BOW WAVE 126

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news and views on trade, insurance and risk

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Wavy Line	sam@wavyline.com
(c)2002 WavyLine.com	Issue No 126 22 Apr 02
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. Freight Forwarding Reprise
3. Whither Hull Market?
4. ChinaFeedOnline
5. Utmost Good Faith Wobbles
6. And Finally...

1. Welcome

We should have known better than to set such an easy puzzle for Bow Wave Readers. The correct answer to last week's item 6 was that the passage concerned did not contain the letter e which is normally considered the most frequent letter of the alphabet to appear in printed English prose.

In the order in which they were received the following Readers sent in correct answers

UK Freelance Journalist Adrian Leonard
Max Fulton of CTC in Sydney
Trevor Harrison of Groombridge
Andy Williams of China Navigation
Consultant Fred Doll
Cigar Man Paul Dixon
Richard Harvey of Lawyers Richards Butler
Nick Angus of Craven and Partners in London
Angela Humphries of Bowood Partners
Dennis Lavers of the Tracker Network (UK) Ltd
Digital Signaturist Ake Nilson
Abid Gill of CTC's IT Department
Daniel Marsh of Willis
Neale Rodrigues of the PIL UK Office
Irish sailing enthusiast Paddy Boyd
Supplementary Calls guru Roger Ingles
Jock Mawson of CP Ships
Fairplay Super Sub Patrick Neylan-Francis
Maria Narancic of Telos Export Document Services
Susan McKee
Claims Man Barry Gower of CTC
Claims Woman Barbara Jennings of CTC
Carl Romare
Greg Carter of Fitch Ratings
Lyndon Johnson
Iain Webb-Wilson of Miller Insurance
Hidde Lahaise of CTC in Rotterdam
K. Murali of Radiant Shipping in Mumbai
Fairplay Editor Paul Gunton
Alex M Guillamont
Lawyer William D. Hughes in San Diego
Frank Divona of Metropolitan Stevedores in California

For some reason puzzles are very popular. We will set some more in weeks to come and perhaps offer some kind of prize. Would any Reader care to sponsor such a thing? Due to the international spread of our readership, any prizes would need to fit inside a jiffy bag.

New Readers this week include:

HY Woo in Hong Kong
Mr Shankar of Agil Freight in Chennai
Lawyer Richard Gunn of Richards Butler
Broker Alan.J.Cross of Marsh
Conference Organiser Danielle Jarmey of Informa
New Broker on the block Stephen Doman of HSBC Gibbs Transport Broker Andy Buglar of Willis
Alan Collier of London lawyers Merricks
Loss control man Barry Tarnef of Chubb Philadelphia

News of Readers

Bruce Farthing as President of Maritime London, the shipping promotion group, has along with others through the letters column of the Times and elsewhere been warning of the consequences of tampering with the tax status of shipping's non-domiciled owners in London.

This is the kind of issue which for some reason modern governments have trouble understanding. The message in short is: if you tax them they will go.

The position since the recent speech by the British Chancellor of the Exchequer is not much clearer, he writes:

"The concerns Maritime London leaders expressed in our letter to The Times have only been met to the extent that the Treasury in its Budget Report on the subject of 'residence and domicile' explains that the Government is reviewing the rules as they affect the tax liabilities of individuals but believes these must be based on clear principles ,be fair ,clear and easy to operate and support the competitiveness of the British economy.Since this is a complex area those affected will be given an opportunity to put forward views. This Maritime London and the various sectors will undoubtedly be doing.

Meantime all this is relevant to the wider issue of Security, who are the true owners of vessels and the whole question of 'genuine link' between owner and Registry addressed in the UN Registration Convention of 1986 and subjects like Tax Havens and Sub Standard vessels."

(Your editor well recalls how during the 1980s any number of Far Eastern Container Operators decamped to Hamburg under the combined pressure of English indifference to employment visa needs and Hamburg blandishments--it doesn't take much to start a shipping flight. If I were the Governments of Hong Kong or Singapore, I would watch how well Blair and Brown deal with this issue).

