BOW WAVE 504

Bow Wave Issue 504--Taking Stock Edition

news and views on trade, insurance and risk

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(c)2009 WavyLine.com	Issue No 504 13 Jul 09
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. Quarterpoints
3. Avoid Gilding the Solvency II Lily, says IUA
4. The Top 10 Alternatives to Google Search
5. WSC Approved for IMO Consultative Status
6. And Finally...

1. Welcome

Poem of the Week

Blue Suburban

Out in the elegy country, summer evenings,
It used to be always six o'clock, or seven,
Where the fountain of the willow always wept
Over the lawn, where the shadows crept longer
But came no closer, where the talk was brilliant, The laughter friendly, where they all were young
And taken by the darkness in surprise
That night should come and the small lights go on In the lonely house down in the elegy country,
Where the bitter things were said and the drunken friends Steadied themselves away in their courses
For industrious ruin or casual disaster
Under a handful of pale, permanent stars.

Howard Nemerov (2003)

New Readers this week include:-

Ryan Reddy of lawyers Bowman Gilfillan in Cape Town Robert Emerick of International Marine Experts in Panama Steven Janoff and Sue Osin of Royal Marine Insurance Group in Miami

News of Readers

Mark Stevens has joined PT Asuransi Sinar Mas as Technical Advisor with effect from 1st July 2009. Formerly MD of Willis Indonesia, part of his new role at Sinarmas will be to develop the marine hull book.

mailto:mark_stevens@sinarmas.co.id

Torben Strand has left BIMCO

tclstrand@hotmail.com

Note from the Editor

Home from our travels, we take stock of the market in this edition.

Enjoy!

2. Quarterpoints

The latest column in Lloyds List by your editor examines the market from the peculiar point of view of the maritime e&o and intermodal liability specialist.

Mid Year Notes

This is the traditional time of year when the marine and transport insurance market passes its mid year peak and enters the period of mild hiatus as markets and customers give themselves over to # the holiday season. From now until September we are supposed to enjoy a quiet time.

Somehow after the events of the last 12 months I am not sure these expectations will be born out of events. This time last year we entered into the realization that far from entering a recession, the economic downturn was well underway. As the summer wore on to late summer, the terrific rumblings in the financial system turned into bust. In insurance the fall of Lehman brothers caused people to wonder what was coming next. But the sudden fall from grace of AIG induced doubt into the minds of insurance buyers all over the world.

Insurance, even marine insurance ideally occupies in the mind of buyer’s a sense of security, of routine ,even of ennui. Buyers do not like to think the ponderous and inexorable progress of their insurers will be facing any sort of precipice. When they do, they may be afflicted by indecision and worry, wondering whether the long standing insurance arrangements they have in place will be equal to modern events.

Just as people like to go to a dentist to meet a well turned out person in a white coat with minty breath as their dentist, they expect their insurers to be stolid, preoccupied by risk, mindful of precedents and orthodox procedures and maddeningly cautious . Excitement is not something which is necessarily welcome at the insurance mid-summer feast.

In the areas best known to the author, the mere fact that AIG was in very hot water seemed to prompt an unaccustomed amount of uncertainty. This translated into the generation of high volumes of enquiry. Accounts which have enjoyed long periods of continuity with insurers suddenly appear in the hands of brokers who would not ordinarily expect to see them. A week before the end of each month sees a regular flurry of last minute comparison shoppers who know that the rapid transaction of new enquiries is far from welcome in the minds of working underwriters.

Is a great hardening underway? It hardly seems so. The greater mobility of previously settled business present s new brokers and underwriters with opportunities to write business with good or fair records in exchange for a modest discounts. A tendency by reinsurers and underwriters to eschew the renewal of troubled accounts is certainly higher. It is difficult for third parties to quantify the tendency, since to the outward the replacement of one name on a slip by another is not a very public transaction. But in the markets most observed by the author, there are plenty of movements between insurers and reinsurers of large books of marine risks where leaders choose to withdraw rather than attempt to negotiate a hefty increase.

Perhaps the only exception to this is represented by the individual long term loss prone account. An Assured "Standing to his Record", that much loved idea especially in the P&I world is most likely to occur in markets where the movement of good or acceptable business is not in too great scarcity.

So what is visible this warm mid year season? Lots of quoting and not getting. Plenty of surprising enquiries from the previously long term settled customer. A certain amount of new players anxious to enter new promising fields. In the field of ports and terminals insurance for example, there seems to be no shortage of exited new entrants, even as the existing market players tot their losses. Maybe there is also a certain "flight to Lloyd’s" as new facitlities and coverholders set up their stalls. They may be taking the benefit of the stability of the market in particular and the industry as a whole, which has managed to weather the storm of the post AIG era as well as its proponents might have planned and hoped.

It is not surprising that the industry as a whole is being difficult on the subject of further regulation by governments. The slower, more risk averse players in insurance have not been slow to point out that they have not caught the sort of draught which blew down the booming banks, nor to plead that the further attentions of governments is called for. Boring is good.

