A shift in insurance sentiment
Signs of repositioning are emerging in the insurance market after a largely uneventful spell.
Competition for the major ports and terminals accounts is sharpening, although market sources do not expect any earthquakes, in cover terms, as yet. Of course, those terrible real earthquakes in Chile, Japan and New Zealand have been the big talking point, and as the January 2012 reinsurance renewals approach, nervousness will heighten.
An indication that port clients are battening down the hatches has come with reports that a two-year deal covering liability and physical damage to handling equipment has just been agreed by International Container Terminal Services Inc, effective July 2011. The arrangement is believed to have been negotiated via London broker Tysers with participants in the London company and Lloyd’s markets, led by RSA.
In light of what was a steady or slightly weakening market until the start of 2011, almost all contracts signed in recent years have been for periods of 12 months.
A longer deal looks to be a hedge against reinsurers – who have been hit by contingent business interruption claims of $1bn from General Motors alone – pushing up their rates next January, with the consequent pressure on the direct insurers to seek higher premiums.
With its reported two-year decision, the Manila-based port manager has dipped quite a big toe in the water – it is involved in the operations and development of 22 terminal and port projects in 17 countries and has lately been on the acquisitions trail with an offer for Singapore-based Portek International – and could start a trend.
Observers said it seems likely that ICTSI will have accepted a break clause in the insurance period should the loss ratio reach a certain point.
Market interest has also been high in the renewal of physical damage cover for the mighty Hutchison group, which has for some while been placed by Marsh with Insure London, which also boasts DP World in its portfolio.
Lloyd’s consortium Wavelength is another big player and serves AP Moller (which is reported to be revising its broking relationships by reducing Aon and Marsh participation in favour of Willis) among other clients, and the TT Club enjoys strong loyalty from its members on the liabilities side, looking after the needs of Hutchison among many others.
A Lloyd’s market source noted that underwriters have been revising their catastrophe modelling criteria after various costly experiences. In short, underwriters want their dollar to work harder for them, and those with top-notch rating security will drive a hard bargain with the clients. Even so, when quoting rates underwriters are expected to show understanding to port businesses with good claims records.
Meanwhile, shipowners’ enthusiasm to build giant containerships, coupled with general inflationary trends, is loading more risk onus on to crane operations, as units that a short while ago cost $6m are now likely to sport price tags of up to $10m.
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