MARINE
MARKET REPORT
MARINE HULL & MACHINERY
AND WAR RISKS MARKET UPDATE
MARCH 2015
Founded by Arthur Gallagher in Chicago in
1927, Arthur J. Gallagher & Co has grown to
become one of the largest insurance brokerage
and risk management companies in the world.
With significant reach internationally, the
group employs over 20,000 people and its
global network provides services in more
than 140 countries.
Outside the US, we use the brand name
Arthur J. Gallagher.
CONTENTS
Market Report December 20142
Market Moves
2
Casualty Reports
3
General Average Disbursements Facility
6
Latest Maritime News
7
Oil Price Fluctuations:
A Marine Hull Insurer’s Perspective10
War & Piracy
15
Sources
18
ARTHUR J. GALLAGHER
AJGINTERNATIONAL.COM
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
1
MARKET REPORT DECEMBER 2014
Welcome to the March 2015 edition of the Arthur J. Gallagher
Hull & Machinery and War Risks Market Report. New in this issue
is a section for maritime news alongside the usual casualty and war/
piracy incident reports. We also have our first contribution to the
report from Underwriters. David Hughes and Jonathan Holmes
from Catlin Syndicate have kindly written a very informative article
on the impact of fluctuations in the oil price on the insurance market.
We believe such contributions from Underwriters will be a valuable
resource for our clients and hope they will become a regular feature
in this publication in the future.
MARKET MOVES
There has been a flurry of recent merger activity on the Underwriting side.
A well-documented merger between XL and Catlin was finally confirmed
on Friday 9th January. It is understood that XL acquired Catlin for around
USD 4.2bn. The combined entity is expected to have a leading presence in
global specialty insurance and reinsurance markets.
This was followed in February by the announcement that Canadian property
and casualty insurer Fairfax has purchased Brit Insurance for around USD 1.9bn.
Fairfax already owns two other Lloyd’s Syndicates (Advent and Newline) but has
ruled out merging them insisting they will continue to operate independently.
Analysts continue to speculate on further M&A activity with Amlin, Beazley,
Novae and Lancashire regularly featuring in the financial gossip columns.
Debbie Shilabeer has resigned from Atrium and will join Brit Syndicate in May.
Peta Kilian has resigned from Brit Syndicate and will re-join Amlin. In further
Amlin-related news, Alex Becker has moved to the Dubai office where he has
commenced Underwriting marine risks locally in the Middle East.
2
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
AJGINTERNATIONAL.COM
ARTHUR J. GALLAGHER
CASUALTY REPORTS
The 186 meter long, 7800 dwt passenger
ro-ro ferry “Norman Atlantic” caught fire
in the Adriatic Sea off the coast of Albania,
while en route to Ancona, Italy from Patras
via Igoumenitsa, in difficult sea conditions.
The vessel was carrying some 128 trucks
among some 200 vehicles. It is believed that
one of the trucks had scraped against the
vessel causing sparks and ignited the fire.
The blaze engulfed the length of the vessel as
black smoke forced the 477 persons on
board outside. Passengers reported that the
deck with lifeboats were hot enough to cause
shoes to melt. Eventually flames would reach
the lifeboats destroying them.
On 3rd February 2015, 5 weeks after the
incident a body was discovered on the
vessel’s garage. The discovery of the body
brings the total death toll to 12–10
passengers and two Albanian tug crew have
been confirmed dead - and the number of
missing passengers to approximately 18-20.
ARTHUR J. GALLAGHER
AJGINTERNATIONAL.COM
The same day a collision between the
Turkish general cargo “Gokbel” and The
“Lady Aziza” off the port of Ravenna, led to
the sinking of the first. “Gokbel” was
carrying a crew of 11 Turkish nationals, of
which 5 managed to survive the wreck.
Among the two confirmed victims was the
captain who reportedly did not leave his ship
until the last minute.
The 101 meter long, 8919 dwt general cargo
vessel “Better Trans” sank in the Philippine
Sea in an area of 19 25 N 127 40 E between
Taiwan and the Philippines. All 19 crew
escaped into the life rafts. Four hours later
the crew were rescued. However, only 18
men were later rescued and one man was
listed as missing.
On another ferry accident, three have
died and a further 12 went missing after
ro-ro ferry “Vicente” sank in heavy
weather off Cape Verde, Africa, on 2nd
January. The vessel, built in 1965, was
carrying 26, as well as a cargo of vehicles
and containers en route from Praia, with
some local news reports indicating the
vessel was dangerously overloaded.
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
3
The Cypriot-registered “Cemfjord”, a 2,500
tonne cargo ship carrying cement, sank15
miles north east of Wick, carrying a crew of
8 passengers. According to the vessel’s
management company it is most likely that
the incident was caused by severe storms. No
survivors were found, and after three days
the rescue operations were halted
The “Cemfjord” had previously run
aground in July off the island of Laeso
off the north coast of Denmark. According
to police reports the 57-year-old Russian
captain was drunk at the helm when they
came aboard and had a blood alcohol count
over twice the legal limit.
