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Issue 105 - 11th June 2010

• Lloyd’s buzzing as bees and media arrive
• World Cup kicks off with £6 billion and quake warning
• Cannes hears French insurance fears
• City kicks off for the World Cup for a prize which shows things are picking up
  

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Lloyd’s buzzing as bees and media arrive

Canopius Group Limited (Canopius), a leading specialist insurance underwriting business, today announces that it has partnered with this year’s City of London Festival in support of the International Year of Biodiversity by acquiring and hosting a bee hive.  The hive, which is situated on Canopius’s tenth floor roof terrace at Lloyd’s, was this week officially inaugurated by Lloyd’s Chief Executive, Richard Ward and Canopius Chairman, Michael Watson.  The arrival of the Canopius bees at Lloyd’s was filmed by the BBC programme, Panorama, as part of a documentary on biodiversity, currently scheduled to be broadcast on 30 August at 8.30pm on BBC1.  Through the sustainable and long-term placement of this and seven other hives, the initiative aims to support the biodiversity of the Square Mile and its environs and provide an innovative example of the scope for successful and productive urban bee keeping.  As part of this initiative, Canopius has installed bee-friendly planting on the roof terrace to help support the bees’ immediate environment. Following an enthusiastic response from its staff, a group of volunteer beekeepers from Canopius is being trained by a professional beekeeper to ensure that the hive can be maintained on an on-going basis after the close of the festival.  Michael Watson, Chairman of Canopius, commented “We are proud to represent the insurance industry in this innovative initiative by the City of London Festival. This is the first urban bee project of its kind in the UK and we hope that it will help highlight the importance of maintaining the biodiversity of our natural environments, an issue of increasing importance to us all”.  Richard Ward, Chief Executive of Lloyd’s, commented, “This initiative supports the market’s reputation of innovation and leadership, and we wish the bees well in their unusual new environment, along with Canopius in their support for the City of London Festival.”

World Cup kicks off with £6 billion and quake warning

As the FIFA World Cup arrives in South Africa, Lloyd’s has been courting significant publicity after stating that the event will be covered by £6.2 billion worth of insurance but reinsurance broker Aon Benfield, has launched a report on the impact of a major earthquake on the country. Its South Africa Spotlight on Earthquake In conjunction with the Aon Benfield Natural Hazard Centre Africa, shows that Cape Town could be affected by an earthquake close to magnitude 7.0 but with a very low probability. The new assessment of seismic risk will enable insurers to obtain a more accurate estimate of their exposure and in turn purchase appropriate reinsurance cover said the broker. The new research looks into potential earthquake magnitudes and their probabilities. With South Africa in the spotlight for the World Cup, Cape Town and Durban’s Moses Mabhida stadiums are featured as case studies to illustrate the low probability of high magnitude earthquakes. Historically, the most severe observed seismic event of magnitude 6.3 occurred on 29 September 1969 in Ceres, 100km northeast of Cape Town with a loss of 12 lives.  On 4 September 1809, a seismic event of equal magnitude occurred at the Milnerton fault, a mere 10km from Cape Town CBD and the Cape Town Stadium. The report stated that claims from an earthquake today would mainly affect the local South Africa insurance market and could lead to higher insurance rates in the country. However this would not impact the global reinsurance market significantly.   Pieter Visser, catastrophe modeler at Aon Benfield in South Africa, said: “This collaboration with Professor Kijko allows us to look into one of the largest risks facing the people, government and insurance community in South Africa. As earthquake is regarded as the natural hazard most likely to trigger the country’s largest financial loss, this report combines science and insurance industry expertise to help prepare for a seismic event.”  Professor Andrzej Kijko, head of the Aon Benfield Natural Hazard Centre Africa at the University of Pretoria, added: “The new research helps to set the record straight around the recent hype on predictions of a Haiti sized scenario for Cape Town and Durban. While we also address the potential of large earthquake magnitude in South Africa, this is put in the context of the probability of these events.” John Moore, Head of International Analytics at Aon Benfield, added: “Using scientific expertise from one of South Africa’s leading universities, the report helps both insurers and reinsurers operating in South Africa to appropriately price catastrophe risk for potentially the largest natural hazard in the region.” Lloyd’s issued its estimate on the insurance exposure to the event and said that in total there was £6.2 billion of insurance cover for the competition. With estimates the top players are insured for up to £60 million a piece there was no shortage of coverage from media desperate for any new angle on the event in the days leading up to the opening match.

