The Nordic Association of Marine Insurers (Cefor) has released its 2024 hull trends from the Nordic Marine Insurance Statistics (NoMIS), highlighting the rise of machinery damage in an ageing fleet, whilst fires and collisions account for the largest losses.
The Nordic Association of Marine Insurers (Cefor) has published its 2024 Ocean Hull and Coastal Hull reports, based on the Nordic Marine Insurance Statistics (NoMIS) database.
According to the data, machinery damage has showed a substantial increase in recent years, which should be seen in the context of an ageing fleet.
Key findings of the Ocean Hull Report 2024:
– Major losses – collisions and fires: Collisions were the costliest claims in 2024. Fires continue to represent a high share of major loss costs. 2023 and 2024 were the first years after a benign ten-year period with claims above USD 50 million.
– The machinery claim cost per vessel was 50% higher in 2024 than in 2015-2021, after a steep increase the past 3 years: This is partly due to an increasing number of very large claims. Those claims often include substantial consequential damages such as collisions, groundings, and contact claims due to engine or steering gear malfunction.
– A silver tsunami in the offing: Many vessels were delivered in the years after the financial crises (2008-2012). These vessels are now getting old (13-17 years) and more prone to fires, machinery claims, and consequential damages. Machinery claims accounted for 56% of the claims cost for these vessels in 2024 compared to 35% machinery share on vessels built in later years.
– Vessel rerouting causing more heavy weather claims? Weather-related casualties showed an increase from the 4th quarter of 2023. Vessel rerouting around the Cape of Good Hope and climate change might be contributing factors. Heavy weather can also trigger and/or affect the consequences of engine black-outs.
– Idleness is the root of all evil – or is it the other way around? Analysis shows that vessels that were idle during the pandemic had more claims than other vessels, especially before and after the idle/layup period – suggesting that the “worst” vessels go idle. Some of those vessels are later scrapped. This “survival of the fittest” phenomenon might contribute to the countercyclical nature of insurance.
“Among the largest losses, fires and collisions dominate, with 2023 and 2024 being the first years after a benign ten-year period with losses above USD 50 million,” said Astrid Seltmann, Analyst, Cefor.
Fires and explosions continue to impact costs
In the years 2016 to 2018, only a few fire and explosion claims exceeding USD 10 million were reported, with none surpassing USD 30 million. This changed in 2019 when the number of severe fires on container vessels increased. Insurers and the marine industry became increasingly concerned about the rising number of fires on container vessels, especially those starting in the cargo area.
After a slight reduction in 2022, the following two years saw several severe fires. In 2023, the two largest losses above USD 50 million were fires, and four out of the eight losses above USD 10 million were fires. In 2024, four out of the nine losses above USD 10 million were fires.
The cost of nautical-related claims (collision, contact, grounding), which had been relatively stable since 2014, has shown a recent increase. In 2024, the two largest losses above USD 30 million were both collisions.
Furthermore, the average cost of machinery claims has been rising in recent years. In 2024, eleven machinery claims above USD 5 million were reported, compared to seven in 2023 and nine in 2022. The majority of machinery claims involve damage to the main engine, followed by the auxiliary engine and propeller shaft.
While low-cost machinery claims have declined over the past decade, the frequency of more costly machinery claims has increased. It’s important to note that some of the costliest claims, such as collisions, contact, or groundings, may be caused by machinery or steering gear failure.
A recent example was the machinery blackout that caused the container vessel Dali to hit the Baltimore Bridge. In some cases, these claims are categorized as machinery claims, while in others they are not.
Similarly, many fires start in the engine room, and some heavy weather claims are triggered by machinery blackouts. The total cost of all claims related to machinery and equipment malfunction is therefore higher than the costs associated with machinery claims alone.
Additionally, Christian Irgens, Chair of Cefor’s Statistics Forum, highlighted an increase in heavy weather losses that might be linked to vessel rerouting through more weather-exposed areas.
An analysis of bulk and container vessels idle in the pandemic year 2020 also revealed that vessels which become idle first have a worse claims record both prior to and after the lay-up period.
Claims cost inflation continued into 2024 but to a lesser degree than for claims occurred in 2022, according to Cefor.