• A photo of the FSO Safer taken from the salvage vessel Ndeavor near the coast of Yemen. AFP / Coen de Jong / Boskalis
    A photo of the FSO Safer taken from the salvage vessel Ndeavor near the coast of Yemen. AFP / Coen de Jong / Boskalis
  • The UN says it is ready to start salvage work on the oil tanker stranded off Yemen's coast. AFP / Coen de Jong / Boskalis
    The UN says it is ready to start salvage work on the oil tanker stranded off Yemen's coast. AFP / Coen de Jong / Boskalis
  • The FSO Safer has more than one million barrels of crude on board
    The FSO Safer has more than one million barrels of crude on board
  • It is feared that it poses an acute risk to the marine environment
    It is feared that it poses an acute risk to the marine environment
  • Concerns have been raised that the stricken oil tanker could break apart and release its cargo into the water
    Concerns have been raised that the stricken oil tanker could break apart and release its cargo into the water
  • A crew to inspect the rusting tanker has arrived from Djibouti
    A crew to inspect the rusting tanker has arrived from Djibouti
  • An operation to relieve the decaying FSO Safer of its crude cargo is now set to begin
    An operation to relieve the decaying FSO Safer of its crude cargo is now set to begin
  • It is hoped the move will avert a potentially catastrophic oil spill in the Red Sea. Reuters
    It is hoped the move will avert a potentially catastrophic oil spill in the Red Sea. Reuters

MENA

Insurance 'milestone' reached in FSO Safer salvage operation

Crew from Dutch salvage company Smit were able to board the ship for the first time

Nada AlTaher
Nada AlTaher

June 12, 2023

  • English
  • Arabic

The UN Development Programme has announced a binding insurance plan for the decaying FSO Safer, in another step towards averting a potential environmental disaster in the Red Sea.

The vessel, which contains 1.1 million barrels of oil, was left to decay after the war between the Yemeni government and the Houthi rebels broke out in 2014.

For the first time, workers from Dutch company Smit, which is conducting the salvage operation in the UN-led project to ultimately replace the FSO Safer with a permanent ship, were able to inspect the vessel's condition up close in recent weeks.

Another ship called the Nautica is en route to Ras Issa, where the FSO Safer is moored. The Nautica will temporarily host the barrels of oil while a permanent replacement is secured for the FSO Safer.

“We have a few steps to take care of in terms of insurance and other issues we need to resolve before bringing the Nautica into the area,” UN humanitarian co-ordinator for Yemen David Gressly said at the second Yemen International Forum in The Hague on Monday.

“It’s a war risk zone which complicates the insurance process and certain requirements to qualify for the insurance and completing the registration process will be important.”

Commenting on what the UNDP called a “pivotal milestone” in enabling a ship-to-ship transfer operation from the FSO Safer, UNDP administrator Achim Steiner said: “Insurance became a critical element of enabling this salvage operation to proceed. Without it, the mission could not go forward.”

Former captain of the FSO Safer, Salvatore Calleri, who left the ship two days before the war broke out, said the vessel was in a good condition at the time.

“The maintenance of the vessel was halted immediately after I left the vessel,” he told The National.

“The Houthis did not permit anybody to board the FSO. All abandoned. No maintenance on deck and in the engine room.”

He added that he had stayed in touch with some of the ship’s crew.

Peter Berdowski, chief executive of Smit’s parent company Boskalis, said his team had found the ship to be in a better condition than expected and thanked the skeleton crew which had been keeping it afloat.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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