Marine hull losses are expected to be the worst on record thisyear following a $1.5 billion loss year in 2007, according to aglobal market update report released by insurance brokerLockton.

The report, titled “Market Update,” released by the Kansas City,Mo.-based firm, said marine hull insurers believe there were 67total losses declared in 2006 and that final 2007 figures wouldbring that number to around 80.

While the number of losses of vessels of more than 500 grosstons has reduced year-over-year since 1990, 2007 is the first yearof increase in total losses for the period.

Both the number of vessels and tonnage has grown substantially,the report said, and the total number of ships is expected toincrease by 40 percent in the next five years for ships above 300gross tons.

The report puts the total number of vessels at 42,872, citingfigures released by the International Union of MarineInsurance.

The loss problem is expected to worsen because of the growingshortage of qualified and experienced crew. Plenty of capacityremains in the market, however, and fleet owners with good lossrecords can obtain improved terms on renewals, according to thereport.

Marine cargo remains very competitive, the report noted. Somerisks running at losses exceeding 100 percent are being offeredpremium at reduced rate just so insurers can put the business onthe books.

The report covers a wide variety of markets. Other highlights ofthe report reveal:

o The U.S. energy market has benefited from two years of verycalm activity, posting record high rates and profits following 2005record losses from hurricanes.

Capacity continues to build with new entrants to the market.

o Directors and officers insurance continues to decline despitegrowing litigation trends from the subprime meltdown and theeconomic downturn.

There are estimates that D&O losses due to the subprimemeltdown could exceed $3.5 billion. Much of that loss, however, maybe uninsured due to high retention rates and limited coverage.

Capacity remains plentiful and small capitalized and privatefirms are benefiting from competition. Terms and conditions remainattractive.

The 58-page report is available at www.lockton.com.