BOW WAVE 315

Bow Wave Issue 315--Changi Edition

news and views on trade, insurance and risk

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Wavy Line	sam@wavyline.com
(c)2005 WavyLine.com	Issue No 315 05 Dec 05
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. The Month of November 05 in Marine
3. Christmas List
4. Hull Disputes More Likely between Insurers
5. So Farewell then AXA P&I
6. And Finally...

1. Welcome

Poem of the Week

THE CONFUSED HEART

Oh Sweet mem’ry from another world
You haunt me in the watches of the night.
For then my defences lie unfurled
And pain’s no longer held in tight.
How can anything so fair
So full of love and joy, and wanton bliss
Cause such hurt and dark despair
From the pits of longing for your kiss?

On tropic’s blue, or grey Atlantic storm
The plying of the strangeness of my trade
Must needs lead far from fireside’s warm
Or the dry sure path past my heart’s stockade.
Always restless, always moving
But always at some other’s bidding
I travel on the ocean’s grooving,
Working hard for my own sad ridding.

My love, my love, so far away
My life’s purpose lies in our union
Your smiling face is my mainstay
And the strength of our communion.
Yet, from choice, I keep these parts
Enjoy the life and hold it good;
I practise all the sailor’s arts.
Should this repay your dear sweet mood?

You are my tenderness, my fawn
Can mens’ rough grouping substitute?
Well no, but in the watches of the dawn
Is beauty still and sounds unput.
A breaking wave, the next red buoy
Hold me: I feel but can’t explain
My lifting heart with surging joy
I’m outward bound again.

Douglas Lindsay

New Readers this week include:-

Anthony Filiato of the Signal Mutual
Catherine Smith of Solicitors Brodies
Angelito Colona of the Eagle Group in Manila)
Bayani C Coching of Mercury Freight
Reporter Damas Jat of Ocean Week in Jakarta
Freight Forwarder Vichit Sadettan in Ventiane, Laos

News of Readers

Chris Reilly has left 20 years of duty with the U.S. Coast Guard to join the Seattle office of Nicoll Black Misenti & Feig. Chris is also a civil engineer, member of the Patent Bar, and former litigator for the Admiralty Claims Division of the U.S. Department of Justice. Prior to joining Nicoll Black, Chris' last posting was as Staff Judge Advocate for the Coast Guard's District in Alaska.

Contact him at

CReilly@nicollblack.com.

John A. Chamberlain, Senior Vice President of Signal Administration Inc has retired

Contact him at:-

john.chamberlain@mac.com

Nigel Rogers has joined the Advisory Board of Hull Insurers Dex

Contact him at:-

Nigel@rogerswilkin.com

Readers Write

TruckPol's Mark Hooper writes:-

For the latest alert, please go to:-

http://www.truckpol.com/alerts.htm

Jim Callahan of Metropolitan Stevedores writes:-

Re your item featuring George Carlin (Bow Wave Issue 314), I do believe that the bit on ageing is from one of his old shows. However, I can guarantee you that the HOW TO STAY YOUNG part accompanying it is not Carlin, and he would probably be upset by the association with it. If someone ever said to Carlin, "Life is not measured by the number of breaths we take, but by the moments that take our breath away," he would probably vomit and refer to it as sophomoric, over-emotional crapola! (Well, actually he would use a lot stronger language). He is way too bitter and angry (at least in his comedy routines and books) for a comment like that. I'm a fan. Saw him in Lost Wages AKA Las Vegas years ago before the city became overrun by tourists, traffic, and corporate hotels. In 2006, he will celebrate his 50th anniversary in the entertainment business.

http://www.georgecarlin.com

Contact Jim at:-

James.Callahan@metsteco.com

This edition of Bow Wave comes to Readers from the transit lounge at Changi Airport thanks to that Airport Authority's rather good internet access for birds of passage like your editor.

Enjoy.

2. The Month of November 05 in Marine

Walter Mellert writes:-

Dear Mariners,

it's been quite a month, plenty of new capital bent on getting a share of the catch-up rate increases enters the market with (conscience?) about a dozen new start ups in Bermuda, and , yes, Swiss Re moves up to pole
position.

Some of the other highlights:

-->The International Group pleads with reinsurers that Katrina / Rita knee jerk reactions should stop short of P&I.

-->Break-bulk conference in Houston establishes that packaging coming from most 3rd world countries is rather poor resulting in damage when stacking. Rough handling could be a contributor.

