Industry-wide cooperation and knowledge sharing vital on path to net zero: IUMI
Global ocean hull premiums rose in 2022 by 5.7% to reach $8.4bn, delegates attending this week’s annual gathering of the International Union of Marine Insurance (IUMI) were told. This was largely due to a combination of growing activity, increased vessel values and reduced market capacity. Claims for the same period remained moderate although early 2023 has witnessed a modest increase. Taken together, this has had a positive impact on overall loss ratios that have enjoyed a downward trend for the past three years with 2022 ratios starting out at the lowest point since 2015.
Despite this relatively good news, inflation is likely to have a significant effect going forward. Ilias Tsakiris, chair of IUMI’s ocean hull committee said: “During the post-covid period, there was a scarcity of materials such as steel coupled with an increase in their demand following the re-activation of global shipping. This was exacerbated by rising inflationary pressure, which has driven up the costs of materials, shipyards, and labour. From an underwriting perspective, inflation has not only been applicable to vessel repairs and claims but also to general office overheads. In the main, the underwriting community has not applied inflationary increases to the premium base and this may lead to a reduction in overall profitability over the coming year or two.”
Aside from inflation, three other key issues are currently demanding attention from hull insurers: alternative fuels, lithium-ion batteries and the growth of the so-called dark fleet.
“Emission reduction technologies are inevitably more sophisticated than the current methods of ship propulsion. This will increase the value of the global fleet and, consequently, the level of risk to be covered,” Tsakiris explained on the first point.
At the summit, taking place this year in Edinburgh (pictured), IUMI also called for industry-wide cooperation and knowledge sharing as shipowners move toward net-zero.
“There needs to be comprehensive cooperation and knowledge sharing between owners, class, flag states, underwriters and others. This will be particularly important as the first movers begin implementing new technologies which will then, inevitably, be taken up by the remainder of the industry. It will be essential for a comprehensive regulatory regime to be in place before the bulk of the fleet starts to comply,” said Helle Hammer, chair or IUMI’s policy forum.
Turning to lithium-ion batteries and electric vehicles and the spate of fires seen at sea, IUMI warned such incidents are becoming more common in recent years and action was needed.
As far as the dark fleet goes, IUMI stated in a release: “Many report that Russia is managing to bypass insurance regulations, with approximately 20% of the global tanker fleet avoiding sanctions.” IUMI statistics suggest the dark fleet today is around 600-strong.
