BOW WAVE 510

Bow Wave Issue 510--Back to Work Edition

news and views on trade, insurance and risk

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(c)2009 WavyLine.com	Issue No 510 24 Aug 09
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. Quarterpoints
3. Anti-Fraud Initiative in Southern Africa
4. Kiln Sees Rates Up
5. Indian Logistics Parks Plan
6. And Finally...

1. Welcome

Poem of the Week

Patriotism

My country is this dirt
that gathers under my fingernails
when I am in the garden.
The quiet bacteria and fungi,
all the little insects and bugs
are my compatriots. They are
idealistic, always working together
for the common good.
I kneel on the earth
and pledge my allegiance
to all the dirt of the world,
to all of that soil which grows
flowers and food
for the just and unjust alike.
The soil does not care
what we think about or who we love.
It knows our true substance,
of what we are really made.
I stand my ground on this ground,
this ground which will
ultimately
recruit us all
to its side.

Pat Ellie Schoenfeld (2009)

New Readers this week include:

Chris Lloyd of Atlantic Container Lines
Henri Haaksema of Scandinavian Underwriting Agency (SCUA) Frank Anderson of fire gurus Burgoynes
Allwyn D'Souza of Lumley Insurance in Sydney

News of Readers

Mike Grinter has left Informa Hong Kong

Contact him at:-

Mike.Grinter@live.com

Chris Meyer, Tony Gray, Sandra Speares and Val Kearney have left Lloyd's List

Ian Edwards has left the Allianz

Chris Childs has left Galatea/Travelers

We regret to learn of the death of Surveyor John Bonner of John Bonner & Associates, the dean of marine surveyors on the the West Coast of the US. John passed away on Friday afternoon 14AUG09 in hospital surrounded by his family.

Readers Write

From Capt Mike Le Pree

Re your item on the Cosco Busan in Bow Wave Issue 509:-

Masters orders....Pilots Advice.... This has worked for a long time and all we need is to have Coast Guard or VTS or the Pope involved with when and how we sail our ship. Granted accidents happen and always will, but the 'implied' law is simple and in my humble opinion should stay that way ! Leave US in command to decide, not someone who is not there.......

Contact him at:-

saundersmarine@mpinet.net

From Ravi K. Sishta, Master Mariner

Re your item on the Cosco Busan (Bow Wave Issue 509)

The Landmark sentencing that purported to serve as a deterrant to shipping companies and mariners has rather unwittingly 'punished one for anothers' crime'. The Bay Pilot represents neither the 'shipping company' nor 'mariners' in the context of those involved in the accident.

However, the sentence by default serves as a deterrant to Pilotage services world-wide, who believe in the age old dictum that their advisory is immune to legal action. Of all the errors committed by the pilot the following stands out for analysis on the conclusive way forward: Having made the decision to leave port in impenetrable fog, Captain Cota took no action to assure the fortification of the bridge or bow watch or review the passage plan with the master and crew of the Cosco Busan. In particular, Cota failed to have a master-pilot exchange to review the transit plan.

By sentencing the Pilot for the errors' committed, the above indeed sends a message to the Pilotage services within the Maritime Industry. The Message? A well thought out and collective Transit Plan is the most practical pilotage risk management model. The burden of liability in having no such plan is no longer that of the Shipowner and their Mariners alone; ISM code notwithstanding.

Of course and in conclusion, this is not to suggest that the sentencing takes the heat off the Shipowning community and on-board Mariners.

(Ravi K. Sishta is a graduate of the World Maritime University, Malmo (Sweden) and is currently Head of Matitime Facilitation at the Department of Transport, Abu Dhabi (UAE))

Contact him at:-

ravisishta@rediffmail.com

Note from the Editor

Greetings dear Readers. Your editor is back in the chair but sends thanks and admiration to Michael McDaniel ("McD") for the splendid editions of Bow Wave which have gone out under his guest editorship this August. These editions enlivened the summer and provided evidence of McD's great knowledge and enthusiasm for the world we follow in Bow Wave.

Enjoy!

2. Quarterpoints

Your editor's column for August in Lloyd's List addressed the work of introducing new ways in the market:-

New Approaches?

What room is there in the modern world for a new approach in marine and transport insurance? This is a question that we few pioneers ask from time to time. It is an industry which requires capital, skill and some plant. These are organized in such a way as to preserve and foster the underlying capital, sometimes called reserve or passive capital . And you can argue that in the great financial storm of the last 18 months, the owners of insurance capital have not done too badly, save for the unfortunates who owned AIG, the triple A rated giant, which grew accustomed to a rate of growth which was not in the event sustainable.

How to account for the relative success of the industry in recent times? Undoubtedly the risk managers have used their skills to good effect. The regulators of the industry would probably claim they have fostered better practices in the industry than was once the case. Industry wide volatility has on the whole been avoided and cyclical competition has not been so fierce as to drive all the players to a bath in red ink.

