IUMI: Major Vessel Loss Trends

Major vessel loss frequency and cost trends pressure marine underwriters.
By: | May 2, 2017 • 3 min read

Marine insurers are under pressure from the simultaneous trends of rising claims in energy and a declining premium base. They are also vexed by increased cargo-accumulation risk both on-board vessels and in port.

Those were the main messages from the annual spring meeting of the International Union of Marine Insurance (IUMI) held earlier this month in Hamburg. Speakers and statistics indicate those trends will continue to challenge marine underwriters for the foreseeable future.


Broadly, the frequency of major vessel casualties rose again in 2016 for the second consecutive year. They had enjoyed a year-on-year decline until 2015 when they recorded a sharp upturn which was continued in 2016.

Conversely, the trend in total vessel losses from 2000 onward continued its downward trajectory through to 2016 notwithstanding a minor uptick in 2015.

In general, many markets reported a reduction in frequency of claims but an increase in the average cost of the claim.

In energy, there was a significant drop in offshore activity with very little infrastructure spending. Concerns were raised over re-activation of rigs after a prolonged period of lay-up and the potential impact on attritional claims activity. However, the current spate of rig scrapping should improve the general age profile of the mobile fleet.

In general, many markets reported a reduction in frequency of claims but an increase in the average cost of the claim.

In cargo, the new generation of ultra-large container ships is now capable of carrying 20,000 TEU (twenty-foot equivalent units, the standard measure of container capacity). While there are some 20-foot containers in service, the vast majority are the 40-foot units roughly equivalent to a single truck trailer.

Although cargo value varies widely from consumer disposables to antique cars, IUMI estimates that the 20,000 TEU capacity puts a potential cargo value for a single ship at close to $1 billion.

That represented a significant risk for cargo underwriters that continued to increase. Put in context, MSC Flaminia, which suffered a fire in 2012, carried about 3,000 containers (6,000 TEU) at an estimated cargo value of $115 million.

Accumulation risk in ports, particularly Chinese ports, was thought to be even greater. It was estimated that the value of cargo throughput at Shanghai could reach $1.6 billion a day; Shenzhen $681 million; and Tianjin $477 million.

The explosion at Tianjin in 2015 also resulted in a significant loss but might have been much worse. The total cargo estimated to be on board the 754 ships in the port on the day of the incident would have amounted to more than $53 billion.

“It is not surprising that these trends of decreasing frequency but greater claims are continuing,” said Lars Lange, secretary general of IUMI.

“We have had several years of limited shipyard capacity while a lot of new building took place. So there was a real fight for capacity. That may have led to a situation where repairs had to be done at yards farther away [or postponed].

There were also high steel prices, and that has had an effect on repair costs. Neither of those is the case anymore. Quite the opposite, now yards have too much capacity. But that change will take time to work through the fleets.”

“No one has a crystal ball, but conditions in the industry seem to be stable. Fleets overall are aging slightly. There is a reduction in container ships as a result of overcapacity, so older vessels are being scrapped.” – Lars Lange, secretary general, IUMI

Lange added that “as insurers, we are experienced in dealing with risks.” In contrast, he said, the shippers and the companies operating the vessels are having to balance their ability to manage risks against their willingness or ability to transfer risk.


Beyond making quotes and writing policies, Lange said, “we add value to our clients when we can make recommendations.”

While Lange is not surprised that the trends are continuing, his sense is that they may start to moderate.

“No one has a crystal ball, but conditions in the industry seem to be stable. Fleets overall are aging slightly. There is a reduction in container ships as a result of overcapacity, so older vessels are being scrapped,” he said.

In other segments there is less overcapacity, so fleets are stable to slightly aging.

Overcapacity is actually a bigger challenge for underwriters than for ship lines, according to Lange.

“Ideally premiums would rise when business is stronger for the ship lines, but in practice that is not the case — generally because of the highly competitive nature of the market.

