BOW WAVE 150

US West Coast Strike Edition

news and views on trade, insurance and risk

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Wavy Line	sam@wavyline.com
(c)2002 WavyLine.com	Issue No 150 06 Oct 02
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. The Strange Absence of New Mutuals
3. New P&I Kid on the Block?
4. All 29 US West Coast Ports Go Quiet
5. Security Audit
6. And Finally...

1. Welcome

New Readers this week include:

Thomas Cappelen at brokers Cambiaso Risso in Genoa Solicitor Edward Gray at More Fisher Brown in London Julian Todd at brokers Willis
Loss Adjuster Simon P Knowles
Captain GJ Ross
Paul Murray of Hannover Services in Bermuda
Sinologist and shipbroker Michael W Waldman of BRS in Paris

News of Readers

Mr Paul Schalkwijk, who for the past seven years has represented the TT Club in the Benelux Market, left his office in Antwerp on 20th September 2002 and began work for Post & Co (P&I) B.V in Rotterdam. on 23rd September 2002. We wish this transport enthusiast well in his new endeavours.

Contact him at:

paul.schalkwijk@post-co.com

Reader Sandor Palfi in Budapest, whom your editor has known since the time when he used to travel around Eastern Europe in the 1980s, is looking for suggestions from Readers:

"My company Transurance is an insurance agency specializing in transport related risks, which I own and have been managing now for more than 5 years. We have just moved into new office premises where we would really love to have a large world map on the wall, clearly indicating to our Clients the business we are in. Unfortunately, I have not been able to find the right map, e.g. a prestigious maritime one,in the Budapest shops. I wonder if you are aware of any web-site where I could buy something like that online. Alternatively, a suitable shop somewhere in the City of London or the world outside could also well serve the purpose. I would be most grateful for any useful hints.

Let me also mention that I always enjoy the not strictly professional parts of your newsletters, as well. In fact, the one with the innovative announcements on board of aircraft by airline crew have been one of the most memorable to me, not only beacause my wife works for Malev, but for other reasons, too. Ever since I read your collection of sligtly altered announcements, I can't help giggling when flying and the good old seat belt demo starts. Sentences like - if you travel with more than one child, pick your favourite - come to my mind and then that's it.

I wish you all the best and remain a devoted Bow Wave Reader"

Readers with good map ideas can contact him at:

transur@axelero.hu

Quite a lot on the world of mutuals this time and also strong items on the West Coast Strike. Although
this is something of a milestone Issue of Bow Wave, we will compose something more suitable on the occasion of Issue 156.

Enjoy.

2. The Strange Absence of New Mutuals

Your editor's last column in Lloyd's List asks about the fate of the new mutual in the 21st Century.

The Strange Absence of New Mutuals

This is the time in the cyclical progress of the insurance market for industrial, professional and trade sectors to sponsor mutual insurance associations to help them deal with the shortage of insurance capacity around the world. I remember well how during previous severe shifts in the market, there were mutuals established for lawyers, airlines, architects, ship agents, housing associations and much else. I am aware of a number of initiatives to mutualise new risks in various sectors, but it does seem this time around that the mutual alternative will not be tested in earnest in many potential market areas.

Why should this be?

Sometimes this is simply the natural product of the nature of the trade or sector concerned. In some areas of commercial life, the mere thought that one competitor might provide another with a temporary benefit, even in the arcane area of insurance via an industry mutual causes the thinkers too much anquish to take the notion any further. The barrier of clubability is simply too high to climb.

One school of thought holds that it is the qualities of mutuals themselves that make a further flourishing of the model unlikely in the 21st Century. They are after all the product of a kind of thinking called self help by those who founded the insurance Clubs. This took practicality as a higher good. People who did things internationally in the 19th Century and who found the limitations of governmental or commercial arrangements were not helping, would combine amongst themselves to do what was needed. This notion was also called international functionalism. But although the model of The mutual has withstood the test of time very well, it is a peculiarly unmodern way to own wealth. The mutual organisation is hard to sell, take over or merge with others and can suffer from a reluctance to change with the times. Mutuals certainly can lock up capital very effectively.

