A major fire at Germany’s Lurssen shipyard in September last year, which led to a $700m hull claim, could be the trigger for further rate raises in the Lloyd’s of London marine market, according to a report from broker Gallagher.super-yacht
The Gallagher report, penned by brokers Mike Ingham and Haris Lagios, suggests that the loss of a super-yacht, which was under construction for a mystery buyer, at the yard could turn out to be the marine markets' largest-ever hull claim.
Gallagher has already seen a hardening of rates — and it expects this to continue into 2019 as a result of the fallout from the incident.
“It is this loss more than any others that has galvanised hull underwriters, their management and Lloyd’s of London to look for higher prices and trim back the book,” the report's authors said.
They added that the Lurssen loss shows the increasing claims scenario that hull underwriters are facing.
“With larger and more sophisticated vessels entering the sector — and more risky trading areas such as polar waters being explored — the risk of ever-larger single losses occurring is growing. A loss of an ultra large or very large vessel now has the potential to generate claims in the $1bn to $2bn space.
Further costly claims
The Lloyd’s hull market could be hit by further expensive claims from recent casualties, including the 6,400-ceu car carrier Sincerity Ace (built 2009) and 7,250-teu Yantian Express (built 2002).
Even before the Lurssen fire, the Lloyd’s of London market told syndicates that they needed to improve profitability. The moribund hull and machinery market has been an obvious place to start improving the balance sheet.
Gallagher has identified 10 Lloyd’s of London syndicates that have cut back or withdrawn from the Lloyd’s market.
However, some of this capacity has transferred to the market. Aspen syndicate 4711 has sold its hull and machinery portfolio to the Helvetia Assurances Group, which is now operating the business in London through former Aspen underwriter Ralf Godwin.
Gallagher has suggested that there could be more cutbacks in capacity from the Lloyd’s and non-Lloyd’s marine markets, but is concerned that it could simply be replaced by capacity entering the market in other regions.
“It is widely believed that there could be further casualties in a marketplace which has been characterised by overcapacity in recent years," the authors said. "There has already been some hardening of rates and this is expected to continue in 2019.
“How significant will largely depend on whether capacity enters the market in other parts of the world in an attempt to take advantage of a more favourable rating environment.”