4
Six people were killed and four are missing
following an explosion on 11 February 2015
in a Brazilian offshore oil and natural gas
field run by Petroleo Brasileiro SA, said
Norway’s BW Offshore Ltd, which owns
the production ship on which the accident
occurred. According to reports the explosion
occurred after a natural gas leak on the
“Cidade de Sao Mateus”, a floating
production, storage and offloading (FPSO)
ship that was contracted to Petrobras. The
FPSO is anchored in the Camarupim oil
field in the Espirito Santo Basin about 75
kilometers northeast of Vitoria, Brasil
The death toll rose from three on Wednesday,
according to Petrobras, as the oil company
is commonly known, and Brazilian oil
regulator ANP. All the workers killed on
the platform were BW Offshore employees,
BW said. The FPSO was shut down after
the explosion, halting about 2,200 barrels
a day of oil output and 2.25 million cubic
meters of natural gas production.
On Tuesday 3rd March 2014 BW Offshore
stated that the last of the remaining three
crew missing have been recovered.
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
AJGINTERNATIONAL.COM
ARTHUR J. GALLAGHER
BULK JUPITER SINKING PROMPTS BAUXITE LIQUEFACTION WARNINGS
By Mike Schuler
The recent loss of the Bulk Jupiter off Vietnam
has once again prompted insurers to warn over
the carriage bauxite aluminum ore cargoes and
the potential for liquefaction.
The MV Bulk Jupiter unexpectedly sank after
departing from Kuantan, Malaysia on December
30 fully laden with 46,400 metric tons of bauxite,
a clay-like substance that is the primary ore used
in the production of aluminum. All but one of the
19 crewmembers onboard were lost in the accident.
Liquefaction is a phenomena in which a dry
cargo becomes liquified, which can cause a
ship to lose stability quickly and unexpectedly
due to the internal movement of the cargo.
Liquefaction has long been known to be a major
source of marine casualties. While the exact causes
of loss of the Bulk Jupiter are not known at this
time, the circumstances surrounding the loss
of the vessel are similar to those of previous
cases involving cargo liquefaction, prompting
some insurers to once again issue warnings over
bauxite liquefaction. Bauxite is typically listed in
the International Maritime Solid Bulk Cargoes
Code (IMSBC) as a ‘Group C’ cargo, meaning
it is not known to liquefy or possess a chemical
hazard, although it is noted that the ‘Group C’
categorization with a moisture content between
0% and 10%, consists of 70% to 90% of lumps
with a size between 2.5 mm and 500 mm, and is
10% to 30% of powder. In some cases, however,
bauxite cargoes have been known to exhibit
liquefaction characteristics similar to high-risk
‘Group A’ cargoes, such as high-profile nickel
ore, aka the world’s most dangerous cargo,
under certain circumstances.
A joint statement issued this week by the
Britannia P&I and the Norwegian Hull Club to
members noted that in the last month Malaysia
has experienced extremely heavy monsoon rain,
causing stock piles of bauxite at ports such as
Kuantan to become very wet. “Clients proposing
to load or in the process of loading a cargo of
bauxite in Kuantan, Malaysia or any other port
with prevailing or recent wet weather conditions
are therefore advised to contact the Managers
promptly to assess the requirement for appointing
a suitable surveyor, and to treat these cargoes as
potential Group A cargoes, i.e. cargoes which may
liquefy if shipped at a moisture content in excess of
their transportable moisture limit,” the joint
statement warned.
A statement from the American Club, a P&I club
based out of New York, raised similar concerns.
“The liquefaction of bauxite cargo specifically has,
indeed, occurred in the past. Such cargoes have
been those which, for the most part, have contained
a large proportion of very fine material,” the
American club statement said.
“Members intending to carry cargoes of bauxite
should be aware of the above and, in particular, that
such cargoes are prone to liquefaction in certain
circumstances. In any event, should Members have
any concerns over the carriage of cargoes of bauxite,
they are urged to contact the Managers for further
advice and assistance.”
Last year, a statement from the North P&I Club
warned shipowners carrying bauxite cargoes of the
potential for bauxite cargoes to liquefy at sea, citing
a number of instances where bauxite cargoes
pecifically from Brazil and Indonesia exhibited the
liquefaction characteristics of Group A cargoes.
According to the statement issued in February 2013:
“Fortunately none of the incidents have resulted in losses
to vessels or crew members. However, as seen in highprofile incidents involving liquefaction of nickel and
iron ore cargoes, the resulting loss of vessel stability can
be fatal,” said North’s Risk Management Executive
Colin Gillespie. “Conditions which take the cargo
outside the Group C specification, such as excessive
moisture due to heavy rainfall allied to a high fines
content may mean the cargo displays the characteristics
of a Group A cargo,” said Gillespie.
