IUMI doubts over new Chinese yards

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Jan 2008

Leading members of the International Union of Marine Insurance told journalists at a meeting London yesterday that they becoming concerend about potential quality problems with newbuildings constructed at some yards in China. IUMI's executive committee member Simon Beale and ocean hull committee chairman Fred Robertie said that in some cases orders were being taken for newbuildings by yards that were still greenfield sites.Mr Beale that quality problems with Chinese-built ships could potentially be a problem for shipowners in about eight to 10 years time. Mr Robertie said that problems tended to occur when owners did provide adequate supervion of the construction. The two underwiriters concurred that while blue chip shipowners' Chinese-built vessels were well constructed there were concerns where owners were less able or willing to provide close supervision during building. This they said was especially the case where ships were oderedered on a specualtive basis and then sold once or twice before ever hitting the water.While the Chinese yards issue was, accoroding to Mr Beale, ''on the horizon'', IUMI presented a ''bleak'' picture of the current claims situation.IT says: ''The relentless surge in marine insurance hull and cargo claims continued during the second half of 2007, and some serious losses have already occurred at the start of 2008.IUMI president Deirdre Littlefield said that marine underwriters and P&I clubs were facing one of the most damaging claims situations in recent memory, exacerbated by the rising values of newbuildings and commodities. Worse, the claims avalanche was happening when the worldwide premium base, in the hull sector, was flat, with underwriters struggling to obtain realistic increases in their pricing of risks. Excess capacity in the market was partly to blame, but perhaps the current financial/credit crisis would eliminate many of the weaker new entrants, she said. Asked why P&I clubs were able to raise premiums and hull underwiters couldn't, Mr Beale said: ''There are less of them and they are better organised.''Mr Beale noted that the combination of total and partial losses (vessels of 500gt and over) had noticeably accelerated during the last few years, and 2007 appeared to have continued this trend. He was reluctant to give precise figures but did indicateHe said: ''It has been regularly reported that partial losses are dramatically increasing year on year. However, it is the number of total losses, which had been decreasing for some years, that has now moved disappointingly upward during 2007. There will be an increase on the 67 total losses in 2006 as posted early in 2007, as well as a materially higher number of total losses expected for 2007 posted at the same point this year.''Mr Beale was reluctant to reveal exact figures yet but when pressed said the increase could be in the region of 20% but he stressed it was still to early to be sure on numbers or to have an insight into why there had been an increase.Last year, it was reported that 20 major claims in the first six months had amounted to a claims bill for hull and machinery underwriters of around $780m, and the full year's total is expected to be in excess of $1.5 billion. The full-year total for 2006 was estimated at about $350m.He added: ''The full picture will emerge when we release the IUMI 2007 casualty and shipping and offshore energy statistics very shortly. This is a new service for the shipping and insurance communities that our organisation successfully introduced early last year, supplementing the extensive statistics produced by our facts and figures committee which are presented at each IUMI annual conference.''Ms Littlefield commented: ''Unfortunately, the historic profits recently made by shipowners have been helped by driving ships and crews as hard as possible, strategies which inevitably impact on claims.''She continued: ''Now underwriters will face further difficulties if the slowdown in some shipping trades continues. We expect that many ship repairs and replacements, which had been deferred or ignored because of the huge and profitable tide of waterborne trade enjoyed by shipowners for so long, will start to surface, along with the results of skimped maintenance, leading to a further escalation in claims.''