You might also argue that insofar as new approaches are called for, the profession of insurance broker exists to bring these to market. Brokers can invent new wordings and new heads of cover to the best of their ability and present these to existing insurers in the market for support. There is a limit to how many new wordings will see the light of day in a given year. Insurance and insurance practitioners are conservative by nature and prefer to recycle wordings which have a proven legal and practical track record. 20 or so years ago there was even a specialty given over to the production of wordings, the wordings technician, an individual skilled in the production of acceptable of wordings in support of insurance agreements. These have largely left the industry, their work is now done by generalists more or less skilled. It is at any rate no longer acceptable to strike agreements "subject to wording" the modern notion of contract certainty demands a timely wording be issued to a customer.

What of bringing marine and transport insurance to market in a different sort of way? Gone, mostly all are the efforts of a decade or so ago when there was a relatively big push to translate the risks of marine insurance so as to make them providable electronically. One can remember the inventive souls at Wildnet, turning out electronic products for say the hull insurance and freight forwarding markets in keeping with the enthusiasm of the late 1990s for all things internet. The
professional reinsurers have similar episodes in their histories where large amounts of programming were commissioned to make a new sort of on-line reinsurance market or exchange. Most if not all of these efforts foundered as markets, preferring to emphasise face to face and hand made approaches, on the whole declined to build anything which required their customers to access them via the internet. So it is that today one of the central building blocks of insurance is the good old pdf. file, scanned in to a large, inexpensive computer memory, nearly as inert as a piece of paper and no use at all for any sort of data processing or analysis. Rekeying is alive and well in 2009.

It is possible that the retirement of specialists in wordings from the industry and the relative dearth of electronic approaches to insurance is related. Though it is in theory easy in the modern world to slice and dice a white collar product into hundreds of segments, the complexity of a traditional insurance wording covering marine and transport risk calls for an
intimate knowledge which is vested in relatively few people these days. I well remember an attempt by a highly specialized mutual insurer to dematerialize its underwriting into a distributed rating and reporting engine which pressed at the boundaries of technology at the time. It creaked with complexity and was
effectively decommissioned five years into its existence, to be replaced by the consolations of the double signature system of the gurus.

Low points in economic cycles are famous for forcing new inventions upon an unsuspecting world, the hunt for cost savings and improvisations being thought responsible for all kinds of innovation. And certainly at the time of writing there is little on the horizon which suggests that there will be a step change in the way the world buys and sells its marine and transport covers. Within the insurance industry these specialties have often become minority interests to large consolidated insurance companies and organizations. The transport and shipping industry has a lot more on its collective mind than how it might change its insurance buying habits, but the challenges ahead are not hard to spot. How will our precedent minded world deal with the rise and rise of the logistics company, that amalgam of shipping, warehousing and other services, bristling with risks which cut across the categories of insurance, marine and non-marine, property and liability, static and moving, with high concentrations of values trapped in bottle-necks and untraditionally sensitive to delivery deadlines? How can the industry deal with the barbell markets that are such a feature of the modern world, for example there is UPS Line and then there is your local courier company and not so very much left that can be described as middle or medium sized market. One requires a product and service of considerable complexity and financial strength, the other a modestly priced and well administered equivalent designed to appeal to hundreds or thousands of buyers.

Notoriously, the introduction of the new in any field tends to emerge from obscure beginnings, at the hands of the marginal or the little suspected. The innovation escapes extinction and evades barriers. It is by nature unregulated and probably unprofitable for some years. It will probably be introduced in the English language but possibly not in an established insurance centre where present fluency is sometimes overprized.

3. Anti-Fraud Initiative in Southern Africa

Ivor Masher, who promotes on-line the prospects of the Maputo Corridor Logistics Initiative (MCLI), has sent the following out to his Readers:-

At a time when money and intellectual property can be digitally flashed in a matter of seconds across continents in the course of global trade, the difficulty of preventing, detecting and responding to international cross-border fraud, corruption and misconduct is hard to overstate. The growth, the scale and sophistication of fraud and misconduct perpetrated against businesses around the world are accelerating. The negative impact in terms of lost revenu e and property can be substantial -- personal and business reputations, market capitalization, and investor confidence can all be rapidly and significantly impaired. What’s more, when a business must respond to fraud and misconduct, its management is distracted from focusing on growing and developing the business.

As trade barriers fall and international commerce expands, and as the speed of conducting business and remitting funds increases, companies that conduct business across international boundaries are recognizing the corresponding increase in the risk of fraud and misconduct.

Currently most MCLI members trade cross-border and are t herefore exposed to the risk of cross-border fraud, corruption and misconduct. KPMG Forensic has developed an on-line Fraud Risk Management Strategy Assessment Tool (FMSAT) in order to assist our clients. The assessment tool is internet based and is intended to assist
organisations to evaluate their Fraud Risk Management Strategies.

