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Issue 92 - 12th March 2010
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Somali pirates on “missions of no return” as attacks get more desperate
Brokers and underwriters which packed the Old Library at Lloyd’s this week were told that the piracy gangs operating off the coasts of Somalia and the Gulf of Aden were now being sent on missions with only enough food water and fuel to make a one way trip to the major shipping lanes. It meant the gangs had to secure a vessel of face starvation, thirst and death inciting the gangs to ever more desperate and violent acts. Simon Fordham partner at crisis management firm BGN Risk told the insurance Institute of London the gangs would kill crew of they felt that they were in danger of thwarting their efforts to capture the vessel. He added the gangs were also fighting between themselves and there were occasions where a rival gang had sought to capture the ransom before it was delivered to the gang which actually had the ship it was being paid to release. Mr Fordham said the industry could not afford to it not the fact that the gangs were armed criminals which used fear and violence to further their aims and added that withy Somalia now one of the most dangerous place son the planet the chances of any swift solution to the threat of piracy was remote at best. He said: “If you put a ship in these waters it will find itself in danger at some point.” Therefore preparation and risk management were vital to ensure that the vessels were hard to board and capture and potentially attached to a convoy which was protected by a naval presence.“ He added that the Pirates were increasingly desperate to get their hands on ships and crews. “The pirates will do whatever it takes to gain control of the ship,” he added. “If it means killing or harming the crew they will do it.” He added such was the poor conditions in Somalia that the numbers of men in the piracy gangs which attack the ships were raising. “Conditions on boards the ship will be far in excess of the living conditions on land,” said Mr Fordham. “Also if they are capture and sent to jail in the US for example the conditions and standards of food in prison are luxury compared to what they can expect in Somalia.”
Insurer says speciality lines still strong as marine book increases
Asia and the emerging markets has seemingly beginning to off the worst of the financial crisis as Axa Corporate Solutions’ revealed it has grown its marine book by 3.2% last year. Patrick de La Morinerie, deputy chief executive of AXA Corporate Solutions and head of marine, aviation and space operations, said: “The increase in our marine turnover reflects our strong retention rate of 92.5% through providing a bespoke service to clients and to continued development in more dynamic markets (Asia) and developing niche business streams requiring high technical expertise (such as luxury yachts, project cargoes etc.).” The company’s marine operations remain profitable, he added, with a combined ratio of 96.9%. Last year its marine book saw a turnover of €417.3 million, an 8.4% increase on 2008 excluding exchange rate impact, despite “the continuing financial and economic crisis bringing substantial reductions in insured values”. However the same could not be said for aviation where falls in traffic both for passengers and freight (-4% and -15%, respectively, according to IATA) have impacted premium volumes. “Claims-wise, 2009 was very difficult at market level, resulting in an underwriting deficit for two consecutive years,” It added. “The market has reacted with a substantial rise in rates, and further increases are still needed in efforts to restore profitability in the coming years in this volatile line of business. Mr de La Morinerie confirmed this Axa Corporate Solutions will “maintain its current strategy and leverage on a number of initiatives, specifically the Marine Cargo Trade Sector” with an increased capacity up to €80 million. For business requiring high limits, such as project cargoes, and new internet-based facilities. He added: “We will continue to develop the company’s status by moulding our service to clients to reflect their attitudes and goals, and we will also press ahead with our development plans for key geographical areas such as the Gulf and Asia.”
RIMS backs new liability bill and it looks to the create a storm at its annual conference
The Risk and Insurance Management Society (RIMS) announced yesterday its support of legislation that would amend and expand the Liability Risk Retention Act (LRRA) to include commercial property insurance. The bill was reintroduced by Rep. Dennis Moore the measure, (H.R. 4802, the “Risk Retention Modernization Act of 2010”) marks the second consecutive congress that Rep. Moore has led efforts to extend the LRRA’s reach to cover commercial property insurance to address potential capacity shortages. The LRRA permits Risk Retention Groups to self insure risk on a group basis and create Risk Purchasing Groups to allow insurers to market commercial insurance on a group basis. “The new legislation, if passed, would provide another critical venue for insurance purchasers to secure commercial property insurance,” says Scott Clark, RIMS board member and risk and benefits officer for Miami-Dade County Public Schools. “Such an option can make insurance more affordable, especially when natural disasters in some U.S. regions have made it more difficult to purchase commercial property insurance. Many liability risks are related to property owned by business entities and non-profit organizations, and this bill will enable those businesses to obtain coverages that might not otherwise be readily available.” RIMS has also announced it is to stage a special session on the threat from solar storms at its annual conference in Boston next month. It said the threat posed by solar storms to the power and energy supplies across the world in 2010 has already been identified by the US Department of homeland Security and it is to discuss the scale and scope of the threat and how it could be mitigated
Regulations starting to bite for Lloyd’s and London players
The Chairman of specialist professional services supplier to Lloyd’s and London market firms, Ambant has warned the level of regulations being imposed on the industry is now greater then many had feared. Philip Grant said the firm was receiving enquires from it clients over what they needed to do to meet the greater demands of the regulators and in particular the UK regulator the Financial Services Authority (FSA). “There have been two recent Dear CEO letters from the FSA that show that the regulators are taking an even tougher stance than the market was originally expecting,” he said. “The first highlights issues surrounding client monies – an ongoing control issue – and the other focuses on brokers’ balance sheets and whether or not they are genuinely robust. The result is that regulated firms have an increasing need to understand what this means for them – before ARROW visits take place. Such are the changes that Ambant said it had now created a new dedicated business practice to help brokers and underwriters to respond to increasingly rigorous scrutiny from the FSA.
Top jockey in bad fall after night out with insurance market
What a difference a day makes. Markel held a very successful charity pre-Cheltenham Festival race night at their Leadenhall Street offices on Wednesday with guest of honour Sam Thomas one of the country’s leading National Hunt jockeys who is sponsored by the underwriter. Mr Thomas joined a panel of experts to answer questions from underwriters and brokers and give their insight into next week’s festival which is the high point in the jump racing calendar. To his credit Mr Thomas stayed until the bitter end answering the questions from eager market figures seeking to get an inside track on what to back. Following the event he headed from London to Bath where next morning he was out on a conditioning ride on one of top trainer Paul Nicholls’ runners. However on the last of six jumps his horse fell. He was injured, needing to be airlifted to hospital. He was found to have a hairline fracture of the T1 vertebrae which rules him out of the sport for at least six weeks and put an end to his hopes of glory at Cheltenham where he was due to ride at least one favourite at the festival and had a very good outside bet for the flagship Gold Cup. The news took some of the gloss off of the Markel evening which raised nearly £7000 for the Riding for the Disabled Association, one of the organisations supported by a Cheltenham charity song, which has been recorded for the event with the proceeds going to a range of charities with links to the Sport of Kings. Both Sam Thomas and Channel 4’s racing presenter Derek Thompson, who hosted the night, lent their vocals on the song and appeared in the accompanying video.
Jon Guy
Editor
Global Broker & Underwriter
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