The financial crisis has had a considerable impact on the global shipping industry, with charter rates, cargo prices and vessel values all falling. Consequently, many shipowners have been left looking very closely at their finances, and Deirdre Littlefield, speaking at IUMI’s annual winter meeting in London, said underwriters must take into consideration whether the standards on board vessels have fallen over the past year owing to shipowners looking to cut costs.
During shipping’s boom period, shipowners made new additions to their fleets and vessels traversed the globe on a regular basis. However, although marine insurers were glad of the increased premium income, they were worried about a dearth of experienced seafarers with which to man all of the vessels, both new and old, in operation. As Littlefield highlighted during the winter meeting, the majority of total construction losses occur as a result of human error, and underwriters fear a proliferation of inexperienced crews could lead to an increase in claims.
With the decrease in shipping activity, risk carriers are hoping the less experienced seafarers are forced out of the industry, with Littlefield commenting: “The slump has helped the seafarer shortage problem to some extent, but there is still an urgent need to recruit and train good-quality officers.”
And Littlefield added it is important shipowners do not cut back on training budgets, despite the financial constraints many are experiencing. “Owners are under great [financial] pressure but training budgets should not be reduced,” she warned.
However, there is a concern that with many in the shipping industry facing financial problems, they will continue to hire poorer-quality crews because of the lower rates they charge.
Another factor that must be considered is that at the end of the last shipping crisis at the latter part of the 1980s, some of the more experienced seafarers retired or moved into other lines of work after tiring of the topsy-turvy nature of the industry, and the possibility remains a similar scenario could rear its head once again, resulting in a potential shortage of quality workers.
Jerry Westmore, an underwriting director at the West of England P&I Club, explained the situation could go one of two ways. “We could get rid of the poorer-trained crews and retain the good ones or, conversely, we could get rid of the good crews and be left with the bad ones,” he said.