The Insurer

In this relatively small insurance segment, claims have been mounting, especially for bodily injury and handling equipment mishaps. The figures have deteriorated noticeably in the last couple of years, according to London experts in the sector, and the TT Club has admitted feeling the pain.

Forecasting an underwriting deficit for 2008, the mutual has already begun refusing to renew some business. A new strategy agreed by the board for 2009-2011 includes “a continuing but much reduced exposure to more volatile property and handling equipment risks”. For 2009, as in 2008, a claims inflation factor of 5% will apply to most member premiums, but for port and terminal members, this will again be 10%.

That is why many brokers have been advising their clients with January renewals to tie up the deals as soon as possible, before premium ideas harden further. With banks fearful for financed assets of every kind, A-rated providers will feel confident to charge more, because negative outlooks have been peppered around the insurance sector by ratings agencies, which indicates that more insurers will be downgraded than upgraded in the next two years.

After the unexpected announcement of third quarter losses at Swiss Re, the world’s largest reinsurer and which has a stake in marine, Andrew Cox, a partner at consultants Lane Clark & Peacock rightly said of the wider market: “Recent events, including the problems at AIG [the giant insurance group bailed out by the US Federal Reserve Bank in September], have taught us that no insurer is too big or too diversified to fail.” The bigger the insurer, the more likely it is to have dabbled disastrously in complex derivative transactions. AIG was brought low by its financial products division, but its core insurance operation, which includes an important role in the ports sector, has been considered sound all along, and AIG is still very much in the ports game.

Commercial property losses generally have been rising since 2004, which again presupposes a fightback against low rates by insurers. As to liability cover, ports operators must continue to pay for high insured limits, because although trade volumes are slowing, facilities still have to deploy big cranes to handle big ships, and any ill-fortune or negligence opens the door to big claims.