2022 has proven to be a relatively benign claims year to date, with Hull & Machinery insurers reporting lower claims frequencies and lower than average levels of incurred claims. Whilst there was a string of notable casualties early in the year, the numbers have tapered off somewhat over the summer and have yet to pick up to any great extent as we move into the winter months in the Northern hemisphere. Nevertheless, some 30 Lloyd’s Open Form (LOF) contracts have been signed to date, one more than in 2021 as a whole. This should provide some level of encouragement to salvors, although revenues will not be known until well into 2023.
Behind the scenes, IUMI members have been heavily involved in various workstreams coordinated by the Lloyd’s Salvage Arbitration Branch (LSAB) aimed at tackling a problem which is somewhat paradoxical. The shipping and marine insurance industries all agree that the institution of LOF salvage is an essential part of the safety net that keeps stray vessels from grounding on rocky shores, yet we have traditionally struggled to find peace with the mechanism by which it is funded. LOF salvage has been in general decline for a decade or more, and this trend has been linked by some to an increase in delays in contracting for salvage services, with the increased potential for maritime disaster that that may entail. Whilst it is difficult to draw unambiguous conclusions, we can all agree that the LOF system still has a key role to play, and we need to ensure it is both fit for the future and trusted by all.
The LSAB workstreams are focused on three separate areas; Awards and costs, Asia, and Environmental, Social and Governance (ESG) implications. The hope is that the workstreams will lay the foundation for concrete initiatives, ensuring the survival of LOF salvage, with work already well underway.
LSAB has also recently announced that it would start to charge a LOF management fee based on the value of property salved, which will help to guarantee the system’s economic viability and is a welcome and necessary addition.
