Falling ship values highlights importance of value adjustment rates
Tagged: insurers, premiums, risk, shipowner, shipping, value adjustment rate
As shipowners will know all too well, ship values have continued to fall; at FP Marine Risks we have seen some reductions of up to 50% in recent months.
However, the consequent reduction in premium varies widely among insurers and it is important that shipowners are aware of the basis of that variation in premium if they are to get the best deal when they come to negotiate any renewals or changes in value.
In each case, underwriters generate a specific value adjustment rate, which is applied to the difference in value to calculate the return premium due.
This value adjustment rate will be significantly lower than the Hull & Machinery rate, reflecting the fact that the risk of loss is no different, even though the value of the ship is. The return premium will therefore not be in direct proportion to the reduction in value.
Typical of a competitive market, insurers’ value adjustment rates vary widely – by up to 500% – which significantly affects how much of a reduction in premuim the Assured will receive.
It is important that owners understand the importance of obtaining competitive value adjustment rates when they reduce their insured values.
And equally the same approach is recommended when the S&P market rebounds and premiums need to be re-calculated in response to the higher ship values.
For any shipowner who would like to discuss their current situation please contact any of our Shipping brokers who can help you further.
Recent articles
20 July 2011
What has changed in the marine insurance markets over the last year? And can Assureds expect to see these soft markets continue?
14 July 2011
We recommend ways for freight forwarders to ensure the liability insurance they purchase will protect them when they need it most.
Blog
30 January 2012
As of 30 January 2012, the US has issued some important sanctions against a few major corporations and the EU has escalated its regulations on Iranian trade.
12 December 2011
On the 8 December, the Joint War Committee added Syria to its listed areas and removed three areas.
Press releases
11 May 2011
FP Marine Risks and Oceanic partnership announced, creating an expert network of marine specialists serving the Australasian retail and wholesale markets.
29 April 2010
FP Marine Risks builds direct retail business in Australasia through acquisition of specialist cargo insurance agency
Opinions
26 March 2009
26 November 2008