BOW WAVE 261

Bow Wave Issue 261--Substandard Ships Edition

news and views on trade, insurance and risk

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Wavy Line	sam@wavyline.com
(c)2001 WavyLine.com	Issue No 261 13 Jun 01
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. Guest Column: Substandard Shipping and Marine Insurance
3. Sarbanes-Oxley, Cargo Risk Management & C-TPAT
4. Rotterdam goes Paperless
5. The Export Forum
6. And Finally...

1. Welcome

Forty-Five

When I was forty-five I lay for hours
beside a pool, the green hazy
springtime water, and watched
the salamanders coupling, how they drifted lazily, their little hands floating before them,
aimlessly in and out of the shadows, fifteen
or twenty of them, and suddenly two
would dart together and clasp
one another belly to belly
the way we do, tender and vigorous, and then
would let go and drift away
at peace, lazily,
in the green pool that was their world
and for a while was mine.

Hayden Carruth, from Scrambled Eggs and Whiskey
(Copper Canyon Press)

New Readers this week include:

Readers in Ice Shipping in Romania
Lawyer Nicholas Woo at Birketts' Shipping & Logistics Group Anne-Marie Castle of Michael Else & Co
Alexandra Evered of Bayside Shipping Services in Melbourne Capt Peter Barton of m.s. Changsha owned by CNCo
Douglas Lindsay of Maritime Resolve in the UK
Gunarso.Wibisono of Altus Holdings
Mariner Henry Tin Ko Bik
Alexandros A. Pattakos

News of Readers

Capt E.S. Geary's book 'Gotcha' has recently been published. He spent 5 years in the organization and introduction of a training program for the Venezuelan Coastguard that he claims became compromised when he was approached by the CIA to act as an asset (NOC). The CIA operation, he claims was focused on installing Hugo Chavez as the president of Venezuela. In addition to touching on "The Venezuelan Conspiracy" 'Gotcha' deals with a number of different aspects of marine fraud on an international scale.

Contact him at
shipsurveyor@msn.com

http://www.ship-surveyor.com

The subject of substandard shipping certainly has the legs to run a while. Be she ever so substandard, the problem is there is a marine insurer able and willing to give her the cover she needs to trade.

Enjoy.

2. Guest Column: Substandard Shipping and Marine Insurance

by Bevis Marks

In May of this year, a report was published by the OECD’s Maritime Transport Committee on the relationship between the marine insurance industry and substandard shipping. The report was commissioned of Terence Coghlin, a scion of the industry--now retired--who was formerly the Chairman of the International Group of P&I Clubs. Little in this field is published and it is rare for the marine insurance industry to be asked by an international body to examine:- "whether, without prejudice to victims, it would be feasible to remove the (P&I and marine hull) cover available to substandard ships, while maintaining the necessary risk spreading coverage for the rest of the industry."

The 68 page report first sets out to explain the industry to the uninitiated and has an attempt to lay out the reasoning, such as it is, for rating marine risk. As we all know, the rating of the majority of marine underwriters has been faulty for the best part of a decade since 1995 as most have taken long baths in troughs of red ink. Nothing in this report would necessarily lead the mind to think that the process of the industry has necessarily grown sophisticated in the light of this experience and the reasons given for it (the excess of capital in the industry) might strike some as a thin kind of alibi for a prolonged era of poor industry performance.

The report also has trouble coming up with a definition of substandard shipping. "Today’s substandard operator is less likely to be running a flagrant ‘rust-bucket’ than trying to get away with minimal compliance," it says, touching on the modern recognition that so often it is the human element which is behind the large loss or casualty rather than a simple failure of metal or equipment.

Readers uninitiated in the ways of the marine underwriting classes might also be forgiven for looking askance at a number of key assertions in the report. One is that apart from the historical experience of a given ship or owner, little can be done by way of rating the risk presented by substandard ships. This is because large claims (defined as being over $100 000) are few in number and more or less randomly distributed around the industry. "First..the correlation between quality and claims seems to become weaker as the size of claim increases " So the claims most relevant to the question of whether good is subsidising bad are generally acknowledged to fall more less randomly on both. These assertions are thus responsible for the fact that operators, at the outset are liable to given a rate per ton which is average for the class of ships, apart from the special adjustments of rate which are possible with reference to the actual experience of the ship. But can these assertions really be right?

A few minutes with a working club or hull underwriter will disclose any number of risk elements which will be used to find a rate. Some kinds of ships are in any case more prone to be trouble than others. Some kinds of owners are not necessarily from humanity’s higher drawers. Even the flag flown on the ship will tend to burden or lighten the price which will be charged. Within any given trade or industry there are admirably diligent operators who strive to run good operations and there are utter rogues and gangsters. Is it really thinkable that given this spectrum, underwriters are unable to place a given ship or operator within it?

Although is true to say that good operators also have large claims, is it equally true to assert that no device or discrimination known to man and mathematician can work out a pricing mechanism which will tend to charge more to those with a higher propensity to casualty?

Those very same underwriters will also tell you in their less guarded moments that the rate per ton which is first formed by looking at the risk from the point of view of the risks presented is invariably too high for market reality. They (and their buyers) know that the strike price, properly calculated for risk or spread of risk is at odds too rich for the market. For few ships struggle to find insurance when all is said and done. Few owners are so beyond the pale that they are unable to buy insurance by reason of the ethical imperatives of their underwriters. Although marine insurance is not compulsory by law, it might as well be in hard trading reality.

