'Challenging Time' for Shipping Industry - North P&I Chairman

Maritime Activity Reports, Inc.

July 17, 2015

Pratap Shirke, chairman of North P&I club

Pratap Shirke, chairman of North P&I club

Unpredictable markets and continuing marine claims volatility means the international shipping industry is facing a particularly challenging time, says Pratap Shirke, chairman of North P&I club. His comments are published today (16 July 2015) in the 170 million GT, ‘A’ rated club’s 2015 Management Report.

‘Shipowners continue to operate in unpredictable shipping markets and the economic climate shows little signs of improvement,’ he says. ‘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.’

He also notes that risk levels in the industry continue to be volatile, with North’s members experiencing an unusually high level of larger claims during the 2014/15 policy year. ‘The significant number of large claims in excess of US$1 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 says.

Shirke points out that new legislation is contributing to the increasingly expensive claims environment. ‘Government intervention and regulation has continued to have a significant impact on the shipping industry and during 2015 we have seen two further important pieces of maritime legislation come into effect. 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.’

He says the impact is most likely to be felt under the LLMC protocol, which will cause the limit of a vessel of 150,000 GT to increase from US$57.5 million under the old regime to approximately US$85 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.’

In this regard Shirke is pleased to note the progress made this year by the International Group’s large claims working group initiative to conclude memorandums of understanding with coastal states, establishing protocols for the proper handling of maritime claims. Three major coastal states have now signed the document and more are expected to follow.

North was disappointed however by the approach adopted by members of the International Oil Pollution Compensation Funds towards the Nissos Amorgos tanker spill case. ‘The decision to wind up the 1971 Fund, without reimbursing the ship’s P&I club in respect of interim payments made on behalf of the Fund, is likely to undermine the cooperation between the International Group and IOPC Funds in future pollution incidents,’ he says.

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