By GREGORY DL MORRIS, an independent business journalist with more than 20 years' experience covering finance, industry and commerce worldwide.
With the first anniversary of the Costa Concordia wreck off the Italian coast passing on Jan. 13, marine insurers reflect that such major casualties are actually quite rare.
The hull of the Costa Concordia, which is owned by Carnival Corp, was valued at $512 million, but the accident may cost insurers half as much once employer's liability claims are paid.
Insurers note that advances in technology, coupled with an increased focus on training and operating practices, has led to a decrease in both the number and severity of maritime claims.
Hard numbers to support that assertion were just made available in the 2013 Safety & Shipping Review from Allianz Global and Corporate Specialty.
The review's main findings were that shipping losses continue trending downward, with a 27 percent decrease in 2012 on the previous 10-year average. Losses centered on South China and the South East Asia region, with foundering the most common cause of loss. AGCS also asserts that, despite industry initiatives, challenges remain.
"In the past several years, there has been a great deal of advancement in technology," said Tim Donney, head of marine risk consulting for AGCS. "That is all good, but technology advanced faster than industry practices could keep current. Technology is no good if it is not used to its best advantage, and it is up to the owners to train their crews."
Donney stressed that industry best practices are the essential key, because formal regulation moves slowly.
"The International Maritime Organization and the coast guards of major trading nations do the best they can, but it is a long process. That is why we ask owners, 'What are you doing beyond the legal minimums?' We like companies that have their own programs and that actively share best practices."
He explained that the noticeable reduction in losses over the past decade is a direct result of the industry's reaction to some high-profile losses that occurred within just a few years of each other, notably, two ferries in northern Europe, the Herald of Free Enterprise in 1987 and the Estonia in 1994, as well as the Exxon Valdez oil spill in Alaska in 1989.
"Those were the most modern vessels of their time," said Donney. "They were all classed and inspected. What was missing was the human element, the crew training and best practices. Since the mid-1990s, that has been the focus of the IMO with their International Safety Management Codes. Those mandate crew training, regular audits and incident reviews."
Even as losses decline, the need for sophisticated coverage and risk-management support increases.
One of the carriers expanding in the sector is XL, which began building its marine group in August 2011 with the appointment of Richard DeSimone to the newly created post of president of its U.S. Ocean and Inland Marine unit. It also added Chris Cooke as vice president of hull and liabilities in March, 2012.
January 14, 2013
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