While the shipping industry is showing tentative signs of recovery, the surplus capacity in the marine insurance market defies logic as more insurers queue up to enter an already crowded line of business where rates are continuing to fall. This is according to the annual Marine Market Review from global insurance broker Willis Group Holdings.

The Willis Marine Market Review comments that 2010 has seen an improvement in the state of the market, with a reduction in the number of laid up vessels, the majority of freight rates slowly increasing and ship values ceasing to plummet. Despite this gradual upswing in shipowners' fortunes, the report found that the marine insurance market is still feeling the pinch due to fierce competition, and questions why new insurers continue to enter the fray when there is little profit to be made. With its relatively low exposure to natural catastrophes, the marine market is often seen as a safe bet for large composite insurers seeking to diversify their portfolios.

The review found that up to 11 new insurers will have entered the Hull & Machinery market by the end of this year, despite its lack of profitability, and suggests that this could be because the marine business is such a small part of big insurers' overall revenue that they don't feel the pain.

The report noted that while there is still some profit to be made in ancillary insurances like war risks, it seems illogical that new capacity continues to be added to an already saturated marketplace for the main lines of business.

Commenting on the overall findings of the report, Alistair Rivers, CEO, Willis Global Marine, said, "From a client perspective, the outlook is good: pricing is competitive, capacity for all but the largest risks is freely available and choice is greater than ever before. In the insurance market where profit margins continue to be squeezed, we foresee increased divergence between those underwriters who are looking to build or expand their accounts and those who may become increasingly defensive or selective."

Other key findings in the report include:

• Piracy continues to be a huge concern for shipowners and is spreading from the Gulf of Aden into the Indian Ocean. Claims arising from piracy have exceeded $300 million and the report says that it is hard to see any solution in the short term.

• The Protection & Indemnity (P&I) industry reported very positive results for the 2009/10 financial year. Across the market as a whole, underwriters almost broke even, with an overall underwriting deficit of only 1 percent. Over the same reporting period investment revenue approached $680 million - a huge bounce back from 2008/09 when investment losses cost the market $840 million. Against this positive market picture there remains a material variance in results between individual Clubs. On a financial year basis the largest individual club underwriting surplus was 7 percent and the worst deficit was reported at 23 percent.

• Cargo shipments are starting to increase. There is some optimism in the market but the recovery looks to be tentative. The increase in sanctions against countries such as Iran has brought new challenges to shipowners in 2010, said Willis. Underwriters and brokers are constantly working to ensure they remain compliant within the various different sanction regimes.

back to top

Maritime London member Norton Rose has published a wide ranging examination of the health of the shipping, aviation and rail industries based on the responses of 679 individuals to its Way Ahead Transport Survey conducted in September and October.

Key findings of the report include:

• The transport industry as a whole is showing signs of cautious optimism about the state of the recovery.

• 17% of respondents think that the global financial crisis is already beginning to dissipate, with a further 14% expecting improvements within twelve months.

• Joint ventures are being actively sought across all three transport sectors and in all key markets around the world.

• Government support, equity funding and bank debt are expected to be the three primary sources of funding for the industry as a whole over the next two years.

• 44% of respondents agree that infrastructure investment will be the single most helpful form of government support.

• An increase in fiscal incentives is the most likely trigger for a sustained investment in greener technology.

• 63% of respondents are currently engaged in improving their technological performance in order to reduce their environmental impact.

• The Asia Pacific and Middle East and North African (MENA) regions are the most buoyant transport markets.

back to top

Shipping giant AP Moller Maersk has reported a strong increase in revenue for the for the nine months to 30 September, but comments from a senior company executive have sparked a row with seafarers' union Nautilus.

The company, which runs a substantial UK-flag fleet said that revenue was up 17% to USD 41.4 billion, primarily as a result of higher freight rates for the Group’s container shipping activities and higher oil prices. The company made a net profit of USD4.2bn against a loss of USD0.7bn in the same period last year.

