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_50._ As any physical asset, ships deteriorate over time. The rate of deterioration accelerates in the absence of proper maintenance. When their freight earnings shrank many shipowners severely curtailed maintenance expenditures, and the maintenance intervals were extended. A random survey of 100 trading ships by the British Joint Hull Committee in 1991 found that only 18 were in full compliance with the rules that govern seaworthiness classification. Of the vessels with deficiencies 40 percent were so badly damaged that immediate repairs were required before they would be allowed to accept cargo again.

51. Resulting from the continuous deterioration of the world merchant fleet, there has been a growing incidence of ship casualties. But unlike the dramatic media reports may suggest, the highest casualty rate occurred in the dry bulk sector (43 percent of all casualties in 1991), followed by tankers (29 percent) and all other vessel categories (28 percent). Between 1988 and 1991 the loss ratio--dwt of lost ships as a percentage of total world tonnage--doubled from 0.2 to 0.4. During the last five years 94 dry bulk carriers were lost with 381 lives and 2.6 million tons of cargo. More than 80 percent of these casualties were due to structural failure, and over 90 percent of the vessels concerned were older than 15 years. The Institute of London Underwriters reported that 1991 was the worst year in total loss records. The estimated cost of cargo losses in the dry bulk sector reached almost US$ 800 million, whereas the replacement cost of lost ships exceeds US$ five billion.

52. Tht fleets with flags of four countries--Panama, Cyprus, Greece, and Liberia--accounted for almost 50 percent of all casualties. More than three-quarter of all ships lost in 1991 (1.3 million grt) were registered in developing countries. The West European economies continue to have the lowest ship loss record. Exemplary is also the low casualty rate among FSU carriers, which can largely be ascribed to very effective vessel condition control by the Soviet Register of Shipping.

_53._ Given the steadily increasing age profile of the world merchant fleet and modest prospects of improved freight earnings--which are likely to induce many shipowners to keep maintenance expenditures limited--it is foreseeable that the casualty rate will increase. This expectation is also reflected in the risk calculations by the Protection & Indemnity Clubs which cover the insurance of 90 percent of the world fleet. Vessel insurance premiums have doubled during the last 18 months. As a consequence, insurance is now with 30 percent share the largest single item in ship operating cost, which has greatly increased owners' annual expenditures. If the condition of the fleet does not improve significantly, insurance cost can be expected to increase further which would make many vessels uneconomical to operate. Such cost increase may even bankrupt several financially distraught shipowners.

54. The insurers have started to take a close look at vessel manning and operating practices. Poorly trained crews have been identified as one of the key causes of the escalating number of claims. In addition to hiring low-wage personnel, many vessel operators have also reduced crew sizes in order to cut cost. In support of this objective several shipyards have developed vessel designs which allow operators to decrease personnel on board, essentially by automating many functions which are associated with ship operations. The average crew size was 30 during the early 1970s and is now around 14. But insurance companies have realized that reduced crew sizes are among the main reasons for accidents and also of inadequate preventive maintenance, much of which is carried out while a vessel is on voyage. It is therefore to be expected that the insurers will shortly introduce a requirement for minimum levels of crewing which will be higher than the current number of personnel on board of most vessels. They will also insist on higher personnel qualification standards and more rigorous periodic testing of seafarers' skills.