Ever bigger cargo ships means that when maritime disasters occur, we all end up paying – even in New Zealand. Gavin Riley looks at recent shipping incidents that are an insurance nightmare.

A holed British container ship en route to Portugal from Belgium, and carrying more than 40,000
 tonnes of merchandise, is deliberately run aground on England’s Devon coast to stop it sinking during a storm in the Channel. Under cover of winter darkness hundreds of crafty local folk descend on the scene and, ignoring warnings from both constabulary
and coastguard that they are breaking the law, scurry off with whatever they can prise
from the beached cargo – motorcycles, car parts, disposable nappies, dog food and even
Bibles.
This recent and astonishing event is a scene reminiscent of the famous 1949 British comedy fi lm, Whisky Galore, a true story of Scottish islanders who spirited away thousands of bottles of booze from a stricken ship.

But in reality major maritime disasters are no laughing matter. The financial costs are enormous and have significant repercussions globally for both client and insurer. What may turn out to be the biggest commercial shipping catastrophe in history occurred in March last year when a Korean

ship carrying 8100 containers caught fire in the Gulf of Aden after an explosion in the

aft section. Hundreds of containers were destroyed or blown overboard. With more than 7000 bills of lading to review, it may be several years before the total loss to underwriters and ship, container

and cargo interests is known. But it could be as high as US$400 million, a figure that will impact

on global cargo and hull insurance rates.

 

Whereas until now three ships might have called at our ports to

pick up produce, soon there might just be a single much larger one

with a consequent concentration of the insurance risk.

 

(<Click> Down Load Full Article in PDF)

 

This article courtesy of CoverNote Magazine - Official Publication of IBANZ

 

 

Changes in the insurance market

 

The insurance market in New Zealand is primarily affected by the international reinsurance market. The reinsurance market is in turn primarily effected by major international losses.

 

The hardening of the New Zealand insurance market in 2001 was a direct result of the September 11 terrorist attacks.

 

With this in mind the current state of the New Zealand insurance market can best be described as fragile. Large insurance losses from weather events in the US will have their effect on the reinsurance market.

 

There has not been an immediate effect on the New Zealand insurance market from these large losses, primarily because both insurers and reinsurers were better prepared and more solvent than in 2001. Having said that, there are still signs of a hardening reinsurance market approaching.

 

The Managing Director of Anthony Runacres and Associates, Peter Lambert, has recently been in London, and has seen first-hand the direction the reinsurance market there is taking.

 

“Coming off a two year competitive period the reinsurance market has stabilised and even hardened in some areas. There is a trend towards the old + 10% mentality when a reinsurance treaty comes up for renewal.

 

Weather seems to be becoming the new worry for catastrophe reinsurers. There have been several instances of insurers cancelling their reinsurance treaties now, and arranging new covers just to get in before the increases hit”

 

These reinsurance increases will eventually filter down to us on the local insurance level and increases will be unavoidable.

 

The effect on the liability and motor vehicle insurance markets will not be as great as that on the commercial property market, however, as we have seen in the past, insurers will push increases on all lines of insurance to boost their overall premium reserves.

 

The “soft” insurance market in New Zealand is a temporary benefit to insureds, which, will eventually succumb to the inevitable cyclical shift towards “hardening” rates and increased premiums.

 

The current advantages of the market need to be exploited while they last.

 


 

Container Ship Fire

 

Fire fighting and salvage teams battled a major fire in March on the Hyundai Fortune, voyage 333W, which departed Singapore March 15 and was scheduled to arrive in Rotterdam March 30.  The total value of cargo on board is estimated to be US$500m.

New Zealand exporters could be involved if their cargo was trans-shipped through Singapore on route to Europe.

This will be a massive cargo claim as at this early stage one third of the containers on board this 5,500TEU vessel are thought to have been affected by fire and smoke damage.
The fire was eventually brought under control having burnt for nearly 2 weeks and not before the accommodations block and the row of containers immediately forward of the accommodations had been heavily damaged by fire.

Once the vessel was stabilised, “hotspots” in individual containers extinguished and cargo holds dewatered the vessel was towed into Port Salalah, Oman at the entrance to the Persian Gulf on April 17 and arrangements made to discharge the sound and (most of the) wet containers. This was completed by April 20. In total 2,249 containers were discharged of the original 5100 TEU. This was a complex procedure as the vessel required delicate ballasting to ensure stresses in the fire ravaged hull remained within acceptable limits.

Hyundai Merchant Marine (HMM), the vessel owners, have arranged for undamaged containers to be shipped onto their original destinations in Europe. "Hyundai Shanghai" (700 TEU) arrived at Salalah on 18th April, "MOL Advantage" (470 TEU) was due to arrive at Salalah on 22 or 23 April, "APL Cyprine" (468 TEU) was due on 28th April and "HD Liberty" (1558 TEU) was due at Salalah on 2nd May.

These vessels should be on-carrying the cargo to the intended destinations. Cargo receivers should contact their usual Port Agents with any queries about estimated times of arrival, or details of the transhipment operations for their particular cargo.

Following discharge of these containers the vessel, still under the control of Salvors and not yet technically at a “place of safety”, was anchored off Salalah to await her fate which will probably to be sold for scrap.

The hull is insured for US$70M. A 20-foot container and its cargo is typically valued for contents at around US$30,000 but a ship trading from the Far East to Europe carrying high-value commodities could easily lift the value to US$150,000 or more each. This would make an overall cargo value in excess of US$300M realistic. Add to this the cost of salvage and it is still expected that the total value of losses associated with fire will exceed US$400M.

Source: QBE Insurance (International) Limited



 

 
 

Web services by NZSOUTH NETWORKS

Anthony Runacres and Associates Limited  - Insurance and Risk Professionals