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Hull committee focuses on safety of shipyards

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LONDON-A series of shipyard accidents in recent months is prompting London marine underwriters to request more detailed risk information from the facilities when issuing or renewing hull insurance policies.

The Joint Hull Committee, which represents Lloyd's of London and London company market hull underwriters, has developed a warranty-JH 143-that requires shipyards to undergo a risk assessment prior to policies being issued or renewed.

That warranty was launched in November 2003, said John Noble, chief executive of the London-based Salvage Assn. Since then, 14 shipyards have undergone such an inspection, he told delegates at a seminar in London last week sponsored by British Maritime Technology Ltd.

After a relatively benign period of losses from 1970 until 2002, hull underwriters in the past two years have been hit by more than $400 million in claims for hull losses caused by shipyard accidents, Mr. Noble said.

Those claims include an October 2002 fire on the cruise ship Diamond Princess while it was in Mitsubishi Heavy Industries' Nagasaki, Japan, shipyard. The damage resulted in claims of more than $250 million.

In January 2004, the Norwegian Cruise Liner Pride of America took on water and partially sank while in the Lloyd Werft Bremerhaven GmbH shipyard in Bremerhaven, Germany, during a severe storm. The ultimate cost of damage to the cruise ship, which was expected to be salvaged last week, is not yet known.

The fire on the Diamond Princess prompted greater interest by underwriters in issues of shipyard safety, such as fire prevention and security on ships under construction, noted Mr. Noble.

And while shipyards are required to have safety manuals, in some cases where accidents have occurred, these manuals had not been studied by workers, he contends.

Another issue that has become pertinent for underwriters is the way that shipyards manage contracted labor, he noted, because much of the labor on modern shipbuilding projects is outsourced to subcontractors.

The Joint Hull Committee created JH 143 to try to ensure that certain loss prevention standards were being met at shipyards, Mr. Noble said. The Salvage Assn. has been involved in several of the inspections, he said.

John Lillie, who worked with the Joint Hull Committee to design the warranty and who is managing director of the Salvage Assn., said there are many steps that shipyards can take to comply with the demands of the warranty.

For example, he said that imposing a ban on smoking among shipyard workers is one step that could be taken to reduce fire risks.

Mr. Lillie added that fire loss control measures, such as the use of temporary sprinkler systems while a ship is being built, can also reduce risks.

The Joint Hull Committee warranty applies to all aspects of management practices at shipyards, he noted.

The creation of the warranty was very much driven by the insurance market, noted Mr. Noble.

In some cases, brokers have asked the Salvage Assn. to perform a risk assessment of a shipyard before renewals, added Mr. Lillie.