Tag Archives: insurance

MSC Flaminia: Owners Declare General Average

 

The Smit salvage group engaged on Lloyd’s Open Form terms to fight the fire and tow the 6,732–teu MSC Flaminia (built 2001) from the middle of the North Atlantic to a location 240 miles off the south west of the UK are also looking for security based on a percentage of the cargo value.

Contributions to general average will be assessed by Hamburg adjusters Schlimme & Partners who are working with Rogers Wilkin Ahern of London and Groninger Welke Janssen of Bremen.

Mediterranean Shipping Co, the long term charterer of the MSC Flaminia has told shippers that it “regrets any inconvenience” that the declaration of general average will cause.

The latest photograph of the MSC Flaminia managed by NSB Niederelbe but owned by a Conti Reederei KG scheme appear to show the ship and cargo in worse condition than previously.

But the fire is under control although smoke is still pouring from cargo hold seven immediately ahead of the accommodation.

A list that reached 11 degrees has been reduced to 2.5 degrees by pumping water from the cargo holds into the ballast tanks.

NSB Niederelbe is still trying to find a sheltered coastal area or port of refuge to continue the salvage operation but after two weeks has had no success.

The company’s chief executive, Helmut Ponath, has described it as “shocking” that no European country appears willing to provide a refuge for a German flag ship.

The Swedish Club leads the hull cover of the MSC Flaminia with a 25% share and is also the ship’s protection and indemnity insurer.

Source: Tradewinds

General average can be a nasty surprise to cargo owners, particularly if they have no cargo insurance. If you have any doubt about it, have a look at http://www.cargolaw.com/2008nightmare_msc_sabrina.html#GA — the contribution can exceed the value of the cargo one has on board.

 

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MARITIME AND INSURANCE: MSC Flaminia blaze probe underway

A damper has been put on theories that hazardous calcium hypochlorite – involved in many containership fires in the 1990s – could be responsible for a blaze that led to the MSC Flaminia being abandoned in the middle of the North Atlantic.

NSB Niederelbe is still checking through details of the cargo loaded on the 6,732-teu MSC Flaminia (built 2001) but says no calcium hypochlorite was on the manifest and no other obvious cause for the incident has yet been detected.

However hazardous cargoes are sometimes misdeclared so the possibility of a calcium hypochlorite related fire can not be entirely ruled out amongst the 2,876 containers on board on the voyage between Charleston and Antwerp.

Smit has signed a Lloyd’s Open Form “no cure no pay” salvage contract for the stricken vessel but it will be Tuesday evening before the chartered in 16,320hp firefighting tug Fairmount Expedition (built 2007) and a salvage master reaches the stricken containership.

An internal company investigation into the casualty is already underway and Germany, the flag state of the MSC Flaminia, will conduct an official accident investigation into the fire which has cost two lives and left three crewmen in hospital.

There is little current information on the extent of damage to the MSC Flaminia as overflights or satellite images of the vessel appear to have not taken place.

NSB Niederelbe has received preliminary information about the incident from the master and senior officers of the MSC Flaminia who are among the 18 crew and two passengers onboard the 311,000-dwt tanker DS Crown (built 1999) which is due to reach Falmouth in the UK on Wednesday evening.

Reports from the crew of the MSC Flaminia indicate that the incident began with a fire around hatch cover Number Four with the explosion following.

The fire was sufficiently serious for the master to order the ship to be abandoned although the MSC Flaminia was 1,000 miles from the nearest land.

The 16,500-hp ocean going tug Anglian Sovereign (built 2003)is currently being loaded with specialist firefighting gear at Inverness including a Cobra lance system that can pierce container walls and extinguish fires within boxes. But it will be Thursday or Friday before this tug reaches the last reported position of the MSC Flaminia.

The MSC Flaminia was on a voyage from Charleston to Antwerp at the time of the fire with a crew of five Germans, three Poles and 15 Filipinos.

The hull insurance of the MSC Flaminia is led by the Swedish Club which also provides protection and indemnity cover for the vessel.

With the hull of the MSC Flaminia insured for an estimated $40m and back of envelope calculations that about 2,900 containers of cargo might have a value of $90m the insurance market appears to be in for another sizeable loss.

Source: Tradewinds

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MARITIME NEWS: ‘Pilot error’ costs P&I clubs US$ 50 million per year

Pilot error is costing the protection-and-indemnity (P&I) clubs $50m per year with the claims bill appearing to be increasing.