“The result is exceptional, and we are very satisfied. Markets have been favourable, but first of all, our businesses are in excellent shape. Especially our container business has improved and is ahead of competition on profitability. We have moved from defence to the attacking zone, and we are ready to take more territory, especially in emerging markets,” said Group CEO Nils S. Andersen. The company’s container shipping and related activities made a profit of USD2.25bn compared to a loss of USD1.59bn in the first nine months of last year.

The company said: “The result was positively affected by an increase in average freight rates of 34%, an increase in transported volumes of 7% and substantial savings per unit.”

Cream buns can cause offence

However, the union Nautilus is annoyed by a message sent to the containership by Maersk Line chief operating officer Morten Engelstoft which said that “everyday commitment” of sea staff to reducing costs had had a real impact on the overall result and he urged crews to join shore-based staff in the Copenhagen office in celebrating the results with some traditional Danish lagkage (cream cake).

Nautilus general secretary Mark Dickinson commented: “It is clear from the feedback we have had from members in the fleet that seafarers are more likely to be choking back their anger than celebrating with management ashore.”

Mr Dickinson complained: “The profits have been achieved on the back of job losses for highly skilled and experienced personnel, and cuts in operating costs that have left some ships with food budgets that would barely run to covering the costs of cooking cream cakes or providing something to eat them off, since paper serviettes were banned.” Mr Dickinson urged Maersk to listen to a “barrage of dissent” with seafarers on more than 40 of the company’s containerships joining a protest against the message. He said: “Instead of cake, seafarers are looking for genuine recognition of their contribution to Maersk’s recovery over the past year.”

He added: “This means delivering on our repeated requests for a job security agreement and a demonstrable commitment to the future of European officers, with a defined strategy for recruitment, training and retention.”

Søren Andersen, head of vessels management at Maersk Line said: ”We are listening very carefully to the criticism. It illustrates that we have been through a process of cuttings costs that has not been easy. So we are trying very hard to improve the working conditions on our vessels, while ensuring that our business stays competitive.”

back to top

EU-recognised class societies have set up an independent body, based in London, to assess and certify their quality management systems to comply with the requirements of the EU's Erika III maritime safety package.

The new organisation, the Entity for the Quality Assessment and Certification of Organisations Recognised by the European Union or “QACE”, has an elected a five-member board responsible for its oversight. QACE says its five directors - Klaus Grensemann, Hiroshi Iwamoto, Victor M. Santos-Pedro, Dean Tseretopoulos and Francis Vallat - have been chosen for their collective maritime experience, reputation, independence from the classification societies and impartiality. QACE will maintain an administrative staff based at its new headquarters.

A statement said: “The establishment of QACE was welcomed by the ROs (EU Recognised Organisations – primarily classification societies) as quality is a never-ending challenge of continual improvement. When properly implemented and administered, quality-based audits are an extremely valuable tool in helping the audited organisation to identify areas in which it can further improve its services and administration. In this instance, the establishment of QACE can be expected to lead to improvements in the delivery of classification services over time to the benefit of our member societies’ clients and, most importantly, to further improvements in maritime safety.”

QACE has been established in accordance with Article 11 of the EU Regulation (EC) 391/2009. It is tasked with: making frequent and regular assessment of the ROs' quality management systems of the EU Recognised Organisations, in accordance with the ISO 9001 quality standard criteria; certification of their quality management systems; issuing interpretations of internationally recognised quality management standards that take account of the specific features of the nature and obligations of Recognised Organisations; and adopting individual and collective recommendations for the improvement of the ROs' processes and internal-control mechanisms.

The founder members of QACE are: American Bureau of Shipping, Bureau Veritas, China Classification Society, Det Norske Veritas, Germanischer Lloyd, Korean Register of Shipping, Lloyd’s Register, Nippon Kaiji Kyokai, Polski Rejestr Statków and Registro Internacional Naval.

back to top

Could nuclear ships offer the solution?

