IUMI insurance update – losses, seafarers, carbon

Feb 07 2022


The International Union of Marine Insurance (IUMI) provided an update on important issues to tanker operators relating to insurance, including trends in loss rates, seafarer issues and decarbonisation, following its September 2021 annual event.

The main annual event of the International Union of Marine Insurance (IUMI), held over September 2021, was online this year, but hosted by the General Insurance Association of Korea. After the event, the chairs of the main committees provided Tanker Operator with an update on some of the most important developments relevant to tankers.

 

Lowest loss rates

Maritime losses, leading to insurance claims, are at their lowest ever, and have stabilised at this low level, said Philip Graham, chair of the Facts & Figures Committee at IUMI.

 

It should be factored in that maritime activity over the past year was lower than usual in many sectors due to Covid, he said.

 

If ‘ground zero’ for Covid was March 2020, some parts of the maritime market returned very quickly – although LNG took 7-8 months to return, oil trade hasn’t returned to previous levels, nor passenger and the cruise market, he said.

 

In terms of loss rates, “it’s safe to say the tanker market does perform better than other types of vessels,” Mr Graham said.

 

The role of oil companies via OCIMF may be a factor. “I believe there’s a correlation between the two, it is born out in some of the statistics.”

 

Asked on the influence of Covid on risks, Mr Graham said that IUMI has not specifically collected data about losses related to Covid, but, “from my understanding, we've had a relatively few number of Covid losses, with the exception of the P+I market which covers certain Covid related losses.”

 

Most of the products maritime insurers provide are related to physical damage to vessels, equipment and cargo, and Covid has not caused any direct damage.

 

There have been some indirect impacts, such as spare parts taking longer to deliver, leading to vessels being unable to be used, and ‘loss of hire’ claims. There have been some claims under ‘denial of access,’ with personnel unable to travel to vessels, he said.

 

Seafarers

Ramachandran Radakrishnan of QBE Insurance in Singapore, and chair of IUMI’s Ocean Hull Committee, said that he has heard “reports of ships operating with 50 per cent of their crew onboard, and unable to offload crew with Covid in some ports.”

 

Mr Radakrishnan is a former seafarer and a former OCIMF vetting inspector.

 

Some seafarers have been onboard for over 12 months, where they would usually stay onboard 4-6 months. “All this would lead to tremendous fatigue and stress.”

 

IUMI has identified a trend of increased near misses in the first 6 months of 2021. That has “a direct correlation with the stress and anxiety of the crew,” he said.

 

“We need to be able to tell the governments that some of them need to be offloaded and crew change needs to be made possible.

 

This bad news has had an impact on enrolment in seafaring colleges, he said, with life as a seafarer looking less desirable. “This will probably lead to a midterm and long term problem going forward.”

 

If the maritime sector was forced to employ less experienced seafarers, we may see more accidents and insurance claims. Something similar was seen in 2006-2008 when there was a big expansion in shipping, said Philip Graham of IUMI’s Facts and Figures Committee.

 

Decarbonisation

Frank Streidl of Zurich Global Energy, and chair of IUMI’s Offshore Energy Committee, noted that carbon footprints from shipping are “incredibly difficult to measure,” for insurers.

 

One problem is that the criteria of how to measure the footprint of a shipping company is “not universally agreed”. The data shipping companies supply to IMO, so far, is limited in richness (broadness of coverage) and granularity, such as one figure for a whole year.

 

The second problem is that shipping companies can be reluctant to provide their emissions data to their insurers, and they are not forced to disclose it. “It is very difficult to get that.”

 

A change to the data disclosure rules would need to go through the IMO decision process, and require a consensus of countries to agree.

 

But without knowing what emissions companies are making, “how do you prove what you have done?”

 

Another challenge is the different levels of commitment around the world to decarbonisation.

 

“Without any fingerprinting, we have the advanced industrial economies taking a certain view, we have some eastern economies taking a different view, we have developing economies that might again be at a different point in the journey,” he said.

 

“In general regulation depends on countries, it is driven by governments. There’s pressure on certain parts of the industry driven by their respective governments. There's other parts of the industry that virtually feel no pressure. State oil companies in certain part of the world can carry on as is, or are encouraged, whether we like it or not. If governments don't feel they want to regulate then there’s no pressure on industry,” Mr Streidl said.

 

ESG goals are not all about emissions, and some can be in conflict with emissions. For example, there can be efforts to support the rights of indigenous people, but indigenous people want the right to make emissions.

 

The topic of ESG is covering an increasingly wide net, including illegal fishing, sustainability of ship recycling, as well as emissions, he said.

 

The insurance sector gets involved in decarbonisation in other ways. It is “sitting on huge amounts of premium,” which is invested rather than just kept in a bank. There is an opportunity for the industry to make a difference on ESG based on its investment choices.

 

Another area it can improve is on reducing the emissions of running the insurance operation.

 

A third area is in developing new insurance products, linked to low carbon shipping.

 

Another area where decarbonisation affects insurance is if it changes the type of ships seeking insurance, such as from less waterborne transport of coal.

 

Richard Turner, president of IUMI, added that while the insurance sector has every reason to support decarbonisation, it also wants to ensure that risks are not increased in the process of doing so. “There are factors which need to be managed.”

 

“I think this conference has been a watershed moment in terms of IUMI embracing the ESG agenda, it feels like we've made a real step change.” said Richard Turner, president of IUMI.

 

“Pretty much every workshop had something to do with ESG matters.”

 

“I have an increasing sense that loss prevention is linked to measures in the industry linked to sustainability,” he said.

 

Discussions are underway to develop a version of the Poseidon Principles for marine insurers, said Helle Hammer of CEFOR (The Nordic Association of Marine Insurers) and chair of IUMI’s Policy Forum.

 

The idea is that it will use the data which shipping companies already report, such as to IMO, banks and charterers. “That will avoid a lot of double reporting.”

 



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