July 31 - The shipping industry faces a particularly challenging time punctuated by unpredictable markets and continuing marine claims volatility.
That is the view of Pratap Shirke, chairman of North P&I Club: "Shipowners continue to operate in unpredictable shipping markets and the economic climate shows little signs of improvement," he said. "Despite a modest recovery in certain sectors of the market, we do not expect freight rates to return to breakeven or profitable levels for another couple of years as the over-supply of tonnage remains an issue for the shipping industry."
Risk in the industry continues to be volatile, with North P&I Club members experiencing an unusually high number of large claims during the 2014/2015 policy year. "The significant number of large claims in excess of USD1 million was unexpected, however this does of course happen from time to time and most International Group clubs have experienced similar volatility in recent years," he observed.
Shirke highlighted that new legislation has contributed to the expensive claims environment, citing government intervention and regulation as having a significant impact on the industry.
"In April 2015, the Nairobi International Convention on the removal of wrecks 2007 entered into force, and in June the liability limits under the amended 1996 protocol to the Convention on Limitation of Liability for Maritime Claims (LLMC) were significantly increased. Both of these conventions have the potential to lead to a major increase in the cost of claims," cautioned Shirke.
He believes the impact will be felt strongly under the LLMC Protocol that will cause the limit of a vessel of 150,000 gross tonnes (GT) to increase from USD57.5 million under the old regime to approximately USD85 million under the new. "It is important that the International Group of P&I Clubs acting on behalf of their members, the world's shipowners, continue to engage with government and maritime authorities wherever possible."