Source: www.gcaptain.com
ARTHUR J. GALLAGHER
AJGINTERNATIONAL.COM
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
5
GENERAL AVERAGE DISBURSEMENTS FACILITY
We have a new General Average Disbursements Facility supported
100% by Underwriters in Lloyds for a limit of USD 10,000,000.
This offers Ship Owners the opportunity to cover an increase, decrease or
shortfall in cargo’s contribution to general average disbursements, in the
event that the vessel and/or cargo suffer a partial or total loss between the
port of refuge (following the initial casualty), and the final discharge port
for the cargo. This facility offers unparalleled access to immediate coverage
at competitive rating and terms.
FOR ANY ENQUIRIES PLEASE CONTACT
EDWARD REMNANT
ASSOCIATE DIRECTOR | AJG MARINE
[email protected]
TEL: +44 (0)20 7204 6033
6
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
AJGINTERNATIONAL.COM
ARTHUR J. GALLAGHER
LATEST MARITIME NEWS
Largest Container Ship Delivered
The “MSC Oscar”, delivered in January, is
the first of a series to be acquired by MSC
through a long-term charter agreement.
The vessel’s carrying capacity is 19,924
TEUs and she is just slightly larger than
China Shipping’s CSCL Globe, which was
officially declared at 19,100 TEUs.
The vessel’s construction took only eleven
months to be completed from steel cutting
to delivery, which included extensive
commissioning and sea trials. MSC Oscar
is the first of the series of six ultra large
containerships (ULCS) of Olympic Series.
The remaining sister vessels of the series are
expected to be completed by November 2015.
According to a bulletin by DNV that
welcomed the “MSC Oscar” into class:
“not only does MSC Mediterranean Shipping
Company’s newest vessel set a size benchmark
for containerships in terms of capacity, but
it has also been designed with a number of
efficiency enhancing features. For example,
the engine has been optimized so that fuel
consumption can be automatically controlled
to take into account both speed and weather
conditions and she has a broad optimal speed
range for enhanced operational flexibility”.
ARTHUR J. GALLAGHER
AJGINTERNATIONAL.COM
China Lifts Ban On Valemaxes
Chinese Ministry of Transport has
issued a circular on the design of
400,000 DWT bulk carries entering
Chinese ports amending its previous
design layout.
In line with the circular, the eligible vessels
must not exceed a deadweight tonnage of
403,844 dwt and need to be 362m long,
65.6m wide, 30.5m deep and feature a
draught of 23m. The previous design code
covered ships up to 350,000 DWT, the South
China Morning post writes. As all bulkers of
Brazilian iron ore producer, Vale, meet the set
out criteria, the circular is seen as lifting of
Chinese three-year old ban on 400,000
bulkers, known as Valemaxes. Vale introduced
the leviathan cargo ships with an aim of
cutting transportation costs from Brazil to
China. Valemaxes were banned from mooring
in the country’s mainland ports in 2012 amid
safety concerns. However, the ban was seen as
an attempt to shield national carriers such as
China Ocean Shipping Group (COSCO).
Easing of the ban comes in the wake of Vale’s
deal with COSCO from last September on
the lease of ten very large ore carriers to be
built by China Merchants. The VLOCs will
be used to transport Vale’s iron ore from
Brazil to China.
Worldmaritimenews.com
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
7
Capesize Chartering Joint Venture
John Fredriksen’s Golden Ocean and Petros
Pappas’s Star Bulk - are involved alongside
Golden Union Shipping, CTM and Bocimar
in the formation of a new joint venture
company, Capesize Chartering Ltd.
According to a press statement the new
company will combine and coordinate the
chartering services of all the parties.
For the customers this represents the benefit
of a wider geographic area in which vessels
can be made available and with shorter spread
between loading dates.
For the shipowners the major benefit is
achieving a reduction in costs, since always
the best positioned vessel can be offered for
a fixture of a cargo. This will reduce ballast
voyages and associated running costs, notably
in respect of bunkers. A reduction of waiting
time and time spent in positioning the
vessels will benefit the industry as a whole,
in the form of reduction of ballast bonuses
and demurrage payable by charterers/cargo
owners, and a reduction of deviation,
waiting time and idle time for the account
of the shipowners.
Capesize Chartering Ltd was expected to
commence operations in the second half of
February 2015 from the existing offices of
each of the five parties involved.
Tanker merger
General Maritime (Genmar) and Navig8
Crude Tankers have confirmed a tie-up
that will run 46 ships, including 28 VLCCs.
The new entity will be called Gener8
Maritime and be based in New York, the
companies said. The fleet will include
21 VLCC newbuildings, plus 25 existing
ships: seven VLCCs, 11 suezmaxes, four
aframaxes, two panamax tankers and a
handymax tanker. These have a capacity
of more 11m dwt and an average age of
less than five and half years when all the
vessels are delivered. Peter Georgiopoulos
said: “We are pleased to have reached this
agreement with Navig8 Crude, which we
believe will combine an established owner
and highly-respected commercial operator
on an unprecedented scale.”
