The Nordic Association of Marine Insurers (Cefor) has reported a reduction of claims costs and frequency in the first half of this year.
The fall in claims, which have been recorded by Cefor analyst and actuary Astrid Seltmann, follows a slowdown in seaborne trade due to the impact of the Covid-19 pandemic.
“The Covid-19 pandemic led to a reduction in vessel activity, especially for certain vessel types,” Cefor said.
“Figures as of 30 June 2020 show a reduction in the claims frequency and the average claim cost per vessel. It is reasonable to assume that this reduction in claims frequency and cost is partly related to a reduction in vessel activity.”
The figures show that total loss frequency in the six-month period was at an all time low of 0.5%. There were only two losses in excess of $10m in the period and none in excess of $30m.
Shipping’s claims frequency fell below 0.05% slightly lower than the figures of 0.05% and 0.1% that has been recorded since 2010.
“The claims frequency also tends to be lower during periods of reduced vessel activity,” Cefor pointed out.
Collision contact and grounding also reduced over the period.
The average insured value of vessels fell by 2.9% at renewal reflecting lower asset values although some sectors, such as tankers, showed and increase.
Expensive machinery claims also seem to be on the decline. Machinery claims in excess of $5m are not unusual in recent years.
However, Cefor’s figures show there were no such claims in the first half of this year which maybe be due to the lay up of cruiseships which are a major source of high-cost machinery claims.
However, Cefor cautioned there is some potential for costly claims due to the current pandemic.
These include an accumulation of valuable cruise ship vessels laid up in areas exposed to hurricanes and typhoons such as Florida and Asia. There are also a lot of offshore vessels laid up in Scandinavian fjords.
“A natural catastrophe hitting an area with a large accumulation of high-value vessels in lay-up could have the potential to result in an unprecedented accumulation loss for hull insurance,” Cefor said.
Difficulties in securing safety inspections for ships is another risk while maintenance could be compromised because of the difficult market the association suggested.
The issue of crew fatigue because of the difficulties in carrying out crew change is another threat to safety for the industry Cefor warned.
