Neat little packages

The product offered by the London market is very comprehensive, says Martyn Lassman, a director with Lloyd’s broking group RFIB Group Limited. It is especially cost-effective for the bigger operators who have a particular need to get value for money.

A multi-sectional policy will usually cover marine liability, property and equipment, and business interruption. The appeal for the client is that it represents a one-stop shop, with one group of underwriters covering all the required risks, but with each separate risk having individual capacity limits.

Thus, if there is a very high aggregate amount of property (warehouses and structures) or equipment (cranes etc) to be insured, you could cover in excess of $100m of property and the same for equipment, alongside much smaller amounts of liability and business Interruption. To reduce the cost of the property and/or the equipment sections, the client may agree to purchase his cover with an agreed first loss limit from $10m upwards. This allows the underwriters to quote a separate price for liability, property, equipment and business interruption but still results in one final price offered to the client for his package policy.

For the larger ports or terminals we might see a package premium income to underwriters in excess of $1m over five elements of risk. Without that spread, a loss of say $250,000 under one section could mean an overall loss for an insurer of a single class; however, if that happens within a package, the underwriter is still making an overall profit. When the broker starts negotiating at renewal, he is able to argue that the underwriter is still making money, and would look to establish more favourable renewal terms averaged over the whole package premium: this may result in an unchanged premium rate or even a reduction.