Marine


We’re visiting the United Kingdom this week, so it’s appropriate we bring you a British themed news item.

An unpublished and original insurance claim for the loss of the Titanic will come under the hammer this Saturday at Aldridge’s auction house in Devizes, Wiltshire. The document is expected to fetch more than £12,000 ($20,185).

It’s more than 100 years since the RMS Titanic, a luxury British passenger liner, sank in the North Atlantic ocean on April 15, 1912 after colliding with an iceberg during her maiden voyage from Southampton, UK to New York City.

She carried 2,224 passengers and crew, but had lifeboats for only 1,178 people. More than 1,500 people died in the disaster.

The 4-page insurance document up for sale was prepared for insurance purposes and written by second officer Charles Lightoller, the most senior officer to survive the Titanic disaster. It was certified and signed by the Titanic’s second, third, fourth and fifth officers on April 19, 1912.

In what appears to be an attempt to avoid the insurers accusing the ship’s crew of negligence, the certified claim includes an interesting and sometimes curious account of the disaster:

The ship sank in very deep water and proved a total loss, with cargo, luggage, personal effects and mails.”

As to the actions on the bridge, the document states:

…the first officer immediately starboarded the helm reversed the engines full and closed all watertight doors. The ship swung to port, but struck a “growler” or small low-lying iceberg…”

In the words of the auctioneers, it’s fascinating that the officers would seem to attempt to minimize their encounter with the rather large and ominous iceberg by describing it as a “small low-lying iceberg.” This could possibly have been an attempt to downplay the size of the iceberg due to the question of liability and who was to blame for the sinking.

As the Western Daily Press reports, the strategy worked. Insurers paid out £3 million ($5.1 million) within 30 days – crucially before a major inquiry revealed the catalogue of mishaps that led to the sinking.

The lot is one of 200 Titanic collectables included in the auction, which is to commemorate the 102nd anniversary of the loss of the ship.

Atlantic Mutual, then the largest marine and general insurance firm in North America, was one of the major insurers of Titanic, providing the Oceanic Steam Navigation Co, Ltd (Titanic’s parent company) with what is believed to be more coverage for the ship than any of the many other single carriers which were part of Titanic’s insurance consortium.

Numerous Lloyd’s syndicates put their names on the insurance slip to cover the Titanic which was considered a prestigious risk to insure. More on how the disaster remains strongly linked to the history of the Lloyd’s market here.

The insurance policy was sold in an October 2013 auction.

Check out I.I.I. facts and statistics on marine accidents.

The insurance marketplace as a whole could benefit greatly if marine insurers would incorporate more catastrophe modeling in their pricing and profiling of risk accumulations, according to American Institute of Marine Underwriters (AIMU) chairman Roger F. Ablett.

Speaking at the 115th AIMU annual meeting held in New York City late last week, Ablett noted that in the aftermath of Superstorm Sandy there had been a call for marine underwriters to make greater use of cat modeling in their risk analysis.

Despite the shortcomings in modeling hull and cargo risks which are transient, as opposed to property risks which are static, Ablett told the gathering:

It is well known that the marketplace as a whole could benefit greatly if marine insurers would incorporate more modeling schemes in their pricing and the profiling of accumulations.”

Some 15 percent of Superstorm Sandy’s total estimated insured loss of $19 billion was marine-related.

The marine loss of $3 billion exceeded the total amount of U.S. marine insurance premiums collected last year, Ablett said.

The two marine lines most affected by Sandy were cargo and yachts.

Cargo recorded a combined ratio of 131 percent in 2012, up from 88 percent in 2011.

The combined ratio for yachts was 135 percent in 2012, some 40 points higher than the prior year.

AIMU’s annual survey of its members also reported direct written premiums of $2.2 billion in 2012, with a combined ratio of 115 percent.

That represents a slight drop in premiums from 2011, while the combined ratio deteriorated from just over 90 percent.

As we look ahead to the start of the 2013 Atlantic hurricane season marine insurers are among those that will be closely monitoring forecast storm activity.

