BOW WAVE 283

Bow Wave Issue 293--Off to Melbourne Edition

news and views on trade, insurance and risk

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Wavy Line	sam@wavyline.com
(c)2005 WavyLine.com	Issue No 283 25 Apr 05
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. Quarterpoints
3. Lloyd's Underwriters Survey
4. White Nights Ride
5. Kinnect Announcing Progress
6. And Finally...

1. Welcome

Poem of the Week

Waiting for Icarus

He said he would be back and we'd drink wine together He said that everything would be better than before He said we were on the edge of a new relation
He said he would never again cringe before his father He said that he was going to invent full-time
He said he loved me that going into me
He said was going into the world and the sky
He said all the buckles were very firm
He said the wax was the best wax
He said Wait for me here on the beach
He said Just don't cry

I remember the gulls and the waves
I remember the islands going dark on the sea
I remember the girls laughing
I remember they said he only wanted to get away from me I remember mother saying : Inventors are like poets, a trashy lot
I remember she told me those who try out inventions are worse I remember she added : Women who love such are the Worst of all
I have been waiting all day, or perhaps longer.
I would have liked to try those wings myself.
It would have been better than this.

Muriel Rukeyser, from The Collected Poems of Muriel Rukeyser

New Readers this week include:

Anthony Woo of HK Solicitors Kennedys
Director-General Mr Masahiro Sanuki of the Japan Ship Centre Lance Grant, Deputy Registrar (Admiralty and Maritime) of the Federal Court of Australia
Erich Lieb of the Winterthur in Switzerland
Claims man Daniel Steedman of Subrogateway in Canada Cristina Martínez Ribas, Claims Director of INDECO in Spain

News of Readers

Jasamin Fichte, who has supplied us with excellent items on Middle Eastern law and life in the past is leaving Heath Lambert (UAE) LLC.

Contact her at:-

jasamin@emirates.net.ae

Andrew Hughes has left Richards Butler and has become a partner at More Fisher Brown

Readers Write

Bill Fitzhugh writes:-

Apropos of absolutely nothing of a maritime nature, I am a dedicated follower of the poet Roger McGough. In the mid-sixties, I met him very briefly in the Philharmonic Pub in Liverpool, shortly before he and Mike McGear (Paul McCartney's brother) and John Gorman formed The Scaffold, the alternative pop group who produced 'Aintree Iron' and 'Lily the Pink' which reached number one in the charts.

Roger McGough's CBE last year is the least that he deserves. Amongst thought-provoking work, he produces some beautifully funny stuff, such as:-

SCINTILLATE
Now I've outlived my youthfulness,
A quiet life for me.
Where once I used to scintillate,
Now I sin till ten past three.

Contact Bill at:-

FitzHughCareerMgt@compuserve.com

AfterOfficeHours News

Subscriber of the Week:

Gray Page, the maritime investigations and security consulting group have just released their contact details on After Office Hours.

To read more about their chosen specialties in this well laid out presentation, go to:-

http://www.AfterOfficeHours.com/d_page.php?id=80

The Subscribers to the new online emergency services directory can now display an AfterOfficeHours link and logo for use in their own websites.

The HTML that needs to be added to sites of Subscribers for the AOH logo to appear and be clickable as a link is:

'>http://www.afterofficehours.com/"> http://www.afterofficehours.com/images/clock.gif" width="60" height="60" border="0">

This week sees your editor off to speak at the
PORT & MARITIME SECURITY AND COUNTER-TERRORISM SUMMIT to be held on 28th & 29th April 2005 at the Duxton Hotel in Melbourne. I hope I will run into some of my Australian friends there. All things being equal, next week's Bow Wave will come from down under.

Enjoy.

2. Quarterpoints

With apologies to those Readers who are less than fascinated with the small but exquisite world of mutuality your editor's recent column in Lloyds List took a look at the rating agencies in relation to the P&I Clubs:-

Rating Tensions

I see from my favourite weekly reading that the uneasy truce between the P&I Clubs and the rating agencies, or at least one of them, has broken down recently. The Clubs are said to be angry with S&P for having the temerity to rate mutuals for the same purposes the agency rates general fixed market insurers: to see how likely it is they will default.