Lloyd’s Register and BMT Nigel Gee Members have set up a new research consortium, together with Greek-based Enterprises Shipping and Trading US-based Hyperion Power Generation to examine the marine applications for small modular reactors (SMRs).

The consortium plans to investigate the practical maritime applications for small modular reactors as commercial tanker-owners search for new designs that could deliver safer, cleaner and commercially viable forms of propulsion for the global fleet. It believes nuclear power is technically feasible and has the potential to drastically reduce the CO2 emissions caused by commercial shipping.

"This a very exciting project," said Lloyd’s Register CEO, Richard Sadler. "We believe that as society recognises the limited choices available in the low-carbon, oil-scarce economy -- and as land-based nuclear plants become common place -- we will see nuclear ships on specific trade routes sooner than many people currently anticipate."

The consortium believes that SMRs, with a thermal power output of more than 68 megawatts, have the potential to be used as a plug-in nuclear ’battery’. The research is intended to produce a concept tanker-ship design based on conventional and ’modular’ concepts. Special attention will be paid to analysis of a vessel’s life cycle cost as well as to hull-form designs and structural layout, including grounding and collision protection.

Enterprises’ Victor Restis said: “Despite the fact that shipping contributes much less to the world’s atmospheric pollution than other shore-based industries, we believe that no effort is too great when it comes to safeguarding a better world for future generations. We are extremely honoured and proud to be part of this consortium at this historic event, as we strongly believe that alternative power generation is the answer for shipping transportation.”

"We are enthusiastic about participating in the historic opportunity presented by this truly ground breaking consortium," said John ’Grizz’ Deal, the CEO of Hyperion Power. “In addition to fitting the basic requirements as the model for studying the application of SMRs in commercial naval propulsion, the Hyperion Power Module [HPM] can also help to set new nuclear maritime standards. The HPM’s design includes a non-pressurised vessel, and non-reactive coolant. These features, among others in the HPM, should encourage the industry to strive for even higher levels of inherent safety in their models."

"Nuclear propulsion offers the opportunity for an emissions-free alternative to fossil fuel, whist delivering ancillary benefits and security to the maritime industry," said Dr Phil Thompson, Sector Director -- Transport, for the BMT Group. "We look forward to using our wide range of maritime skills and expertise to identify the through-life implications, risks and potential for developing and using SMRs in the civilian maritime environment and to provide a framework for its safe and reliable introduction and utilisation.”

back to top

back to top

The International Chamber of Shipping (ICS), has launched a short film called Shipping, World Trade and the Reduction of CO2 Emissions in advance of the United Nations Climate Change Conference (COP 16) in Mexico, which starts this week.

The ICS film explains the measures being taken by the international shipping industry to reduce its CO2 emissions. In particular, it emphasises the importance of IMO being given a clear mandate by the UN Conference to finalise a package of measures that can be enforced globally to all ships, rather than only the 35% of the world fleet that is registered with developed countries.

ICS has given a cautious welcome to recommendations applicable to shipping made by the UN High Level Advisory Group on Climate Change Financing (AGF). The UN AGF report considers the goal, agreed by developed nations at the previous Copenhagen Conference, to mobilise funds totalling USD100bn year by 2020 to help developing countries confront climate change. Some of this funding might come from international shipping.

ICS notes: “Encouragingly, the UN AGF acknowledges that the UNFCCC principle of ‘Common But Differentiated Responsibility’, whereby rich and poor nations are treated differently, must be reconciled with the need for any market-based emission reduction measures to apply equally to all ships globally. The most appropriate forum for reconciling these objectives is the International Maritime Organization (IMO). At the UN Conference....ICS will emphasise that if measures are adopted that only apply to ships registered in richer nations this would result in the haemorrhaging of vast amounts of shipping tonnage from OECD countries to the flags of those nations not affected.”

