BOW WAVE 435

Bow Wave Issue 435--Arctic Easter Edition

news and views on trade, insurance and risk

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(c)2008 WavyLine.com	Issue No 435 24 Mar 08
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. Quarterpoints for March 2008
3. A Way with Words
4. Book Review
5. FFA Seminar in HK
6. And Finally...

1. Welcome

Poem of the Week

A Farm in Western Minnesota

When I look at childhood, I see the yellow rosebush Grandma planted near her door, the gravel
Beneath the bicycle tires, and the new legs pumping As we raced along; and the roads that invited us
West--only a mile from home the land began to rise.

We tried those wind chargers. My father
Was open to any new idea, and one day
A thousand sheep--starving--arrived in cattle cars From Montana--almost free. We took four
Hundred. How thin they were! Some lived for years.

Many rooms were cold at night, and the hired men
Didn't have much of a life. Sometimes they'd just leave.
I remember my father throwing dead ewes over
The edge of the gravel pit. It was efficient. There Was work to do, but no one learned how to say
goodbye.

Robert Bly, from Morning Poems (1997)

New Readers this week include:-

Scott Bowers of the Firemans Fund
Ivan Wylof
Keith Skedd of the Benfield Marine Team
Steve Findlay
Readers at Iberica Maritima
Tobias Mattsson in Sweden

News of Readers

David Gilbertson has left Informa to run EMAP's
business-to-business section.

Note from the Editor

Greetings from an Arctic sort of Easter here in England.

Enjoy!

2. Quarterpoints for March 2008

Your editor's most recent column in Lloyd's List revisits a favourite topic, the distribution of our industry in modern conditions

New Conduits for Marine Insurance
If you are the CEO of an organisation which is about to move its people into a large handsome new edifice in Lime Street, the very centre of the heartland of the historic London insurance market, what do you want from the world? A highly centralised operation, highly controlled, staffed with presentable men and women living within travelling distance of Bank Station?

Well if you are Joe Plumeri of Willis, according to his recent speech at the Insurance Institute of London you must gear up for a "war for distribution". In his speech entitled "Meeting the Future Today: Insurance Industry Megatrends" Plumeri asserted the global nature of today’s risks which are becoming "bigger and scarier" every year.

We had a small illustration of the scariness of modern risks last week when the container crane carrier Zhen Hua 23 broke her moorings at Felixstowe during a gale and proceeded to lay waste to two shore side cranes. This followed upon the grounding of the container crane carrier Zhen Hua 10 in Rotterdam scarcely a month before. In a career of some 25 years during which I have kept an eye on such things, I can only remember a single occasion when a crane delivery came to grief on the West Coast of the United States and then the cause was equipment malfunction. Is there something in the struggle to install greater container capacity in many developed jurisdictions which is leading to this step change in risk profile? It is certainly thinkable.

Certainly the container industry, that leviathan of consolidation and remorseless expander of scale, more and more proves Plumeri’s point about the scale of risks underwriters face in the marine industry these days. What is the antidote to this piling up of scary risk? According to Plumeri, brokers now need to be able to access any size client in any given sector and that the insurance industry need to learn lessons from the banking area. He added: Both manufacturers and distributors of insurance products are clamouring to get as close as possible to insureds of all shapes and sizes. Innovative aggregator, collaborative network, and managing general agent models are being built to tap into new sources of distribution." In other words something downscale from the big and scary risks must be assembled using
non-traditional distribution methods and networks, this in order to feather the heightened risks of our times and to build up sustainable collections of insurable risks. This would appear to run counter to many established trends. Any broker from any of the major houses knows that the smaller fry in markets tend to be expensive to acquire and handle. The traditional ways of handling such business do not allow for much bespoke work and indeed call out for automation, no frills, value for money and all those things favoured by modern markets. Moreover the distribution or networking of underwriting authority close to the customers (who tend in the marine world to be located in a different ocean to the Atlantic) is a skill and habit very much in its infancy in the London Market. The preference is still for pods, desks and cubicles located somewhere near Leadenhall Street and heavy handed controls by regulators and managements over the wielders of underwriting pens.

Plumeri is almost certainly right in how things will play out in the future. Success will go to the
practitioners with a zen like ability to organise centrally while operating in a highly decentralised manner. This calls for new habits of thought and new kinds of insurance professionals, a greater weight being placed on experience in the field, languages, mobility and trust between executives in dispersed networks. For instance when designing IT tools for this new market, the needs of operations in dispersed conditions should be given greater priority and the requirements of accounting and management control should be reconfigured to take account of these
demands. If Plumeri is right, the day will one day dawn when the road to seniority in the London
insurance world will run via careers spent in
major markets overseas, rather than the cramped
corridors of EC3.