Annual spring statistics recently released by the International Union of Marine Insurance (IUMI) noted that the cost of Superstorm Sandy to the global marine market has been put at between $2.5 billion to $3 billion – effectively wiping out the entire U.S. marine premiums for 2012.

The statistics which cover the cargo, ocean hull and offshore energy sectors remain a litmus test for the marine insurance market and the impact of Sandy will define 2012 in the eyes of underwriters, IUMI said.

While Superstorm Sandy’s main areas of impact were the states of New York and New Jersey, it was one of the largest storms ever and its impact stretched over 1,000 miles from the Great Lakes to Boston.

In its analysis of the cargo market, IUMI noted:

The total insured loss from Sandy is currently estimated to be between $25 billion-$30 billion of which approximately 10 percent or $2.5 billion-$3 billion is for the marine business.

It’s still unclear how much of that was for ocean cargo, but we do know that major industry groups such as automotive, coffee/cocoa trade and fine arts were particularly hard hit. There is also a substantial inland marine loss.

To put the claim in perspective this one loss has eroded an entire years worth of premium for the whole U.S. marine market.”

Insurance Journal has more on this story here.

Lessons learned from Superstorm Sandy are among the topics to be addressed at the 20th Biennial Marine Insurance Issues Seminar sponsored by the American Institute of Marine Underwriters (AIMU) on May 8 in New York City. The conference will be held at the New York Marriott Downtown, 85 West St.

To register for the seminar or for further information click here.

Piracy on the world’s seas has reached a five-year low, with 297 ships attacked in 2012, compared with 439 in 2011, the International Chamber of Commerce (ICC) International Maritime Bureau (IMB) global piracy report revealed today.

Worldwide numbers fell thanks to a huge reduction in Somali piracy, though East and West Africa remain the worst hit areas, with 150 attacks in 2012, according to the IMB report.

Globally, 174 ships were boarded by pirates last year, while 28 were hijacked and 28 were fired upon. IMB’s Piracy Reporting Centre also recorded 67 attempted attacks.

The number of people taken hostage onboard fell to 585 from 802 in 2011, while a further 26 were kidnapped for ransom in Nigeria. Six crewmembers were killed and 32 were injured or assaulted.

A press release cites Captain Pottengal Mukundan, Director of IMB:

IMB’s piracy figures show a welcome reduction in hijackings and attacks to ships. But crews must remain vigilant, particularly in the highly dangerous waters off East and West Africa.”

In Somalia and the Gulf of Aden, just 75 ships reported attacks in 2012 compared with 237 in 2011, accounting for 25% of incidents worldwide. The number of Somali hijackings was halved from 28 in 2011 to 14 last year.

IMB says navies are deterring piracy off Africa’s east coast, with pre-emptive strikes and robust action against mother ships. So too are private armed security teams and crews’ application of “Best Management Practices”.

But the threat and capability of heavily armed Somali pirates remains strong.

Follow the IMB record of piracy and armed robbery incidents on Twitter and view latest attacks on the IMB Live Piracy Map.

The Washington Post has more on this story.

The marine insurance industry is facing a bleak present as it seems to be unable to adapt to a changing business environment amid ongoing economic uncertainty, an international gathering of marine insurers was told.

In a keynote address to the annual conference of the International Union of Marine Insurers (IUMI) in San Diego, IUMI president Ole Wikborg noted that some marine underwriting entities – both old and new – were facing downgrades, and even closures, as a result of prevailing economic uncertainty.

What continues to surprise me is that with one gone, new capacity quickly fills the vacant spot with a business model not very much different from the one that had to quit. In our practical day-to-day dealings, it may be argued that our business models are not very innovative.”

This lack of innovation may be a result of marine insurers’ inability to renew a business model that is out of touch with the needs and requirements of the client base, Wikborg said.

He went on to suggest that the marine insurance industry may be unable to build and maintain a sustainable business activity through continuous profitmaking and service delivery because underwriters are disobeying the undeniable truths of their past performance.

I know it’s a hackneyed phrase, but its bottom line growth and not top line premium production inflation we need.”

Wikborg also pointed to the short-term view of some investors in the marine insurance industry:

Maybe our industry is dominated by shareholders who have no basic knowledge of the marine insurance business and its volatility, – with a short term investment philosophy and no ability nor interest in staying put when times are tough.”

