The Steamship Mutual Management Highlights 2012

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The Steamship Mutual Management Highlights 2012

P&I Claims

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The Steamship Mutual Management Highlights 2012
P&I Claims
“Claims increased broadly in line with tonnage increase for the 2011 year”
The level of claims experienced by the Club in the 2011
policy year was higher than in previous years and
overall was 12.6% higher than the comparable figure
for the previous year.
Attritional claims – those claims with values of less
than US$ 250,000 which make up the overwhelming
majority of all claims in terms of numbers – rose in
both frequency and severity compared to previous
years. These claims increased by 6% in number
compared to 2010 and by 15.8% in terms of overall
cost. Interestingly, a majority of the increase took place
in respect of claims in the US$ 100,000 to US$ 250,000
range. However, this rise in attritional claims has to be
considered against a 12% annualised increase in the
Club’s entered tonnage over that year. Moreover, the
average size of attritional claims increased by 9.3%;
a continuation of an upward trend that has been
seen for some time.
The higher claims levels experienced in the attritional
layer have been mirrored by an increase in large losses –
those in excess of US$ 250,000. The cost of large claims
within the Club’s US$ 8 million retention has increased
by 15%; largely due to an increase in Fixed and Floating
Objects (F&FO) claims and claims involving chartered
entries. Claims in the volatile layer US$ 1 million to
US$ 8 million increased in frequency with 20 claims
in 2011 as compared to 13 for 2010.
Cargo claims, normally the largest category of claims,
remained largely static, the sharp decrease in the 2009
year proving to be an anomaly. Crew claims, the other
claims category which traditionally accounts for the
largest share of claims, increased in both numbers and
overall cost. F&FO claims have also increased after a
dramatic reduction in 2010, although the Club
experienced a better year in 2011 for collision claims.
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To date, 15 Pool claims have been reported for 2011;
all but two of which resulted from collision or grounding
incidents. Of these, only one involved the Club, a
grounding incident involving the passenger vessel
“Costa Concordia” in January 2012, cover being shared
equally with another International Group Club.
The most unusual feature of the 2011 claims year was
the prior year claims deterioration experienced in the first
quarter. Analysis of this result does not suggest any clear
pattern or single reason, and the deterioration appears
to be isolated and unrepresentative of usual claims
trends. There was some improvement in the projected
net cost of prior year claims in the remainder
of the year, although this did not equal the early
claims deterioration.
Large Claims Analysis
The frequency and severity of large claims, those in
excess of US$ 250,000, were at the highest level since
2007, the year of the “Cosco Busan” pollution incident
in San Francisco. However, this increase in severity was
principally attributable to the “Costa Concordia” and,
without that incident, the cost of large claims is broadly
comparable with 2009 and 2010, albeit claims
frequency in 2011 was higher.
Wreck Removal
Wreck removal is the largest claims category incurred in
2011 with three large claims having been experienced,
including the “Costa Concordia” which also involved a
number of fatalities and injuries to both passengers
and crew members. The two largest of these claims
both occurred as the result of navigational errors or
misjudgements that resulted in the vessels passing
too close to charted obstructions.
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The Steamship Mutual Management Highlights 2012
P&I Claims
continued
Fixed and Floating Objects
Nine large F&FO claims were incurred in 2011, resulting
in costs in this category which were treble that of the
previous year. Two of the claims were the result of
vessels striking objects whilst at sea. Poor passage
planning, inadequate look-out, and steering malfunction
were contributing causes of these incidents. Four claims
arose as the result of errors made during berthing
operations, highlighting the need for a proper and timely
exchange of information between Master, pilot and
assisting tugs concerning the berthing plan. One claim
arose when a vessel was blown off the berth in bad
weather and two claims arose from the incorrect use
of anchors.
Cargo
Cargo claims in excess of US$ 250,000 fell slightly in
both frequency and severity compared to the previous
year. Six claims involved product or chemical tankers and
accounted for nearly half of the large cargo claim costs.
The largest arose from an operational error whilst a
chemical tanker was on passage that resulted in cargo
being discharged overboard. Four of the tanker claims
involved contamination, either as the result of
operational error or inadequate tank cleaning operations,
and one tanker claim involved the theft of cargo. Four
claims involved bulk carriers where cargo was damaged
by water – either as the result of structural deficiencies,
or as the result of rain whilst loading. Two claims
involved general cargo vessels and arose from a
stowage collapse and water ingress through hatch
covers. Two claims involved barge-carrying vessels and
arose from water ingress to the barges. A container ship
was involved in one claim that arose from the capsize of
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a feeder vessel, and one claim involving a reefer cargo
was the result of a failure to maintain carriage
temperatures. Several of these cargo claims have
prompted loss prevention action through the means of
condition surveys.
Crew
The number of large crew claims incurred in 2011 was
higher than in 2010 with a total of 15 claims in this
category but, apart from the “Costa Concordia” claim
which is categorised primarily as a wreck removal claim
because of the cost of that element, their cost fell
slightly. Over half the cost of these large crew claims
comprised five claims involving vessels engaged in
offshore, towing or fishing operations; reflecting the
inherently higher level of personal risk associated with
work on these vessel types. Five of these claims resulted
from illness and involved individuals of four different
nationalities – Filipino, Korean, German and Polish. The
remaining five claims arose from a variety of causes and
involved, falling machinery during maintenance, release
of a lifeboat, crushing by a watertight door, a fall on a
high speed craft whilst underway in heavy weather, and
an accidental drowning after falling from the dock. A
number of the injury claims indicated scope for
improvement in working practices and procedures, and
loss prevention action is being taken to minimise the risk
of recurrence.
Passenger
Apart from the “Costa Concordia”, there were six other
large claims in the passenger category. Four involved
cruise ships, and two others involved ferries; one
resulting in the total loss of the vessel following a fire in
 The Steamship Mutual Management Highlights 2012