Any measures adopted on CO2 must, ICS argues, be applied to ships on a uniform and global basis in order to avoid ‘carbon leakage’. Only about 35% of the world fleet is registered with Kyoto Protocol ‘Annex I’ nations, and most shipping companies have the freedom to decide to register their ships with the nations of their choice.

ICS says: “There is widespread consensus amongst the international shipping industry – as well as the majority of the world’s transport ministries – about the most effective means of reducing carbon dioxide emissions from ships. But it requires the UNFCCC Conference in Mexico to give IMO a clear mandate to finalise and implement the comprehensive package of technical and economic measures which governments at IMO have already developed.”

back to top

back to top

Shipping minister Mike Penning presented the 2010 British Shipping Safety Awareness Awards at a ceremony held at the Chamber of Shipping last week. The top three awards, of GBP1,000 , GBP750 and GBP 500 have been given to cadets who have suggested the best idea to improve health and safety at sea. Prizes of GBP400 each have also been given to their training colleges. The ideas had to be original, innovative and capable of implementation.

The winning suggestions include a rail-lock to improve safety when entering the holds of tankers and crude carriers, a medical emergency panic button for use in engine rooms and a new fire fighting nozzle.

First prize went to Adam Creber for a safety lock harness for use on entry into the empty tanks on board tankers and crude carriers. Adam has frequently entered tanks as part of his training and observed that with steep ladders and potentially 6-8 metre drops, there was little in place to prevent a fall. In his project, Adam suggested the use of a rail-lock system. This would involve a hardened piece of metal clipped parallel to the stair hand rail which would follow the user as they descend the stair way. A safety harness could be attached to the user and, if forced by a fall, would lock.

Second prize went to Steven Walker for an emergency medical panic button to be carried specifically in engine rooms. When activated it would emit a wireless signal to a hub directly connected to the main computer console.

Third prize was won by Simon Curtis for a special fire-fighting nozzle that could deliver both high expansion foam and water mist.

back to top

Moving the fleet

Warsash Maritime Academy’s manned model fleet left its Marchwood base and journeyed inland to its new location at one of the UK’s oldest existing reservoirs last week.

The nine-metre long electric powered models – including a tanker, a bulk carrier and a passenger ferry – were carried by road to the new Manned Model Shiphandling Centre site at Timsbury, near Romsey.

The entire manned model operation will be moving to the lake in 2011, as part of a major investment to ensure the continued development of Southampton Solent University’s highly specialised maritime training facilities.

Warsash says: "Mariners from across the globe have been getting vital training at the former 10-acre Marchwood facility – one of only five in the world - for more than 20 years, learning shiphandling skills on scale model vessels in conditions that emulate real-life maritime experiences."

The new Manned Model Shiphandling Centre at Timsbury will build on the expertise gained from the Marchwood operations. Using various ship models, berths, basins and channels on the new lake, a variety of port scenarios, canal transits and berthing operations will be simulated for the ships’ officers and pilots under training to practice their shiphandling skills. Complex and, in real life, potentially hazardous manoeuvres can be practised in complete safety in the manned models making them a key training tool for the shipping industry.

back to top

Maritime London's membership continues to grow with KPMG and Stephenson Harwood joining as corporate members and Tim Gerrard as an individual member. Click here to view a list of all our members.

back to top

Support the Mercy Ships cause

Mercy Ships UK is holding a reception for the maritime community at the House of Lords on 14 January.

Mercy Ships has operated hospital ships since 1978 and has proved medical treatments to 12 African countries and treated over 400,000 patients to date. The ship Africa Mercy, has a total staff of 450 volunteer doctors and nurses and provides78 patient beds in addition to its day care facilities. The operation of the ship is funded by charity, Mercy Ships UK, whose annual budget is £4.4m.

Tickets for the reception, which will be followed by a tour around the House of Lords, are available for £80 per person.

For further details please contact Sue Hall. Email: sue.hall@mercyships.org.uk

back to top