Page 14: of Maritime Reporter Magazine (September 1998)

MARINE FINANCE

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Owners To Face Rising Insurance Costs

The shipping and marine business sectors are noted for being cost conscious. Whether they regard insurance as an obvious necessity or a necessary evil, recent overcapacity in the insurance market, generally, has left ship own- ers, cargo interests and a whole mass of players from shipyards to brokers and forwarders in a relatively comfortable position. Inevitably, the cycle must turn back in insurers' favor. The vital questions are when? and will all sectors respond in the same way? The answers lie with the current "shakeout" processes being seen in the insurance markets.

Drewry shipping Consultants Ltd.'s latest

Briefing Report Marine Insurance: Issues,

Practices and Costs concludes: • In areas where the quest for "market share" remains — notably Cargo and Hull &

Machinery (H&M) — the ferocity of competition will last longest. • The Protection & Indemnity (P&I) sec- tor is being pulled in opposing directions.

Change will come to the International Group agreement as a consequence of the ongoing EU investigations and this may see the mutual P&I

Clubs reduced in number through merger and consolidation. At the same time, choice for shipowners is being expanded as fixed premium

P&I options gain credence. • Marine Liabilities insurance is a very specialist area and perhaps, therefore, the sec- tor most able to reverse the downtrend. saw ship owner (and marine sector) insu costs rise substantially. There was an a turn which began in the second half of 19 with owners with good records seeing reductions. From 1995 to 1998 the rate 1 has been downwards with no real sugge that this would be checked. However, claims activity may be the catalyst the ii ance market is able to respond to. Next could be important, but Drewry concludes I will be a crucial year. Underwriting losses force a review. Hull and P&I rates should h en. The fact that this will coincide with rei id needs on current multi-year policies will to the year's market significance. Other cri; issues will be the continuing "reconstruc and renewal" at Lloyd's, the globalization of Drewry's report notes that the early 1990s

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Maritime Reporter/Engineering News /

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