An analysis of 406 claims that cost the clubs $443m over nine years shows the number of incidents arising from pilot error is not increasing but the value of claims is.

[Of course it is: for starters, ships have been getting bigger.]

A breakdown of pilotage claims produced by Mark Williams of the West of England Club, who is chairman of the International Group’s pilotage subcommittee, puts Mexico in the top spot with an incident costing $100,000 or more for each 13,440 pilotage moves.

By contrast, Italy has the best performance with a costly incident only arising once in 70,400 moves.

But the Mexican figure was based on only three casualties.

The worst place for pilotage error where there was a substantial level of pilotage activity was Argentina, with one in 24,591 moves producing a casualty.

But a challenge for the clubs in tackling the problem of pilot error is that there is little international regulation of standards to match that of seafarers.

The International Group has mooted the idea of pilotage being added to the International Maritime Organisation (IMO)’s Standards of Training Certification and Watchkeeping (STCW) convention but Williams accepts that finding a state to sponsor the change and then pushing the change through was likely to be difficult.

[It was tried before — and failed. What came up was the IMO Resolution A-960.]

Although a pilot may cause a casualty and the master of a ship have little knowledge or opportunity to challenge a bad decision, the shipowner usually ends up footing the bill.

[Expected, though not always fair, as the asymetry of resources between pilots and shipowners and carriers is hugely in favour of the latters.]

The idea of the clubs or some other insurer providing insurance for pilots so they had equally deep pockets was mooted at the conference but an objection is that the premium would be added to pilotage fees, so the owner would still end up with the bill.

Source: Tradewinds, 2012.02.01

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Costa Concordia: Hannover Re braces for major loss

From the Hannover Re site, 2012.01.23. Bolds are mine:

As already reported by Hannover Re on 16 January, the incident involving the Costa Concordia cruise ship will result in a major loss for the company. The loss expenditure from marine hull insurance will be in the region of EUR 30 million for the company’s net account.

Liability claims are difficult to assess at this point in time. The assumption is that a market loss running into triple-digit millions of euros could result. The total loss for Hannover Re – as a leading marine reinsurer – could therefore be in the mid-double-digit million euro range.

 

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PIRACY | Report says average cost per attack is $9 million

A REPORT from the Actuarial Profession puts the average cost of each piracy attack on shipping at about $9m, although estimating the real cost is still uncertain.

The report by the Profession’s General Insurance Research Organisation said that the scarcity of statistics on maritime piracy makes the estimation of risk difficult.

Neil Hilary, a staff actuary with the Profession and one of the authors of the report said: “The challenge to the actuaries involved in pricing maritime insurance products is considerable. Firstly, actuaries are used to working with statistics which number thousands and tens of thousands. Despite the increase in piracy attacks, the numbers are still relatively small. Secondly, the information about the attacks issued by shipping owners is often vague. Understandably, shipping owners don’t wish to encourage further acts of piracy, but without knowing the full details we cannot come up with the true cost.”

However, the authors came up with an estimated figure of about $9m for each attack, based on publicly available data. With a success rate of six per million their calculations produce a kidnap and ransom rate of about $57,000 per vessel using the Suez Canal. “But this is based on judgement, not on strict modelling. Without accurate figures uncertainty will remain and future costs may be significantly different,” Mr Hilary said.

The report was intended to identify trends, look at rating and risk management issues relating to piracy and establish a framework for actuaries to manage new emerging risks.

It warned that although the authors collected data from a range of sources, some of the analysis is based on data that may be unreliable and is based on assumptions that may or may not hold.

It highlights the fact that several new features specific to modern piracy are becoming more acute, in particular crew members and ships being kidnapped for ransom. The number of hostages held globally remained steady until 2007 but has increased sharply since then, almost doubling in each of the two subsequent years.

Pirates’ use of weapons has increased, using proceeds of ransom payments to purchase more weapons. It warns that as shipowners employ armed security guards an arms race is developing. “This situation shows no sign of abating and the trend is expected to continue, with potential consequences to the safety of ships’ crew.”

Its analysis showed that although the overall number of hijacks has increased, they do not represent an increasing share of globally reported attacks. It suggests that the perception of hijacks becoming a more prevalent method of piracy is due to increased media coverage.

A number of additional costs are generated from increased piracy activity, arising due to the need to provide increased protection, risk mitigation and losses caused by piracy incidents.

The report acknowledges that it is not in the best interests of the shipping and insurance industry to publicly divulge pirates’ demands, whether a ransom has been paid or actual ransom amounts. Some payments have been reported in the press, but their accuracy is uncertain.