The assessment should take 30 minutes to complete and the resultant report comes at no cost to the organisation but on the proviso that KPMG are granted 30 to 40 minutes to present the output to them in person.

Click below to download an example output. This report is a sanitised real report from a client who recently completed the assessment:-

http://www.mcli.co.za/mcli-web/news/2009/2009-721/FMSAT_Example_Output_26.01.09.pdf

Thank you for your assistance

Riaan Beekman
Associate Director: Forensic
KPMG Services (Pty) Ltd
Mailto:riaan.beekman@kpmg.co.za

http://www.mcli.co.za

4. Kiln Sees Rates Up

Our friends at the Insurance Insider report:-

Kiln sees H1 reinsurance rates soar; revises '07 and '08 forecasts upwards

Lloyd's managing agent RJ Kiln & Co saw reinsurance rates on its largest Syndicate, 510, climb to the highest it has seen in almost seven years during the first half of 2009, driven by US catastrophe-exposed lines.

In an update on trading conditions, Kiln said its premium rating index (PRI) - which takes 2002 as a base year - showed an average 6 percent increase at renewal for Syndicate 510 on 30 June compared to 2008.

Reinsurance rates lead the pack and were 137.5 percent of their 2002 benchmark levels, exceeding the previous peaks of 132.3 and 136.9 percent experienced in the post-KRW markets of 2006 and 2007 respectively.

Syndicate 510's accident and health, property and marine lines also showed positive rate movements. However, aviation emerged once again as the enfant terrible, with pronounced softening of 20.7 percent and booking a PRI index of 70.3 percent. This represented a further decline compared to the 80.1 percent aviation PRI index Kiln posted in 2008.

http://wwwinsuranceinsider.com

5. Indian Logistics Parks Plan

The Indian railway ministry is going to begin negotiations with state governments this month for identifying locations for setting up of multi-modal logistics parks (MMLPs) along the dedicated freight corridors. These logistics parks, spanning an area of around 400 to 500 hectares (988 to 1235 acres), would be developed with both government and private funding. The MMLPs would contain rail sidings with sheds, container depots, warehouses and office buildings for logistics operators and assembly units for processing raw materials.

The high-tech logistics parks, with mechanized handling and intelligent inventory management at strategic locations, will significantly reduce costs in the supply chain by leveraging the high-capacity rail connectivity of the corridors. Two-thirds of Indian Railways’ revenue came from the transport of goods, but this has slumped as the global recession has taken its toll on freight traffic. To increase rail freight, the railway ministry is encouraging private ownership of rolling stock to utilize surplus capacity.

http://logistics.about.com/b/2009/08/19/indias-new-logistics-parks-on-track.htm

6. And Finally...

Thanks to Paul Dixon for this one:-

Health News

Health Canada has issued a health warning regarding a newly discovered disease which is rapidly spreading throughout the world. The disease is B.A.R.S. (Beer & Alcohol Requirement Syndrome) and effects people of many different ages.

Believed to have started in Ireland in 1500 BC, the disease seems to effect people who congregate in Pubs and Taverns. It is not yet known how the disease is transmitted but approximately three billion people world-wide have been affected, with new cases being discovered every day.

Early symptoms of the disease include an uncontrollable urge at 5:00 PM to consume a beer or alcoholic beverage. This urge is most keenly felt on Fridays. More advanced symptoms of the disease include singing loudly off-key, heightened sexual attraction (even towards hideous targets), and loud laughter. Sometimes in this stage, deaths have occurred, usually accompanied by the victim shouting, "Hey Zeke, watch this!"

In the final stages of the disease, victims are often cross-eyed, and spout sayings like, "Goony Goo Goo", or "I gaga go home". Vomiting is a frequent symptom at this stage. If you develop any of these symptoms, it is important that you quarantine yourself in a bar until last call. Your diligence in containing the B.A.R.S. outbreak is greatly appreciated.

P.S.

Thanks to Robin Dickeson of SMMT for this tale:-

The three Goldberg brothers, Norman, Hiram, and Maximilian invented and developed the first car air conditioner. On 17 July 1946 with the temperature in Detroit at 97oF, they sweet talked Henry Ford's secretary into telling him that they were outside with the most exciting idea in the auto industry since the electric starter. Curious, Henry invited them into his office. They refused and insisted that he come out to their car. They persuaded him to get into the car, where it was about 130oF and then turned on the air conditioner. It cooled the car immediately. Excited, the old man invited them back to the office, where he offered $3m for the patent. The brothers refused, saying they would accept $2m, but wanted a label saying "The Goldberg Air-Conditioner," on the dash of each car fitted. Mr Ford refused but they haggled for about two hours and finally agreed on $4m and that the brother's first names would appear instead. Which is why, to this day, all Ford air conditioners show Norm, Hi and Max on the controls.

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