The session, entitled Marine Insurance – the impact of September 11, was chaired by Luke Readman from the UK P&I Club. The team of speakers comprised John Fawcett-Ellis, INTERTANKO, together with Hedley French and John Garthwaite from Jardine Lloyd Thompson Risk Solutions.
John Fawcett-Ellis began the session with a presentation on the insurance related activities of INTERTANKO and in particular post September 11. An overview was given of the work of the Insurance Committee. It was emphasized that the committee members were
actively engaged in insurance matters on a day-to-day basis. This knowledge of the insurance markets meant that they spoke the same language as those engaged in the insurance industry
, which helped to break down barriers and aid a constructive dialogue with industry counterparts.
Particular attention was given to the work of the Committee with regard to the proposed changes in the international oil spill liability and compensation regime and the close cooperation between INTERTANKO, ICS and the International Group of P&I Clubs to ensure that the fundamental principles of the current regime
An account was given of the series of meetings held with representatives from war risk underwriters post September 11. INTERTANKO together with ICS sought to ensure that the underwriters were aware that shipowners were concerned about the disproportionate increase in rates compared to the little if any increased risk to shipping.
This was followed by a brief overview of war risks cover offered by the members of the International Group of P&I Clubs. The increase in top-up war risks cover to USD 200m was appreciated together with the express inclusion of losses due to terrorism in this cover. The International Group were receptive to the Committee’s wish for the clubs to provide war risks cover from the ground up.
The next paper was presented by Hedley French, who provided a comprehensive overview of the impact of September 11 on the insurance and reinsurance markets. Already prior to these terrible events there had been evidence of a hardening in the market plus the introduction of more restrictive terms, driven by a variety of factors including inadequate pricing, surplus capacity and low investment returns.
The New York City Partnership and Chamber of Commerce estimated that losses would be in the order of USD 52bn. This was over twice as much as the next largest loss, Hurricane Andrew, which was some USD 20bn. Statistics were shown for the losses estimated by the major insurance providers, initial estimates having been replaced by substantially increased estimates.
Significant new capital had entered the market, with some USD 9.6bn of start-up operations based in Bermuda. Other long term consequences included insurer insolvencies, reinsurer failures and sabotage and terrorism non-concurrency.
In conclusion increases in premiums had been felt across the board with some sectors suffering massive increases of 100 percent and more.
The concluding presentation was made by John Garthwaite, who focused on the impact of September 11 on the P & I market. Three questions were posed: What reinsurance capacity will be available to shipowners through the P&I clubs in the post September 11 reinsurance market? At what price? How much risk should shipowners underwrite? It was felt that while there had been a 28 percent increase in the clubs’ reinsurance costs, rates were still nowhere near the rates which had prevailed during 95-98 and they were unlikely to reach such levels.
Lloyd’s capacity had increased but capacity to clubs had reduced. There were now new players in the reinsurance market that did not have the history of losses and were therefore able to offer competitive rates. It was thought that there was capacity in the market for the Group program up to USD 1.5bn and clubs might need to retain some $100 million. The cost of this could increase by some 30 percent with an increased excess point. The increase in rates meant that it was now more attractive for shipowners to underwrite a greater share of the business themselves.
Source: INTERTANKO News