For all the debate over rating levels the impact of hurricanes Katrina, Rita, Wilma, Gustav, Ivan and Ike continue to be felt with removal of wrecks having been forced into the spotlight by a series major windstorms.

The topic will feature in tomorrow’s seminar sessions and Kevin Jarman Managing Director of specialist loss adjuster and claims firm Matthews Daniel says although high in the agenda it is not a new issue.

“The removal of wreck and debris is not something which has simply arrived on the industry’s radar suddenly,” he adds. “It has always been a problems but it has been post Katrina Rita and Wilma when we suddenly had a significant level of damage and wrecks that the issue really became a problem for underwriter and insured alike.”

The traditional limit of 25% of insured value for recovery of wreck was quickly found to be inadequate for many platforms and rigs which had been insured for low values.

“There are three choices really, the recovery of the wreck to land, the recovery and the disposal of wreck in deeper water or the wreck to reef scheme, but the costs of all three have the potential to cost more than the insurance limits in policies,” adds Mr Jarman.

The market is now seeking to address the potential shortfall with the option of additional recovery of wreck cover, beginning to be offered to insureds.

But as Mr Jarman explains claims inflation remains for insurers despite the changing economic outlook.

“The marine market is having problems with falling freight rates and business levels but the energy market remains one where there is a constant demand and the values of oil and gas have remained high,” he adds. “What we have seen is the cost of claims plateau in the more traditional shallow water fields but there is still a issue for the deep water claims due to the lack of specialist equipment and the costs of wreck recovery for instance particularly in the Gulf of Mexico.

 “We have seen the cost of raw materials fall from their highs of two years ago but when we get a major loss there is every expectation that the dynamics of supply and demand will see the cost of claims rise.”

Underwriters and reinsurers have been vocal in their concerns over how best to address the issue. Dominick Hoare, energy Underwriter with Munich Re Watkins Syndicate at Lloyd’s and a member of the International Union of Marine Insurance’s Energy Committee said the market is faced with a tough choice.

It could either seek to charge a rate which was commensurate with the risk but to do so would be to charge a premium many times higher than the market could stand or move to a higher level of attachment leaving he insured to assume greater levels of the risk.

It may well leave the market offering coverage which will only trigger at a catastrophic level.

When it comes to claims many underwriters have expressed concern over the ability to access experience claims teams when there is a major event and it is something that Mr Jarman recognises.

“It is very much a question of balancing staff numbers at the time when there are no catastrophes,” he adds. “Worldwide there is the adjusting capacity at normal demand levels but where the problems arise is when there is a major loss and a particular office then needs multiples of the staff that it would usually have.”

Mr Jarman adds the adjusters can only make disaster plans along with the rest of the market n terms of putting in pace agreements with subcontractors to be called in when needed and to ensure that they can deliver staff from around the world into the area quickly.

“I think the biggest test was Katrina and then Rita three weeks later,” he explains. “The market was just getting understanding of what we faced after Katina then Rita hit and we were faced with a new series of claims which would have tested the market in isolation.”