BOW WAVE 358

Bow Wave Issue 358--IUMI in September Edition

news and views on trade, insurance and risk

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(c)2006 WavyLine.com	Issue No 358 02 Oct 06
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. The Month of September 2006 in Marine
3. EC Competition News
4. World Maritime Day--Fun and Games in London
5. Airwaybill Seminar in Hong Kong
6. And Finally...

1. Welcome

Poem of the Week

Shipowner's lament

Good Morning
We are your member
Can I speak with our claims man
Whose name I can't remember

Good Morning my name is Costas Virous
I have to report a claim
It appears to be quite serious
Although, of course we are not to blame

You see the vessel lost it's way
and crashed into the lock
and 3000 tons of crude oil
is spilling into the dock.

The crew have all been injured
and the masters' abandoned ship
although we did ask him to remain on board
and try and complete the trip

The situation is not that bad
the master said before he did flee
there is still 2 million barrels on board
but it is spilling into the sea

The Harbour Master's fuming
because we have completely blocked the port
there are 17 ships waiting to leave
and all movements have come to a halt.

Oh dear! a fire has started
and the oil is spreading it fast
and all the ships are now burning
from the scuppers to the mast

Now 17 ships are on fire
and the crews have all now fled
The flames are licking around the quay
setting fire to the cargo sheds

The Harbour Master's office is flaming
the town is now on fire
the fire brigades hoses are waning
the situation is very dire!

What's this? we are retrospectively cancelled
for failure to pay our call
Yes I did see the notice you have given
but I didn't think it was serious at all

Well can I ask that you put our case
ask the board to discuss our fate
and if our ships are reinstated
I promise that in future
our premiums will never ever be late

(supplied courtesy of Alan Salisbury)

New Readers this week include:-

Andrew Webster, Ports Specialist with UK Trade & Investment Lise Bertelsen of the China-Britain Business Council Peter Jones,Joint Managing Director of the Simply Group Market Access Specialist Richard Moir
Sue Beech of Pinsent Masons
Ken Gibbons of the Society of Maritime Industries Neville Porteous of C-Mar in London
William Pelandini of Nicoll Black Misenti & Feig in Seattle Sorab Vesuna

News of Readers

We regret to announce the sudden death of our good colleague Andrew Trasler, the former TT Club claims man and the current editor of the TT Talk e-zine. A fine linguist, an excellent writer and a credit to the claims department, Trasler will be missed by all of us who worked with him. He was one of the people who helped to make the TT Club a home of enthusiasts with his detailed knowledge of the freight world and his ready and sometimes sardonic reluctance to accept things on the mere say so of people whose understanding of the business was less than it ought to have been. Our sympathy goes out to his wife Margaret and his family.

Frazer Hunt, who heads up the transport and trade group of Australian national law firm Piper Alderman, has been elected president of the Maritime Law Association of Australia and New Zealand- an association of more than 500 members mainly but not exclusively from Australia and New Zealand, including lawyers and judges, academics, and representatives of major exporters, shipping companies, port operators, ship, cargo and liability insurers and other members of the maritime and insurance community.

Contact him at:-

fhunt@piper-alderman.com.au

Rear Admiral Ian Moncrieff has been appointed the UK National Hydrographer, Deputy Chief Executive (Hydrography) based in the Taunton, Somerset Office.

Shelley Miller has joined the Seattle maritime law firm Nicoll Black Misenti & Feig. Shelly is a recent graduate of Tulane Law School where she was Editor-in-Chief of the Tulane Maritime Law Journal.

Note from the Editor

A more than usually frustrating week for your editor with computer trouble and other things. But some interesting articles all the same including news from IUMI.

Enjoy!

2. The Month of September 2006 in Marine

Mario Ciancarelli writes:-

IUMI 2006 in Tokyo is over with underwriters conscious that t & c need to remain firm; "if not improved in certain classes". Baden-Baden, 3 weeks away, offering the last platform for reinsurers and r/i buyers to get the script right for the 1.1.2007 renewal. Everybody has expectations (shareholders, clients, rating agencies...the boss) but underwriting in order to create economic value will be key. Still windy out there and if the atmospheric situation doesn't change dramatically you might be able to buy a new car next spring. The highlights are:

Remember: "Cougar Ace" the 1993 built 55'328GT vehicle carrier is buoyant again. Request is gaining momentum to rename the vessel after Marty Johnson, the salvor who died during the rescue operations. Respect is due.

