BOW WAVE 119

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Wavy Line	sam@wavyline.com
(c)2002 WavyLine.com	Issue No 119 04 Mar 02
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. Hull Market's Unbroken Mould
3. Links to Liner Competition Decisions
4. Bunker Quality Fraud
5. Port Marketing Course
6. And Finally...

1. Welcome

Larry Montgomery in California writes in reaction to our What is Insurance Question last week:

Insurance is to the commercial spirit what the Catholic church is to the soul: A promise of protection in exchange for a tithing.

New Readers this week include:

Lawyer/Consultant Dan Souter who has joined Hedleys,the solicitors Transport Conference Organiser Rory Doyle
Cargo News Asia Editor Corey Bousen in HK
Fauzan Safuan in Indonesia
Kuala Lumpur based Prema Vallipuram of Richards Insurance Services

Jonathan Spencer in New York reports the sad news that claims handler Irma Colon died on 27th February of a heart attack. We are sure her sunny yet worldly wise presence will be missed by many of our Readers.

A bit of a mixed bag this week.

Enjoy

2. Hull Market--Same old Soup?

The announcement in Friday's Lloyd's List that the Dex Hull facility would go into the Lloyd's market with a stamp of $20 million supplied by Swiss Re rising to $33 million sent us back to our archive to look for where this all fits in the scheme of things. Can it only be two years ago our marine correspondent Bevis Marks was writing:

"As you might expect, the hull market - traditionally measured quantitatively by tonnage - comprises the large bulky beasts carrying oil (about one-third), dry bulk cargo (also about one-third) and container and general cargo (about a quarter). The rest is made up of specialist ships for passengers, gas, refrigerated cargo and so on. Altogether, there are nearly 500 million gross tonnes plying the oceans, excluding small ships of under 5000 grt. Few are the places where these international risks are insured. As the Asian Shipowners' Forum has never tired of pointing out, the international marketplace comprises companies based in the UK, Scandinavia, France and Germany - and really not much else. Other insurers who have exposures to hulls (e.g. the Japanese) tend to serve their national markets well enough with reinsurance support from all the usual places.

Remarkably, London has an estimated 25% of this market, with other markets in Europe together accounting for perhaps one-third of the international total. Of all the insurers in this line of business, not one enjoys a market share of even a tenth of the whole international market. Calculations based on the DTI returns for marine hull put the 1996 total premium at around £750 million, although soft market conditions may have pushed that figure down by 50 per cent. The average income of the industry is thus about $5 per gross registered tonne. Businesses with longstanding reputations in the class often seem to have very small pieces of the world market. Cox and Wellington each probably have less than one per cent of the total world business. By contrast, XL, British Marine Mutual or Ace each have some two to three per cent. The CGNU's leading position in the marketplace consists of a five per cent market share. So this is a traditional market which remains pretty highly fragmented. What can we say with any certainty about the current market and the likely directions it will take after many years of softening rates:-

It would be extraordinary if this worldwide market did not experience a considerable contraction in the number of players from the current 100 or so to perhaps half this number. In Lloyd's, perhaps 20 of the 40 current marine players might remain after consolidation.

Thirty years ago, hull insurance cost shipowners five times more than P&I coverage. Today, the proportion is more like one to one. This makes the era of the combined package a little more likelier. There have always been some P&I Clubs which offered their members hull cover - indeed the British Marine Mutual was for a long time Sedgwick's largest single marine client, such were the dimensions of the hull reinsurance business that Club placed back into the market.

As the importance and size of London's marine insurance market erodes in relation to the rest of the world - as it has for many years - there will be a premium on newer products and a focus of reaching out into the world. The venture by Jonathan Jones of Syndicate 329 to set up a hull insurance operation in Hong Kong may be seen as an early innovation bound to be emulated by others.

The office is a regionalised underwriting operation set up to offer the JL Jones covers for hull, P&I and legal expenses locally.