The deal is an all-share affair whereby a
newly-formed subsidiary of Genmar will
acquire all of the issued and outstanding
common stock of Navig8 Crude. Navig8
Crude shareholders will receive 0.8947
shares of the combined company for each
Navig8 share. Existing Genmar investors
will control 52.55% of the new company.
Peter Georgiopoulos will remain as chairman
and CEO, while John Tavlarios will become
chief operating officer and Leo Vrondissis
will stay as CFO. Navig8’s Gary Brocklesby
and Busch are expected to become “senior
consultants to the board of directors”. The
transaction is expected to close in the first
half of 2015. Genmar is backed by private
equity’s Oaktree Capital Management, and
it is thought to be just a matter of time
before the enlarged owner seeks a New York
listing. Jefferies advised Navig8 on the
transaction, while Evercore worked with
General Maritime.
Photo courtesy: Star Bulk Carriers SA
8
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
AJGINTERNATIONAL.COM
ARTHUR J. GALLAGHER
Costa Concordia Verdict
The captain of the Italian cruise ship Costa
Concordia has been found guilty of
manslaughter and sentenced to 16 years in
prison. Captain Francesco Schettino was at
the helm when the ship hit rocks and sank in
2012, killing 32 people. He was accused of
taking the liner too close to the shore and
then abandoning ship with passengers and
crew still on board. Schettino denied the
charges and said he was being made a
scapegoat. His lawyers had argued that it was
a collective failure of the ship’s crew and
others should share the blame for the disaster.
Schettino was not present when Judge
Giovanni Puliatti read out the verdict at the
court in the city of Grosseto. The 54-year-old
is expected to appeal against the verdict
Baltic Dry Index Hits New Record Low
The Baltic Dry Index (BDI) dropped
by another eight points reaching its new
record low at 522 points on Monday
16th February.
The Baltic Dry Index has fallen close to
50% over the past 12 months.
The Baltic Capesize Index fell to 614 points,
16 points lower than last reported, whereas
Baltic Supramax Index stood at 480 points,
6 points lower. Only Panamaxes seem to be
holding out with the index at 505 points,
recording a 6-point rise. The BDI’s
downturn has seen dry bulk vessel owners
left in dire conditions, especially since there
are no signs of recovery any time soon.
ARTHUR J. GALLAGHER
AJGINTERNATIONAL.COM
Print
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FEB
Graph: THE BALTIC DRY INDEX (Mar2014- Feb 2015)
Source: Bloomberg
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
9
OIL PRICE FLUCTUATIONS:
A MARINE HULL INSURER’S PERSPECTIVE
As ship-owners and charterers well know, fluctuations in the price of crude
oil can present many commercial opportunities and challenges. Part of the
role of the ship-owner is, of course, to manage these fluctuations based on
their experience in the market and entrepreneurial judgment. Indeed, the
success of many shipping companies has hinged upon their owner’s ability
to make the right calls in a changing environment. For a Marine-Hull
insurer, the recent drop in crude prices also presents challenges in the form
of a changing risk environment. These challenges are both commercial and
physical and relate to how the shipping market adapts and changes the way
vessels are operated in response to the changing commercial situation.
“WE VALUE OUR
REPUTATION AS
KNOWLEDGEABLE
AND CONSISTENT
UNDERWRITERS
”
As one of the largest Marine Hull underwriters in the Lloyd’s market, we value
our reputation as knowledgeable and consistent underwriters, in addition to our
recognised claims leadership and commitment to settling claims promptly. In order
to maintain this hard-won reputation we believe in being pro-active and discussing
emerging issues with our clients and the shipping industry as a whole. We hope to
develop a deeper understanding of risk that can help ensure both ourselves and our
clients are able to prosper in the short and longer term by reducing and effectively
managing our shared exposure to risk.
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MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2014
AJGINTERNATIONAL.COM
ARTHUR J. GALLAGHER
In the remainder of this article we wish to discuss some of these issues and offer an insight
as to how, as underwriters, we view the recent fall in the price of crude.
For the foreseeable future, it would appear that lower demand and oil prices are here to stay
and will be a major factor for us all to deal with throughout 2015. Unfortunately, the usual
benefits of lower oil prices, such as increased household disposable income and reduced
industry costs that would normally trigger higher demand and growth have largely been offset
by weak underlying global economic conditions. Other factors including weak currencies in
consumer economies, lower spending in producer countries, global political events and
mounting deflationary concerns have all helped to dampen the demand for oil.
It could also be argued that the oil and global energy market is undergoing major historic
changes that could have a longer-term effect on the industry. OPEC’s embrace of market
forces and the US shale oil revolution, with its lower barriers to entry, are likely to mean that
oil’s place in the global energy mix may be transforming.