-->"Seabourne Spirit" experiences excitement not normally part of the animation programme as pirates with RPGs and machine guns try (unsuccessfully) to board her off Somalia.

-->Interesting legal question: Is ransom paid to secure the release of a ship captured by pirates covered under GA, Sue and labour or not at all? Would tend to lean towards the first and let cargo contribute, although, quite clearly pre-agreement is a necessity as legal ground seems pretty shaky.

-->We hear that your regular hull claims - in particular collision, grounding and anything involving salvage - are getting much more expensive. Another reason to take a critical look at our models

-->You like books on maritime technology? Have a look at http://www.dokmar.com.

-->HDI and Gerling exchange wedding vows, creating the largest (2004 numbers) German marine writer.

-->Seems that an int'l marine claims leader protocol guaranteeing full info flow to all carriers on the slip and outlining the role and responsibility of the leader is getting somewhat nearer.

-->Yet another new $ 1 bio Bermuda facility (ValidusRe) this time led by ex American Re CEO Noonan. Experience, science and conscience in the right proportions?

-->Joined by another Bermuda hopeful: CastleRe, with a rumoured Hiscox vehicle lining up to make the magic total 7.

-->Un-exciting tankers, VLCC at $ 52'000, Suezmax at $ 40'000 and Aframax at $ 32'000 just a few piddling percent above the 2005 lows

-->China Int'l Marine Containers, the worlds largest (40%) boxmaker sees profits drop 30% on account of exploding steel prices.

-->According to a Swedish Club study, the prominent (36%) culprit in machinery damage claims is the turbo charger with average claim amounts north of $ 200'000.

-->What goes up must come down... Container time charter rates have pretty much gone back down to early 2004 levels when they started their rapid ascent.

-->Chittagong wins the doubtful honor of being named the most corrupt port in the world - for the fifth time. Stability at it's best.

-->Lauritzen Cool loads the biggest kiwi fruit
shipment ever - 9000 pallets.

-->A Thai flagged cargo ship carrying $ 3.5 mio worth of sugar (14 '000 tons) from Brazil to Yemen is hi-jacked for ransom off - where else - Somalia, bringing the total number of vsls held there to 7.

-->2000 built LPG carrier "Maersk Holyhead" loaded with Propane and 1996 built bulker Pequot loaded with coal manage a head on collision in daylight on relatively calm seas.

-->Quote of the month: "The best part about the 3rd quarter is that it's over"

-->Captn Krylov of the "Belgian Reefer" is fined £ 2'500 for reckless navigation causing near collisions with three other ships in the channel.

-->We hear of around the world racing yacht physical damage rates ranging between 7.5 to 10% of value, whereas the onboard sailor's accident cover goes for 0.5 to 1% online. Interesting when looking at the implied odds.

-->4 containers worth £ 1 mio washed overboard MV "Endeavour". 3 boxes sank, 1 broke apart freeing 20'000 bottles of liquor to float towards the Pembrokeshire coast causing considerable excitement among local fishermen.

-->Italy's first merchant marine academy opens in Genoa, largely intended to reduce the severe shortage
(est shortfall 2006: 36'000) of officers in Europe.

-->Russian and Canadian co-brokers trying to place Indian hull business in Germany. How much more global can things get?

-->Basque govt upon receiving Euro 45 mio clean up compensation from theSpanish govt drops their legal case against the "Prestige" classification society ABS. All up front, no monkey business. Guaranteed!

-->The Mohorovicic discontinuity (the border between the earth's crust and the mantle below) beckons.
"Chikyu", the 57kton 210 meter, $ 540 mio Japanese drill ship with a 112 m derrick and a 9,5 km drill string is set to go thru 7 km of crust, beating the current 2.11 km record by a comfy margin.

-->Swiss Re buys GE Insurance Solutions and moves up to number one.

-->Chinese "GCC AnJin" carrying 5000 t of steel sinks off Vietnam, 9 rescued, 13 missing.

-->TT Club warns that a 5% general increase is imminent whereas the Swedish Club plans to seek only a modest 5% increase for 1.1 hull renewals.

-->20 yr old Korean bulker "Bright Sun" sinks in rough seas off the northern Philippines, 20 crew rescued, chief engineer still missing.

-->It doesn't look good for the Black Sea, fish catch is down 80%, dolphin population has dropped to an all time low. Reasons: Toxic waste. Only 13% of this large body of water is said to be capable of still supporting life - other than just bacteria.

