Eternity C: when war risk insurers don’t face the music and dance

Whatever the case, the casualty has sparked anger among major bulk carrier operators. Some have even sent us unsolicited emails to express unhappiness at Travelers’ actions.

From their perspective, the anger is understandable. As owners see it, the Russian invasion of Ukraine and the fighting in Gaza have been a licence for marine insurers to print money.

There are no verifiable statistics for the market in aggregate. But on a back of an envelope estimate from one prominent underwriter, war risk additional premiums in the London market alone may have totalled some $400m last year.

Yet it’s not as if insurers have sat back and raked it in. The Houthis’ malign activities have been responsible for a string of total loss payouts.

Have these policies been profitable in the round? The recent influx of new capacity into the niche suggests the answer is yes, but not excessively so.

Moreover, shipowners have benefited through the backdoor. Much of the proceeds have been used to cross-subsidise bread and butter hull & machinery policies, with underwriters quoting low out of a wish to hang on to market share.

Lloyd’s List has always adopted a pro-shipowner editorial stance. But do not forget that we were originally launched as a print publication for marine insurers who congregated at Edward Lloyd’s coffee shop in the reign of King George II.

Underwriters genuinely have a point on this one. In the marine insurance world, it is the P&I clubs that function as mutuals, often absorbing hefty underwriting losses in the best interests of their shipowner members. Some but not all even write war risk.

But a big majority of contracts are provided by commercial insurers, often as one of many products offered by diversified big players such as Travelers.

They are responsible to their shareholder base and capital providers, who rightly expect informed underwriting decisions on marine clients.

Travelers’ conclusion was indisputably the correct one from their point of view, avoiding a payout that will run to tens of millions of dollars.

It is pointless to uphold their conduct as somehow dodging a moral obligation, because there was no moral obligation in the first place. The deal is entirely transactional in nature.

To put it another way, underwriters are no more bound to write a policy than shipowners are bound to accept a fixture.

What both sides can fully agree on is that what happened to Eternity C was both shocking and callous. There have already been at least four confirmed fatalities, and it is feared that the death toll could rise as high as nine. Our condolences to their families and friends.

Allied Dunbar disappeared some time ago, after being acquired by Zurich Financial Services. But if you are old enough to remember their advertising campaign, you are old enough to take advertising campaigns with a pinch of salt.