While an increase in global economic activity and demand levels might take time to be
observed in containerised and other cargos, one of the first and most notable changes in
vessel utilisation is in the tanker market, particularly the use of VLCCs as floating storage
units. Chartering out a vessel as a storage unit may well be a sensible commercial move
that makes the most of the available charter opportunities however, such a change of use
does alter a vessel’s risk profile. It might be that an owner could expose themselves to an
aggregation of risk if numerous vessels were moored at the same location. While vessels
might be fully crewed and ready to get underway at any time, the ability of a static vessel
to avoid approaching heavy weather is diminished, especially if there is limited prior warning
of a localised weather front. The likelihood of collision also increases significantly when
even a few vessels begin to anchor close to offshore terminals or ports. Sadly, Marine War
underwriters must also consider the fact that such vessels are potentially an attractive target
for terrorist attack, as has been recently observed in Libya.
Although we have not seen this yet, one of the positive impacts of cheaper crude oil on the
world economy may be an increase in growth and trade as cheaper energy eventually translates
into cheaper production for manufacturers, and increased consumer spending. Should such a
development occur, it will have a significant impact on the world container vessel fleet. Given
that most industrial output is now transported in containers, it is likely that container vessels
will be used to greater capacity on both east-west and west-east voyages. This is likely true of
even the recent behemoths like the ‘Triple-E’ specification vessels and other 18,000+ TEU
vessels of which large container lines are currently taking delivery. The recent case of the MV
RENA, a constructive total loss and one of the largest P&I claims in history, shows just how
costly a container salvage operation can be, not just financially but also environmentally and in
terms of reputational damage to individual companies and the industry as a whole. With an
increased size of such vessels, marine insurers must consider the potential for increased salvage
awards. These changes in potential exposure should be factored into premium pricing in order
to protect the industry at large. There will also need to be increased investment from salvage
companies in equipment that can cope with the increased size of vessel and container volumes.
Furthermore, while currently a hot-topic of debate amongst naval architects, underwriters
must consider the compound effects faster steaming and more heavily laden vessels might
have on the market experience of actual total loss. Debate still rages concerning the cause
of the break-up of ‘MOL Comfort’ but the school of thought that contemporary modular
construction methods and the use of high tensile steels may negatively affect loss experience
must be considered. Potential negative impacts resulting from new construction methods and
machinery must be included in pricing because it certainly isn’t the role of the underwriter to
ARTHUR J. GALLAGHER
AJGINTERNATIONAL.COM
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2014
11
provide funding for real-world research and development. Unfortunately, history shows us that
unforeseen perils can always emerge.
Of course, it’s not just the Tanker and Container sectors that will be affected by the reduction
in oil prices. Another sector that we anticipate being significantly affected, particularly in the
medium term when current charters are completed, is the Offshore and Seismic sector. Should,
as many market commentators believe, a reduction in demand for exploration, supply and
survey work result in increased numbers of vessels entering lay-up, the risks face by both
owners and insurers change. Traditional Marine Hull policies, while often including provisions
for lay-up, are primarily designed to protect vessels trading at sea.
Here at Catlin, we’ve been discussing various different coverage solutions with our clients and
brokers. We feel there might be genuine benefit for clients who are intending to lay-up vessels
to have access to a policy which is flexible enough to offer different coverages when a vessel is
laid-up, and which then can switch back to standard navigating perils once the vessel is active
again. Such policies can also aid owners in protecting their laid-up vessels by including specific
lay-up provisions tailored to the individual lay-up location of each vessel. It is hoped that this,
and similar solutions will help ensure clients have the exact coverage they need and help ensure
that they do not overspend on coverage that might not be required during difficult financial
situations.
Another key consideration for underwriters is what will happen to the offshore market.
If weaker oil prices are to be a medium or long-term trend, offshore operators might struggle
to maintain profitability. The solvency and liquidity of our clients is of paramount concern
to us as underwriters and can be as important as the physical profile of a fleet. An operator’s
ability to manage and protect themselves against risk depends entirely on having the available
funds to undertake prudent risk management and employ quality labour and expertise. In
tough economic times engines and other machinery are often worked longer and harder, with
increased intervals before overhaul and maintenance. While such measures are often only
undertaken with prior approval of, and in consultation with, classification societies and
manufacturers, historical loss figures do show a connection between increased running hours
and rates of machinery failure.
In terms of physical risk, there are numerous issues that present themselves to ship-owners
and underwriters when the price of oil drops dramatically as it has in recent months. For many
of these risks, our working knowledge of them will only deepen over time once prediction has
given way to real-world experience. However, both clients and insurers need to be proactive in
preparing for potential negative impacts.
The aim of this article is not to provide definite answers to the developing issues in marine
risk as, no matter what we might think, no actuary or underwriter can predict the future!
