Insurers to cruise firms: Run tighter ship

Jan 24, 2012

The following article was published in The Chicago Tribune on January 24, 2012:

Insurers to cruite firms:  Run tighter ship

By Reuters

Passenger ship operators should tighten up safety procedures and crew training standards to prevent a repeat of the Costa Concordia shipwreck, potentially the costliest marine insurance loss on record, shipping insurers said on Tuesday.

“In the past, we have raised and discussed a number of issues that will definitely come out of this investigation, like evacuation procedures, crew competence, stability issues, safe navigation issues,” Ole Wikborg, president of the International Union of Marine Insurance, told reporters at a press conference in London.

“We welcome the opportunity to maybe make a change in the legal environment that regulates this type of business.”

The Costa, a cruise liner carrying more than 4,000 passengers and crew, ran aground and capsized off the Italian coast Jan. 13, killing at least 16.

Analysts have said the disaster could cost the insurance industry up to $1 billion, displacing the 1989 Exxon Valdez disaster as the biggest shipping loss insurers have ever absorbed.

The International Maritime Organization has said it would re-examine safety rules for passenger vessels in the wake of the Costa Concordia disaster, though some shipping executives believe there is little appetite for change in the industry.

There have been questions in particular over the quality of training given to entertainment and hospitality staff on cruise liners, after it emerged that two thirds of the stricken vessel’s crew were in these categories.

The insurance group’s Wikborg said there was no guarantee the Concordia disaster would push up shipping insurance prices, as many underwriters in the fragmented industry could be unaffected.

“If there is a sufficient number of underwriters who are not affected by this loss, then there is no incentive for the whole market to tighten up,” he said.

Underwriters and analysts have previously said the Concordia shipwreck would likely put the marine insurance industry into loss almost before the year has begun, increasing pressure on insurers to raise their prices.

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