Strike Club Results Reflect Growing Labor Unrest

The early months of 2013 have been marked by damaging labor strike action in several countries which has punished shipowners and charterers even though they are innocent parties, says The Strike Club, the market leader for delay insurance for the marine trades.

Some of the worst trouble spots in recent weeks have been in South America, particularly Chile where a three-week strike crippled the country’s key ports, blocking exports of copper (Chile is the world’s largest producer of this metal), fruit and wood products. Chile’s business leaders estimated the country lost more than $200 million a day due to the conflict.

There has been a miners’ strike in Colombia, and it was only this month that US stevedores signed a six-year master contract with the employers that removed the strike threat at east and Gulf coast ports.

In Southeast Asia, a port workers’ strike has now dragged on for more than three weeks at Hong Kong, one of the world’s top container hubs.

And at present Greece is in the spotlight as the seafarers’ union is threatening strike action in protest at new maritime legislation that, say the union, will swell their current high unemployment number.

It was against this volatile background that the club’s directors met in Singapore at the end of last week, when the managers reported higher levels of shore-related claims from a wide range of incidents. These included general strikes, port strikes, strikes by land transport operators, customs and pilots, as well as port closures, blockades by fishermen, physical obstructions and mechanical equipment breakdowns.

Conversely, the club’s mutual business saw lower levels of ship-related claims from causes such as collision, grounding, machinery damage, crew strikes, piracy and pollution.

Given the continuing unsettled outlook for the shipping industry, the club has experienced further strong demand for its various insurance covers, which include fixed-premium war risks and loss of earnings. The February renewal saw a healthy retention ratio of 90% for mutual entries.

Although turnover dropped during 2012/13, as insured values fell, combined free reserves increased by 5.4%, following the previous year’s 8.6% rise. The club retains its S&P rating of BBB+ with a stable outlook.

In Singapore the directors noted that the aggregate total of tonnage entered in the mutual classes during 2012/13 (to February 1 this year) was 170m dwt – a significant increase on the 145m dwt the year before.

Bill Milligan, chairman and chief executive of S.C. Management, said that the club’s mutual insurance covered a range of marine trade delays outside a ship operator’s control, hence the appeal both to owners and charterers wanting to manage their risk exposures. Moreover, the size of the club and the wide spread of entered tonnage were important for risk management purposes.

“The Strike Club has been a protector and partner of shipowners and charterers for over half a century,” he said, “and it will continue to seek to expand its product range to meet members’ needs. Our job is to provide a financial back-stop to alleviate any losses arising from marine delay risk exposures. Members have all the benefits of mutuality that the P&I system provides, and at a very modest cost.”

Fixed-Premium Covers

Overall, fixed-premium income was $18.5 million. The club provides ‘one stop shop’ fixed-premium war cover up to $200m to owners or charterers, combining traditional hull & machinery risks with tailored extensions as required; for example, loss of hire due to piracy even in the absence of a hull & machinery incident, or charterers’ loss of bunkers resulting from a highjacking etc.

Loss of earnings cover is up to $3.375 million, using standard market wordings, for periods up to 180 days. The club also offers fixed-premium cover for delay risks for longer periods than covered by the mutual rules, such as delays up to 180 days, plus expenses, caused by discovery of drugs or contraband, as well as for delay risks outside the mutual rules.

Claims and Release Calls

For Classes I and II (shore-related risks), despite the high level of claims, the directors have been able to levy a closing call of 20% for the 2011/12 policy year. For 2012/13, after 12 months claims are higher than expected, but nevertheless the release call is maintained at 30%. For the current policy year, the release call is maintained at 30% in spite of the early claims setback.

For Class III (ship-related claims), the closing call for 2011/12 is 20%. After 12 months, claims for the 2012/13 year are lower than expected, and the release call is maintained at 30%. The new policy year has started well, with the release call maintained at 30%.

The club is now in its 56th year of operation. Membership is spread widely around the world, with Asian membership developing strongly.