The insured value of vessels has increased for the first time in more than a decade, according to analysis by the Nordic Association of Marine Insurers (Cefor).
The figure had been in decline since asset values crashed following the 2008 financial collapse.
The decline in insured values stabilised in 2019 but, following the post-pandemic recovery in shipping activity, have now picked up by 1.1% in the first six months of 2021.
Cefor has attributed the increase mainly to the post-pandemic boom in container shipping.
“The increase is mainly due to the high demand for container vessels after a strong increase in demand for consumer goods after the dip in 2020 due to Covid-19 lockdowns," Cefor said.
"Further, the rising steel price may contribute to an inflation of newbuilding prices.”
The rise in insured values could see premium income increase for insurers.
But, on the downside, the cost of total losses would also increase as a result.
Repair cost must exceed a ship's value for it to be declared a constructive total loss. That means that the higher the insured value, the less likely a vessel is to be declared a constructive total loss in a casualty situation.
Losses remained low in 2021 in the post-pandemic recovery. Cefor recorded only five losses in the $10m to $30m range in the first half of this year, compared to three in the reduced shipping activity of 2020. Two of the 2021 losses were containerships.
As shipping activity has picked up, claims frequency has also returned to average levels over the last decade of between 0.05% and 0.10%.
Cefor said containership fires continue to be a major contributor to costly marine claims, citing the recent 2,743-teu X-Press Pearl (built 2021) accident. The X-Press Pearl was declared a constructive total loss after it was destroyed by a cargo fire off Sri Lanka.
“In addition to the fire damage, the subsequent sinking of the vessel caused severe environmental challenges to the coast off Sri Lanka when dangerous container contents leaked into the water,” Cefor said.
Cefor said it recorded 22 cases of containership fires in the first half of 2021, two of which cost insurers more than $10m.
Cefor also noted that there had not been a surge in claims related to the IMO 2020 regulation — introduced in January last year — to limit the sulphur content of fuel.