Rather, we hope to encourage an exchange of views between insurers and ship owners that
takes into account the shared and unique considerations of each party. We believe in working
with owners whose businesses are being affected by oil price fluctuations before they are
exposed to greater risk. Failing to do so invariably results in financial, operational and
reputational losses for both owners and insurers.
It’s our job to be here when bad things happen and in some very unfortunate cases, losses
are unforeseen, often tragic and unavoidable. On a day-to-day basis however, smaller scale,
attritional losses can be anticipated and actively managed. It is these types of losses we hope
to reduce by discussing them frankly and openly with clients. As an insurer, we have a direct
stake in the profitability and success of our clients’ businesses, and we hope to benefit by
working together with them in preparing for the future.
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MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2014
2015
AJGINTERNATIONAL.COM
ARTHUR J. GALLAGHER
THANKS AND ACKNOWLEDGEMENTS
We would like to thank Paul Hill and Steve McCarthy of BraemarSA
for giving their time to discuss the issues discussed in this article.
Furthermore, we’d like to give thanks to our numerous clients that
have visited us at Catlin London or, have generously hosted ourselves
and our colleagues and helped inform and develop our understanding
of the changing risks we face.
THE AUTHORS
David Hughes ACII, Senior Class Underwriter, Marine Hull & War.
David began his insurance career in 1996 working for Sedgwick Insurance Brokers after
graduating from Southampton University with a Master’s Degree in International Banking
and Financial Studies. After a short period in Insurance consultancy at Accenture, David joined
Catlin in 2003. Three years later he took a lead role in establishing the Catlin Hong Kong Office
and developing Catlin’s footprint in the Asia-Pacific region. Eventually moving to the Singapore
office, David became Head of Marine Insurance for the region in 2009. In this role David
was responsible for growing profitable Hull, Cargo and Specie portfolios in Asia Pacific and
developing the Catlin Singapore Office to become a leading insurance provider in Lloyd’s Asia
and the region in general. In 2013 David decided to return to the UK in order to be closer to his
family and is currently, alongside Simon Shrimpton, responsible for Catlin London’s Marine Hull
portfolio and can be found underwriting at Lloyd’s on a daily basis.
Jonathan Holmes ACII, Assistant Underwriter, Marine Hull & War.
Jonathan began working for Catlin in 2011 after graduating from King’s College London with a
Master’s Degree in Environmental Science. In the period since, he has worked alongside the class
underwriters at the box in Lloyd’s, servicing the Marine-Hull account and continuing his
technical training.
ARTHUR J. GALLAGHER
AJGINTERNATIONAL.COM
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2014
2015
13
CATLIN GROUP LIMITED
Founded in 1984 by the current CEO, Stephen Catlin, the Catlin Group began
trading as a Lloyd’s syndicate in 1985. During its early years of trading the syndicate
produced profitable results each year, even when the Lloyd’s market as a whole was
suffering from large losses. Today, Catlin Group Limited is a global specialty,
property/casualty insurer and reinsurer, writing nearly all lines of commercial
insurance and reinsurance business worldwide. The company’s insurance carriers
have been assigned an A (Excellent) financial strength rating from A.M. Best. Catlin
is dedicated to disciplined underwriting and providing the highest levels of service to
clients and brokers when underwriting risk as well as settling and paying claims.
With regards to Marine insurance, Catlin writes Marine Hull and Cargo risks
through four of its underwriting hubs: Asia-Pacific, Europe, London and the US.
There are dedicated Marine underwriting and claims staff within each of these hubs.
The Group is involved in assisting hundreds of clients worldwide manage both the
Liability and Property risks associated with maritime trading.
“THE GROUP
IS INVOLVED
IN ASSISTING
HUNDREDS
OF CLIENTS
WORLDWIDE
”
In London, where the majority of the group’s Marine Hull risks are written, the
Catlin team boasts a wealth of experience. The Marine Hull class underwriters have
more than 70 years of combined experience in the market and a wide range of
expertise in various sub-sectors of the shipping industry, writing coverage for
Blue-Water Hull, Coastal and Offshore Craft, Construction Risks, Loss of Hire,
Yachts and Marine-War Perils. Furthermore, Catlin’s claims service has been ranked
as best overall in the London market, by brokers participating in a survey conducted
by Gracechurch Consulting. In London alone, the marine claims team has eight
dedicated claims adjusters. To find out more about Catlin Group please visit
www.Catlin.com or consult your broker.
14
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2014
2015
AJGINTERNATIONAL.COM
ARTHUR J. GALLAGHER
WAR & PIRACY
Libyan Air Force Plane Bombs Tanker, Killing Two
Two crewmen on board a Greek-managed tanker were killed after a Libyan Air Force
plane bombed the vessel in a Libyan port in an apparent case of mistaken identity, Greek
and Libyan officials said Monday. The vessel, the Liberian-flagged Araevo, was “bombed
immediately as it approached” Derna in the east of the country, an aide to the chief of staff
of the Libyan Air Force said. The airstrike on Sunday 4th January 2015, killed a 29-yearold Greek cadet engineer and a 23-year-old Romanian seaman. Two other seamen, both
Philippine nationals, were also injured. One was taken to hospital for emergency surgery.