The consolidation exercise in the hull world will produce successful ventures which have managed to marry a global approach to a low cost but personable local delivery service. Thinking globally but acting locally in the hull and marine markets are things which the large international brokers ought to be better able now to supply. If they can't do it for marine , they might as well pack up and leave now
·
Technological developments still have some way to go in this market. In theory at least, there ought to be tremendous scope for more high-tech approaches to what is only a moderately technically challenging form of asset protection.

Despite all that is printed in the newspapers, the traditional industry servicing hull underwriters - meaning claims handlers, average adjusters, surveyors, classification inspectors, lawyers and so forth - has less and less call on its services. The number of shipping casualties continues to fall as navigation and safety are buttressed by better and better technology and an international climate of opinion which is intolerant of the genial shipowner-rust bucketeer of yesteryear. All cynicism aside, the introduction of quality
assurance methods and the holding liable of those who are responsible for the management of shipping companies has made a measurable difference to loss and damage patterns.

Yet the interest and the fine print of what is really going on in the world of shipping and marine insurance is best observable not in the halls where rates are agreed but in the gleaming offices and sweatshops where the casualties and claims are examined and serviced."

3. Links to Liner Competition Decisions

Peter Carlo Lehrell, the Euro Specialist sends in the following new cases for those who like to follow the traditionally less than warm relationship between the EC and the Liner Companies:

Liner conferences did not secure immunity from competition fines by notifying the Commission under Regulation 1017/68: judgment
http://www.publicinfo.net/pic.php?allvars=44701612976f000000202002-02-28en
Court - 2002-02-28

Liner conference companies fail in appeals against competition decisions: two judgments

http://www.publicinfo.net/pic.php?allvars=447016129770000000202002-02-28en
Court - 2002-02-28

4. Bunker Quality Fraud:

Seen in Mike Wall's latest Flashlight the e-zine for marine surveyors: quite a mess.

Corrupt practices

In November DNV Petroleum Services (DNVPS), the largest fuel tester in Singapore announced it had sacked five of its subcontracted quantity surveyors after they "admitted taking advantage of their position".

The sackings came after an investigation by Singapore's Corrupt Practices Investigation Bureau.

Forty two bunker surveyors are under investigation, eight having been formally charged with accepting bribes from Navi Marine Services in exchange for misrepresenting the quality and quantity of bunkers supplied. The bribes are believed to range from $499 to $3,156.

Five of those charged pleaded guilty and were fined between S$8,000 and S$20,000, and the other three opted to go to trial.

A senior Singapore judge has described their offences as "just the tip of the iceberg" and the first of a number of industry malpractices aimed at "deceiving ship operators", to come to court.

Further court cases for those remaining under investigation are expected in the future. Many in the industry expect those yet to come to trial to be facing jail sentences.

In addition to the bunker surveyors, privately top shipping executives talk of chief engineers who were signing off on a higher quantity of volume of bunkers
than they had actually been delivered and taking kickbacks from suppliers in exchange.

A report by US based Viswa laboratory has alleged that bunker fuel in the republic had been deliberately used as a dumping ground for toxic waste. The chemicals do not show up in standard testing procedures.

In his preliminary report Viswa principal, R Visweswaran, said, "One may wonder why tri-tetrachloro ethylene should be found in bunker fuel. These solvents are used in the dry cleaning industry. The quantity of these chemicals used in the USA alone is more than 700m pounds weight. There is a cost associated with the disposal and it should not be surprising if some of it finds its way into bunker fuel.

"The above is a deliberate addition or adulteration... if bunker fuel contains more than a minuscule quantity."

At least 10 ships have suffered engine damage, including a fully laden VLCC which broke down in the Straits of Malacca. Among those to complain to the authorities was the Tankers International pool over the quality of bunkers received by two of its ships.

