The Tesco Effect

Something like this is going on also in the ports and terminal sector. One container in eight is moved by the Hutchison Port Holdings group one way or another, all around the world. Add all the other large chains of terminals together (a list of perhaps ten organisations) and you can confidently say that five containers in ten are moved by such organisations.

For insurers this scale of risk is not easy to cope with. Traditional marine insurance was the province of not particularly plutocratic insurers with relatively modest amounts of capital to dispose of. The traditional mutual insurer of the industry, the TT Club, has a free reserve worth around the new price of ten or fifteen post-Panamax cranes.

Other fixed market insurers have in theory much larger pots of capital, but they tend to devote relatively little to the insurance of risks such as ports and terminals. There is always a safer sector of insurance to which they are happier to devote the greater part of their capital.

Yet there are at least 5,000 ports and terminals in the world which are large enough to claim the attentions of the risk managers and insurance industry. The vast majority of these are relatively quiet, relatively small operations, struggling, some of them, for a meaningful role or throughput in the life of the modern industry. But insurers probably prefer them as risks.

On all the traditional measures of volatility and ease of risk management they are preferable.

As for the larger and getting larger groups, a future of self-insurance looms, captives and other retained options. When you get a lot larger and a lot wealthier than your insurer, why do you need to swap lowish level risk with them? A question that Tesco long ago answered to its own satisfaction by effectively retaining its own risks for many areas of its business.