Although hull and machinery claims are falling overall, the Bergen-based insurer is warning that at least some of the advanced equipment now being supplied to ships appear to be "faulty products".
Club managing director John Wiik identifies ducted and pod-type propulsion systems, as well as advanced large drum winches on anchor-handlers and auxiliary engines, as equipment that is producing loss-of-hire claims.
As the problem machinery is new and fitted on recently delivered ships, the equipment failure is generally covered by manufacturer and yard guarantees but there is also a consequential loss claim from the ship being out of commission and it is this that is leading to loss-of-hire claims.
The annual report of the club shows there has been a big fall in gross claims with the total bill falling to $112.3m in 2009, as compared with $160.5m the previous year. The report adds that although the economic crisis and its impact on shipping has not affected the club to any significant degree, the result from mainstream hull and machinery-related business is still "unsatisfactory", encouraging it to continue to diversify into other lines of business such as charterers' liability, super-yachts, the offshore market and construction and war risks.
Wiik, however, indicates that he is optimistic that the hull and machinery market is close to a turnaround.
He says the club has yet to see any reduction in repair costs as a result of the recession but he is anticipating a reduction in steel prices and more competition from shiprepairers as building yards with denuded orderbooks return to repair.
Wiik expects to see a 10% improvement in the premium-to-claims balance from lower repair costs. "Sooner or later this will materialise and I don't think we will then need any further increase in premiums," he added.
The club logged a $28.4m surplus for 2009, as compared with a $43.8m loss the previous year. This lifted its solvency capital, or free reserve, to more than $160m, as compared with $126m the previous year.
TradeWinds reported the Norwegian Hull Club's financial outcome for 2009 in full detail on 12 March.
By Jim Mulrenan, TradeWinds, London
