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.