The vessel was under long-term charter by the National Oil Co. of Libya to carry fuel
from various points along the Libyan coast to feed local power plants. It had been
operating exclusively in Libyan waters for the past eight years.
Second tanker bombed in war-torn Libya
Libya has reportedly bombed a tanker near the port of Benghazi as it tried to deliver
gasoline to a radical Islamist group, the second such bombing in a matter of days. The
attack was carried out by the Libyan National Army, according to publication the Libya
Herald. No further details have yet emerged on the identity of the tanker, the extent of
the damage or whether there are casualties. According to the Libya Herald, smoke was
seen by local residents coming from the coast near the port of Benghazi.
Around a week earlier, a plane controlled by the Libyan National Army bombed the
Greek tanker “Araevo”, which was moored in the port of Derna, and operated by Aegean
Shipping Enterprises. As reported by Lloyd’s List, Aegean Shipping Enterprises was still
awaiting a proper account of why that vessel was attacked by a Libyan jet, killing two
young crew members and leaving another two hospitalised. Libya seems to be in a period
of turmoil worse than at any time since the ousting of Colonel Gaddafi in 2011,
according to Lloyd’s List Intelligence.
The situation is seriously harming its crude export operation and therefore cargo-carrying
opportunities for tankers. In December, shipments from Es Sider and Ras Lanuf were
halted, according to Lloyd’s List Intelligence. Following the attack on December 25 at
Es Sider that resulted in six crude oil storage tanks being set ablaze, it was estimated that
crude oil production in Libya had fallen to only 350,000 barrels per day, of which
128,000 bpd came from fields connected to Marsa el Brega, with the balance from
offshore fields.
ARTHUR J. GALLAGHER
AJGINTERNATIONAL.COM
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
15
Ghanian Naval Forces Free Pirated Tanker After Tracking Device Activated
ACCRA, Jan 18 (Reuters) – Ghana’s navy has freed a tanker ship hijacked off the coast of
Nigeria and arrested eight pirates believed to be responsible for seizing it, a military spokesman
said on Sunday.
Pirate attacks have increased in West Africa in recent years, jacking up insurance costs for
shipping companies. Experts say gangs based in the waters off Africa’s top oil producer Nigeria
are extending their reach across the region’s Gulf of Guinea.
Colonel Aggrey Quarshie would not say when the “MT Mariam” was seized by pirates. The
small tanker’s owners, using an onboard tracking device, informed Ghanaian authorities of its
position in Ghanaian waters on Saturday.
“The Ghana Navy responded swiftly with a patrol team to the area and they were able to
overpower the pirates and free the ship. But when they got there, the cargo had already been
transferred to another vessel,” Quarshie told Reuters.
It was not immediately clear what cargo the ship was transporting. Its crew members were
unharmed, Quarshie added.
The pirates, armed with weapons including AK-47 rifles, were arrested and handed over to
Ghana’s Bureau of National Investigations. Cash was also recovered during the operation.
“They are all suspected to be Nigerians,” Quarshie added. He said Ghana’s navy and other forces
from Togo, Benin and Nigeria had launched a search for the ship carrying the stolen cargo.
(Reporting by Kwasi Kpodo; Editing by Joe Bavier and Clelia Oziel)
16
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
AJGINTERNATIONAL.COM
ARTHUR J. GALLAGHER
Deadly pirate raid on Greek ship in Nigeria
Gunmen have boarded a Greek-owned tanker anchored near a Nigerian port, killing one
crew member and taking three others hostage, officials say. The “Kalamos” was attacked while
it was waiting to load at Qua Iboe, an oil terminal in south-eastern Nigeria.The pirates killed
a Greek deputy captain of the ship, and took two Greeks and a Pakistani citizen hostage,
according to the Greek government. The Gulf of Guinea in West Africa is regarded as a new
centre of piracy. The International Maritime Bureau recorded 33 incidents of piracy and armed
robbery in the area between January and September last year, according to the AFP news
agency. The remaining 19 crew members are believed to be safe. The Maltese-flagged
“Kalamos” had travelled from China without any cargo.
Twenty days later, the two Greeks and one Pakistani seafarers were released and were taken to
hospital after their ordeal ended. Aeolos Management said it was greatly relieved that the men
were free, but it added there was still great sadness over the chief officer who lost his life.
The company is not releasing any details of the operations that led to the release of the
hostages, as it might encourage further attacks.