3. Avoid Gilding the Solvency II Lily, says IUA

For example here is the message put out to the UK government by the IUA, the body for insurance companies in the London International Market:-

The IUA (International Underwriting Association) has urged the Financial Services Authority to have faith in the incoming Solvency II regime and to avoid the temptation to impose additional regulation on the insurance and reinsurance industries. Any such action, they warn, would risk making the UK a less attractive business location and would bring little or no benefit to customers and shareholders.
In its eight-page response to the Turner Review, set up after the onset of the banking crisis, the IUA says the FSA’s existing ICAS regime and the future Solvency II regime already provide robust frameworks for the regulation of insurance and reinsurance.
"We do not believe that the re/insurance industry poses a systemic risk to the economy at any level, national, European or international. Re/insurance is pre-funded and not highly leveraged. It does not rely on short-term deposits that can be instantly withdrawn.....Solvency II already provides an innovative and high quality regulatory framework that meets regulatory concerns effectively," according to the IUA’s submission.

Nick Lowe, Director of Government Affairs at the IUA, said the association was concerned that insurance and reinsurance would be affected by the fall-out from moves to tighten regulation of banking.

"There may be a temptation for the FSA to gold-plate Solvency II, but such a response is neither needed nor desirable," he said. "Any attempt to interfere with the delicate checks and balances already in place under Solvency II would almost certainly make London a more bureaucratic, less attractive place to do business. It might also distort the marketplace and tie up capital unnecessarily, resulting in higher costs to our members and their customers."

(editorial comment--it is difficult to see financial historians acclaiming the regulators in the UK for their part in the melt down of the banks in 2008 in anything other than negative terms. The idea that the way ahead for the insurance industry which, under the current British Government is already carrying the heaviest regulatory burdens it has ever had to carry, will run via a new regime laid down by the FSA is quite hard to think).

4. The Top 10 Alternatives to Google Search

Our friends over at Silicon.Com run a very fine IT related publication which this week features a very good question. Though the Google facilities are admirable and very clearly hard to beat, it is always good to look out for alternatives

For instance

http://software.silicon.com/applications/0,39024653,39442327,00.htm

We think the new Wolfram Alpha search engine is more useful for running underwriting calculations than an orthodox desk calculator. It helps to remind an underwriting person that there are many different ways of stating the same mathematical result and relationship.

http://www.wolframalpha.com/

5. WSC Approved for IMO Consultative Status

The following statement has arrived courtesy of Anne Marie Kappel:-

July 8, 2009--Washington, D.C.--On Friday, July 3, the International Maritime Organization (IMO) Council approved consultative status for the World Shipping Council (WSC). Ron Widdows, Chairman of the WSC Board of Directors, stated: "Consultative status for the World Shipping Council at the IMO provides the liner shipping industry a direct voice at the IMO on a series of critical issues, including vessel emissions, climate, security, and other matters that will shape the operating landscape of the industry for years to come. The Council has developed a strong staff and expertise on many regulatory issues, and we look forward to engaging at the IMO on the liner shipping industry’s behalf."

WSC and its member companies have for nearly a decade been engaged and committed to sound environmental, security and regulatory policy development. With its consultative status at the IMO, the Council intends to be a voice of support for the IMO’s development of effective international regulatory regimes for international shipping," said Chris Koch, WSC’s President and CEO.

The decision taken last week by the IMO Council is subject to final review and approval by the IMO Assembly in November, but consistent with IMO practice, the WSC will begin participation in the Organization with next week’s 59th Session of IMO’s Marine Environment Protection Committee. The World Shipping Council was formed in 2000 and today operates offices in Washington and Brussels. Its mission is to provide a coordinated voice for the liner shipping industry in its work with public policymakers and other industry groups with an interest in international transportation. Its 29 member companies operate approximately 90% of the liner shipping fleet, which includes container vessels and roll-on/roll-off vessels operating on fixed schedules.

http://www.worldshipping.org/

(The WSC is a well run and intelligent organisation which has continued to utter good sense throughout the confusing post 911 years for shipping. Other trade bodies for transport and shipping could do worse than pay a regular visit to the organisation's website to see how it is done--ed)

6. And Finally...

This one comes from R Mulcahy in South Africa

Muldoon lived alone in the Irish countryside with only a pet dog for company. One day the dog died, and Muldoon went to the parish priest and asked, 'Father, my dog is dead. Could ya' be saying' a Mass for the poor creature?'

Father Patrick replied, 'I'm afraid not; we cannot have services for an animal in the church. But there are some Baptists down the lane, and there's no tellin' what they believe. Maybe they'll do something for the creature.'

Muldoon said, 'I'll go right away Father. Do ya think 5,000 Euros is enough to donate to them for the service?' Father Patrick exclaimed, 'Sweet Mary, Mother of Jesus! Why didn't ya tell me the dog was Catholic?

P.S.

Thanks to maritime lawyer Frazer Hunt in Sydney for this one:-

A six year old goes to the hospital with her grandmother to visit her Grandpa.

When they get to the hospital, she runs ahead of her Grandma and bursts into her Grandpa's room...

"Grandpa, Grandpa," she says excitedly, "As soon as Grandma comes into the room, make a noise like a frog!"

"What?" said her Grandpa.

"Make a noise like a frog - because Grandma said that as soon as you croak, we're all going to Disneyland!!!"

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