The Fremantle Highway fire in the North Sea is set to chalk up another major loss for hull underwriters and put pressure on rates, particularly in the car carrier sector.
The hull of the Shoei Kisen Kaisha-owned, 6,210-ceu Fremantle Highway (built 2013) is valued at about $78m, but the long-running salvage and firefighting operation will also push up the final claims bill significantly for the ship’s hull underwriters.
Salvage has been agreed on Lloyd’s Open Form terms with Multraship and Smit Salvage.
Shoei Kisen has placed most of its hull cover in Tokyo, but there is also likely to be a large portion of reinsurance for risk placed in the London market.
The casualty comes on top of two other expensive hull claims this year.
The loss of the 3,382-gt fishing vessel Kodiak Enterprise (built 1977) in a fire in Tacoma in the US in April is expected to cost insurers about $160m.
The possible loss of the 13,200-dwt pipelaying vessel Skandi Buzios (built 2016), which caught fire at a Brazilian port in June, could eventually cost up to around $250m.
Brokers had been expecting the recent strengthening of rates in the hull market to settle down this year, but the concern is these costly casualties could potentially trigger further rate rises, London brokers suggest.
There is also the question of the cargo loss of close to 3,000 cars, including Mercedes vehicles, on board the vessel.
The eventual claims settlement is likely to depend on the terms of carriage, but a proportion of the cargo costs could fall on the ship’s protection and indemnity insurer, the Japan P&I Club.
The club may also be on the hook for costs if the Fremantle Highway is declared a wreck, with P&I generally picking up the costs incurred in wreck removal.
Under the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, the ship will almost certainly have to be recycled within Europe, which again will come at a significant cost.
There will be additional costs for the environmentally friendly disposal of the consignment of cars, which will likely be considered toxic waste.
Rates are already expected to increase for car carriers because of the perceived higher risk of electrical cars and following a number of similar incidents, including the 6,400-ceu Felicity Ace (built 2005) in 2022 and 4,900-ceu Hoegh Xiamen (built 2012) in 2020.
The incident also marks another major claim for Shoei Kisen, which controls the Fremantle Highway through its shipowning subsidiary, Luster Maritime/Higaki Sangyo.
Ever Given owner
Shoei Kisen has built up a fleet of 200 ships and is strong in the car carrier and ultra-large container ship sector, which have run significant claims for marine insurers over recent years.
Shoei Kisen was the owner of 20,388-teu Ever Given (built 2018), which drew global attention when it grounded in the Suez Canal in March 2021.
An initial settlement, believed to run into the hundreds of millions of US dollars falling mostly on Japanese hull insurers led by Mitsui Sumitomo Insurance, was reached with the Suez Canal Authority, allowing the ship to depart.
Shoei Kisen also suffered a major car carrier loss when the 6,400-ceu Sincerity Ace (built 2009) caught fire in the Pacific Ocean in 2019.