The number of global shipping losses last year was 55 – down from 87 the year before – according to the International Union of Marine Insurance (IUMI).

But the 2011 losses will increase due to the long time insurers take to declare vessels a total loss, IUMI warns.

A total of 461,227 tonnes of shipping was declared lost last year, compared to 818,273 tonnes the year before.

Major serious losses stand at 591 claims for 2011 compared to 691 in 2010.

The major cause of serious losses remains “machinery damage and engine room problems”, which account for 35.43% of incidents during the past five years.

Major serious losses are more common in older vessels, with 50% of all major serious incidents reported occurring to vessels more than 20 years old.

But this year is already off to a bad start with the estimated $US500 million ($485 million) hull claim for the Costa Concordia disaster.

Willis Global Marine CEO Alistair Rivers says the next year will be difficult for the insurance industry with the aftermath of the Costa Concordia, further problems in the Euro- zone, pirate attacks and increased sanctions.

“For many marine insurers the year began badly with the loss of the cruise liner,” he said. “Some underwriters are adamantly refusing premium reductions or even flat renewals.

“But unaffected underwriters in Asia and Scandinavia are more open to negotiations.

“Marine liability underwriters are hoping the disaster drives through a general hardening of rates, with many seeking 5% increases.”

Mr Rivers says that while the disaster might stiffen the hull market, the long-term impact will be questionable.

“The protection and indemnity as well as the liability aspects of this loss will be of far greater significance to insurers as matters evolve throughout the year,” he said.

“But a true hard market is a mirage as long as capital providers are prepared to tolerate marginal returns from their hull and machinery book.”

The Willis Marine Market Review notes cargo insurance buyers continue to enjoy a soft market, achieving reductions in premium and deductibles at little or no additional cost.

“Despite ever-dwindling returns to insurers, competition for business remains fierce with a flurry of new entrants creating excess capacity,” Mr Rivers said. 

“Cargo underwriters are also feeling the impact of piracy, which continues to blight the shipping industry with no clear resolution in sight.”

The good news is the security measures taken by ship owners are becoming more effective with less than 20% of attacks successful in 2011.

The review says excess capacity in the Asian marine insurance market is putting pressure on rates as insurers compete for market share.

“Some underwriters in Asia will be affected by the disastrous start to the year and will look to recoup their losses across the whole portfolio including Asia,” Willis said.

“We expect to see more underwriters walk away from unprofitable accounts.”