Implosions and explosions: marine insurance is at a crossroads

The International Union of Marine Insurers will hold its Asia Forum in Shanghai tomorrow (22-23 May), addressing a market that has fragmented as claims are again on the rise.

Ahead of the meet IUMI secretary general Lars Lange spoke to Hong Kong Maritime Hub about an imploding Lloyds market and the possibility of a hardening marine book for the first time in a generation.

It has been reported that marine hull rates on policies written out of London may have increased by as much as 7%. But while Mr Lange acknowledges that “everybody is hoping for harder rates”, he is equally certain that everybody should be doing their part. Thus far the drama has been confined to London where it is reported that 13 syndicates have closed and a further 30 syndicates have seen mass redundancies.

“It is really, really serious and the cost will be a huge loss of experience, “he laments. And in the end the desired result of across the globe rate increases may not be achieved. “In former times we would have a crisis followed by a period of pretty good deals before going into another crisis. These cycles are flattening if not completely diminishing and this is because the more international, more fragmented markets we have today are not reacting in the way they have in the past.”

It is one of the functions of IUMI to overcome such fragmentation through its global membership which aims to create a single voice for the industry. To that end IUMI has been following the relentless flow of business to Asia. In October 2016 the organisation launched its first overseas branch in Hong Kong, swiftly followed by a further representative office in Singapore a year later.

Mr Lange expresses satisfaction that IUMI’s intentions of being more visible and more influential in the region are being fulfilled.

“It’s about influencing the markets more – is there anything we can lobby here. It’s about connecting more with the markets including existing members and new members,” he says.

“Last year Myanmar became a new member. And we have all the established markets more or less. Unless you class Thailand as an established market, which is missing. But there are exciting upcoming markets such as Bangladesh, Vietnam, Myanmar, Philippines, these are markets where we would like to have better insight and a stronger say,” he adds.

IUMI decided to have its official Asia hub in Hong Kong, due to the strong connection it has with the Hong Kong Federation of Insurers.

“But we also appreciate the connection with Singapore. So, we now have two ambassadors in Asia; Agnes Choi in Hong Kong and Mike Davies in Singapore. Both territories have a can do spirit,” he notes.

Mr Lange is encouraged by what he sees as Hong Kong taking its can do spirit to a new level.

“The Hong Kong Maritime and Port Board is an extremely good initiative to coordinate Hong Kong’s approach,” he says.  “Agnes Choi is also a member of the Board. This makes it easier for us to address our needs. It is a good initiative. For example, we are off to the Shanghai Forum and then we shall return to have a meeting with Frank Chan (Hong Kong Secretary of Transport & Housing). It is a good example of our relationship that Frank takes his time to meet up with us – not for the first time, to discuss developments here with us.”

IUMI is naturally interested in the Hong King Government initiative that will see (possibly as early as 2020), the introduction of a 50% discount on corporate tax for marine insurers in the territory: “The tax regime is an issue to be considered, as is the environment. But when it comes to marine, while there is shipping there will be marine insurance.”

Having dealt with the implosion earlier, Mr Lange’s thoughts turn to the explosions, or more specifically containership fires.

“We see an opportunity for us as an industry to influence this,” he says.

“It is completely avoidable, and it’s pretty obvious that there is something going wrong in the case of containership fires. We would like to take the lead in addressing this in the shape of an IMO initiative. We would be looking to amendments to the SOLAS Convention.

“There are, in our view, some low hanging fruit. A chief cause of containership fires is mis-declared dangerous goods, chiefly calcium hypochlorite and charcoal,” he remarks.

Mr Lange suggests carriers need to reorganise their processes, to deal with dangerous goods, and impose more controls. “We see this already with Maersk who are working with external parties creating controls for the reception of containers. I think that when shippers are made aware that carriers are taking measures we shall see a reduction in mis-declared dangerous goods,” he says.

Other measures Mr Lange would like to see introduced include the creation of dedicated onboard spaces for dangerous goods, a recognition that the use of CO2 as an extinguishing agent makes little sense, a greater need for using water, and better training for seafarers.

“We have been putting our position to flag states. And during the next Maritime Safety Committee at the IMO in two weeks we shall have a presentation. I am confident that we can take this to the next stage – a formal process. That takes time of course.”

With that Mr Lange heads off to the airport and Shanghai where myriad insurers look on with bated breath for opportunities to insure Belt and Road projects

 

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