Flexibility on insured values and lay up returns are helping ship owners through the tough part of the offshore market cycle, with signs that activity could begin picking up again in the autumn.
With oil prices staying at a low of around USD 48 a barrel in June, the number of new offshore oil and gas installations that are going ahead this year remains in the small numbers.
Operators in some cases are bidding at cost, and other times are facing the tough option of having to put vessels into lay up.
In such situations, JLT Specialty is stepping up to support marine clients with flexibility on conditions around lay up and by obtaining significant returns on premiums.
“We have a very big book of offshore supply boats that supply the rigs, and they are suffering because the rigs are unemployed,” explains Nick Berry, Senior Partner in the Marine Division at JLT Specialty. “A lot of our owners are having to lay up vessels, because the daily hire rate doesn’t support the cost of running the ship. We are being very proactive and trying to get the best insurance solutions for them.”
This includes introducing ‘very generous’ lay up returns on a lot of policies, as well as potentially obtaining deals to lay up vessels in certain areas. “That should help a lot. Some owners reduce their values accordingly, and where they can’t, because of their loan requirements, they tend to reduce their loss of hire insurances, which saves a lot of money, because there are so few charters — until the market returns.”
Where ship owners have no terms on lay up returns, JLT Specialty is introducing them on renewal, thereby providing a reduction in premium, or introducing mid-term where possible. Meanwhile, although the offshore market has hit a low point, some seismic activity is going on, offering potentially positive signs that new projects may be on the horizon.
Oil Price Outlook
“Seismic vessels go first, and there is some seismic activity at the moment, so there is hope,” says Miles Dymock, Director of global marine broker Offshore Shipbrokers, explaining how the offshore cycle generally unfolds. “Next is exploratory drilling, then construction vessels, cable lay vessels, and finally heavy lift vessels to do the top side lift.”
The cycle is likely to begin picking up more fully once oil prices hit about USD 60 a barrel. The International Energy Agency offers hope of an oil price rise because it expects global demand for oil to begin outstripping supply in October this year. “With the cost cutting that’s going on at the moment, and all the initiatives that are going on, activity would pick up a decent amount at USD 60 a barrel,” says Dymock.
When the market does recover, JLT Specialty will be well placed to continue offering appropriate and flexible deals. “We have a great relationship with our markets, in terms of volume and co-operation. We are able to obtain lay up returns to help owners through the hard times, because of our relationship with the market,” says Berry. “We’re a leader in supply boats in the London market, operating for 33 years: a long-term player in marine hull insurance with expert market knowledge.”
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For further information, please contact Nick Berry, Business Unit Head on +44 (0)20 7558 3516 or email firstname.lastname@example.org