BOW WAVE 110

New Year\'s Eve Edition

news and views on trade, insurance and risk

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Wavy Line	sam@wavyline.com
(c)2001 WavyLine.com	Issue No 110 31 Dec 01
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. Looking Forwards Looking Backwards
3. Bolero De Layers
4. Chan's Advice
5. Slow Progress in London Renewal Season
6. And Finally...

1. Welcome

New Readers this week include:

Hong Kong Broker Alan Yu who has left JLT and set up on his own. Carlos Efraín Guzmán L from Panama City
Roderick Post in the Netherlands
Chris Bonehill of Norstar Shipping in Monaco
Chris Curran of Lloyd's brokers Seascope

Our Night Before Xmas Edition produced a blizzard of Out Of the Office autoresponses, but also some very nice messages from Readers. One correspondent in Seattle, lawyer Rivers Black suggested he in reading and your editor in publishing Bow Wave needed to get a life. How true. However. a periodical can be many things but it must be periodic. So, a think piece on the present and future which appeared in recent days in Lloyds List some other bits and pieces accompany our best wishes to Readers for the coming new year.

Our Resolutions for the New Year are to make more offers to Readers and to describe the markets in greater commercial detail as they become known to us.

Happy New Year

2. Looking Forwards, Looking Back

A year ago, those of us who earn a crust in the risk business were, we thought, looking at a period of rising rates as reinsurers started to insist the marine insurance world start paying more for its losses.

Expectations of large increases were not particularly high and the joint ventures which many Clubs concluded in the cause of convergence were in many cases looking mostly forlorn.

This year's winter solstice sees a market enduring rather than enjoying a reformation. The years of attritional loss were finally capped by the WTC catastrophe, an incident which I believe will haunt the industry memory for as long as this generation works for a living and which also introduced many people to the realities of disjunctive change.

It is now no longer very arguable to say that the period we are entering will be markedly different to what went before. This is already obvious to the more imaginative observers in the industry.

The changes in the nature of international trade and transport, which will go through steep changes during the coming period, will have to be processed by marine and transport insurers. Sometime last month, one or two analysts of the container trade, who have been busy tracking the downward progress of freight rates and predicting worse, noticed that the 50% mark had been passed in the raw capacity available to shippers which is controlled by operators based in the Asia Pacific region. If you are a supplier to this industry, the time to beef up your operations in the region is coming to an end. An inscription on the panels of consolidation may well await.

Six entities will constitute half the available capacity at Lloyd's of London. This will lead to a return to something resembling the subscription market of yesteryear but it will be a subscription market of necessity (no slip no cover) carrying very few make weights and like a high stakes poker gain, requiring more and more resources to stay in the game.

After a year of income buoyancy, the container business is back in the freight basement. It is always sensible to remember that by value of cargo moved, the container operators carry 80% of the world's trade. Apart from the going down of Cho Yang, the industry managed to escape the spectre of individual out and out bankruptcy, but it would take a brave wager to count on this much longer. With freight rates so low and too much big capacity coming on stream, what can the liners do to try and collapse their costs? Strangely enough they are turning to internet solutions and new supply chain techniques to weather these harsh times. This is based on the economics of white collar costs in shipping. A typical shipping transaction, say analysts, provokes nine separate interactions between the customers and the operators. The cost of these are priced at:

$295 via phone;
$83 via email;
$11 via Web 'self-service'
.
These sorts of economies will, sooner rather than later, prove hard to resist for the bargain hungry customers of the container shipping company, we think. And many others too.

So at least some of the skills base that went into the maritime dot.com era will not be squandered. But the idea that operators would pay transaction and access fees to third party suppliers to interact with their own customers is a fainter notion on the eve of 2002.

The future consists of constant enhancement of self-service, web based systems supplied free to customers by owners anxious to depress their costs to a level which was never imagined in the container industry.

Plenty of people staring at keyboards, but no less crucial the need to put a real human face to the name you deal with. So much of what goes wrong with IT is based around the failure to understand how crucial is the creation and maintenance of trust and relationships between suppliers and customers. This can only ever be supplemented by automation and backroom systems.

This seems to me to guarantee that the network is the proper model for insurance in the future, rather than the one based only on a single exchange or location. Somewhere in the network is authority and system, but in every crucial market is presence, skill and reputation. This is not something which the lowly-capitalised can carry out very easily.

Whole cities and maritime centres are under challenge as we move forward. Hong Kong looks nervously at the emergence of Shanghai and its tremendous hinterland.