Cannes hears French insurance fears

All eyes were on Cannes last week but there were no film streets in sight as 400 insurance and maritime industry professionals from 35 countries debated a wide range of topical issues at the second Rendez-vous de Cannes organised by CESAM, which represents the French maritime and transport insurance services. Piracy, the impact of a cyclical market on freight rates, new sea routes, the French market’s new hull insurance policy, and air cargo were high on the agenda. Keynote speaker Philippe Chalmin, Professor of International Affairs at Paris Dauphine University, spoke about the current state of world trade which, he said, would remain volatile and uncertain. It was at present largely influenced by China, the world’s second biggest economy, running on a 15% growth path. China continued to import huge quantities of iron ore and copper, as well as rubber, and this insatiable appetite would continue to drive shipping markets. On the situation in Greece, he said it was “like opening Pandora’s Box”. Piracy continues to dominate the maritime thinking with Commander Rune Bratland from the Royal Norwegian Navy/EU NAVFOR Operation, telling delegates that Somali pirates were now attacking ships some 1,200 nautical miles to the east of the Horn of Africa. At mid-April this year, 16 vessels were under pirate control with 343 hostages.

On protective measures which vessels could take, he cited wire, hoses, water curtain, foam/dye marker, sound devices, lighting, smoke/steam and lookouts. Referring to armed response, he said that EU NAVFOR warned that the use of active measures might escalate pirate violence. Insurance was a key influential factor, he said, but questioned if insurance could be an incentive for companies implementing best management practice? Dieter Berg from Munich Re said there was little case law about the legality of ransom payments and General Average declaration. K&R insurance covered ransom monies for the insured crew, paying a loss prevention consultancy, and delivering services after a kidnapping. Loss of hire covered loss of income or obligation to pay charter hire without a physical trigger if the vessel is held by pirates. Rhys Clift, a partner in UK law firm Hill Dickinson, said that the huge co-operative naval venture underway off Somalia had so far had little success with prosecutions and convictions, while “catch and release” was causing increasing frustration. The use of (lethal) military force risked enflaming the situation, and the use of arms, especially armed guards, might lead to insurance coverage difficulties. P&I cover did not exclude armed guards, he said, but most club rules excluded losses arising out of or consequent upon “performing any voyage or being employed in any trade which in the opinion of the directors is imprudent, unsafe, unduly hazardous or improper.”  Would this exclusion cover the carriage of arms, he questioned? Captain John David, who spent 25 years at sea, five as master, and now an independent consultant, experienced his first pirate attack 17 years ago. He said there were between 2,000 and 3,000 pirates in Somalia, where 50% of the population was under 18 years of age. Despite the presence of 35 warships from 20 navies, violence was escalating and would continue to do so, he predicted. Adding a postscript, Patrick de La Morinerie, Deputy Chief Executive of AXA Corporate Solutions, said that ransom payments had moved beyond an average of $3 million to $5 million.

City kicks off for the World Cup for a prize which shows things are picking up

Saturday sees England play the United States but prior to the game bankers and underwriters in London will have played their own version with a glittering prize at the end of it. Organisers have invited 32 teams to play a five a side world cup tournament in the City with each firm’s teams drawing a country from the finals and playing the competition as that respective country with the event following the world cup group and knock out format. The players have every incentive to emerge victorious as the winning five-a-side team will win £1,000 but also an all expenses paid trip to the country which wins the real thing. One participant said: “We are all praying that Brazil to Argentina win the World Cup. If England wins it we think it will end up with a week in Southend!!!”

Jon Guy
Editor
Global Broker & Underwriter

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