Full report in Lloyds List Maritime Asia, Jan/Feb 2002, Editor:a.com

Mike comments "As I have already stated, anybody found endangering life at sea should have the book thrown at them, particularly those who are ex seafarers and in a position of trust.
Subscribe to Flashlight at:

mikewall@netvigator.com

5. Port Marketing Course

From Hans Carl comes the following notice of this forthcoming event in Aqaba, Jordan in April.

The International MultiModal Transport Association (IMMTA) is therefore pleased to announce the holding of a Port Marketing Workshop in cooperation with the World Maritime University (WMU) and the Aqaba Special Economic Zone Authority (ASEZA), from 21 to 25 April 2002 at Aqaba, Jordan.

WMU has agreed to send its premier professor on ports, the Vice Rector of the university and its Academic Dean, Dr. Ma Shuo. Before joining WMU, Dr. Ma worked in the Ports Section of the Shipping Division of UNCTAD. Before that Dr. Ma worked, during the period 1988 to 1991, with COSCO (China Ocean Shipping Corp.). Dr. Ma holds a PhD. in economics from the University of Paris (Sorbonne). He is specialized in shipping and port economics, logistics and shipping and port marketing. He has published a book and numerous articles in those areas.

The course consists of 5 modules, lasting one day each, with lectures and discussion in the morning and exercises and case studies in the afternoon. The 5 modules are:

o Port marketing principles and environment
o Port marketing information
o Port marketing strategies
o Port marketing promotion tools and mix
o Port marketing organization and control

Throughout the course, a balance is sought between lectures and relevant case studies and discussion sessions.

The Registration Fee is US$500 per Delegate. Fee covers all course sessions, one full set of the course documentations, refreshments during coffee breaks, lunches and the course certificate.

Contact

IMMTA
Rue de Moillebeau 3 b
CH-1209 Geneva
Switzerland
Tel: +33 450 40 17 23,
Fax: +33 450 42 73 11,
E.mail:org
or
Mr Sufian Al-Muhaisen, DG
Transport & Port Development Dept.,
Aqaba Special Economic Zone Authority
PO Box 2565 Aqaba,
Jordan
Tel: +962 3 201 4201,
Fax: +962 3 209 1029,

6. And Finally...

We seem to have missed these pictures the first time around. They are currently doing the rounds amongst marine insurance folk on the internet. Many thanks to Nonny Mouse.

http://home.attbi.com/~nwigen/TowBoat/towboat.htm

From Doug Webster comes this fine story, a bit too close to the truth for comfort.

Get a Life!

A boat docked in a tiny Mexican village. An American tourist complimented the Mexican fisherman on the quality of his fish and asked how long it took him to catch them.

"Not very long," answered the Mexican.

"But then, why didn't you stay out longer and catch more?" asked the American.

The Mexican explained that his small catch was sufficient to meet his needs and those of his family.

The American asked, "But what do you do with the rest of your time?"

"I sleep late, fish a little, play with my children, and take a siesta with my wife. In the evenings, I go into the village to see my friends,have a few drinks, play the guitar, and sing a few songs . . .I have a full life."

The American interrupted, "I have an MBA from Harvard and I can help you! You should start by fishing longer every day. You can then sell the extra fish you catch. With the extra revenue, you can buy a bigger boat.With the extra money the larger boat will bring, you can buy a second one and a third one and so on until you have an entire fleet of trawlers.Instead of selling your fish to a middle man, you can negotiate directly with the processing plants and maybe even open your own plant. You can then leave this little village and move to Mexico City, Los Angeles,or even New York City! From there you can direct your huge enterprise."

"How long would that take?" asked the Mexican.

"Twenty, perhaps twenty-five years," replied the American.

"And after that?"

"Afterwards? That's when it gets really interesting," answered the American, laughing. "When your business gets really big, you can start selling stocks and make millions!"

"Millions? Really? And after that?"

"After that you'll be able to retire, live in a tiny village near the coast,sleep late, play with your children, catch a few fish, take a siesta, and spend your evenings drinking and enjoying your friends."

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