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.