It used to be that the establishment of a mutual was a very frugal way of setting up insurance arrangements. The members by pledging their own balance sheets as the strength behind the mutual could lend the insurance company solvency and strength which otherwise would be denied it. Government regulators continue to accept this notion by allowing mutuals to carry fewer free reserves (solvency) than orthodox fixed commercial insurers. The purest mutual imaginable is one where the Members agree to fund a claims as and when it happens but not before. A rare jewellers’ mutual might be able to work on this basis. For the rest, there is still no alternative to the building up of capital so that the mutual carries a sum of money adequate to cover a bad run of claims. And this need for early amounts of capital to form a free reserve and to satisfy government solvency rules is probably as responsible as anything for the relative scarcity of new mutuals these days. In areas where insurance is hard to find there is usually a history of poor commercial results for insurers. Some sectors which have trouble finding insurance are themselves sorely pressed financially. There is not much sense in forming a mutual with a collection of balance sheets which rob the banker of sleep at night.

Finally in the way of a flourishing future is the sense that one runs across in some mutuals of a sense of otherness, a slight disconnection with market developments, which might be described as the "this is our Club" syndrome. Here the established members of the Club set themselves against the rising ones outside who in some way are deemed not to be suitable for membership. Everyone can see that the world is changing but no one, certainly not the professional managers who need to know such things, can make the committee change the rules. One can think back for examples of this to the golden age of mutuals. When the first generation of steam driven ships were being launched, the members of the sailing ship mutuals were not happy to share risks with them. They were forced to form their own steam ship mutuals.

I am always attracted to the line of thinking which holds that it is not completely necessary for mutuals to be "ownership mutuals" so long as the ideology of mutuality is preserved in significant ways. The best example of this which can be cited is the Linus movement of computer programmers which has produced a working alternative to other commercial operating systems for computers such as Microsoft Windows. It has been built on the back of the common interests and enthusiasms of programmers. It is not beyond the designers of insurance future to build into their services things which promote affinity and self-help within the markets served.

3. New P&I Kid on the Block?

Reader Julian Wade has written in to advise:

We are about to correct the recent phenomenon (a shortage of new mutuals) identified in last week's edition of Bow Wave with the establishment of The South of England Protection and Indemnity Association (Bermuda) Limited ready for the forthcoming February renewals. It will be targeting primarily ocean going dry cargo ships in the range 7,500 to 25,000 gross tons and providing the first independent mutual Club to the International Group since the demise of Ocean Marine Mutual a number of years ago.

It will complement Southern Seas Management (UK) Limited's existing facility with Lloyd's for smaller tonnage up to 7,500 gross. It is also intended that it should complement the International Group from the point of view of the European Commission's fear that there is no competition in the P & I clubs' market place.

Further, the continuing instability and withdrawal of various fixed cost insurers' commitment to Protection & Indemnity over the longer term is giving rise to an increasing need for an alternative and independent club. Many ship owners of slightly larger tonnage are experiencing difficulties in entering a club within the International Pool or in obtaining a fixed premium policy. This could be because of the newness of the operation, age of the ships, their bigger size or wider trading area or indeed a variety of other factors. The aim is for the new Association to underwrite an international book of sound and well-balanced business. Annual ship condition surveys will be the norm.

A full and comprehensive reinsurance programme is currently being put together.

Contact the sponsors of this latest in the line of have-a- -go P&I Club founders at

jwade@southern-seas.com

nbell@southern-seas.com

4. All 29 US West Coast Ports Go Quiet

Our friend lawyer Michael S. McDaniel of LA, who produces a great e-zine for the freight industry describes the scene in his own inimitable way in the latest edition of CargoNews:

"CURRENT STATUS: Pacific Maritime Assn. said it will bar workers from the docks until the ILWU agrees to extend a lapsed contract while talks toward a new agreement continue. But ILWU said it will not budge until the lockout is ended. Just from the 1st 38 hours of stoppage we expect cargo delivery delay, perishable commodity loss, rail congestion, & increased theft opportunities. The PMA & ILWU may meet with federal mediators tomorrow at San Francisco..

DANGER: There are many unattended loads on the streets, truckers having no port access. Unload containerized cargo back into your warehouse! It's a very small price to pay.