The argument is redolent of the time when S&P began to rate the mutuals first of all in the early 1990s. Then a simple flag rating was used, ie Clubs were awarded between one and three flags. The argument was floated back then that becaus e mutuals are owned by their members, the balance sheet they had reached into the total assets of the members, making them much more robust than they would appear to be with simple reference to the free reserves of the Club alone. The trouble was this argument was advanced with the greatest vehemence by the Liverpool and London Club, a notable absentee from the International Group of Clubs whose affairs were absorbed by another Club back in the late 1990s.

When truces slip, unmentionables get mentioned. And the unmentionable between the Clubs and the rating agencies is that those who choose to pay the agencies a fee for their rating get a better rating than those who are rated on the information that is publicly available and pay no fee. This no doubt does wonders for the analysts'standing within their organisation as a profit centre, but undercuts their reputations as detached impartial figures who simply report what they see. The result occasionally is embarrassing, the weaker mutuals will receive quite a good rating from one agency while another one ranks them at the same time as financially wobbly.

It is probably unwise for the agencies to have gone down the paid road. Their function in the world is to look to the evidence available to you and me and all the other members of the Club and to use their skills and experience to say something useful about how the evidence stacks up when compared with the rest of the industry.
In an industry which is certainly two tiered in terms of solvency and always in dread of a third tier of walking wounded emerging there is certainly a need for someone shrewd and unattached to comment on the current state of play.

The need for shrewdness and understanding is certainly a given because the Clubs are something of a financial services paradox-organisations which give high amounts of service and specialist attention to a client proprietor base which has accumulated relatively little free capital in conditions of rather low profitability. I remember during the casino years of the late 1990s when Clubs and Managers were the object of merger and acquisition strategies, the incredulity of one banker I met who could not understand how little was left on the bottom line at the end of each trading year of mutual insurance. I pointed out to him that this was guiding ideal of an industry devoted to insurance at cost.

So is it on the frequently rather slender reserves of capital alone that the agencies should base their views of the mutuals, or should their be a wider view taken of human factors?

There could be reference to such things as

The degree to which the Club is a leader rather than one of the led. (it is not only in Lloyd's where the role of simple follower has lost its financial cachet)

The degree to which the Club is managed with an eye to the longer term (organisations which have made
inadequate provision for the future by failing to allow for the succession of generations are in greater danger of losing their way than others).

The degree to which the governance of the Club is lively and reflective of a healthy balance of power. The ideology of Clubs is that the policy is set and ratified by the governing body of the Board and the day to day affairs of the Club are in the hands of delegated managers. In a vibrant Club the identity of interest between the groups does not necessarily overlap. In a less ideal situation the Board and the Managers spend too much time in each others pocket and end up thinking that each and every measure they agree ipso facto is serving the market as a whole.

The degree to which the protective role of the Club is real. In orthodox fixed insurance it is often said that the best loss prevention is a good sized deductible carried by the assured. Some Clubs enjoy strong reputations for the careful analysis they carry out and the zeal with which they promote good loss prevention practice. The mediocre mutual organisation will do as much as is seemly to do to demonstrate the heart is in the right place even if the resourcing and organisational rigour is not.

The degree to which the Club will be able to cope with operating in the global economy of the next 20 years. The profound changes going on in production, consumption, shipping and logistics are leading into a new era where all things Asian loom much larger.

To some extent, the rating agencies are known to take into consideration non-numeric, qualitative criteria when they form a view. But they too should be taking a good hard look at what they are doing. No industry whose worth is based on its judgement and opinion in the eyes of third parites should rest easy when leading trade press articles appear describing their
interactions as "palpably corrupt".

3. Lloyd's Underwriters Survey

Last week saw the release of a survey carried out on the opinions of 102 underwriters in the Lloyd's market which reflects the markets preoccupation with things regulatory with the challenge of managing the pricing cycle and the opportunities presented by China. Read it here:-

http://www.lloyds.com/index.asp?ItemId=9618

4. White Nights Ride

With the approach of summer comes the day when
Nick Fairfax (who heads the London office of PL Ferrari's broking organisation) and Ron Pape (the risk manager of P&O Nedlloyd) along with eight other intrepid riders will start their 6200 kilometre motorbike ride across Russia.

