ALMOST 40% DUE TO MACHINERY


Source: Nordic Marine Insurance Solutions


cent. This means machinery claims represent a grey area in the insurer- insured relationship as insurers are duty-bound to shoulder extensive risk and liability when it comes to machinery loss or damage.


Under the Institute Time Clause (ITC), which governs what is insurable under marine hull insurance, negligence of master officers, crew, pilots, repairers or charterers are insured perils. This means that insurers are expected to pay claims out, even if the incident was due to negligence on the crew’s part. With ship crews not being held liable for their own errors, and instead transferring this liability to their insurers, a potentially careless ship maintenance culture can easily take hold on board vessels.


As such, the inefficiency arising from this provision in the ITC is likely to be one of the contributing factors to the slowly diminishing buffer marine insurers need at their disposal to continue supporting the shipping industry in times of need and peril. Insurers will never skirt their responsibility to work positively with the marine shipping industry. However, more needs to be done to ensure ship crews maintain a culture of thorough maintenance and servicing.


To help understand the waste this entails, consider this: the shipping industry paid a total of US$7.6 billion in insurance premiums in 2015 of which US$2.6 billion were machinery claims (again, the most significant portion of total claims paid out). The average cost of a


30 | The Report • December 2017 • Issue 82


ship’s main engine is around US$1.5 million, which essentially means that the amount paid out in machinery claims in 2015 could finance more than 1,700 new engines – or more than the 1,600 total engines delivered for new ships that year. This emphasizes the need to address inefficiency in maintenance for existing equipment.


IDENTIFY THE ROOT CAUSES TO MINIMIZE LOSSES


Of course, the smooth operation and serviceability of a ship hinges on many factors that go beyond the regular maintenance of components and machinery. Other important considerations include crew training and competency, as well ensuring the right fuel treatment


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