December 2018
INTERNATIONAL SALVAGE UNION
ISU outlines new vision for the salvage industry
The following is an edited version of the keynote speech given by ISU President, Ms Charo Coll, (above) at the Salvage and Wreck Conference, London 05 December 2018 Over the last two years the leadership of the ISU has been concerned that its messages and tone have been out of line with the realities of our side of the industry – the supply side – and the realities of the demand side of the industry – the owners and their insurers, both property and liability. ISU has been through a period of change in the past decade with increasing professionalism and development and expansion of the membership.
increasing use of alternative contracts that were not necessarily intended for emergency situations requiring immediate response. It has also led to the erosion of the core strength of the Lloyd’s Open Form by the use of side agreements – albeit, as far as Lloyd’s is aware, there are very few of them.
The shipping and insurance industries must – in their own interests – recognise the need to provide sufficient compensation to encourage investment in vessels, equipment, training and the development of highly qualified staff in order to continue to provide an essential, global emergency response capability.
Gross revenue for ISU members in 2017 from all activities was US$ 456 million. It compares with US$ 380 million in 2016 and that is a 20 percent increase but still far from the US$ 717 million in 2015.
Turning now to the demand side of the industry – the owners, property insurers and Clubs. The latest 2017 IUMI statistics show that premium income from hull and cargo combined was $23 billion. It means that total salvage industry income is just 2% of total marine property insurance premium income.
Revenue from Lloyd’s Open Form (LOF) cases in 2017 was US$ 54 million which is the lowest since 1999 and continues the downward trend of LOF. At the same time, revenue from operations conducted under contracts other than LOF has risen significantly. We are well-aware of the suggestion to consider a new version of LOF, the so called LOF “light”. But the ISU Executive and members do not support the initiative and cannot support the use of LOF to adopt a tariff-based form of Article 13 remuneration. We do not believe that will provide adequate an incentive to undertake salvage operations.
ISU is fortunate that it is a generally well regarded and meaningful organisation for its members. We believe that the ISU has a reputation as professional, fair and reasonable. We also think that the industry has a good reputation but we do recognise that there have been concerns about some behaviour in recent years.
The intense competition has led to the
This is exactly where the salvor can add value to property insurers. ISU members can work with their clients proactively to help mitigate risk and, if the worst does happen, are best placed to make helpful interventions to reduce loss. The liability insurers, the P & I Clubs, in contrast, have not experienced the same pressures. International Group statistics show, as one key indicator, that the number of claims on the IG pool follow a clear downward trend for the past nine years. Further, individual clubs have seen no general increase in calls and have even returned cash to members. At the same time, we know that individual cases may be much more expensive for the Clubs and the IG pool and re-insurers these days.
We are in a positive position as an association so we are ready to build for the future from solid foundations. Let me first describe the context as the ISU sees it and then move on to our response to the conditions. For our members – the supply side of the industry – there is much pressure, mainly through intense competition; a reduced number of jobs and generally lower income. Competition is between the ISU members and there is also competition from non-members.
But we do understand the pressures on those who pay for our services. IUMI has said publicly that the “hull sector remains a serious concern”. IUMI points out that in the past ten years there has been an increasing volatility in the impact of claims and as vessel size continues to increase, this trend will not reverse.
Shipowners have also experienced very difficult conditions since the 2008 economic crash. It is clear from our members and the industry statistics that, even compared with just a few years ago, the commercial environment has changed to the extent that it is not really possible to sustain a traditional, stand-alone salvage business based on “no-cure, no-pay” jobs with tugs kept on station. 1
ISU acknowledges these are difficult times for our partners and we cannot be seen to ignore reality – both our own and that of others. We must therefore be a forward-looking. There is no appetite or need for revolutionary change to ISU but we must confidently evolve and match our Continues on page 2