3. A Way with Words

Lee Coppack writes:-

More attention to wordings will reduce disputes

More care drafting of the language of marine and energy insurance policies could reduce the growing number of costly disputes that concern the intent of cover and interpretation of policy language, states Michael Harvey, a Fellow of the Association of Average Adjusters (AAA) and former chairman of the association.

Mr Harvey was speaking at the Association’s first market seminar of 2008, which was held in the City of London on 19 March 2008 and considered issues arising from the drafting and interpretation of policy wordings. Tim Taylor, partner in London solicitors Barlow Lyde & Gilbert, also spoke.

After giving examples of particularly poor drafting, where the intention of the drafter was not at all clear, Michael Harvey then explored issues concerning the use of terms in their correct context, such as "insured value" and "sum insured". These terms have particular implications as to whether the subject-matter of marine insurance policies is insured on a valued or unvalued basis.

Other problem issues highlighted included the use of numerous terms intended to mean the same thing and attempts to introduce positive cover via exclusion clauses. He also said. "When people redraft part of a policy, they frequently fail to read it in its entirety afterwards to eliminate inconsistencies and conflicts."

Tim Taylor provided a legal overview of the issues of intent and policy construction. After reviewing recent legal history concerning the interpretation of policy language, he explained the rules to be applied and, in particular, highlighted that words should be given their natural and ordinary meaning unless that meaning flouted business common sense and that evidence of the subjective intent of the parties was not relevant.

Mr Taylor also dealt with the issue of contra preferentem (a legal maxim meaning that any ambiguity in wording should be construed against the drafter) and pointed out that it should not always be assumed that wordings should be construed against underwriters. With regard to exclusion clauses, he explained that they are always construed strictly and that the burden of demonstrating that they apply, rests with those asserting so. Finally, he outlined the problems of assuming that foreign laws are the same as English law and illustrated the issue by reference to a claim involving both of the speakers which required the application of iranian insurance law.

The association’s annual dinner will take place on 8 May 2008 and applications for tickets are now available to annual subscribers. It will be held this year at the Sheraton Park Lane Hotel, as the usual venue is being refurbished.

Copies of the Speaker’s presentations will shortly be posted on the Association’s website:-

http://www.average-adjusters.com

4. Book Review

Changing Places--The Remarkable story of the Hong Kong Shipowners, Stephanie Zarach (2007) 252pp

This reviewer can recall how upon taking up an appointment in Hong Kong in the early 1990s it was necessary for the neophyte manager to learn the origins of the local shipowning scene, which at the time was poorly documented and the stuff of local knowledge and anecdote. Now those with a need to know need to do no more than turn to Stephanie Zarach's well researched and concise book written in celebration of the 50th Anniversary of the Hong kong Shipowners Association.

The book is divided into a history of the many figures who moved their base of operations from Shanghai to Hong Kong during the turbululence of the war and civil war in China followed by a less chronological account of various themes underlying shipowning in Hong Kong in more or less modern times. The cultural melange of the Hong Kong scene is well portrayed: Cantonese locals, Shanghaiese shipowner emigres and their staffs, often rather traumatised by their experience of dislocation and the illogically long lived colonial administrators of a territory living on borrowed time. Between them these players produced one of the great success stories of globalisation.

Stephanie Barach and the HKSOA are to be congratulated for producing a fascinating but highly readable history which documents a tangled story, much fortitude and style and any number of highs and lows which attended the rise of the HK shipowner. The production standard is high, not least the care and attention which has been lavished on the many illustrations by the HK publishers and printers.

As to the future, the book casts an eye or two on the post handover future of HK as a regional shipping centre. Shanghai and Singapore loom as rivals for this role and only time will tell whether the improvisational genius which characterises the Pearl of Asia will see it prevail over its rivals.

Contact:

hksoa@hksoa.org.hk

5. FFA Seminar in HK

Christian Ott has written in with these details of Clyde & Co's event which is thefirst Maritime Seminar in Asia to address head on the legal issues of the risks and problems that have arisen from the FFA trade, how Operators can protect themselves against these pitfalls and what the future may hold for this ever more relevant trade in the wider Shipping Industry.

Speaking at the Seminar will be special guest Mikal Boe, Managing Director of Imarex Clearing House in Singapore and lawyers from Clyde & Co's Hong Kong and China Marine Group, Christian Ott (Hong Kong) and Nicholas Lum (Shanghai).

The global trade in Shipping Futures and its impact on the Shipping market is making regular headlines. As have the high profile casualties of companies that got it wrong. But what is really behind this trade? What are the true risks that go with the trade - as well as the opportunities - and how can these be tackled?