The high urban costs of traditional financial centres will certainly drive out many operations to pastures new. Not to mention security concerns.

There were so few deaths in the WTC in the marine industries in buildings located in the heart of one of the world's best known maritime centres because the tenants had long ago moved away to better rates per square foot.

Only a limited number of ports have a future as hubs (perhaps as few as 100-200 out of 6,000). The rest will strive to attain membership on one of the consolidating groups of terminals. In transport, the emergence of new techniques and falling trade barriers is spawning a successor business to forwarding based around highly economic and highly automated haulage, distribution and logistics. Such groups are getting larger and larger in the United States and in Europe. Marked change, continuing consolidation, our world as network, rock bottom costs, plenty of online sophistication and then let us make an underwriting surplus and keep the aspect of contentment visible on the visages of the reinsurers.

republished courtesy of:

http://www.lloydslist.com/

3. Bolero De Layers

Word is out on the street that the Bolero organisation has let 20 staff go (about a sixth of the complement). Sustaining an organisation of 120 people and trying to revolutionise world trade at the same time is not easy in the current climate.

There seems to be no suggestion of a Setfair situation but in this seasonal story, the ghost of Christmas future is probably a merchant bank.

http://www.bolero.net/

4. Chans' Advice

Meanwhile between Christmas and New Year we received the latest newsletter from old colleagues Richard and Simon Chan, who report on a decision from the HK High Court which did not allow a godown operator to limit liabilities under the godown warrant with a new client whose attention had not been drawn to the conditions before the conclusion of the contract. Richard Chan in particular is known throughout the industry in his part of the world for insisting on the use of standard trading conditions by operators.

In the case under consideration Deputy High Court Judge Gill is quoted in this way:

"The burden is on the party seeking to rely on an exclusion clause to prove that it has became part of the contract. Crucial to its cause is that notice must be given no later than when the contract is made; communication after that is of no effect. There is no need for that notice to contain the conditions for the parties to be bound by them, provided that by the notice the receiving party has knowledge that there are conditions which will be binding on him; it is not disputed that the terms of the storage contract in its entirely were settled, verbally, before delivery of the consignment or any part of it. There was no notice of the existence of a Godown Warrant or any exclusion clauses contained in it prior to the receipt of the first delivery by which time it was too late to be effective. At no stage was it put forward, let alone accepted, that the parties would be bound by additional terms and in particular terms which purported to limit the liability".

To receive the newsletter send an e-mail to:

richardchan@sunhinginsurance.com

5. Slow Progress in London Renewal Season

No renewal season has been like it in living memory. Late reinsurance offers mean that primary underwriters have been forced to hold covered or write risks subject to changes in rates caused by unexpectedly high reinsurance rates. Many contracts are as yet unconcluded. The market for containers, chassis, land transport risks and ports and terminals is in disarray as players reconsider their positions. The ability to make a dollar or two off the underwriters in this market by operators paying in a dollar of premium may well have been lost during this latest turning of the cycle.

Consolidation is the order of the day (again) as marine and transport insurers shrink in number and expand in size to keep pace with the scale of risks that they face.

6. And Finally...

A further contribution on the onward progress of the English language as a medium of communication in the world comes from Hong Kong Lawyer Chris Potts of Crump and Co who sent in this treasury of signage:

Signs seen around the world (excluding Havana)

Doctors office, Rome -- SPECIALIST IN WOMEN AND OTHER DISEASES

Hotel, Acapulco -- THE MANAGER HAS PERSONALLY PASSED ALL THE WATER SERVED HERE.

Information booklet about using a hotel air conditioner, Japan -- COOLES AND HEATES: IF YOU WANT CONDITION OF WARM AIR IN YOUR ROOM, PLEASE CONTROL YOURSELF.

Car rental brochure, Tokyo -- WHEN PASSENGER OF FOOT HEAVE IN SIGHT, TOOTLE THE HORN. TRUMPET HIM - MELODIOUSLY AT FIRST, BUT IF HE STILL OBSTACLES YOUR PASSAGE THEN TOOTLE - HIM WITH VIGOUR.

Sign in men's rest room in Japan -- TO STOP LEAK TURN COCK TO THE RIGHT.

On a poster at Kencom -- ARE YOU AN ADULT THAT CANNOT READ? IF SO, WE CAN HELP.

In a City restaurant -- OPEN SEVEN DAYS A WEEK, AND WEEKENDS TOO.

