In Marine Insurance P&I Club News 15/07/2016
TONNAGE CONTINUES TO GROW
FREIGHT MARKETS CONTINUE TO CHALLENGE
DELIVERING FOR SHIPOWNERS
FROM STRENGTH TO STRENGTH
SECURING A PORT IN A STORM
THE PRESTIGE – 13 YEARS ON
REACHING OUT
THE WAY AHEAD2016/17 will undoubtedly present new challenges for Clubs in meeting shipowners’ liability insurance needs. The Group Clubs, individually and collectively, are however, robust, financially sound and well-equipped to meet these new challenges, and will continue to work and innovate to develop new solutions for shipowners’ liability insurance requirements.
The shipowners’ liability cover provided by the Group Clubs, and through the Group’s claims pooling and reinsurance arrangements, is a key factor in enabling world seaborne trade, the protection of the marine environment and of the interests of both public and private victims of maritime accidents. Furthermore, the spread of risk across Club’s mutual tonnages, and the cost efficiency of the collective reinsurance purchases, delivers significant benefits to the shipowner members of the Group Clubs.
2015 saw further growth in total Group entered tonnage, which increased from 1,047 billion GT as at August 2014 to 1,088 billion GT as at August 2015.
World fleet growth over the past year has remained broadly static and, according to Clarksons in 2015, it was just under 4%, down from the highs of between 7% and 9% annual growth in the 2000s. In addition, new building deliveries over the past year show a marked reduction in all vessel sectors. After a significant decline in demolition activity in the second half of 2015, scrapping has now resumed to around same levels as it was a year ago.
World seaborne trade is projected to continue to expand by around 2% during 2016, roughly half the year-on-year expansion in the period 2011-2014.
Testing times continue for shipowners in the global freight markets, particularly in the dry bulk and container sectors. The ClarkSea Index, which peaked at over US$18,000 per day in May 2015, has fallen to just over US$9,000 per day in May 2016.
In the first quarter of 2016, overall bulk carrier earnings reached their lowest quarterly level on record, at just over US$4,200 a day. With very few exceptions, all vessel type rates have declined during the past 12 months.
The strengths of the Group system, in delivering for shipowners needs, was again demonstrated during 2015/16. In particular, in the work being undertaken to provide a workable solution for shipowners’ financial security obligations under the Maritime Labour Convention, when the new requirements for financial security for back wages enter into force at the beginning of 2017. In addition, the development of the Group fall-back reinsurance programme has facilitated some resumption of Iran trade. This is designed to address the potential reinsurance collection shortfalls on claims involving Iranian liabilities as a result of the continuing application of US primary sanctions. However, there is further work to be done in achieving a permanent and effective solution to the risk of reinsurance shortfalls arising from continuing sanctions measures.
Individually, all Group Clubs are reporting the strengthening of their financial position, reflected in increased free reserves, and most are also experiencing favourable claims trends within their retention during the past year. Underwriting results are generally improved, and have helped to offset continuing under-performance in the global investment markets.
During 2015/16, the Group worked closely with the European Commission Directorate General for Mobility and Transport, Member States and other industry representatives, in the successful development of the EU Operational Guidelines in relation to the granting of places of refuge to vessels in distress. Following a series of high-profile cases, involving refusal or delay by maritime authorities to grant a place of refuge, including the CASTOR, the PRESTIGE, and more recently the MSC FLAMINIA, the EU initiative was welcomed by EU Member States and industry alike. The Operational Guidelines were formally launched in Brussels in January 2016 and, quite literally, as this launch was taking place a car carrier, the MODERN EXPRESS, was heavily listing in heavy weather in the Bay of Biscay and in urgent need of a place of refuge. The prompt action of the Spanish authorities in permitting the vessel to proceed under tow to Bilbao, where she was safely secured, prevented what might have been a major maritime incident impacting on European shores. The challenge, of course, will be to ensure that European Member States implement and apply the new guidelines, but hopefully these will assist in avoiding repetition of past and, very costly, maritime disasters.
More than 13 years after the sinking of the PRESTIGE in November 2002, the judgment of the Spanish Supreme Criminal Court rendered in January 2016 came as a considerable disappointment to shipowners and insurers alike. The first trial court in the criminal proceedings, the Audiencia Provincial in La Coruña, held a nine-month oral hearing between November 2012 and July 2013. The evidence received by that court consisted of the testimony of many witnesses, including numerous experts called by various parties, together with a volume of documents said to be the greatest number ever submitted to a court in Spain. The Supreme Criminal Court decision substantially overturned the judgement of the Audiencia Provincial and followed a hearing which lasted less than one day, at which none of the defendants or other witnesses were heard and only brief oral submissions were permitted. The Supreme Court’s decision is being appealed, with the objective of reinstating the lower court judgement. This is a process which will inevitably take a number of years to complete.
One of the core objects and functions of the Group is the co-ordination and external representation of the views of Clubs’ shipowner members on matters of concern to the shipping industry with States, inter-governmental organisations, national and regional authorities and marine insurance and shipping industry associations. The Group Clubs, co-ordinated through the activities of the numerous Group subcommittees and the Group Secretariat, are very active in outreach engagements and continue to explore new opportunities and to welcome and encourage dialogue and co-operation with interested States, and public and private stakeholders on issues of mutual concern and interest.
Source: IGP&I (International Group P&I Clubs)
