Counting the cost when things go wrong

THE good news is that there has been a consistent decrease in the number of total losses of vessels at sea over the past 10 years, according to the International Union of Marine Insurance's ocean hull committee. Unfortunately, the bad news is that this has been more than offset by a dramatic increase in the number and size of large partial losses.

Partial losses, where the vessel has to either undergo very extensive repairs or is declared to be "constructive total loss" (CTL), can be fraught with difficulties. Often the coastal state where the casualty occurred will have some expensive things to say about protecting the environment. A CTL is when a ship is so badly damaged that the cost of repairs would exceed the value of the ship when repaired.

Shipowners were warned recently that they could face being saddled with "negative equity" in the insurance aftermath of disasters at sea. In his final address as chairman of the Association of Average Adjusters, Keith Jones sounded the alarm at last week's annual general meeting in London marine insurance market.