One of the Mathare buildings -- MENTAL HEALTH PREVENTION CENTRE.

A sign seen on an automatic restroom hand dryer -- DO NOT ACTIVATE WITH WET HANDS.

In a Pumwani maternity ward -- NO CHILDREN ALLOWED.

In a cemetery -- PERSONS ARE PROHIBITED FROM PICKING FLOWERS FROM ANY BUT THEIR OWN GRAVES.

Tokyo hotel's rules and regulations -- GUESTS ARE REQUESTED NOT TO SMOKE OR DO OTHER DISGUSTING BEHAVIOURS IN BED.

In a Tokyo bar -- SPECIAL COCKTAILS FOR THE LADIES WITH NUTS.

In a Bangkok temple -- IT IS FORBIDDEN TO ENTER A WOMAN EVEN A FOREIGNER IF DRESSED AS A MAN.

Hotel room notice, Chiang-Mai, Thailand -- PLEASE DO NOT BRING SOLICITORS INTO YOUR ROOM.

Hotel brochure, Italy -- THIS HOTEL IS RENOWNED FOR ITS PEACE AND SOLITUDE. IN FACT, CROWDS FROM ALL OVER THE WORLD FLOCK HERE TO ENJOY ITS SOLITUDE.

Hotel lobby, Bucharest -- THE LIFT IS BEING FIXED FOR THE NEXT DAY. DURING THAT TIME WE REGRET THAT YOU WILL BE UNBEARABLE.

Hotel, Yugoslavia -- THE FLATTENING OF UNDERWEAR WITH PLEASURE IS THE JOB OF THE CHAMBERMAID.

Hotel, Japan -- YOU ARE INVITED TO TAKE ADVANTAGE OF THE CHAMBERMAID.

In the lobby of a Moscow hotel across from a Russian Orthodox monastery: --YOU ARE WELCOME TO VISIT THE CEMETERY WHERE FAMOUS RUSSIAN AND SOVIET COMPOSERS, ARTISTS, AND WRITERS ARE BURIED DAILY EXCEPT THURSDAY.

From the "Soviet Weekly -- THERE WILL BE A MOSCOW EXHIBITION OF ARTS BY 15,000 SOVIET REPUBLIC PAINTERS AND SCULPTORS. THESE WERE EXECUTED OVER THE PAST TWO YEARS.

Hotel catering to skiers, Austria -- NOT TO PERAMBULATE THE CORRIDORS IN THE HOURS OF REPOSE IN THE BOOTS OF ASCENSION.

Supermarket, Hong Kong -- FOR YOUR CONVENIENCE, WE RECOMMEND COURTEOUS EFFICIENT SELF-SERVICE.

In an East African newspaper -- A NEW SWIMMING POOL IS RAPIDLY TAKING SHAPE SINCE THE CONTRACTORS HAVE THROWN IN THE BULK OF THEIR WORKERS.

A sign posted in Germany's Black Forest -- IT IS STRICTLY FORBIDDEN ON OUR BLACK FOREST CAMPING SITE THAT PEOPLE OF DIFFERENT SEX, FOR INSTANCE, MEN AND WOMEN, LIVE TOGETHER IN ONE TENT UNLESS THEY ARE MARRIED WITH EACH OTHER FOR THIS PURPOSE

Hotel, Zurich -- BECAUSE OF THE IMPROPRIETY OF ENTERTAINING GUESTS OF THE OPPOSITE SEX IN THE BEDROOM, IT IS SUGGESTED THAT THE LOBBY BE USED FOR THIS PURPOSE.

An advertisement by a Hong Kong dentist -- TEETH EXTRACTED BY THE LATEST METHODISTS.

A laundry in Rome -- LADIES, LEAVE YOUR CLOTHES HERE AND SPEND THE AFTERNOON HAVING A GOOD TIME.

Tourist agency, Czechoslovakia -- TAKE ONE OF OUR HORSE-DRIVEN CITY TOURS WE GUARANTEE NO MISCARRIAGES.

Advertisement for donkey rides, Thailand -- WOULD YOU LIKE TO RIDE ON YOUR OWN ASS.

In a Swiss mountain inn -- SPECIAL TODAY - NO ICE-CREAM.

Airline ticket office, Copenhagen -- WE TAKE YOUR BAGS AND SEND THEM IN ALL DIRECTIONS.

BOW WAVE is published each week to around 6600 readers in the transport,insurance, shipping and finance industries.

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