Violence in Nigeria which is expected to increase has reduced oil production by 30%. Foreign oil workers in Port Harcourt targeted.

AIG: Launched Electronic Yacht Insurance Facility run by Underwriting Risk Services in London.
https://www.yacht-mark.com/

Dangerous goods on board: A growing concern for both the H&M, Cargo and P&I underwriter. No time for stowage advisers to give their few pennies worth in terms of proper carriage conditions. Claims on the increase with P&I clubs to publish advice on this matter.

Quote of the month: Level with your child by being honest. Nobody spots a weirdo quicker than a child. (need to bring my sons to work then)

The tail is still lingering. US & Alaskan authorities demanded an additional $92.2 mio from Exxon Mobil for environmental damages linked to the 1989 "Exxon Valdez" disaster.

Piracy attacks map. Interesting website:
http://www.icc-ccs.org/extra/display.php

Classification Societies & Strategy: How do they intend to compete and consequently differentiate themselves after the common structural rules were implemented back in April 2006 . 1st lesson in Corporate strategy: Service and/or Price and/or Product?

Some figures: World Oil Reserves (in trillion barrels): Middle East: 742 (or 62% of ww reserves),
Europe&Eurasia: 140, Africa: 114, South & Central America: 103, North America: 59, Asia Pacific: 40. Out of the 62%: Saudi Arabia 265, Iran 138, Iraq 115, Kuwait 101, UAE 100, Qatar 23.

First sniff of Tyssen/Krupp to get closer to Italian shipbuilding group Fincantieri. Definitely a strategic attempt to further strengthen the European shipbuilding sector.

Spot on: Famous rating agency makes the following comment: "We believe (next 12-24 months) a soft market is coming and reinsurers need to maintain underwriting discipline in order to protect their capital and financial strength." Bingo.

"Asian Empire" the largest car carrier docks in Port Rashid with almost 8,000 vehicles on board. Cargo sum insured on board? Guess?

Share of world GDP: US 21%, China&Eurozone 15%, Other advanced 11%, Eastern Europe 7%, Japan & India 6%, others 19%. Asia definitely picking up speed! Please bear also in mind the Chinese intra-asian trade.

Capital base comparison Lloyds vs Bermuda 94 - 06: 1994: L=£11bn /B=£14.9bn.
2006: L=£14.8bn/B=£82bn. Interesting.

Avg. barrel/day production in 2005 (in mio.) :
Saudi A.: 9.4, Iran: 3.9, Venezuela: 2.6, Kuwait: 2.5, UAE & Nigeria: 2.4, Iraq: 1.8, Libya: 1.6, Algeria: 1.3 with an OPEC average of 28.

Munich Re & Swiss Re a little bit worried about the rate(s) development in the Indian insurance market. I am too if one looks at the pulverised Marine rates.

Bigger ships, larger & more valuable Cargo, increased shipyard activities (subcontracting to keep up with demand) and shipowners that are facing increased liability exposures and repair costs. But somehow, Marine underwriters struggle to adjust the premium wallet!
http://www.thestandard.com.hk/news_detail.asp?we_cat=2&art_id=27546&sid=9971579&con_type=1&d_str=20060919

China's shipbuilding sector is largely assembly work (only 40% of parts produced domestically). At the end of the day it's all about R&D, int' it?

UN considers ban on bottom trawling. Long pocket-shaped nets weighted down with metal rollers (+ scrapping devices) are lowered onto the sea bed up to 1,000 metres ripping up everything in their path. =>80% of what is dragged is thrown away <=Fishy indeed.

