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As claims mount, discussions are under way about how to limit the risks of fire and overboard containers on the new generation of ultra large container vessels Boxship insurance claims continue to rise
To reduce the risk of major losses, insurers are working with shipowners, shipbuilders, flag states and ship classification organisations to improve vessel safety. The first item on the International Union of Marine Insurance (IUMI) agenda is fires, where some progress has been made. Work is under way to amend the International Convention for the Safety of Life at Sea (Solas) to improve fire detection and control on new containerships. The amendments will come into force on 1 January 2028, if adopted before 1 July 2026. Lost containers Efforts to tackle containers lost overboard, a relatively new area of discussion, are in earlier stages but remain a priority. IUMI believes that regulation of the lashing equipment used to secure containers to vessels may need to be strengthened, for example. While it may take time to implement regulations, it is thought that some shipping companies are already taking action, such as improving container checks and systems for positioning dangerous goods to prevent fires. Until a year ago, there was on average a fire on a container vessel every other week; now the frequency of fires has decreased, but there is no room for complacency. In many ways the risks are going to continue to multiply as shipping lines faced with unprecedented demand have placed orders equivalent to 25% of the current global fleet. Many of these will be ultra large container vessels, which are currently causing the insurers of containerships such concern.
A series of major loss events involving containerships in recent months — including a sudden surge in containers lost overboard in the North Pacific region in late 2020 and early 2021, the grounding of the Ever Given in the Suez Canal in March and a fire that destroyed the X- Press Pearl off the coast of Sri Lanka in June — has highlighted the risks to companies that insure ever-larger vessels. Efforts are under way to stem rising insurance claims from such incidents, but it could take years to make an impact, according to marine insurance specialists. It has been noted that it usually takes the International Maritime Organization (IMO), the global regulator, approximately 10 years to introduce and pass any regulatory changes. Bigger ships, bigger claims Container losses, ship fires and the overarching trend of increasing vessel sizes — which makes ships harder to control and rescue along with more cargo and vessel to lose or damage —
have conspired to create bigger exposures for insurers. Claims from these incidents can affect all areas of marine coverage – hull and machinery, cargo, and marine liability – collectively known as protection and indemnity insurance or P&I. The average number of containership claims covered by the International Group of P&I Clubs – a risk pool of mutual marine liability insurers – increased to 5.2 per year between 2016 and year-to-date 2021 from 1.4 per year between 2010 and 2015, according to Alexander Gray, head of marine P&I at insurance broker Lockton Inc in Singapore. The International Group pool and its reinsurance programmes cover claims from $10 million to $3.1 billion. The frequency and severity of claims is increasing, and we are now seeing total annual claims exceeding the total premiums paid. This ‘negative trend’ is causing concern among insurers and reinsurers and is not sustainable in the long term.
8
October 2021
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