The Insurer September

When a major account moves home, as rarely occurs, but has happened with Hutchison Port Holdings withdrawing the majority of its placement with the TT Club, there are pluses and minuses on both sides.

Clearly the TT Club needs a great deal of premium and reinsurance to cover the substantial claims arising from costly incidents in today’s fragile quayside environment. While it is genuinely sorry to see a major constituent depart, the managers may well have feared that claims were beginning to plunge out of control. Like all the big insurers, the mutual has been putting a lot of energy into training and education aimed at reducing a variety of risks, from themes ranging from correct markings on docksides to procedures in tying up ships, all aimed at driving operational safety, particularly at container ports.

With the benefit of hindsight, it is easy to see that when Hutchison went into the open market by means of a tender, the result would be a swing away from mutuality – although it would be too harsh to speak of a clean break, because some of its residual covers stay with the club.

Some big claims in the past 12 months from the Hong Kong-based group may have felt rather taxing for the mutual – remember that by constitution it shares losses around all the members – but taking on Hutchison with a clean sheet has been appealing to the combination of Lloyd’s and company market entities that have become the new insurance home – even, it seems, at the rumoured “as at expiry” premium rates. There is a feeling that the claims record has a good deal of outsiders’ fault in it, and ought to be manageable from now on.

When you are handling a throughput of 66.3m teu in 47 locations, as did the Hutchison Whampoa subsidiary in 2007, alongside, to quote the company’s website, “related operations that span the entire logistics chain”, there is clearly scope both for resounding efficiency as well as for persistent claims.

Certainly, this account is a gorgeous feather in the cap of the relatively new property specialist Insure-London, led by former TT Club man Niels Aaskov, and for the separate Lloyd’s and company providers who will now underwrite the liability business of the ports group. It remains to be seen whether premium and deductible levels are sustainable, and if this is not the case, whether the same parties can afford to renew at similar rates a year from now.

For the TT Club, the switch has an interesting side-effect, in allowing it more elbow room to expand its logistics book and to seek the business of bulk terminal operators. The mutual’s portfolio was beginning to look a little top-heavy with ports and terminals accounting for 62% of business, even though the organisation is intensely proud of its ports membership.

The move brings to prominence the Insure-London facility, which is in the tradition of independent intervention in the sector, as an intermediary wholly owned and controlled by its principals. It acts as a managing general agent on products written on behalf of leading insurers.

Will other majors follow Hutchison’s exit? It seems unlikely. AP Moller and Dubai Ports World and its predecessors have been largely content to stay with the Thomas Miller-managed club over the years, while Hutchison has experimented before, taking a year out in 2002 to insure with Wavelength, a consortium backed by Lloyd’s underwriters. Even then it kept a toehold in the TT Club, which was processing claims from the back years.

It is worth noting that unlike its counterparts in the field of shipowners’ mutuality, which control 90% of the tonnage market, the TT Club is constantly challenged by strong commercial competitors, some of whom admittedly stay the course for only a few years.

Pricing is as ever the key element in all this, but the long-standing relationships built up by the club in its 40 years of existence still represent a powerful draw.