IUMI Special (Tokyo):
- Global Marine Premium Volume in 2005 $17.8bn (excl. P & I IGA worth $ 1.8bn);
- In 2004 the total Cargo gross loss ratio was under 70%; - In 2004 the total Hull gross loss ratio was slightly above 80%;
- At the beginning of 2006 the average age of general cargo ships was 22.6 years;
- Only 2.5% of the world maritime trade value is spent on Marine insurance premiums;
- Hull (esp. blue water) is still the problem child. Will the underwriters good will to improve t & c dissolve during the renewals where growth for glory seems to be the recurrent battle call;
- Survey in 8 countries shows that in avg. 10% of all containers contain hazardous cargo;
- Check of 25,000 containers. The content of 1 out of 3 was not properly documented;
- Solvency II: Link between capital requirement & real exposures (accumulations) will be inevitable. Exposure rating here I come!
- Possible loss scenario on 10,000 TEU container carrier (vessel sinks) = euro422.5mio. Should two of these vessels collide and sink the possible worst case scenario could reach euro900mio. Put cash in the kitty (large loss allocation) for the possible big bang.
- China exports in 2005 $752bn vs $149bn in 1995. China imports in 2005 $631bn,
- 2,500 TEU lost in 2005 due to poor lashing; or is seven or eight layers high on deck just to much to handle; - Energy: High oil price = utilization of installation close to 100% = rigs worked hard = check deductibles for PD & ...(guess what) = watch out for "new for old" (some of the rigs are really old) = enforce full value declaration & quality/condition survey = faulty design cover to be avoided = avg. age of rig workers is increasing with no new blood coming in = outsourcing of key-staff is an issue = cost cutting = reduction of key staff (incl. engineers) at the expense of technical sustainable processes seems to be the way ahead ===> folks, just keep your guard high. - FPSO's should be written within Energy; but guess what it is also written in Marine as Hull risk at anything between 0.1%-0.2%; ==> 90% of the value though is represented by t he on-deck installations <==.
- 4.1mio fishing vessels navigating the world seas with 35mio people involved in fishing + fish farming;
- Risk Assessment & sound underwriting practices for FV: Skipper & ownership is > than 50% of the risk. Stick to what you know. Risk selection is key. Hit ratio of 15% is not low. Outstanding presentation by G. Parkinson, MD Sunderland Marine!
- Swiss Re: C. Menn's (Head Product Development & Strategy) wake up call to the Marine industry. ==> Banking and insurance will converge incl. tools - processes - pricing approaches = Risk Capital based pricing, ROE based targets, liquid risk trading (benchmark for pricing/hedging), regulating framework on economic basis and considering risk capital costs <==;
- Kiln Marine to start writing Cargo business (focus on frozen food and cargo rejection) out of Singapore t hroughout southeast Asia.

- Whilst contributing with less than 20% of the world's merchant fleet General Cargo vessels generate 40% of total losses. Newbuildings or second-hand reefers or switch to container ships. Big question for fruit traders as current reefer fleet > 20 years of age
- New Marsh $500mio terror cover for cruise & ferry vsls to yield $0.10 per passenger day. Debate on iro take off date of product.
- 91 out of 174 trucks were taken off the road after a 16-hour police check on safety at the UK port of Holyhead. - Scrap deals still going strong with 70ies built tankers measuring ldt12,000 going, still, for usd $400 per ldt. Early 2005 levels are not back yet, though.

Remembrance day: 11.9.2001 - 11.9.2006.
http://upload.wikimedia.org/wikipedia/commons/thumb/3/35/Wtc-2004-memorial.jpg/400px- Wtc-2004-memorial.jpg.

Disclaimer
Any opinion expressed in this newsletter should be regarded as the personal opinion of Mario Ciancarelli and not one made in his capacity as an employee of Swiss Re and any such opinion is not the opinion of Swiss Re, of any of its affiliated companies or of any of its officers or employees. Accordingly, Swiss Re hereby expressly disclaims any liability, loss, cost or expenses arising directly or indirectly from the content or expression of views of this newsletter or of other Websites to which this Newsletter may provide a link.

3. EC Competition News

Peter Carlo Lehrel writes:-

Bow Wave Readers may not all have noted that EU ministers for competitiveness policies on 25th September adopted the European Commission's proposal to repeal the block exemption for liner shipping conferences.

By October 2008, when the phase-out of the waiver ends, the commission will therefore issue guidelines on the application of competition rules to maritime transport. Partly to that end it will also shortly publish a paper on the market impact of the industry's proposal for a new information exchange system.

The text of the commission's statement follows:

The European Commission has welcomed the unanimous adoption, at the 25th September Competitiveness Council, of the Commission’s proposal to repeal the exemption from the EC Treaty’s ban on restrictive business practices (Article 81) for liner conferences on routes to and from the EU.

The current block exemption, established by Council Regulation 4056/86 allows carriers to fix prices and regulate capacity jointly.

The repeal will enter into effect in October 2008. To ensure that the new regime fosters competitive markets, the Commission will issue Guidelines on the application of the competition rules to maritime transport before the end of the transitional period.

The Council also empowered the Commission to apply EC Treaty competition rules to cabotage and tramp shipping, by extending the scope of the competition implementing rules (Regulation 1/2003).

