Marine Insurance Counts the Cost of Increased Attacks by Pirates!
Unbelievably Marine Piracy continued to grow in 2009, which should be a sobering thought for all us sea dogs who like to roam the seven seas.
The ICC International Maritime Bureau’s Piracy Reporting Centre (IMB PRC) has just released it’s 2009 annual report and it makes bleak reading for insurance loss adjusters and marine insurance actuaries trying to set rates for 2010.
Piracy and armed robbery incidents topped 400 in 2009.
Incredibly in these days of satellite surveillance and Type 45 Destroyers, incidents of Marine Piracy have grown from 239 in 2006 to 406 in 2009.
The total number of incidents attributed to the Somali pirates stands at 217 with 47 vessels hijacked and 867 crew members taken hostage.
Somalia accounts for more than half of the 2009 figures, with the attacks continuing to remain opportunistic in nature, with small high speed outboard land based vessels being used to pick off a certain type of easy target.
So what precautions against pirates are being taken?
All shipping and vessels in the gulf are required to transit the Somali coast in convoy with a minimum speed of 10 knots with absolutely no stops or slowing.
It is recommended to protect the boat with razor wire around the freeboard or the the lowest area of the deck.
Greased or electrified handrails have been used although the vessel owners are encouraged to use non-lethal deterrents to prevent the situations escalating.
Vessels that regularly transit the area even resort to welding doors shut and welding metal plates across windows. The return of the Iron Clads!
It's quite obvious that America doesn't want to get involved in the region after the Blackhawk incident, however it's Insurance Blogger opinion that until very stern measures are taken against the major perpetrators, these attacks will continue and continue; and the cost of freight insurance and boat insurance will rise and rise......
Meanwhile........
British Hostages Paul and Rachel Chandler, taken by Somalia Pirates, are spending their 159th day in captivity!
Hey Gordon Brown!
How about this for some political capital this Easter.......
NEWS FLASH!!!
We interrupt the Snooker final for a message from Prime Minister Gordon Brown..
" It is with great pleasure that I have to tell you that this morning a team of our finest Royal Marine Commandos, successfully carried out a mission to rescue Mr and Mrs Chandler. There were no British Casualties......"
The International Union of Marine Insurance (IUMI) has added its weight to a radical compromise proposal put forward by the influential Lloyd’s market underwriter Simon Stonehouse that marine insurance underwriters should have the option of being able to purchase vessels at the current rock bottom values in replacement of lost vessels that have been insured at the previous peak market rates that were prevalent before the global economic crash.
This recommendation was delivered to a panel of IUMI members against a backdrop of plummeting asset values which has impacted hugely upon ship owners, many of whom are now facing loan defaults. Mr. Stonehouse – a senior underwriter for Brit Insurance, commented that “If a vessel is worth $60m yet an underwriter can go out and purchase an exact same type of vessel for just $30m, surely the underwriter should have that choice?”
With Moral Hazard proving to be another boat insurance issue never far from debate in the current climate Stonehouse added he felt that although this unusual approach may draw criticism from some area of the industry “The intention, by pushing for value reductions, is to improve risk by eliminating moral hazard,” he argued. “But increased financial pressure can also increase moral hazard.”
Indeed Moral Hazard has emerged as one of the key topics of debate within the marine insurance and ship insurance sector. With the shipping slump deepening at an alarming rate, the worrying situation of ship owner’s insured value being the worth more than the actual value of the ship they own has become more and more prevalent. In particular this has been evident since the market in secondhand vessels has now all but collapsed.
Chairman of the London Market’s Joint Hull Committee Peter McIntosh entered into the debate bringing managing director of Bankserve, Peter Mellett with him by publicly asking the finance expert to provide an overview in the role that he believes underwriters can play in saving ship owners from dreaded covenant defaults or even complete business failure.
In response Mr. Mellett told the IUMI it was his belief that the underwriting fraternity could become the catalyst which triggers an overhaul in lending policies and defaults if they were to continue to drive insured values to levels below those required by ship financiers. Mellett added “The issue is values. It is a debate beyond banks about how to address indemnity on hull and machinery policies. It is a great idea [purchasing replacement vessels], although I am not endorsing it.”