To find out more contact:

Chris Ellison, Maritime London's Executive Director who has an office at the Baltic Exchange at

cellison@baltice.com

A packed edition this week.

Enjoy.

2. Freight Forwarding Walking Wounded

Your editor's last column in Lloyd's List again addressed the issue of where to go in the insurance of freight forwarding. In a world of short marine and transport insurance capacity, the architects of transport are adjusting to the unfamiliar need to find someone, anyone to supply some insurance cover.

In hard truth, Mr.Mike Miller of the Allen Group in Fort Valley Georgia, USA wrote in and protested that his outfit had managed a 40 per cent loss ratio over many years in the sector by dint of paying attention:

It's not rocket science if we can do it... but a matter of finding, helping, servicing, and caring for honest and trustworthy clients. .. providing more than the competition... using today's technology to provide more and better services, not asking technology to do or be more than it can, while respecting the traditions of the past that make ocean marine a subsector of insurance to be proud of.

We like the sound of this.

At any rate, here is the column

It's time for a rethink as risk takers approach end of the road on freight
16-04-2002

It doesn't rain but it pours in the world of freight and transport. More and more around the world underwriters are taking in the welcome mat for the architects of transport and the actual carriers of goods on land.

I wrote recently in Bow Wave to nary a peep of protest:

"If there is one place in the international insurance market for marine and transport risks where buyers are getting a fairly dusty reception right now it is in the freight sector where underwriters in many markets are severely uninterested in the cargo and liability risks of freight forwarding. This may not be unconnected with the propensity of freight forwarders to take out in claims and advice rather more than they put in by way of premium. This is also the result of the rise and rise of shippers, who are so large that they can more or less impose higher burdens of responsibility on forwarders in exchange for awarding them their business. Many large shippers have marine cargo policies with deductibles of $1m each accident. This means they would like someone else to carry any loss below that figure. Large underwriters are bidding adieu to the sector."

And what is the evidence for this sweeping statement? To take one example, the mighty Allianz no longer cares to participate in the spedition business in Germany. The SVS system, used since the 1920s to cover the responsibilities of forwarders in Germany was as formidable a combination of law, language and trade custom as ever saw off a foreign insurer. It appeared impregnable to attack and covered the medium-sized forwarding Mittelstand right through until the mid 1990s before reform and globalism just made too many inroads for it to survive.

In the US, right about the same time the freight specialists Intercargo began to feel the stresses and strains and folded at the end of the decade. Over at the TT Club, the word has gone out that it is the forwarders who have done the most to drain $50m out of the Club's reserves in the last three years. What is it that has led these organisations, and their skillful specialists with their decades of experience to apparently suffer so at the hands of freight forwarders and hauliers? Is it that they did not allow sufficiently for the length and depth of the last soft part of the insurance cycle which lasted from about 1996 to 2001? Or was it that they lacked a strategy for freight insurance and a sense of where they were going?

A poor strategy is one that takes you with each step of the march further and further away from where you need to go, so that once you have realised how much ground you have lost for no gain, you have no option but to turn around and expend more strength getting to where you should have gone in the first place. Many times the alibi is that everyone else got it wrong too.

There is always in the financial services industry a tendency to believe as one wag put it that a million flies can't be wrong. That there is absolutely nothing wrong with swarm like behaviour so long as a cold snap catches everyone. Very difficult decisions are taken and votes are unanimous. Folly is acclaimed as the idea of the moment and only the brave few who warned at the time are singled out for censure.

But most of all I believe the current crisis in capacity comes from a simple failure by insurers to understand sufficiently the way the transport and shipping world has been heading for a good decade and a half.

Those who use the services of forwarders and hauliers are much more powerful than they used to be and much more likely to impose on them high levels of responsibility. A large soap and consumer products giant will insist in its warehousing contracts that the operator is responsible up to the value of the goods lost or damage with no limiting of liability. A leading producer of printers will not stand for hauliers to bring the defence of force majeur when goods are lost in armed robbery. So it goes.

