German freight, demurrage and defence (FD&D) mutual Schutzverein Deutscher Rheder (SDR) has weathered some tough years.
The marine insurer’s fleet has fallen by about one-third over five years, mirroring the trend of the German fleet and reducing premium income.
This article is part of a special report on the shipping market that you can read in full in TradeWinds' weekly edition on 29 January.
But the recovery in the container markets is raising confidence that the numbers may have stabilised.
Hamburg-based SDR has been run by managing director and German marine insurance veteran Michael Wester since January 2018.
Wester started with SDR in 1994 when it represented about 700 vessels.
He has watched the fleet numbers rise and fall in line with the fortunes of the German fleet.
Today, the tally of SDR's insured vessels numbers around 1,005.
That is about 10% down on 2019 and compares with 1,540 in 2016.
Tonnage insured totals about 20m gt, down from 22m gt in 2019 and 36m gt in 2016.
Optimum size
The goal is to maintain the tonnage insured at current levels, which is the optimum size according to Reederei Nord chairman Kurt Klemme.
Klemme became SDR chairman three years ago after fellow board member Carsten Sommerhage of Columbia Shipmanagement (Deutschland) stepped down.
His optimism stems from the recovery of container markets and the increase in equity entering shipping from German investors.
"The capital markets will open again in shipping because people have no other sort of investment,” he said.
“The real estate market is overbought and the euro is pretty strong. So people can buy ships and US dollars at a good rate, so we hope there are new ships coming.”
Wester, who runs the office with the help of three other lawyers, agreed.
“We are seeing now the positive development in container charter rates,” Wester said.
"That's giving us some hope that members have the opportunity to obtain some funding for new projects."
Common philosophy
SDR’s members comprise top German shipowners and shipping companies.
Deputy chairmen are Jochen Dohle of Peter Dohle Schiffahrts and Bimco president-elect Nikolaus Schues of Reederei F Laeisz.
Newer board members include Nicolaus Bunnemann of Atlantic Lloyd in Hamburg and Martin Harren of Harren & Partner.
Other companies represented include Hartmann, Jungerhans, Bereederungsgesellschaft Alstership, Schiffahrtsgesellschaft Oltmann, Bernhard Schulte, Borealis Maritime and Ahrenkiel Steamship.
Wester described the club as having “a homogenous membership", with “a common philosophy in relation to claims”.
Members generally prefer to find compromise solutions that make it unnecessary to proceed to arbitration or court proceedings.
"Most members are not eager to pursue a dispute to the very end — if necessary, we'll support members to high court and appeals,” Wester said.
He feels that philosophy is helped by the club’s focus on the container side.
Boxships account for about 55% of SDR’s fleet, with tankers, bulkers and multipurpose vessels making up most of the rest.
“On the container market, there are not that many players on the charter side; you meet again maybe next week,” Wester said.
Moreover, he believes the booming container market provides an incentive for companies to resolve disputes quickly.
He said charterers are keen to have the ships running but have not been able to resolve issues in every port they have visited during the pandemic.
“That's a problem," he said. "It takes some time, but solutions are being found."
Expansion plans
Going forward, the SDR is hatching plans to enlarge the services offered, including an information database. It is also opening membership to non-German owners and is looking at its first customers from the Netherlands and Cyprus.
But those plans mean jumping through various regulatory hoops, which can prove costly for a relatively small club.
SDR remains one of only two clubs that are not affiliated to the International Group of P&I Clubs. The other is Norway's Nordisk Defence Club.
"The members would like to remain independent,” Wester said.
Being based in Hamburg helps it remain competitive by keeping costs low. Wester added that administration costs per claim are estimated to be at least 30% lower than London FD&D law offices.