Commissioner Charlie McCreevy, who is handled the proposal, said "I am delighted the Council has adopted this proposal less than a year after we presented it. The European shipping industry will benefit from the more competitive market that will result from the repeal of the block exemption and the EU economy as a whole stands to benefit from lower transport prices and more competitive exports."

Liner shipping (i.e. the provision of regular, scheduled maritime freight transport, chiefly by container) has been organised in the form of cartels -- called liner conferences - since the 1870s. Liner shipping is an important part of the EU economy as 40% by value of EU external trade by sea is transported by liner carriers. Liner conferences are agreements between liner shipping companies on prices and other conditions of carriage: as such they reduce competition between members of those conferences, and lead to higher prices for users.

The Commission’s proposal to repeal the block exemption for liner conferences was the result of a three year in-depth investigation by the Commission during which extensive consultations with carriers and transport users (shippers and freight forwarders) took place. Carriers recognise that price fixing is no longer necessary in today’s market conditions and the shippers expect the reform to trigger a new era of customer-focused relations with carriers.

The abolition of the exemption for liner conferences will affect EU and non-EU carriers operating on routes both to and from Europe. The market distorting effects of price fixing will be corrected, and lower prices for sea containers are likely to result.

In order to ease the transition to a fully competitive regime, the Commission will, in line with a
recommendation by the European Parliament, issue
Guidelines on the application of the competition
rules to maritime transport services, in consultation with all stakeholders.

The Guidelines will be issued before the end of the transitional period of two years for existing liner shipping conferences in 2008. With a view to collecting stakeholders’ comments, the Commission will shortly publish a staff paper on the market impact of the industry’s proposal for a new information exchange system.

The Council also extended the scope of Regulation 1/2003. This does not involve a change to the applicable law as EU competition rules already apply to cabotage and tramp shipping. It rather establishes that the Commission can enforce the competition rules in these sectors, in addition to national competition authorities and courts.

In the liner shipping sector, as in others sectors, competition rules are not applied in the same way worldwide. Noting that liner conferences will continue to be tolerated in other jurisdictions, the Commission will take appropriate initiatives to advance the removal of price fixing liner conferences and thus promote further competitive reform of the liner shipping sector.

lehrell@fipra.com

4. World Maritime Day--Fun and Games in London

Our correspondent Aline de Bievre writes:-

World Maritime Day, traditionally celebrated on the last Thursday of September under the auspices of the International Maritime Organization (IMO), got off to a jolly start in London on 28th September with a whole day of ‘outreach’ activities organised around the theme ‘Sea’s the future’ on board the good ship ‘HQS Wellington’, the beautifully preserved World War Two Atlantic sloop moored on the River Thames with breath-taking views of the Houses of Parliament and St Paul’s Cathedral. Headquarter of the Honourable Company of Master Mariners and of the International Maritime Pilots’ Association, the vessel welcomes ‘serious students of maritime affairs’, as the boldly printed warning message at the bottom of its gangplank states, as well as regularly playing hosts to maritime celebrities including royalty. The Queen’s messenger of the day was Her Royal Highness Princess Anne. Though looking rather tired for what was otherwise a splendidly festive occasion, she seemed agreeable enough to cut a huge iced cake for afternoon tea and to present prizes to the lucky few - all young cadets decked out in impeccable uniforms and glowing with beaming smiles as ‘HRH’ exchanged a few quiet - no doubt encouraging - words with them.

They and the small groups of - visibly excited but impressively well-behaved - school boys and girls did pride to the organisers of what was meant to be a day of reaching out to the wider community with a positive message about the role shipping plays in passing knowledge and expertise as well as economic development and prosperity around the world. For the youngsters’ education some 25 exhibition stands had a lot on offer by way of computer displays and video films of life at sea, as well as generous supplies of the usual colourful brochures, posters, stickers, pens, carrier bags and - of course - World Maritime Day t-shirts, blue-and-white embossed, courtesy of Lloyd’s Marine. A life-size, open-sided container was positioned on a pontoon alongside. Visitors could also inspect a river survey vessel, a fireboat and a Royal National Lifeboat Institution (RNLI) fast rescue boat.