The report also says something about the mind set of the industry, a strange mixture of arrogance and complacency which allows it to operate using generalities and loose assumptions which "seem to be acclaimed by general agreement", and at the same time to observe the near financial collapse of an historic world beating industry like the marine insurance market in London. It would probably be a better idea for the better kinds of actuarial minds to gather around the evidence of the last ten years of claims and to examine it with a view to finding something which might be of help to those who must assess risk for a living. Marine insurance actuaries are in fact rather rare--as a walk of life they hardly exist at all. But there is today a number of marine insurers whose underwriting approach has a large element of the actuarial table about it. At least one Scandinavian P&I Club and many marine hull underwriters are known to try and use the approach in their dealings.

Can it really be beyond the scope of the modern analytical mind to devise orders of probability for the 100 000 or so ships in the world and their propensity to suffer loss? But absent a new degree of intellectual and numerical curiosity, a more determined hunt for an alternative to the tradition of wagering so characteristic of marine insurance, underwriters are most likely to continue to follow the old binary tradition of either writing the risk (at more or less the rate prevailing in an average sort of way) or resorting to the best technique of loss prevention known to them which is simply to follow the dictates of their noses and to decline to insure it.

Readers may not be so surprised to learn that the report concludes the work of policing the shipping industry is the responsibility of governments--though with certain reservations, the industry is willing to help. Advance Liberia Fair, as it were.

Bevis Marks appears here courtesy of the publishers of Tanker Operator magazine

3. Sarbanes-Oxley, Cargo Risk Management & C-TPAT

Jason Gibbons writes:-

What is Sarbanes-Oxley? Does it apply to me? Isn't this just in the US? What's it got to do with cargo and C-TPAT? All good questions that are being asked regularly at the moment. In the wake of WorldCom and Enron the US passed legislation in 2002 to protect shareholders and obligate companies to more efficiently manage their businesses. Sarbanes-Oxley extends beyond financial management and has broader implications than you may think.

Click on the link to read more....

http://www.cargo-solutions.com/bowwave2

4. Rotterdam Goes Paperless

This month the Port of Rotterdam has announced it will be going paperless. The first phase, which is called "Notification ship" aims to save a stack of paper of A4 sheets some 750 metres tall. Read more below:-

http://www.portofrotterdam.com/news/UK/Pressreleases/Pressreleases/HBR_03112004_01.asp?lng=UK

5. The Export Forum

Peter Salmon has written in with details of the next meeting of the Export Forum, who are the people who really know or want to know the latest trends relating to documentary credits and the Export Trade.

Meeting of The Export Forum on Friday 3rd December 2004 at The D.T.I.Conference Centre , 1 Victoria Street, London SWI commencing at 10:00 for 10:30

AGENDA

10:00 Coffee

10:30 Welcome by the Chairman John Turnbull
Sumitomo Mitsui Bank
10:35 UKT&I Services Annette Jones or
David Train
10:55 E- Business. Electronic Delivery of Andrew Stratchan Export Help

11:15 OMIS Robert Holkham

11:35 Passport Process--Country Presentation Paul Jenkins (may change)

11:55 I.C.C. update Gary Collyer
ABN Amro Bank
12:15 Open Forum

12:30 Lunch

Contact Peter Salmon at:-

peter@wktuk.com

6. And Finally...

Many thanks to Barbara Jennings for passing on this latest contribution to our continuing campaign to make one half of the human race more explicable to the other

The Hormone Hostage

The Hormone Hostage knows that there are days in the month when all a man has to do is open his mouth and he takes his very life into his own hands.

This is a handy guide that should be as common as a driver's license in the wallet of every husband, boyfriend, or significant other...........

DANGEROUS: What's for dinner?
SAFER: Can I help you with dinner?
SAFEST: Where would you like to go for dinner?
ULTRASAFE: Here, have some chocolate.

DANGEROUS: Are you wearing that?
SAFER: You look good in brown.
SAFEST: WOW! Look at you!
ULTRASAFE: Here, have some chocolate.

DANGEROUS: What are you so worked up about?
SAFER: Could we be overreacting?
SAFEST: Here's fifty quid
ULTRASAFE: Here, have some chocolate.

DANGEROUS: Should you be eating that?
SAFER: You know, there are a lot of apples left.
SAFEST: Can I get you a glass of wine with that?
ULTRASAFE: Here, have some chocolate.

DANGEROUS: What the hell have you done all day?
SAFER:! I hope you didn't overdo it today.
SAFEST: I've always loved you in that dressing gown! ULTRASAFE: Here, have some chocolate.

Pass this onto all of your hormonal friends and those who might need a good laugh! Or men who need a warning! And remember: Money talks...but chocolate sings.

Another thing to giggle about...

My significant other,not happy with my mood swings, bought me a mood ring the other day so he would be able to monitor my moods. When I'm in a good mood, it turns green. When I'm in a bad mood, it leaves a big red mark on his forehead. Maybe next time he'll buy me diamonds. Here have some chocolate

PS:

Thanks to Andrew Charlton for passing on this tip:-

How to Rescue a Car the Hard Way

http://leenks.com/pics/?gid=184

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