Read more here:-

http://www.whitenightsride.org.uk/

5. Kinnect Announcing Progress

Taken from the latest issue of LIMP, the e-zine published by the ubiquitous Roger Foord, which deals with insurance IT and market issues:

"Kinnect have announced another tranche of new members. These are managing agent AEGIS who are signed and sealed and to be signed and sealed shortly, underwriters Catlin, SVB Holdings PLC and Talbot, and reinsurance broker Guy Carpenter. TThis means there are to all intents and purposes, three brokers and twelve underwriting organisations, mostly in Lloyd’s.

The publicity says that the Kinnect platform now has 45 per cent of capacity at Lloyd’s signed up. Kinnect Chief Executive Toby Davies has said: "The fact that Kinnect’s underwriting customers now represent almost half of Lloyd’s capacity clearly shows its increasing importance to the market, and more businesses are expected to sign up later this year. We welcome this support. By setting up an electronic audit trail of risk data, Kinnect is crucial to addressing the problems of data transfer, inefficient process and lack of contract certainty that can limit our industry’s ability to manage cost and risk."

Personally best of luck to them, but the spin being put on the project (45 % of the market capacity) does seem to over egg the pudding. What would be really useful is actual numbers of transactions so far, number of completed contracts, amount of premium closed by the brokers, and when the whole members on one slip will be on the platform, because presumably at the moment brokers have to have two systems, one for the Kinnect haves and one for the have nots. Therefore what should be saving brokers costs appears to probably be costing the brokers more."

http://www.rogerfoord.com

6. And Finally...

Thanks to Frazer Hunt for these:-

Subject: KINDERWISDOM

HOW DO YOU DECIDE WHO TO MARRY? (written by kids)

(1) You got to find somebody who likes the same stuff. Like, if you like sports, she should like it that you like sports, and she should keep the chips and dip coming.
-- Alan, age 10

(2) No person really decides before they grow up who they're going to marry. God decides it all way before, and you get to find out later who you're stuck with.
-- Kristen, age 10

WHAT IS THE RIGHT AGE TO GET MARRIED?

(1) Twenty-three is the best age because you know the person FOREVER by then.
-- Camille, age 10

(2) No age is good to get married at. You got to be a fool to get married.
-- Freddie, age 6

HOW CAN A STRANGER TELL IF TWO PEOPLE ARE MARRIED?

(1) You might have to guess, based on whether they seem to be yelling at the same kids.
-- Derrick, age 8

WHAT DO YOU THINK YOUR MOM AND DAD HAVE IN COMMON?

(1) Both don't want any more kids.
-- Lori, age 8

WHAT DO MOST PEOPLE DO ON A DATE?

(1) Dates are for having fun, and people should use them to get to know each other. Even boys have something to say if you listen long enough.
-- Lynnette, age 8

(2) On the first date, they just tell each other lies and that usually gets them interested enough to go for a second date. -- Martin, age 10

WHAT WOULD YOU DO ON A FIRST DATE THAT WAS TURNING SOUR?

(1) I'd run home and play dead. The next day I would call all the newspapers and make sure they wrote about me in all the dead columns.
-- Craig, age 9

WHEN IS IT OKAY TO KISS SOMEONE?

(1) When they're rich.
-- Pam, age 7

(2) The law says you have to be eighteen, so I wouldn't want to mess with that.
- - Curt, age 7

(3 ) The rule goes like this: If you kiss someone, then you should marry them and have kids with them. It's the right thing to do.
-- Howard, age 8

IS IT BETTER TO BE SINGLE OR MARRIED?

(1 ) I don't know which is better, but I'll tell you one thing. I'm never going to have sex with my wife. I don't want to be all grossed out.
-- Theodore, age 8

(2 ) It's better for girls to be single but not for boys. Boys need someone to clean up after them.
-- Anita, age 9 (bless you child)

HOW WOULD THE WORLD BE DIFFERENT IF PEOPLE DIDN'T GET MARRIED?

(1 ) There sure would be a lot of kids to explain, wouldn't there? -- Kelvin, age 8

HOW WOULD YOU MAKE A MARRIAGE WORK?

(1 ) Tell your wife that she looks pretty, even if she looks like a truck.
-- Ricky, age 10

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