The trade comes in many different forms, through Clearing Houses, via Brokers and even direct deals. The forms of contract used can vary significantly, too. Each brings with it its own benefit and risks, and when legal action is necessary it often requires the knowledge and expertise to quickly secure large sums of money and take action in multiple
jurisdictions. Tricky stuff unless you are in the know.

Agenda:

1530 Registration and coffee

Welcome address/introduce speakers
Christian Ott, Marine Group, Clyde & Co Hong Kong

1600 High level perspective on the FFA market and a summary of key current issues for market participants Mikal Boe, Managing Director, Imarex, Singapore

1635 Risks and problems arising out of FFA trades and legal decisions on the subject
Christian Ott, Marine Group, Clyde & Co Hong Kong

1705 Tea/coffee break

1720 PRC issues arising from the trade, including important regulatory and litigation issues
Nicholas Lum, Marine Group, Clyde & Co Shanghai

1740 Q&A - open forum for discussion between speaker and guests

1800 Clyde & Co Cocktail Reception

To register: please contact Louise Langford at

Email:.com.hk
Phone: + 852 2878 8600
Fax: + 852 2522 5907

http://www.clydeco.com/knowledge/events/
http://www.clydeco.com/knowledge/events/clyde%2Dand%2Dco%2Dfreight%2Dforward%2Dagreements%2Dffa%2Dseminar%2Dand%2Dcocktail%2Dreception%2Ecfm

6. And Finally...

MAny thanks to Paul Dixon's Joke of the Day for this one:-

From the Washington Post Style Invitational in which it was postulated that English has male and female nouns, and readers were asked to assign a gender to nouns of their choice, and explain their reason.

The best submissions:

Detective Novel -- f., because you're not supposed to peek at its end the minute you pick it up.

Swiss Army Knife -- m., because even though it appears useful for a wide variety of work, it spends most of its time just opening bottles.

Kidneys -- f., because they always go to the bathroom in pairs.

Penlight -- m., because it can be turned on very easily, but isn't very bright.

Hammer -- m., because it hasn't evolved much over the last 5,000 years but it's handy to have around and is good for killing spiders.

Tire -- m., because it goes bald and often is over-inflated.

Hot air balloon -- m., because to get it to go anywhere you have to light a fire under it. And, of course, there's the hot air part.

Web page -- f., because it is always getting hit on.

Web page -- m., because you have to wait for it to reload.

Shoe -- m., because it is usually unpolished, with its tongue hanging out.

Copier -- f., because once turned off, it takes a while to warm up.Because it is an effective reproductive device when the right buttons are pushed.Because it can wreak havoc when the wrong buttons are pushed.

Magic 8 Ball -- m., because it gives monosyllabic answers that usually indicate it did not pay attention to your question.

Ziploc bags -- m., because they hold everything in, but you can always see right through them.

Sponges -- f., because they are soft and squeezable and retain water.

Critic -- f. What, this needs to be explained?

Subway -- m., because it uses the same old lines to pick up people.

Hourglass -- f., because over time, the weight shifts to the bottom.

P.S. Thanks to Frazer Hunt for this one:-

Paddy had been drinking at his local Dublin pub all day and most of the night celebrating St Patrick's Day.

Mick, the bartender says, "You'll not be drinking anymore tonight Paddy.

Paddy replies, "OK Mick, I'll be on my way then."

Paddy spins around on his stool and steps off. He falls flat on hisface.

"Shiite" he says and pulls himself up by the stool and dusts himself off.

He takes a step towards the door and falls flat on his face,

"Shiite, Shiite!"

He looks to the doorway and thinks to himself that if he can just get to the door and some fresh air he'll be fine.

He belly crawls to the door and shimmies up the door frame.

He sticks his head outside and takes a deep breath of fresh air, feels much better and takes a step out onto the sidewalk and falls flat on his
face.

"Bi'Jaysus... I'm feckin' fecked," he says.

He can see his house just a few doors down, and crawls to the door, hauls himself up the door frame, opens the door and shimmies inside.

He takes a look up the stairs and says "No feckin' way".

He crawls up the stairs to his bedroom door and says "I can make it to the bed."

He takes a step into the room and falls flat on his face.

He says "Feck it" and falls into bed.

The next morning, his wife, Jayne, comes into the room carrying a cup of coffee and says, "Get up Paddy. Did you have a bit to drink last night?"

Paddy says, "I did Jayne. I was feckin' pissed. But how'd you know?"

"Mick phoned... you left your wheelchair at the pub".

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