The Insurer

Although all the old economic certainties have evaporated in the last few months, it is likely that ports insurance will hold steadier than most, and although there will be upward pressure on prices as investment returns shrink, there is unlikely to be any need for panic action. A large portion of cover in this sector is lodged with either the mutual, TT Club, or with Lloyd’s, or a combination of both. With the former carrier, its mutual and prudent nature ought to have provided protection against silly investments and thus against the remote need for any emergency supplementary call; and with the latter, the Lime Street market is said to have been much more tightly regulated in its business planning and general behaviour in the last half dozen years.

That said, brokers in the sector have been taking a close look at the existing format of cover and at the financial security of providers, just as they have for clients in neighbouring areas of activity. This is particularly the case where AIG, the mighty insurer that had to be bailed out by the US government, is concerned. AIG has continued to be under pressure post-rescue, with rival companies in some cases refusing to co-insure, despite assurances from the New York regulator that AIG’s property and casualty operation is well capitalised.

All this being said, the insurance market is feeling the same squeeze as other areas in terms of sometimes unexpected financial hits, and many underwriting businesses will be hard put to achieve a profit during the next couple of years. The failure of Yamato Life in Tokyo was a warning sign: the first collapse of a Japanese insurance company in seven years. That company was hit by the swift and drastic fall in stock prices stemming from the US subprime mortgage crisis.

Nor is it just the financial side that is inflicting damage: this has been rather a bad year for insured catastrophes, with hurricanes Ike and Gustav believed to have contributed to global claims totaling more than $40bn so far in 2008.