Managing ship claims - five vital steps to undewriters heaven - 30/03/2006

Pricing a risk and issuing a policy is only part of the underwriter’s role today.

Pricing a risk and issuing a policy is only part of the underwriter’s role today. The active management of claims to ensure that costs are controlled and that the ship is back in business as soon as possible is an equally vital part of the process.

With the current buoyancy in the shipping market this can deliver genuine financial benefits to both the hull and machinery and loss of hire underwriters, as well as ensuring that shipowners can keep their vessels in optimal employment.

Historically, it was the Norwegian insurance market that was more actively involved in these practices, but London and other markets are also adopting this philosophy, and as a result, underwriters are today looking to be more and more involved in the salvage and repair process.

As surveyors for the Norwegian market for many years and more recently for London underwriters, we have seen the very real benefits that this can deliver in terms of controlling and ultimately saving costs. However, there are some steps that can be taken which can help to ensure the best possible result in both the short and long term for both owners and underwriters.

Acting swiftly to appoint a surveyor to attend the vessel immediately after the casualty, or after the vessel has been put back into safety is a vital first step.

This allows for a very early preliminary assessment of the extent of damage, which is essential for the underwriters to form a first impression on the quantum of the costs, and to assess what repair options are available. Arriving at a correct assessment of the damage, and then being able to create an accurate specification can assist owners, and ultimately underwriters, in achieving tremendous savings on repair costs.

Taking the time to get things right is another key component. There is no doubt that getting the specification right can be a time-consuming task, but we often advise our clients that they are better off delaying repair decisions for a few days in favour of a well drafted and detailed specification. A vague specification will, more often than not, lead to a vague shipyard tender, the result of which is inevitably huge extra repair charges at the end.

The next thing to get right is to manage the tendering process as effectively and efficiently as possible. Getting this right is a complex issue and we would recommend that the underwriters’ surveyor has strong background in this area, and deep experience of working with shipyards.

It is during this stage of the process that the costs can best be controlled. With an open tender there are three components that need to be considered: the yard’s capability, capacity and pricing techniques, an understanding of each of these for yards in a particular geographic area is very important in achieving the optimal result.

Depending on the location of the casualty, and the size of the repair required, the approach to the yards needs careful strategic planning for each individual case. If at all possible, shipyard representatives are to be invited on board to carry out their own assessment of the damage in order to produce a tender.

This allows them to form their own opinions on the nature and extent of required repairs, and therefore consider exactly how they would go about it. In an ideal world, all the yards that are tendering for the job would visit the vessel simultaneously; this generally results in clearer tenders and more competitive pricing.

The management of the actual repair of the vessel is equally as important; the time taken to complete the repairs is another key driver of costs, and the early involvement of the surveyor can be a very positive influence at this stage.

Recently, we handled a case for an underwriter which involved the grounding of a newly built tanker vessel and around 500 tons of steel that needed to be repaired. We ensured that the prefabrication of the steel had been almost completed when the vessel arrived at the dock, so that with further close supervision the time taken to effect the repairs was kept exactly to the tender. And this is a shipyard in the Black Sea!

The resulting savings not only benefited the loss of hire underwriters, but also the owners in view of the prevailing tanker rates.

The last stage of the process essentially ends with the delivery of the final repair bill. The negotiation and agreement of this requires experience and understanding of the yard’s costing practices, and a surveyor’s wider experience across a range of cases can be helpful in assisting the shipowners with this.

Much of this comes down to having the technical and local expertise to really understand the processes required, and how a particular region and individual shipyards work. By ensuring that the right steps are taken, at the right time and in the right order, a potentially expensive and difficult process can be managed to a controlled and effective outcome for all parties involved.

Dimitrios Giannakouros is head of technical at Kalimbassieris Maritime.