-->92 built boxship "NDS Prosperity" has anchored 5 miles off South Africa with a salvage tug on standby trying rather desperately to get the main engine back to work.

-->US mercenary Marines working for the Somali gov't ordered to hunt down those pirates giving the country a bad name. Se non e vero....

-->Dubai Ports World bids £ 3.3 bio to take over what's left of P&O. The M&A game is alive and well!

For some reason, the list of insurers wanting to write risks on the waterfront has been expanding over the last three or four years. Since there are 8000 ports in the world which can be taken very seriously by insurers, many of which contain many terminal operations, it may be seen that there are more than enough to target for any man’s marketing campaign. But it may be a lot easier to make an underwriting surplus year on year from the coming things and the wannabes in the sector.

3. Christmas List

Your editor's Quarterpoints column in Lloyd's List last week had a seasonal flavour:-

THIS year, the marine insurance industry waits expectantly to understand the implications of the horrific storm season of 2005. Some of the pattern to come is fairly easy to spot.

Almost every day, someone announces the flotation of another, usually Bermuda-based, "clean sheet" insurance fund, set up with fresh slugs of capital and designed to take advantage of the better rating climate sure to prevail in 2006.

In some ways, with the gloomier reaches of pessimism removed, events are reminiscent of the way the market responded after the events of September 11. It does not seem very long ago that the talk of the market was how these new funds were designed to make hay by concentrating on the excess of loss property market and catastrophe risks in general. This, it was averred, was a really sure thing.

The worrisome part is how these new ventures are virtually all eschewing London. Is the world’s most specialised insurance market heading into a high cost zone of past glory, burdened insurers and senior control freaks where the young can no longer entertain their expectations and support the old with any real comfort?

Put it this way: if all our Christmases were to come at once, we might find the following presents below the tree, bound in silver paper and claret ribbon:-

Miniature regulations--the sort that take account of the fact that the roots of insurance are watered by
entrepreneurial flair and risk. The buyers of marine insurance are many things, but widows and orphans they are not.

Sweet oxygen--of the sort needed by insurance professionals who have been stifled by an era of over-control exercised by managers who have not learned how to coax excellence from their staff using more creative means. Many people working in insurance, a trade which has always hosted an unusually high propensity for compulsive record-keeping and internal administration, are hedged in by multiple audits and reporting obligations to boards of management who would need less of this were they more engaged in the sharper ends of the business.

Colourful players--the sort of people who give what can be a grey calling the brightness, fun and flair we all seek in working life. All manner of men and women supply this X factor in our lives and not all them have to be ex-public school boys residing in Guildford to serve the world’s markets for transport and insurance products.

Contrarians are more necessary today than ever. As the marketplace consolidates and fewer and larger companies rule the roost, there is too often the melancholy spectacle of the widely spread misery of a Hurricane Katrina. Financial services at their insufferably conformist worst will march into a common disaster as in a dream, in lock step.

In such events, the general market environment is normally given the blame, rather than the identification of something nutritious using the assumption that a million flies cannot be wrong.

Bright front offices--around the world, close to the customers of marine and transport insurance, many more in the East where the cargos come from, staffed by curious people with good cultural skills.

Ploughs--with deep, shiny blades designed to rip up the areas of turf, the defence of which, along with the status quo, often takes pride of place in the future planning of insurers.

The latest electronic kit--acquired in an almost playful spirit, given over to people encouraged to find ways of using it to make their business sing. That is to say, to take the internet, wireless communications, computing and all the rest and do everything that can be done to leverage desk- and bureaucracy-bound people into more creative, efficient and even successful entrepreneurs.

Gold coins--the sort that come after a sustained period of successful operations, sound underwriting judgments and calculated risks, earned from insuring not only the big battalions so characteristic of our times, but also the smaller players in niches and places where the skill lies in superior understanding.

Marine insurance is provided by a relatively small cadre of specialists around the world, mainly united in their enthusiasm for a calling which has more than its fair share of setbacks (ask any hull insurer).

It is a people business, where the human dimension is much more important than is often realised. It is difficult over the distance for any bunch of humans to stay bright and positive about an uncertain world in the absence of a good old surplus. Hope Santa will bring plenty of those in the coming year.

4. Hull Disputes More Likely between Insurers

Lee Coppack has sent in this report of the recent Conference held by the Association of Average Adjusters which was previously trailed in Bow Wave.

Disputes between insurers as to which policy year should pay for long term damages are likely to increase, if the market consensus on how to deal with such claims is allowed to break down. Assureds will be caught in the cross-fire as they wait for valid claims to be settled, according to Richard Cornah, Vice-Chairman of the Association of Average Adjusters (AAA).