New and stricter regulation was another concern for the industry:

Maybe our regulators are to be blamed for not understanding the marine insurance business model, its global reach and special requirements.”

Despite a trebling of the global commercial shipping fleet in the 100 years since the sinking of the Titanic, overall shipping loss rates declined from one ship per 100 per year in 1912 to one ship per 670 per year in 2009.

This telling statistic comes in a new report from specialist marine insurer Allianz Global Corporate & Specialty (AGCS).

The report reveals that while marine safety has vastly improved in the century since the Titanic, the maritime industry now faces new risks driven by the continued growth in world shipping.

Human error risks and the growing trend to super size ships are among the next challenges facing the industry, AGCS says.

Human error is described as the weakest link in the system.

Over 75 percent of marine losses can be attributed to a wide range of human error factors, including fatigue, inadequate risk management and competitive pressures, as well as potential deficiencies in training and crewing levels.

AGCS says:

As technological improvements reduce risk, so does the weakest link in the system – the human factor – become more important. This is where the industry should focus most closely, so that best practice risk management and a culture of safety becomes second nature across the world fleet.”

Other significant safety risks include: increasing bureaucracy on board ships; the continued threat of piracy off Somalia and elsewhere; and the emergence of ice shipping and its associated navigational and environmental complications.

Still, shipping disasters tend to spur marine safety improvements and Costa Concordia is certain to be no different, the report says.

Another key takeaway from AGCS’s research on safety and shipping from 1912-2012:

Marine transport is one of the safest means of passenger transport overall with far lower fatal accident rates than car, motorcycle, bicycle or walking in Europe.

Business Insurance has more on this story.

Check out I.I.I. facts and statistics on marine accidents.

March 11, 2012 will mark the one-year anniversary of the Japan earthquake and tsunami. Together the quake and tsunami caused $210 billion in economic damage, an estimated $35 to $40 billion in insured losses, and 15,840 fatalities, according to Munich Re.

While the disaster hit Japan, its aftermath was felt well beyond that country’s borders. Concerns were raised worldwide over supply chain disruption, nuclear risks and tsunami damage.

Another ongoing issue of concern beyond Japan’s shores is marine debris.

According to NOAA, it’s possible that debris washed into the sea by the tsunami could arrive on shores in Alaska, Hawaii, the West Coast, and Canada over the next few years.

Over at the Marine Debris blog, a post by Nancy Wallace, Director of the NOAA Marine Debris Program, notes:

It is likely that beachgoers on the West Coast and Alaska will start noticing a gradual increase in marine debris items near-shore or on the beaches in 2013. Those on the main Hawaiian Islands might start noticing an increase closer to 2014.”

Despite the alarming news headlines, NOAA’s Wallace assures us there is no scientific estimate of how much debris the tsunami washed into the sea or how much is still floating. It is also highly unlikely any debris is radioactive, while the chance of human remains arriving with it is almost zero.

You can find out more about the Japan tsunami marine debris on the NOAA Marine Debris Program site. Resources include the informative tsunami debris FAQs and fact sheet.

There’s also a marine debris tracker app that allows you to check in when you find trash on U.S. coastlines and waterways. Significant marine debris sightings can also be reported to NOAA via email at DisasterDebris@noaa.gov

A HuffPost piece offers further analysis on the tsunami marine debris story.

Reports suggest that insured losses arising from the grounding and capsize of the Costa Concordia cruise ship off the west coast of Italy Friday night could make it the largest marine insurance loss in history.

So far, six are confirmed dead and 29 reported missing after the Costa Concordia, carrying over 4,000 passengers and crew, apparently deviated from its course and hit rocks near the island of Giglio. The ship is owned by Carnival Corp.

Concerns were growing yesterday that the ship could break up and cause an environmental disaster if some of its roughly 2,300 tonnes of fuel leak.

A Reuters report cites one industry analyst estimating the insured loss from the Costa Concordia at between $500 million and $1 billion. Meanwhile, Bloomberg News cites another analyst saying the insured loss could total as much as $800 million. 