Come the time when there is a casualty it is all the more expensive to clear away the mess. The ranks of the transport intermediaries have been thinned by many things:

The Single European Act killed off the customs forwarder. Deregulation did for medium-sized truckers in the US. Globalisation and the consolidation of economic life is producing a massive new scale in international forwarding. Piggy in the middle in transport just takes the hit all the more frequently these days.

So it is time for a rethink in this field of insurance. Think much higher deductibles, more intelligent loss prevention and risk management from the insurance side and advisory services on the basis that the user pays. This because people only really value the things they pay for and self-evidently the sector as a whole has been taking out much more out of insurance than it has put in for a good many years. And in the middle of all this red ink the skills base is eroding away, we may not be surprised to learn.

3. Whither Hull Market?

Just as a sagacious report on the hardening international marine hull market by brokers Willis attains wide circulation we learn that the London hull underwriter Mr Bishop of Allianz AGF-MAT has entered the job cessation vortex along with Paris hull underwriter M.Pages of Allianz AGF-MAT. It does not behove us or anyone else to criticise the stout heartedness of those who wish to suffer no more in the marine hull marketplace, but where, they whisper in the coffee shops, does this leave poor Maid Marianne over at the Allianz AGF-MATish Tindall Riley Marine, managers of the Britannia P&I Club?

4. ChinaFeedOnline

From Reader Henry Yau in Hong Kong comes this reference to this portal was set up by a friend who has substantial experience in the feed/ agricultural industry in China. It was professionally set up 2 years ago and has just been upgraded to its present format.

With China’s accession to the WTO, this portal, he writes, is becoming a major gateway for foreign companies to break into the local feed/agricultural markets. This portal is aimed to provide valuable market information, trading opportunities and services in Chinese market for all subscribers. In addition to providing an electronic trading platform by which deals can be concluded, this portal also provide the following services:

1. the latest market information and statistics;b

2. special market reports including price reports;

3. broking services assisting foreign companies to conclude deals, negotiate contracts, LC terms, shipping documents etc;

4. consolidating small orders for any seller;

5. a platform for foreign companies to promote and market their products in China. Services in this regard include finding local distributors, advertising, website design, products licensing and registration and products packaging;and

6. credit check reports on PRC companies;

The Portal can be seen at:

http://www.chinafeedonline.com/ecfo/index.jsp

5. Utmost Good Faith under Scrutiny

From Dr. Aleka Mandaraka-Sheppard of the London Shipping Law Centre comes notice of the next meeting:

We wish to extend an invitation to you and Bow Wave readers to attend the LSLC Lecture on "Future Trends in Marine Insurance" which will take place on Wednesday 24th April at Clifford Chance at 6.00pm.

Nearly a century old, the MIA 1906 is being viewed with a degree of unease, although it is recognised as providing a framework of certainty in the law. Australia and major European jurisdictions have explored reform measures to deal with clarity of language, lacunae and modern practices. Is reform necessarily the answer? Is this the way forward? Are there any other alternatives? This panel of experts looks at:
i) the treatment of warranties;
ii) controversial aspects of 'utmost good faith' iii) current market forces;
iv) future trends and practices;
v) legal and practical implications.

Chairman: The Rt. Hon. Lord Justice Mance

Panellists:
Nicholas Legh-Jones QC. - 20 Essex Street
David Taylor - International Underwriting Association Terence Coghlin - Consultant
Matheos Los - Chairman, Insurance Comittee. ICS

6. And Finally....

Our good friends in Crump & Co, Hong Kong passed on this reference to Andrew Mathews, a motivational speaker and writer, whose Happiness in a Nutshell e-letter contains the odd gem.

We particularly recommend the travel checklist in issue 21 on ways of avoidind travel without essentials.

http://www.seashell.com.au/PastNewsletters.asp?IssueID=21

BOW WAVE is published each week to around 6800 readers in the transport,insurance,shipping and finance industries.

Thanks for reading BOW WAVE