Incidentally, the RNLI crew told your reporter that the lifeguard service was introduced on the River Thames in London only relatively recently, some four years ago, as part of the government’s response to the inquiry into the ‘Marchioness’ disaster of 20 years ago, when the river cruise boat was rammed by the ‘Bow Bell’ causing many young revellers to drown in what is a notoriously dangerous, tidal, river, their chances of rescue not helped by the darkness of the night and the habitually very cold water temperatures. The RNLI now conducts patrols 24 hours round the clock and is kept very busy, the crew reported, not least with people jumping off bridges, but also with boats and craft of all sorts getting into trouble. Also as part of the post-Marchioness enhanced lifeguard service, the high riverbanks have been fitted with uninterrupted lines of chains above the water line for people to grab hold of. Given the free flow of alcohol on board the Wellington, this was a reassuring message!

What was primarily intended to be an induction day for those unfamiliar with shipping’s ways effectively turned out to be one of the best networking occasions of the year, as one grey-haired shipping insider quipped, especially for those from within shipping’s political and diplomatic arenas and business communities, the maritime media and students. A two-hour, stand-up, lunch generously hosted by the Round Table of international shipping associations - BIMCO, International Chamber of Shipping, International Shipping Federation, Intercargo and Intertanko - was open to all, adding to the general ‘feel-good’ factor among the initiated.

However, one must live in hope that the stalwart liaison efforts of the organisers did do some good with hacks from ‘serious papers’ such as The Times, The Independent and the Financial Times, which, your reporter was told, all sent their representatives. Attractive bait like ‘Easy Stelios’ (alias Sir Stelios Haji-Ioannou, former head of Stelmar Tankers, head of easyJet and the easyGroup) was on hand as were such other heavy-weights as the First Sea Lord, Admiral Sir Jonathan Band, and IMO secretary -general Efthimios Mitropoulos. All VIP guests had been invited with strict time slots, either to give a short presentation or to make a speech or to participate in a question-and-answer session. Nonetheless, when your reporter was eager to find out the time of a presentation on the IMO Voluntary Flag State Audit Scheme, the otherwise unflappable Intertanko public relations man sighed with visible relief, "Thank God, here’s is at last one person who actually knows what the scheme is all about!".

The Wellington event closed down promptly at 16 hours to leave plenty of time to head for nearby Whitehall Palace. Here, under the magnificent ceiling of Banqueting House painted by Rubens - not Rembrandt, as quite a number of the guests seemed to believe, to the great dismay of your reporter, whose home town, Antwerp, was also the home town of the great 16th century Flemish master - some 800 of the great and the good of the shipping world rubbed shoulders at an evening reception hosted by ‘Thimio’ Mitropoulos. Reaffirming his reputation as an indefatigable ambassador for the noble aims of the United Nations to promote peace on earth and to eradicate poverty and hunger, he was just back from another of his seemingly daily voyages around the world that, this time, had taken in a major international conference on the Malacca Straits in Singapore and a visit to Brazil. As to the choice of what must be one of the most beautiful venues in London, this came about thanks to the IMO building on 4 Albert Embankment undergoing major refurbishment work.

alinedebievre@btopenworld.com

5. Airwaybill Seminar in Hong Kong

Our friends at Sun Mobility, Richard and Simon Chan are planning a seminar on this subject on 08NOV06 in Hong Kong.

Contact them for further details at:-

simonchan@sun-mobility.com

6. And Finally...

Many Thanks to Frazer Hunt for this one...

A young family moved into a house, next door to a vacant lot. One day a construction crew turned up to start building a house on the empty lot.

The young family's 5-year-old daughter naturally took an interest in all the activity going on next door and spent much of each day observing the workers.

Eventually the construction crew, all of them gems-in-the-rough, more or less adopted her as a kind of project mascot. They chatted with her, let her sit with them while they had coffee and lunch breaks, and gave her little jobs to do here and there to make her feel important.

At the end of the first week they even presented her with a pay envelope containing a couple! of dollars. The little girl took this home to her mother who said all the appropriate words of admiration and suggested that they take the two dollar "pay" she had received to the bank the next day to start a savings account.

When they got to the bank, the teller was equally impressed and asked the little girl how she had come by her very own pay check at such a young age. The little girl proudly replied, "I worked last week with the crew building the house next door to us."

"My goodness gracious," said the teller, "and will you be working on the house again this week, too?"

The little girl replied, "I will if those as*holes at Home Depot ever deliver the f*cking sheet rock."

BOW WAVE is published each week to over 13 200 Readers in the transport,insurance,shipping and finance industries.

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