Whatever the loss ultimately totals, global insurers and reinsurers will play a key role in covering claims related to the incident. A special report by Guy Carpenter has more on this.

In the world of marine insurance, damage to a vessel is typically covered by a hull and machinery policy, while marine liability insurance would cover property damage and injury to third parties at sea.

The Protection & Indemnity (P&I) market typically covers liability claims arising from large marine insurance claims.

The International Group of P&I Clubs comprises 13 mutual insurance associations (P&I clubs) that between them provide liability cover for approximately 90 percent of the world’s ocean-going tonnage.

Clubs cover a wide range of liabilities including personal injury to crew, passengers and others on board, cargo loss and damage, oil pollution, wreck removal and dock damage.

Under the Group’s pooling agreement by which the clubs reinsure each other, losses in excess of $8 million are shared between the clubs.

This claim-sharing agreement is underpinned by a very extensive market reinsurance program which the Group clubs arrange.

For more on this, check out the latest P&I market review from Willis.

 

Today we take to the high seas to bring you latest reports of a surge in world piracy attacks and the resulting cost to the economy.

The number of people taken hostage at sea and the number of vessels taken in 2010 rose to record levels, according to annual data from the ICC International Maritime Bureau’s Piracy Reporting Centre (IMB).

Pirates captured 1,181 seafarers in 2010, up 12.5 percent from 1,050 in 2009, while a total of 53 ships were hijacked in 2010, of which all but four occurred off the coast of Somalia. Eight crewmembers died in these incidents.

Overall, ships reported 445 pirate attacks in 2010, up 10 percent from 2009, the IMB said.

The IMB describes the continued increase in these numbers as “alarming”:

As a percentage of global incidents, piracy on the high seas has increased dramatically over armed robbery in territorial waters.”

Hijackings off the coast of Somalia accounted for 92 percent of all ship seizures last year, with 49 vessels hijacked and 1,016 crew members taken hostage. A total of 28 vessels and 638 hostages were still being held for ransom by Somali pirates as of 31 December 2010.

While attacks off the coast of Somalia remain high, the good news is that the number of incidents in the Gulf of Aden more than halved last year, with 53 attacks in 2010 down from 117 in 2009.

The IMB attributed the reduction to the deterrence work of naval forces that have been patrolling the area since 2008 and to ships’ application of self-protection measures.

An article in the Washington Post has more on this story. Follow the IMB record of piracy and armed robbery incidents on Twitter and view latest attacks on the IMB Live Piracy Map.

Meanwhile, Insurance Journal reports that a new study from think tank One Earth Future (OEF), estimates that maritime piracy cost the international economy between $7 billion and $12 billion in 2010.

OEF’s calculation includes costs related to ransoms, insurance premiums, re-routing ships, security equipment, naval forces, prosecutions, anti-piracy organizations, and cost to regional economies. OEF noted that the numbers could change substantially as the economy rebounds from the current economic recession.

The fortunes of ocean marine insurers are inextricably tied to the state of the economy and world trade so in today’s environment of slow economic growth, low inflation and minimal interest rates they really have their work cut out. At the annual meeting of the American Institute of Marine Underwriters (AIMU) in New York City yesterday, AIMU chairman Dennis Marvin noted that with fewer ships to insure, fewer goods in transit to cover with reduced value of merchandise and lower exposures most marine segments are seeing flat or falling premium volume. Combined with more than sufficient capacity, the budget constraints of buyers and shrinking profit margins, these factors are likely to lead to a continuing soft market in 2010, he said. “Now, more than ever, the most successful marine underwriters are the most diligent, knowledgeable and focused on the risks they assume,” Marvin said. Restrictive trade practices, cargo theft and piracy attacks are just some of the other issues affecting marine insurers. While incidents of piracy continued to increase during the first nine months of 2009, with the Gulf of Aden and the coast of Somalia primary areas of concern, a host of initiatives are being undertaken to counter the threat. For example, Marvin noted that a consortium of industry associations, including the International Union of Marine Insurers (IUMI), have produced a set of guidelines which stress that superior planning and training by a ship’s crew can significantly reduce the risk of hijacking.

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