The London insurance market has set up an initiative to tackle the incidence of shipbuilders' losses which have cost underwriters around $700 million

According to Peter McIntosh, chairman of the Joint Hull Committee (JHC), losses for one case alone, the Diamond Princess, totalled $310 million, whereas the annual market earnings from the sector were about $100 million, he explained to a seminar in London organised by the Average Adjusters Association (AAA).

The Diamond Princess, a luxury cruise ship was under construction at the Mitsubishi Heavy Industries shipyard in Japan when she caught fire in October 2002.

Winter storms that hit Germany in January 2004 also resulted in a loss, estimated at $180 million by reinsurer ERC, when the cruise ship Pride of America, undergoing work at Lloyd Werft's Bremerhaven shipyard, partly submerged and sank.

The JHC is reviewing builders' risks coverage and is putting together a subcommittee of experts to discuss revision of clauses. "There is potential for a crisis," McIntosh said. "There is a reducing appetite in the market for certain types of risks."