolving needs, the portal provides 24/7 access to crucial information and documentation. “Our goal remains to make it easier for the broker to work with the Club and we believe that ongoing investment in system solutions will help deliver against this goal,” explains Swallow.

PROTECT AND INDEMNIFY

As the Club faces the opportunity and challenges of 2023, its fundamental focus remains on servicing its existing membership through the broker network, maintaining underwriting discipline and striving to offer a supportive approach to claims.

The Club will continue to focus on helping members mitigate the ever-evolving risks that they face, through loss prevention advice and innovative insurance solutions, which helps to offset the increasing cost of claims.

Inflation will continue to be influential in terms of overall claims costs and the Club also expects to face modest increases in reinsurance costs for next year. But, what will always remain is the commitment and enthusiasm across the Club to “do the right thing” for its membership and brokers.

Peacock concludes: “Shipowners’ Club has been successful, is successful and will continue to be successful by doing the same things it has recently done and has always done.”

“The Club’s members also have the benefit of a much larger spread of risk. With more than 34,000 vessels underwritten, the Club has the largest membership of any IG Club with more than 8,000 members.’’