Shipping market to remain volatile says North P&I Club
The shipping insurance market is expected to continue facing significant challenging market conditions during 2012 as well, say Paul Jennings and Alan Wilson, joint managing directors of North P&I club, in an interview with Hellenic Shipping News Worldwide. The world economy is still plagued with uncertainty, making it harder for the shipping industry to recover.Still, the North P&I Club has kept its sound financial position, as an “A” rated Club by Standard & Poor’s and is now the second largest P&I Club, among the 13 in total, providing cover for a total of 6,000 ships from 400 members worldwide. A total of 51% percent of its clients are from Europe, while tankers are the largest ship type with 36% of the total, followed by dry bulk carriers with an additional 30%.
North of England has been one of the leading P&I clubs for some time now. Could you let us know on the profile of the club, in terms of ship types and fleet age?
North provides P&I, FD&D, war risks and ancillary insurance to 115 million GT of owned tonnage and 35 million GT of chartered tonnage, with 6000 ships entered by 400 members worldwide. We are the second largest of the 13 clubs in the International Group of P&I Clubs in terms of owned tonnage, with nearly 12.5% of the world’s fleet. In terms of ship types, tankers account for 36% or our tonnage, bulk carriers 30%, container ships 20%, car carriers 3%, LNG ships 2%, general cargo 2% and others 7%. By regions entries are split Europe 51%, Asia Pacific 25%, Middle East 12%, Americas 9% and others 3%. Around 65% of our entered vessels are less than 15 years old.
The past few years have proven to be rather challenging for the shipping industry, with few exceptions noted. How have these difficult market conditions, coupled with a more than fragile economic recovery been affecting the shipping insurance industry?
The shipping insurance industry continues to face difficult economic conditions. Despite this North remains committed to maintaining the financial strength of the club, and in January 2012, ratings agency Standard and Poor’s confirmed our ‘A’ financial strength rating and stable outlook for the eighth consecutive year.
Which were the main developments and highlights of the North P&I club during 2011?
We moved into our newly enlarged and improved UK head office in March 2011, which will enable us to employ up to 125 more staff. This followed a very successful renewal in February, which saw free reserves advance 30% to a record US$312 million. Also in March, a charity fund set up during our 150th anniversary year in 2010 was able to donate US$150 000 to sailors, lifeboats and local communities.
Which are your expectations for 2012? Should shipowners expect further rate increases and why?
We expect economic conditions to remain difficult in 2012, with continued volatility and instability in the shipping markets. The club’s member directors have agreed on a modest 5% general premium increase for P&I cover at the February 2012 renewal to preserve the club’s financial strength.
The issue of piracy has continued to plague the shipping industry during 2011 with increasing intensity. How have you been dealing with this problem, in terms of collaboration with your club’s ship owners?
In September 2011 the club joined forces with specialist maritime intelligence, investigation and crisis management company Gray Page to vet armed maritime security providers on behalf of the club’s members. The aim is to help its members identify providers whose governance and operations meet – at the time the vetting is carried out – the professional, legal and ethical standards required by a shipowner or operator contemplating the use of privately contracted armed security personnel on board a vessel entered with the club.
Could you describe us the procedures you would follow if a vessel covered by North was being hijacked?
In the event of a hijack, we would do everything possible to expedite the safe release of the vessel’s officers and crew, provide full support to them and their families during and after the attack, and help to ensure the vessel resumes trading as soon as possible.
At the same time, a series of new rules and regulations have been spawning both centrally, through the IMO, as well as around the world in terms of cargo handling, shipping emissions etc. Could you elaborate on the most important ones that ship owners should pay special attention to?
We continue to advise members of new rules and regulations through our circulars, online industry news pages and a wide range of loss-prevention newsletters, briefings, information sheets, guides and posters. We have particularly focused in recent months on raising awareness of the dangers of liquefying bulk cargoes and the importance of adhering to the IMO International Maritime Solid Bulk Cargoes (IMSBC) Code. Other recent legal developments of note are the Manila amendments to the International Convention of Standards of Training, Certification and Watchkeeping for Seafarers (STCW) and a growing range of international trade sanctions against Iran.
Do you believe that as years go by, insurance costs will be rising in order to anticipate more improbable events, or as the global shipping fleet gets ever so younger, costs could actually go down from that perspective?
P&I claims have always been and always will be inherently volatile, and even the most modern ships with the latest navigation aids are not immune from major incidents. Shipowners covered through International Group clubs can at least be sure that their insurance costs are the most cost-effective available and that they will benefit from any positive claims trends that emerge in the future.
Nikos Roussanoglou, Hellenic Shipping News Worldwide