"Which policy pays" was the subject of a seminar organised in London by the AAA on Thursday 24 November 2005. Speaking to a capacity audience, Cornah set out the issues which occur when it is not obvious which insurer and which policy year should respond to a particular claim.

Such difficulties are common where there is

Mystery damage which is discovered only when a ship is dry docked, or during other routine inspections. Progressive damage which develops over time until it results in a loss.

Cornah told the AAA seminar that in the absence of legal authority on the subject, the market had developed a pragmatic approach to such claims by apportioning losses over the relevant policy years on the basis of a technical analysis of how the damage progressed.

However, some insurers were arguing that the claim should only attach to the policy when the damage started or to the policy when it was discovered, according to their position in the policy "chain". This was most often the case when an insurer was in run-off or when the business had changed markets, thus breaking the commercial relationships.

Cornah concluded: "Apportionment with an eye to how the damage progresses remains the best response to these difficult issues. It has the flexibility to mirror the particular circumstances and the lack of litigation indicates that this approach has succeeded fairly well. In the current circumstances, we need to maintain a consensus on methods. This means paying attention to the wordings and their plain sense and to the facts of each case, to minimise the number of disputes.

Seminar panellist Tony Hazell of Xchanging Services commented that while the same issues arise in the energy market, the sums at issue are typically much larger and the division of liability for a physical damage claim under different policies would not necessarily be applicable to the business interruption claim in respect of that physical damage.

Bob Clarkson of LIMIT and David Kingston of JLT Insurance Brokers both emphasised that if there is a potential problem over which policy or policies should pay, this should be highlighted at the earliest stage. The average adjuster has a role in doing this and can help to establish a dialogue as the claim progresses.

5. So Farewell then AXA P&I

AXA announced last week that it is to join the rather impressive list of fixed premium insurers who have entered the P&I market only to leave with regrets.

Back in the late 1990s, the men from AXA went the rounds of the mutuals, measuring them up for a takeover, in the manner of the AGF/Allianz or Capital Z, helping thereby to cause great excitement in the hearts and minds of many Club managers. This was the time of notable asset inflation, pre-the bursting of the internet bubble. AXA took the view that they could do better themselves, by acquiring a modest insurance operation based in Belgium and
seeking to build a business organically. In the end it seems the reinsurance costs were prohibitive, even for bulk purchasing AXA.

Now not far short of 1000 ships insured with a decent loss ratio and six years into the intention, the company is to leave the field, for other more profitable lines. Does this mean that fixed premium P&I has no real future? Not necessarily--looking at the figures behind the sale of BMM to QBE, you could say the owners of the small ships specialists did very nicely out of demutualisation. Contrariwise might it be said that insurers are best advised to acquire something in the P&I mutual world to gain the cross selling platform they often desire? Not inevitably looking at the rather inchoate union brought about by the Allianz and the Brittania Club's management operation where the reason why hangs heavy in the atmosphere.

It is always germane to recall that Mutuality is very possibly the last living part of the 19th Century, now that Marx and Steam Locomotives are no more. It is economical, resistant to 21st century financial machinations, and purpose driven to an extent rare in the modern insurance industry. This is not to say that it is impervious to all reform and reinvention, but only the really well conceived initiatives will survive over the distance and the insurance cycle. The specter hovering over many Clubs is that there is no process of succession in place. The need for renewal and reform in a time of great change in the shipping world is thus liable to be stymied.

6. And Finally...

Many thanks to Barbara Yeninas for this one:-

An elderly man in Phoenix calls his son in New York and says, "I hate to ruin your day, but I have to tell you that your mother and I are divorcing; forty-five years of misery is enough."

"Pop, what are you talking about?" the son screams.

"We can't stand the sight of each other any longer," the old man says. "We're sick and tired of each other, and I'm sick of talking about this, so you call your sister in Chicago and tell her." And he hangs up.

Frantic, the son calls his sister, who explodes on the phone. "Like Hell they're getting a divorce", she shouts. "I'll take care of this." She calls Phoenix immediately, and screams at the old man, "You are NOT getting divorced! Don't do a single thing until I get there. I'm calling my brother back and we'll both be there tomorrow. Until then don't do a thing! DO YOU HEAR ME?" And she hangs up.

The old man hangs up the phone, smiles and turns to his wife. "They're coming for the holidays and paying their own way."

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