Decline in LOF salvage contracts continues despite industry backing (source: Tradewinds)

Insurers have promised to support the salvage contract in the face of its declining popularity

By Adam Corbett

Latest figures show Lloyd’s Open Form (LOF) salvage contracts continue to be poorly supported by shipowners, despite recent backing by the insurance industry.

Lloyd’s Salvage Arbitration Branch reported the award of just 27 LOF contracts in 2021, compared to 32 in the previous year, 29 in 2019, and 37 in 2018.

The 114-year-old LOF contract used to be the leading salvage contract but now represents a fraction of the total number of contracts handed out each year. Owners and their insurers seem to prefer pre-arranged terms or standard towage contracts.

Under the LOF system salvors are appointed when an incident occurs allowing salvage equipment to be mobilised immediately. The salvage award is decided at a later date, through negotiation or arbitration.

Dutch Salvor Smit Salvage picked up the most LOF contracts last year with six awards, followed by Tsavliris Salvage with five. Smit handled the salvage contract for the 2,743-teu X Press Pearl (built 2021) which was one of the biggest LOF contracts last year.

Last year Lloyd’s of London said it was considering withdrawing support for the Lloyd’s Salvage Arbitration Branch which would likely have put an end to the LOF contract.

In face of shipping industry opposition, led by the International Salvage Union (ISU), it backtracked. An industry working group has been set up to improve the LOF contract.

The ISU said that the key issues up for discussion are improving understanding and transparency of the LOF contract, as wells as funding and environmental considerations.

At the ISU’s recent Salvage and Wreck Conference the International Union of Marine Insurance (IUMI) said it fully backed the LOF.