SSG No 20 - Shipgaz

finANCE & INSURANCE
Editor: Petter Arentz ~ Phone +47 33 40 12 00 ~ E-mail: petter@shipgaz.com
New vessel funding scheme
China is devising a scheme whereby shipbuilders
are allowed to mortgage ships
being built when raising finance. The
scheme would primarily apply to local
private shipbuilders, which has long been
under-funded. The private shipyards stand
for 47 per cent of the country’s shipbuilding
output. To allow the use of unfinished
vessels as collateral will cut financing cost
by round one per cent. Many of the private
shipyards build for export.
No EU intervention in P&I pact
The major P&I reinsurance contract for
ship owners seems to be saved from EU
intervention yet again, according to an
EU report. The International Group of
P&I Clubs, which has 13 members, has for
many years defended their system in Brussels.
In the latest enquiry found that the
system could be exempted from strict competition
rules, but not beyond Mars 2010.
The group provides a compensation system
of nearly USD 6 billion to cover huge
casualties, which one single club could not
manage on its own.
Stress and depression at sea
London P&I Cub views with concern the
large numbers of seafarers being repatriated,
suffering from a rage of psychological
difficulties and in its latest issue of Stop-
Loss Bulletin talks of the need for recognition
and understanding of the problem.
The international Human Element Forum
Alert says in a recent report that fatigue
is a more complex condition than many
believed and can affect the health and
effectiveness of all aboard ship. London
P&I Club says that afflicted crew members
could be a danger to others onboard, or
might even be a suicide risk.
Higher premium increases
Owners could risk premium increases as
much as 15–20 per cent on their P&I cover
at renewals in February 2008.
P&I clubs say that claims have soared
and there is a need to preserve a healthy
solvency rate in the clubs.
Owners
pay more
for funding
The cost of money has risen sharply and
owners must now be prepared to pay
between 15 and 30 basis points more, as
banks struggle to find participants in syndicated
shipping loans.
Hans Petter Aas, the head of shipping
offshore and logistics for DnB Nor, told
Lloyd’s List that the syndication market for
shipping loans has almost ground to a halt
and may not be fully functioning until the
beginning of next year. Aas continued:
“There are a few deals but not to the
extent that we are used to”.
Glen Maguire, chief economist with
Société Générale Asia Pacific, who says
that ship owners have to pay more for ship
financing requirements as liquidity dries
up, shares Aas’s sentiment.
KG funds struggling
In another development Deutsche Bank
director Felix Ulbricht admits that KG
(limited partnership) funds are struggling to
produce sufficiently high dividend. Private
investors want after-tax return of between
six and eight per cent. Such returns are
becoming difficult to achieve, especially
Lloyd’s has record profits
Lloyd’s reached profits of USD 3.6 billion
in the first half of 2007 against USD 2.7
billion in the same period last year, in a
market where underwriting conditions are
weakening. The combined ratio, where
anything below 100 per cent is profit, came
to 82.9 per cent.
Lloyd’s have had comparatively little
exposure to storms and floods in the UK or
indeed to Windstorm Kyrill, which caused
some EUR 5 billion worth of insured damage
in North Europe. But there is bound
to be damage during the US hurricane and
Asian typhoon seasons. According to Lord
Levene, Lloyd’s chairman, “the absence
of severe catastrophic activity in the past
Tanker fleet development
2005–2007 (in mill. DWT)
Tanker fleet >10,000 DWT
375
350
325
300
End 2005
End 2006
End June 2007
for investments in container vessels where
the growth in charter rates.
And the problems could get stickier with
the new super-postpanamax vessel. One of
these vessels costs USD 160 million. With
112 vessels on order, the banks and finance
houses need to find USD 17.9 billion with
an equity share of around 25 per cent.
In the wake of this development the KG
model with a greater degree of flexibility.
Ulbricht told a Hamburg ship finance seminar
that the KG funds needed institutional
as well as foreign investors, who today have
limited access to the funds.
18 months merely reinforces the need for
a continued focus on underwriting discipline,
as the benign environment puts
downward pressure on rates.
Allianz SE, Europe’s biggest insurer,
predicts that annual insured losses from
catastrophes as floods and hurricanes may
increase to USD 41 billion a year in 2010–
2019 against USD 30 billion per year in
the period 2000–2006 and less than USD
5 billion before 1989. Total losses, including
uninsured, may well be in the region
of USD 400 billion. Hurricane Katrina in
2004 caused more than USD 41 billion
worth of damage. Total losses were USD
170 billion.
76 SCANDINAVIAN SHIPPING GAZETTE • OCTOBER 26, 2007