Insurers in campaign to scupper unsafe ships

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INSURANCE underwriters and shipowners' representatives are mounting an unofficial campaign to drive unsafe ships off the seas. Insurers are being encouraged to insist on penal premiums or, in the worst cases, to refuse cover.

In the wake of a near 40 per cent increase in ship losses last year a number of leading underwriters have indicated they are ready to use their financial muscle to put firms out of business unless they raise standards.

The recession and overcapacity in the industry have been blamed for a serious fall in the standards of merchant ships and their crews as owners cut corners to stay in business, operating poorly crewed rust-buckets well beyond their useful life.

The insurers' tough line comes after a reduction in overcapacity in the worldwide marine insurance market as a number of firms have pulled back after heavy losses. This has brought the opportunity for the rest to insist on higher standards.

Mark Brockbank, group managing underwriter at the London insurer Hayter Brockbank, said: 'Individual insurers will refuse to insure owners who cannot demonstrate the right quality of management.'

He said that, as well as raising prices, underwriters were tightening up on other conditions and on retentions. The change was international as rates hardened, giving insurers the opportunity to be more selective.

At a meeting of marine insurers in Switzerland last week Juan Kelly, chairman of the International Chamber of Shipping, urged insurers to turn away all vessels that did not meet minimum standards.

He said: 'If insurers refuse cover for sub-standard ships, and enforcement agencies ensure that without cover such ships do not sail, the industry will have taken a major and unprecedented stride towards the solution of an enormous problem.' It was 'difficult to over-emphasise' the leverage underwriters had.

Chris Horrocks, secretary-general of the International Chamber of Shipping, said: 'We need a co- ordinated effort on the part of the potentially very powerful triumvirate of shipowners, insurers and the classification societies to squeeze out the marginal operators.'

The classification societies, which inspect merchant ships, have taken some of the blame recently for falling safety standards, leading some underwriters to appoint their own surveyors to check the ships they insure.