Looking out at the Los Angeles/Long Beach port complex today from the windows of The Cargo Letter -- one saw a forest of idle cargo crane booms pointing skyward. What's next in this busy Christmas season? The White House is concerned about the effect on the struggling U.S. economy but said it has no immediate plans to break impasse by declaring a national emergency. This could get much, much worse. Merry Christmas?! McD

Subscribe to CargoNews at:

http://www.cargolaw.com

Another Report received comes from Mike Miller of the Allen Insurance Co in Fort Valley, Georgia which specialises in the transportation side of insurance. Their very comprehensive Front Page E-zine has a day by day coverage chronology of the port strike and is well worth following:

PORT SHUT DOWN

Friday 175 ships were waiting at the 29 US West Coast ports to unload and load.

Ports have been closed for a week.

Union and Port officials met for 15 hours Friday and were to meet again Saturday.

Fifty-one groups representing retailers, farmers and manufacturers asked for a White House meeting to end the West Coast port shutdown that snarled shipping and threatens to slow the economy.

The request, directed to President George W. Bush's economic policy adviser Larry Lindsey, comes as shippers and longshoremen held contract talks in San Francisco.The White House has been urging the two sides to resolve the dispute quickly.

So

Who is right and who is wrong?

Like any view, the scenery depends on where you stand.

Port operators represented by the Pacific Maritime Association closed ports on Friday, 27 September, when members of the International Longshore and Warehouse Union began a work slowdown and began sending too few union members to do work.

The union wants to protect and grow its membership. The terminal operators and shippers want to move goods faster using modern technology, not today’s outmoded work rules that, for example, have union members printing out cargo manifests only to retype them into a computer.

All agree new dockside technology is the main sticking point.

Longshoremen have said they can accept the increased efficiency that computerized cargo tracking systems will bring but want guarantees that new technology-related positions be union-covered and for some of the jobs now covered by other unions (the Intl. Assoc. of Machinists and Teamsters) to be transferred to the ILWU.

Shipping lines have guaranteed no ILWU member will lose their job, and that trade increases will more than offset job losses caused by technology, but argue the ILWU shouldn't have jurisdiction over every new job.

Each day costs the US economy. The cost grows exponentially. Some industrial plants are closed for lack of parts. More have said they will close next week if the port closure continues.

Large retailers and consumer groups are now calling on President Bush to invoke a law to force ports to re-open, but the Taft-Hartley Act would not require workers to work at normal speeds, and port operators have said they will not pay a full wage for half-speed work, the reason they locked-out the union to begin with.

MORE ILWU: http://www.ilwu.org/main.htm

MORE PMA: http://www.pmanet.org

TAFT-HARTLEY (Section 206): http://www.nlrb.gov/rr/rr6.htm

Subscribe to FRONT PAGE at:

http://www.allenins.com/pageone.html

5. Security Audit

The latest edition of RiskVue, the e-zine published for Risk Managers published by the firm of Griffen Communications Inc, contains a quite sensible article on the first principles of security audits by William Irwin, a retired Special Agent of the US Air Force Office of Special Investigations. He writes:

Most security audits will have three fundamental elements to be examined, separately and as a whole:

(1) Personnel security

(2) Physical security

(3) Information security

Read the article at:

http://www.riskvue.com/rbtsa.htm

6. And Finally....

Many thanks to Gordon Elliot of CTC Legal for these insights into the natural world:

If you yelled for 8 years, 7 months and 6 days you would have produced enough sound energy to heat one cup of coffee.

The human heart creates enough pressure when it pumps out to the body to squirt blood 30 feet.

A cockroach will live nine days without its head before it starves to death.

Banging your head against a wall uses 150 calories an hour.

The male praying mantis cannot copulate while its head is attached to its body. The female initiates sex by ripping the male's head off.

The flea can jump 350 times its body length. It's like a human jumping the length of a football field.

The catfish has over 27,000 taste buds.

Some lions mate over 50 times a day.

Butterflies taste with their feet.

The strongest muscle in the body is the tongue.

Right-handed people live, on average, nine years longer than left-handed people do.

Elephants are the only animal that cannot jump.

A cat's urine glows under a black light.

An ostrich's eye is bigger than its brain.

Starfish have no brains.

Polar bears are left-handed.

BOW WAVE is published each week to around 7500 Readers in the transport,insurance,shipping and finance industries.

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