Bigger boxships herald bigger problems for insurers and salvors
The growing size of container ships may pose problems for marine insurers (Maersk Line)
Denzil Stuart looks at the impact of the growing size of container vessels on the marine insurance community.
The maritime industry at large, as well as the marine insurance community, continues to benefit from the activities of the International Union of Marine Insurance as it focuses on the emergent dangers in shipping operations.
This was most evident at the 2011 annual conference of IUMI in Paris, where a greatly varied programme of topics was highlighted by IUMI’s seven technical committees, each of which arranges presentations and a workshop over the three days. These cover risks associated with hull & machinery, cargo, offshore energy, fishing, inland waterways and yachting, loss prevention, facts and figures (stats), and legal and liability matters.
As the shipping industry is savagely hit by the worldwide economic blizzard, leading containership owners have seen billions of dollars wiped from the value of their fleets over the past year. In spite of this, and the continuing gross oversupply of ships, the building of the new generation of super boxships does not appear to be affected. Thus, there was great interest in Paris among marine underwriters and industry representatives when this subject came under the spotlight. Given the huge leap in the size of boxships and the consequences of an accident, what will hull and cargo insurers be up against in the near future?
In 1970 the largest boxship had a capacity of 1,000TEU; but today’s new New-Panamaxes can carry 15,000 times that amount. Meanwhile, we have the 20 18,000TEU vessels ordered by Maersk from Korean yards for delivery from 2013 onwards, and there is talk of owners looking at 22,000TEU vessels.
At the Paris forum, Peter Townsend, hull and liability underwriter at Swiss Re, graphically illustrated the growing problem for underwriters and all other stakeholders. He gave the example of the APL Panama, which at 4,038TEU was much the same size as the MSC Napoli, that grounded at Ensenada on Christmas Day 2005 with 1,805 boxes onboard. She was not refloated until March 10, 2006, after some 1,300 containers had been offloaded. There were 1,445 cargo interests involved (again rather mirroring the Napoli casualty), and the insurance claims occupied 1,600 man-hours by claims adjusters.
Should a similar accident befall a 15,000TEU, 157,000dwt vessel, 75% laden, meaning 11,250 boxes, cargo interests could exceed 9,000, occupying perhaps nearly 10,000 adjuster man-hours, and taking five years to adjust (the APL Panama was not completely adjusted five years after the accident).
A realistic disaster scenario, said Townsend, would be an 18,000TEU vessel fully loaded with an average box value of $30,000, giving a total cargo value of $800m.
The new giant containerships, he said, would bring all manner of logistical problems when they encountered difficulties which required cargo discharge, with any problems suffered in port magnified at sea with the marine equivalent of dismantling a 20-storey building. Very few cranes would have the reach to access the top boxes at sea.
In his opinion, the salvage and insurance industries had not really been tested as there had been no major casualty of the ultra Post-Panamax vessel. But because it hadn’t happened, almost by definition, this meant it would surely happen. Meanwhile, insurers are worried about three major issues if there is a serious accident involving a giant boxship: the aggregation of values, the pollution threat, and salvage capability (or lack of). The problems are multiplied if the containership is in a serious collision with, say, a cruise ship or LNG/LPG carrier.
As for ship and cargo owners, they will need to accept that salvage will become longer, far more complicated, and much more expensive.
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