Adding further fuel to the debate Mr. McIntosh was noted to have tersely responded that if underwriters were “nervous about moral hazard” he strongly recommended that they “examine their relationship with their insured” and re-appraise their valuations.
Whether these strongly voiced opinions are borne out of necessity or frustration is yet to be seen. As is whether Mr Stonehouse’s honest yet somewhat unusual suggestions will actually take seed. If they do so it could mean a period of revolution within the sector. If they don’t then things will still be uncertain for some time as the economy slowly picks itself up from the series of sucker punches delivered across the last year.
Either way one thing is for certain – there are troubled waters ahead.....
Transport, Marine Insurance and Marine Cargo Insurance
Transport, Marine Insurance and Marine Cargo Insurance - The Oldest Profession By Insurance Blogger Paul Magus
Insurance brokers were already an established feature of the London Commercial and Finance scene by the time of Queen Anne. At the beginning of the Eighteenth Century Stuart and Hanoverian England controlled most of the trade runs around the Globe and the British Empire was in its early heyday.
Insurance Brokers came into existence because the marine insurance of ships (hulls and cargoes) emerged slowly as the part-time occupation of a large and disorganised group of private individuals, some with specialised knowledge such as merchants, ship owners and bankers, but including a wide range of people whose only common characteristic was that they had capital to speculate and large profits were available for risk seekers during these enterprising times of discovery. The first insurance broker was a Marine insurance broker and came into being as a response to a need at the time.
This miscellaneous group of individuals included, at one time or another, such diverse figures as Samuel Pepys, the Admiralty civil servant and famous diarist, and Daniel Defoe, the celebrated journalist and novelist, but no doubt there were hundreds if not thousands of others who, in the gambling spirit of the age, were willing to put their signature to, that is to underwrite, a list of people sharing a risk.
Because of the hazardous nature of marine insurance, no one would gamble more than a fraction of his (or her) fortune on any particular vessel, and so someone had to run round the City to assemble a list of names to provide cover for each of the ships leaving port, the so called Lloyds List provided by an early bookies runner.
As Gibb writes in his Lloyds of London, the brokers were the fixed point in a floating market.
It was they who were the professionals, the full-time men who depended on insurance for their daily work and livelihoods, who kept recognised offices, knew the responsible underwriters and, through long experience, were best informed on the nature of marine risk.
Over the next 300 years of so until the present day, the evolution of insurance broking saw many ups and downs, but was characterised by three outstanding features: the growth, diversification and, most recently, amalgamation of insurance broker firms. Insurance products themselves have followed the insurance broker evolutionary path and likewise responded to the needs of the times.
How Mr Pepys would marvel at the way Insurance is now transacted everywhere across the Internet. Marine Insurance is readily available online today for global cover and risks and can as easily be obtained by the small boat owner seeking boat insurance cover as the large shipping magnate looking for cruise ship insurance. Equally available, Freight Forwarders Insurance and Marine Cargo Insurance advice, risk information and quotes can also now easily be obtained online, as can tracking the progress of shipments.
You've only got to search on the Internet for all the popular personal lines insurance such as Car Insurance or Home insurance or even gas bills and you'll find the lisitngs dominated by the big insurance comparison sites. Now this is great if you are Joe Normal and aren't too particular about the cover you get, but these sites don't help me find cover for my 12 foot laser sailing dingy.
So it was refreshing to search through lists of results to find a site that actually finds me quotes and price comparisons for my small boat without having to fill in reams of questions just to get cover from one operator. Small boat insurance company BoatInsurance.org.uk have made the process very easy and quick and can offer instant online cover for all boats under 23 feet in length and in my case for under a tenner. Definitely worth a visit if you own a small boat and want to save time and money! Boat insurance can cover sailing dinghies, sailboats, motorboats, motor cruisers, catamarans, sailing boats, small yachts, keelboats, powerboats, speedboats, RIBs, small multi hulls, wind and sailboards, jet skis and personal watercraft, rowing boats, kayaks, canoes and all watercraft under 23 feet.
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Piracy and armed robbery incidents topped 400 in 2009. 
