The last major “bad”’ period resulted in a situation so serious that ship operators were declared incapable of managing safety themselves, such that the international community had to take drastic action – the result being the development of the ISM Code.

The biggest problem facing the industry during the recent “good times” was the serious shortage of adequately trained and experienced Masters and officers. This problem was a direct result of the mistakes made during the last “bad times”. The old proverb yet again proved itself to be correct – ‘Ye shall reap what ye shall sow!’ In other words you will pay the price tomorrow for your mistakes today! If the ISM Code has taught us one thing it is that we must learn lessons from our previous mistakes and ensure that we implement corrective actions to prevent the same problem. If there are some who still need to be convinced about the economic wisdom of this advice – they should perhaps reflect upon the recent experience and realize the implications for the shipping industry.

During their annual conference in Vancouver the International Union of Marine Insurers (IUMI) presented statistics prepared by the Scandinavian ‘Central Union of Marine Underwriters’ (Cefor) which demonstrated very clearly that both average claims costs  and the frequency of major claims continue to rise. Cefor identified an alarming increase of average hull claims by 86 per cent over a five year period. This can only mean one thing – continued increases in the H&M premiums. As we enter the P&I Club renewals we have seen numerous Clubs announce major problems, both with investment income and more importantly with the value of claims experienced. All of the 13 Clubs of the International Group of P&I Clubs which have announced their General Increases so far have declared increases for 2009 – 2010 policy year of between 12 ½ and 20 per cent - with the more realistic increases being in the region of 17 ½ per cent. Of greater concern is the recognition that at least 4 Clubs are so seriously under funded that they are raising unbudgeted additional supplementary calls of between 35 per cent and 45 per cent for each of the open policy years from 2006.

Not only will H&M and P&I insurance costs and premiums rise but insurers will almost certainly take a much harder line when deciding whether they even want to insure particular risks. Increasingly insurers will be conducting risk assessments when deciding whether to insure. The bottom line is that if a ship operator can obtain insurance it is going to be increasingly expensive. Some ship operators may find that they cannot obtain insurance – at least not at a price that is in any way affordable. Surely it does not take a genius or an expert in marine casualty investigations to understand that the insurance claims have been rising because of problems in managing safety – both on board the ships and in the office ashore.

 This isa problem which can be dealt with and addressed. The causal factors behind almost all of the maritime accidents are, invariably, human element related issues. A properly developed and implemented ISM Safety Management System should create the barriers necessary to prevent these accidents, and consequently claims, occurring. One of the most common reasons why those barriers break down is because the Master and Officers on board have not been adequately prepared to respond and deal with an unexpected or unusual situation. This is often as a result of accelerated promotion through the ranks.