“It is always a challenge for insurers to increase premiums. We don’t see premiums rising now as was the case 10 or 15 years ago.”

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

After 20 years in the business, Navy Pier’s Director of Risk Management values her relationships in the industry more than ever.
By: | June 1, 2017 • 4 min read

R&I: What was your first job?

Working at Dominick’s Finer Foods bagging groceries. Shortly after I was hired, I was promoted to [cashier] and then to a management position. It taught me great responsibility and it helped me develop the leadership skills I still carry today.

R&I: How did you come to work in risk management?

While working for Hyatt Regency McCormick Place Hotel, one of my responsibilities was to oversee the administration of claims. This led to a business relationship with the director of risk management of the organization who actually owned the property. Ultimately, a position became available in her department and the rest is history.

R&I: What is the risk management community doing right?


The risk management community is doing a phenomenal job in professional development and creating great opportunities for risk managers to network. The development of relationships in this industry is vitally important and by providing opportunities for risk managers to come together and speak about their experiences and challenges is what enables many of us to be able to do our jobs even more effectively.

R&I: What could the risk management community be doing a better job of?

Attracting, educating and retaining young talent. There is this preconceived notion that the insurance industry and risk management are boring and there could be nothing further from the truth.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

In my 20 years in the industry, the biggest change in risk management and the insurance industry are the various types of risk we look to insure against. Many risks that exist today were not even on our radar 20 years ago.

Gina Kirchner, director of risk management, Navy Pier Inc.

R&I: What insurance carrier do you have the highest opinion of?

FM Global. They have been our property carrier for a great number of years and in my opinion are the best in the business.

R&I: Are you optimistic about the US economy or pessimistic and why?

I am optimistic that policies will be put in place with the new administration that will be good for the economy and business.

R&I: What emerging commercial risk most concerns you?


The commercial risks that are of most concern to me are cyber risks, business interruption, and any form of a health epidemic on a global scale. We are dealing with new exposures and new risks that we are truly not ready for.

R&I: Who is your mentor and why?

My mother has played a significant role in shaping my ideals and values. She truly instilled a very strong work ethic in me. However, there are many men and women in business who have mentored me and have had a significant impact on me and my career as well.

R&I: What have you accomplished that you are proudest of?

I am most proud of making the decision a couple of years ago to return to school and obtain my [MBA]. It took a lot of prayer, dedication and determination to accomplish this while still working a full time job, being involved in my church, studying abroad and maintaining a household.

R&I: What is your favorite book or movie?

“Heaven Is For Real” by Todd Burpo and Lynn Vincent. I loved the book and the movie.

R&I: What’s the best restaurant you’ve ever eaten at?


A French restaurant in Paris, France named Les Noces de Jeannette Restaurant à Paris. It was the most amazing food and brings back such great memories.

R&I: What is the most unusual/interesting place you have ever visited?

Israel. My husband and I just returned a few days ago and spent time in Jerusalem, Nazareth, Jericho and Jordan. It was an absolutely amazing experience. We did everything from riding camels to taking boat rides on the Sea of Galilee to attending concerts sitting on the Temple steps. The trip was absolutely life changing.

R&I: What is the riskiest activity you ever engaged in?

Many, many years ago … I went parasailing in the Caribbean. I had a great experience and didn’t think about the risk at the time because I was young, single and free. Looking back, I don’t know that I would make the same decision today.

R&I: What about this work do you find the most fulfilling or rewarding?

I would have to say the relationships and partnerships I have developed with insurance carriers, brokers and other professionals in the industry. To have wonderful working relationships with such a vast array of talented individuals who are so knowledgeable and to have some of those relationships develop into true friendships is very rewarding.

R&I: What do your friends and family think you do?

My friends and family have a general idea that my position involves claims and insurance. However, I don’t think they fully understand the magnitude of my responsibilities and the direct impact it has on my organization, which experiences more than 9 million visitors a year.

Katie Siegel is an associate editor at Risk & Insurance®. She can be reached at [email protected]