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

2017 Teddy Awards

The Era of Engagement

The very best workers’ compensation programs are the ones where workers aren’t just the subject of the program, they’re a part of it.
By: | November 1, 2017 • 5 min read

Employee engagement, employee advocacy, employee participation — these are common threads running through the programs we honor this year in the 2017 Theodore Roosevelt Workers’ Compensation and Disability Management Awards, sponsored by PMA Companies.

A panel of judges — including workers’ comp executives who actively engage their own employees — selected this year’s winners on the basis of performance, sustainability, innovation and teamwork. The winners hail from different industries and regions, but all make people part of the solution to unique challenges.


Valley Health System is all-too keenly aware of the risk of violence in health care settings, running the gamut from disruptive patients to grieving, overwrought family members to mentally unstable active shooters.

Valley Health employs a proactive and comprehensive plan to respond to violent scenarios, involving its Code Atlas Team — 50 members of the clinical staff and security departments who undergo specialized training. Valley Health drills regularly, including intense annual active shooter drills that involve participation from local law enforcement.

The drills are unnerving for many, but the program is making a difference — the health system cut its workplace violence injuries in half in the course of just one year.

“We’re looking at patient safety and employee safety like never before,” said Barbara Schultz, director of employee health and wellness.

At Rochester Regional Health’s five hospitals and six long-term care facilities, a key loss driver was slips and falls. The system’s mandatory safety shoe program saw only moderate take-up, but the reason wasn’t clear.

Rather than force managers to write up non-compliant employees, senior manager of workers’ compensation and employee safety Monica Manske got proactive, using a survey as well as one-on-one communication to suss out the obstacles. After making changes based on the feedback, shoe compliance shot up from 35 percent to 85 percent, contributing to a 42 percent reduction in lost-time claims and a 46 percent reduction in injuries.

For the shoe program, as well as every RRH safety initiative, Manske’s team takes the same approach: engaging employees to teach and encourage safe behaviors rather than punishing them for lapses.

For some of this year’s Teddy winners, success was born of the company’s willingness to make dramatic program changes.


Delta Air Lines made two ambitious program changes since 2013. First it adopted an employee advocacy model for its disability and leave of absence programs. After tasting success, the company transitioned all lines including workers’ compensation to an integrated absence management program bundled under a single TPA.

While skeptics assume “employee advocacy” means more claims and higher costs, Delta answers with a reality that’s quite the opposite. A year after the transition, Delta reduced open claims from 3,479 to 1,367, with its total incurred amount decreased by $50.1 million — head and shoulders above its projected goals.

For the Massachusetts Port Authority, change meant ending the era of having a self-administered program and partnering with a TPA. It also meant switching from a guaranteed cost program to a self-insured program for a significant segment of its workforce.

Massport’s results make a great argument for embracing change: The organization saved $21 million over the past six years. Freeing up resources allowed Massport to increase focus on safety as well as medical management and chopped its medical costs per claim in half — even while allowing employees to choose their own health care providers.

Risk & Insurance® congratulates the 2017 Teddy Award winners and holds them in high esteem for their tireless commitment to a safe workforce that’s fully engaged in its own care. &


More coverage of the 2017 Teddy Award Winners and Honorable Mentions:

Advocacy Takes Off: At Delta Air Lines, putting employees first is the right thing to do, for employees and employer alike.


Proactive Approach to Employee SafetyThe Valley Health System shifted its philosophy on workers’ compensation, putting employee and patient safety at the forefront.


Getting It Right: Better coordination of workers’ compensation risk management spelled success for the Massachusetts Port Authority.


Carrots: Not SticksAt Rochester Regional Health, the workers’ comp and safety team champion employee engagement and positive reinforcement.


Fit for Duty: Recognizing parallels between athletes and public safety officials, the city of Denver made tailored fitness training part of its safety plan.


Triage, Transparency and TeamworkWhen the City of Surprise, Ariz. got proactive about reining in its claims, it also took steps to get employees engaged in making things better for everyone.

A Lesson in Leadership: Shared responsibility, data analysis and a commitment to employees are the hallmarks of Benco Dental’s workers’ comp program.


Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]