In addition to actual ransoms there are other related costs such as delivery of ransom payments, negotiation costs, repair costs and earnings losses. These add-on costs are thought to double the actual amount paid to pirates. Estimated average ransom as at end June had risen to $6.8m, although some reports have indicated higher ransoms being demanded.

Additional costs bring the total average cost to about $9m. Based on an estimated hijack success rate of 28% this equates to a claim frequency of 0.77% in 2010, up from 0.27% in 2009. This means the estimated kidnap and ransom cost is about $57,000 per vessel and a total cost of over $1bn.

Adding up the costs of sailing safely

* Alternative transport routes
Additional costs due to: ports and terminals loss of earnings due to reduced transit activity; local economies loss of earnings; increased costs to charterers and cargo owners; disruption and increased costs to supply chains; additional costs to shipowners of using longer routes to avoid high risk areas. For example, V.Ships Management estimated that avoiding Somalian pirates in the Indian Ocean added an average three days to a voyage. Using the Cape of Good Hope instead of the Suez Canal will incur further time and costs. Some of these costs are net costs, while others can result in benefits to others, such as ports on the alternative shipping route
* Security and Protection
Hiring a team of security guards costs an estimated $25,000-$100,000 for crossing the Gulf of Aden. There are further potential costs in the event of casualties, such as legal costs.
* Insurance
Contracts are available to protect stakeholders. The cost of insuring a container passing through the region increased ten-fold between 2007 and 2008 to $9,000. Munich Re estimated that Kidnap and Ransom payments premiums also rose ten-fold between 2008 and the first quarter of 2009, though Hiscox reduced premiums for ships with armed protection.

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INSURANCE | Piracy costs still uncertain

The true cost of piracy to the maritime insurance industry remains uncertain, a new report by the Actuarial Profession claims.

The report, which will be unveiled at the Profession’s General Insurance Research Organisation (GIRO) later this month conference later this month, will argue that the scarcity of statistics on maritime piracy make the estimation of risk difficult.

“Piracy attacks have been on the increase in the last 15 years,” said Neil Hilary, a staff actuary with the Profession and one of the authors of the report.

“But, since 2006, the level of attacks has increased by an average of 125%. And this is almost entirely due to the attacks by Somali pirates.”

However, Hilary says the challenge to the actuaries involved in pricing maritime insurance products is considerable.

“Actuaries are used to working with statistics which number thousands and tens of thousands. Despite the increase in piracy attacks, the numbers are still relatively small.”

In addition, says Hilary, the extent of the information about the attacks issued by shipowners is often vague.

“Understandably, shipping owners don’t wish to encourage further acts of piracy, but without knowing the full details we cannot come up with the true cost,” he said.

The authors of the report have been able to come up with an estimated cost of around $9m for each attack using publicly available data at the time and, with a success rate of six per million, this produces a kidnap and ransom rate of around $57,000 per vessel using the Suez Canal.

But Hilary says this is based on judgment, not on strict modelling. So, without accurate figures, uncertainty will remain – future costs may be significantly different, he warns.

Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities.


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INSURANCE | P&I Club warns against GPS-only navigation

Originally published in Lloyd’s List, 2010/10/05

RELYING solely on global positioning satellite without the right navigational corrections could put ships in danger, the London P&I Club has warned.

The club highlights its concerns with the grounding of a containership on a regular schedule, which got into trouble because the officer was using only GPS to navigate the vessel.

GPS positions are referenced to the World Geodetic System 1984 Datum (WGS 84), which may not be the same as the horizontal datum of charts in use. This means that a GPS-only plotted position could be wrong.

This can be avoided by first checking to see if any chart corrections are necessary. However, in the grounding case raised by the club, the officer had failed to do this.

“During a coastal passage, a containership ran aground after a navigating officer commenced a significant alteration of course about half a mile before he reached the intended alter course position,” the London P&I Club noted.

The officer was “wholly unaware that a significant correction had to be applied before GPS positions could be plotted on to any of the charts used in the service”.

The club added that a “more detailed passage plan would have alerted the inexperienced officer to the danger and required him to cross-check his position by more than one method”.

The London P&I Club said that navigating officers should always check the charts for information about corrections to be applied to satellite-derived positions when preparing a passage plan. Navigating officers should alert navigators to any existing corrections that are required before positions are plotted on the individual charts, it added.

The club declined to name the ship involved in the incident.

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