Source: BBC, Tradewinds
Pirates Hijack Tanker off Indonesia
On 28th January 2015, a tanker carrying around 1,100 tonnes of fuel was hijacked while its
crew forced to board a lifeboat off North Sulawesi, Indonesia. Initial reports suggested that,
eight masked men armed with knives approached and boarded the MT Rehobot on a wooden
boat, forcing 14 of the ship’s crew members to climb into the lifeboat which was then left
behind. The crew was found and rescued with no reported injuries on January 31 by
Indonesian authorities. The Philippine Coast Guard found the hijacked tanker three days later
abandoned and grounded in Davao Oriental province.
ARTHUR J. GALLAGHER
AJGINTERNATIONAL.COM
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
17
CASUALTY SOURCES
VESSEL
Norman Atlantic
SOURCE
PHOTO
http://www.shipwrecklog.com/log/2014/12/
norman-atlantic/
http://www.e-typos.com/gr/kosmos/article/111134/sto-bridizi-eftase-to-norman-atlantic-/
http://www.nydailynews.com/news/world/italianprosecutors-order-fire-ravaged-greek-ferry-backarticle-1.2061689
Gokbel
http://www.hurriyetdailynews.com/captain-namedamong-dead-seamen-in-turkish-ship-crash-off-italy.
aspx?pageID=238&nID=76308&NewsCatID=359
Vicente
http://www.seatrade-global.com/news/middle-eastafrica/passengers-still-missing-in-cape-verde-ferrysinking.html
Cemfjord
http://www.independent.co.uk/news/uk/home-news/
rescue-teams-search-for-crew-of-overturned-cargoship-cemfjord-off-north-coast-of-scotland-9955779.
html#
Bulk Jupiter
http://gcaptain.com/gearbulk-owned-ore-carriersinks-vietnam/
Better Trans
http://www.shipwrecklog.com/log/2015/01/
better-trans/
Cidade do Mateus
http://gcaptain.com/five-killed-four-missingpetrobras-fpso-accident-update/
Bulk Jupiter
Sinking Prompts
Bauxite
Liquefaction
Warnings
http://gcaptain.com/bulk-jupiter-sinking-promptsbauxite-liquefaction-warnings/
18
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2015
AJGINTERNATIONAL.COM
ARTHUR J. GALLAGHER
MARKET NEWS
SOURCE
PHOTO
Largest Containership
delivered
http://www.shipspotting.com/gallery/photo.
php?lid=2169474
China lifts ban
on Valemaxes
https://worldmaritimenews.com/archives/151712/
china-lifts-ban-on-valemaxes/
Capesize Chartering
Joint Venture
http://www.starbulk.com/UserFiles/sblk021015.pdf
Tanker Merger
http://www.tradewindsnews.com/tankers/354929/
gener8-ready-to-roll
Costa Concordia
Verdict
http://www.bbc.co.uk/news/world-europe-31430998
Baltic Dry Index hits
new record low
http://worldmaritimenews.com/archives/152342/
baltic-dry-index-hits-new-record-low/
PIRACY REPORTS
SOURCE
PHOTO
Two Tanker crewmen
killed in Libya after
attack by unidentified
military jet
http://www.wsj.com/articles/two-tanker-crewmenkilled-in-libya-after-attack-by-unidentified-militaryjet-1420453961
Second Tanker Bomber
in war-torn Libya
http://www.lloydslist.com/ll/sector/tankers/
article455549.ece
Ghanian Naval Forces
Free Pirated Tanker
after Tracking device
activated
http://gcaptain.com/ghanian-naval-forces-freepirated-tanker-tracking-device-activated/
Pirates Hijack Tanker
off Indonesia
http://worldmaritimenews.com/archives/150948/
pirates-hijack-tanker-off-indonesia/
Deadly Pirate Raid
on ship in Nigeria
http://www.bbc.co.uk/news/world-africa-31141078
ARTHUR J. GALLAGHER
https://worldmaritimenews.com/archives/149775/
ghanas-navy-frees-oil-tanker-from-pirates/
http://worldmaritimenews.com/archives/153116/
update-philippine-coast-guard-finds-hijackedtanker/
http://www.tradewindsnews.com/piracy/354923/
kalamos-crew-freed
AJGINTERNATIONAL.COM
MARINE HULL & MACHINERY AND WAR RISKS MARKET UPDATE 2014
19
Arthur J. Gallagher
Walbrook Office
The Walbrook Building
25 Walbrook
London
EC4N 8AW
Tel: Fax:
+44 (0) 20 7204 6000
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www.ajginternational.com
Arthur J. Gallagher (UK) Limited is authorised and regulated by the Financial Conduct Authority.
Registered Office: The Walbrook Building, 25 Walbrook, London EC4N 8AW. Registered in England and Wales.
Company Number: 1193013. www.ajginternational.com
The information contained in this market review has been compiled by Arthur J. Gallagher from various news
sources. This review does not purport to be comprehensive or to give legal advice. While every effort has been
made to ensure accuracy, Arthur J. Gallagher cannot be held liable for any errors, omissions or inaccuracies
contained within the document. Readers should refrain from acting upon information in this document without
first taking further specialist or professional advice.