Singapore marine firms can now enjoy the benefits of having greater control over war risk insurance cover and prices, with the establishment of Singapore War Risks Mutual (SWRM), the republic’s first ever national mutual war risks insurer.
The SWRM is a class within The Standard Club Asia Ltd (Standard Asia) and was developed with strong backing of the Singapore Shipping Association. It addresses war risks, which encompass not just traditional notions of war, but include terrorism and acts of piracy.
Tilt to Asia – growth of not just maritime sector, but also piracy
As the centre of gravity for the maritime sector has moved towards Asia, the piracy threat that vessels face in the region, in particular Southeast Asia, has also grown in recent years.
In 2014, 75% of pirate attacks occurred in Asia, up from 60% the year before. Since the start of 2015, SEA has accounted for 55% of the world’s piracy to date.
Benefits of a mutualised facility
Traditional hull, machinery and P&I insurance exclude war risks, so most shipowners take out specific insurance policies which cover the latter. War risks insurance includes hull and P&I war risks on a worldwide trading basis. However, vessels passing through selected “additional premium” areas would have to pay more. War risks insurance can either be written alongside a hull policy by the same underwriter or as a separate insurance, or it could be done by a war risks club.
Historically, war risks facilities have grown out of geographical locations, for example there are the Den Norske Krigsforsikring (Norway) and the Hellenic War Risks Club (Greece). Due to their commercial power, war risks pools are often able to provide cover at a competitive cost. With the creation of the SWRM, shipowners in the region will have greater control over war risks cover and price, giving them greater flexibility and independence in
difficult times.
In a briefing to the audience at the Sea Asia 2015 conference in Singapore in April, Mr David Roberts, Managing Director of Charles Taylor Mutual Management (Asia) Pte Ltd, which manages The Standard Club said the SWRM offers competitive rates, stable pricing of additional premium areas and good service given that it has a dedicated team for such cover in Singapore. Underwriting is done from Singapore, which facilities the efficient negotiation of terms and pricing.
“At the moment, we reinsure the risks, but in time as the SWRM builds up its funds, it will gradually retain more of the risks. As we build up additional staff to administer this class of risks, the SWRM will also add to Singapore’s expertise and talent pool in this field,” said Mr Roberts.
Areas of cover
Given that the SWRM committee of shipowners means a model of “shipowners supporting shipowners”, it is able to offer discretionary insurance often not available in the commercial market. This means claims can be made even for terms not expressly covered by the rules of the pool.
SWRM is also able to tailor the terms of the policy to cover established market wordings (eg ITC and Nordic). Other areas of coverage include P&I war, hull war, detention and diversion expenses, sue and labour, optional additional insurance areas such as loss hire.
Who qualifies for the SWRM?
The SWRM is open to ships or fleets with a connection to Singapore – these include Singapore-registered ships, ships operated by a Singapore Shipping Association member or their affiliated company, irrespective of flag and a ship managed (commercial, technical, or crew) from Singapore, irrespective of flag.
It should be considered by users of the Straits of Malacca or Singapore territorial waters, if these zones are declared an excluded area for war risks in their existing policies, said Mr Roberts. Standard Asia does not require the shipowner to be its existing member for regular P&I risks.
“The SWRM was set up to assist shipowners not only in Singapore but also in the region. We hope the SWRM will further develop Singapore’s maritime cluster,” said Mr Roberts.