GROSS OWNED INCURRED CLAIMS BY SIZE AS AT 12 MONTHS – US$ MILLIONS

Under $250k $250k-$500k $500k-$1.8m $1.8m-$8.0m Over $8.0m

0 50 100 150 200 250 300

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

GROSS OWNED CLAIM BY POLICY YEAR AND CLAIM CATEGORY – US$ MILLIONS

Cargo Collision Crew FFO Injury Others Passenger Pollution Wreck Net IBNR Net Total

0 500 1000 1500 2000 250 300 350 400

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

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The Steamship Mutual Management Highlights 2012

TOTAL CLAIMS BY POLICY YEAR – US$ MILLIONS

Gross Ultimate Net Ultimate

2002 187.2
181.6
2003 141.6
133.7
2004 151.1
141.6
2005 215.1
153.8
2006 247.9
189.6
2007 437.7
184.7
2008 175.8
169.4
2009 185.7
167.8
2010 205.7
190.0
2011 450.0
229.8

AVERAGE SIZE OF ATTRITIONAL CLAIMS (UP TO US$ 250,000)

20,000

16,000

12,000

8,000

4,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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P&I Claims
continued
passenger luggage stowed in the vehicle deck and the
other involving severe motion of the vessel following
malfunction of the stabilisers.
Chartered
Both the frequency and severity of claims involving
chartered entries were higher than in previous years.
Various claim categories were involved. The majority
(eight) were cargo claims but there were six Damage to
Hull (DTH) claims, two Third Party Injury (TPI) claims, and
one involving damage to F&FO. Three incidents, two of
which included a DTH element, involved explosions or
fires in dangerous cargoes stowed in containers and
accounted for over half the overall chartered claim
exposure. This highlights the significant risk associated
with containerised dangerous cargo.
The other four DTH claims were caused by grounding,
inadequate hold preparation for the carriage of the
intended cargo, contact by a floating crane during cargo
operations, and main and auxiliary machinery damage
caused by bunkers.
The Steamship Mutual Management Highlights 2012
In addition to the fires and explosions, other cargo
claims involved the deterioration of frozen cargo in reefer
containers, theft of the contents of apparently sealed
containers, loss or damage to cargo caused during
loading or discharge operations, and shift or collapse of
stowage of break-bulk cargo. In several of these claims,
the residual liability on the charterer was greater than
might otherwise have been the case because of the
financial weakness of various counter-parties who might
otherwise have been expected to contribute.
Finally, the two TPI claims both involved the injury or
death of stevedores, as the result of a stowage collapse
and the improper use of lifting gear.
Colin Williams
Head of Claims
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