Regional insurance for Asian ships

Regional insurance for Asian ships

SINGAPORE (AFP): Asian shipowners are gearing up to launch a
regional insurance market to underwrite their expanding fleets,
save costs and challenge the dominance of Western insurers,
officials said Wednesday.

"The establishment of an Asian-based insurance market is fast
becoming a reality," Hong Kong shipping tycoon George Chao said
at the opening of a conference of marine and insurance industry
executives.

Chao said regional shipowners were dissatisfied with the
"levels of support and consultation" they received from Western-
based insurers and wanted to develop a pan-Asian market offering
more competitive premium rates.

He said a regionally-focused market on their doorstep would
offer Asian shipping lines greater flexibility, cheaper rates and
an "atmosphere of local consultation and local understanding."

Shipowners in Asia manage some 17,000 vessels with an
estimated capacity of 272 million deadweight tons -- 40 percent
of the world tonnage. Asia's share is expected to grow to 50
percent of the world merchant fleet by 2000.

Last year, Asian shipowners paid 1.6 billion US dollars in
insurance premiums mainly to London-based underwriters who have
traditionally dominated the market. Japan accounted for the
lion's share.

London, with Lloyd's as its cornerstone, has in recent years
been facing intense competition from Scandinavian, French and
American marine underwriters.

"In the past when there was no competition Lloyd's was the
Lord Almightly. They dictated the terms," Chao told reporters.

"Competition is good in any industry. We in Asia should not
rely on somebody else's facility. We should have something of our
own."

He said Asian shipowners were working closely with the
insurance sector to launch a regional market that would compete
with Western underwriters.

The move comes at a time when the marine insurance industry
appears to be heading for a downward cycle, reversing the trend
in the mid-1990s when premium rates had peaked and loss ratios
were at a record low, experts said.

A regional insurance facility can be launched within a year,
Chao said, but "we are not going in within a year for the simple
reason that the insurance market at the moment is very soft."

"An insurance company going in now would lose money and the
Asian market would be short-lived," said Chao, who is chairman of
the Hong Kong Shipowners Association.

"But we are gearing up and as soon as we see the right time,
we move in," Chao added.

Asia has some of the world's busiest ports and most congested
sea routes in addition to the perils posed by cyclones and
typhoons, and ship losses are common in the region.

Insured sums have hit a peak. The insured sum of a new
container vessel can easily exceed 100 million US dollars, and
that of a liquefied natural gas carrier 300 million dollars,
experts said.