Issue 36 - Winter 2005
Tullio Biggi (left) succeeds Aleco Kairis (right) as Chairman of the UK P&I Club
|
|
New Club Chairman
Mr Tullio Biggi, President of V.Holdings, was elected Chairman of the UK P&I Club at the Annual General Meeting in Bermuda on October 17th. He succeeds Mr Aleco Kairis of N.J. Goulandris, who steps down after five years in office.
Mr Kairis has spent his career with London-based Greek tanker and dry bulker operator N.J. Goulandris. He joined them in 1970 and was made a director two years later. He was elected a director of the UK Club in 1988 and Deputy Chairman in 1993, before becoming Chairman in 2000.
Four new Directors have joined the UK Club board: Anastassis Margaronis, Director of Diana Shipping Services S.A. of Athens; Amir H. Azizan, President and CEO of American Eagle Tankers Inc, London; Sergey Frank, President and CEO of OAO Sovcomflot, Moscow; and Nikolaos Inglessis, Director of Samos Steamship Co, Athens.
For more details of our new Directors, click here for an article profiling these latest additions to our Board.
The AGM also considered some changes to the Rules for the 2006 policy year. These rule changes were made for clarification and details of them, including explanatory notes, can be found in the appendix to circular 14/05 Annual General Meeting. This circular is published on the Club website together with all the other recent Club circulars.
......................................................................................
Background to the 2006 general increase
The volatility of claims, investment markets and other external factors are the many elements that set the challenge of charting the course for the general increase each year. Recent unpredictability in the claims development has been particularly notable. Taking all matters into account the Board concluded that an increase in premium levels is required and approved a general increase of 12.5% for the 2006 policy year.
Shipowners know the freight and other markets have changed dramatically of late, but so too has the Club's claims experience. Members may recall the Club's circular in October 2004, which identified the volatility in claims performance. As tables below illustrate, claims costs increased sharply in 2002, dropped in 2003, but even in the early months of 2004 Members were warned that 2004 would be another heavy claims year.
By the end of the Club financial year on February 2005 – at the height of the shipping boom – we reported the 2004 policy year incurred claims were running at near record levels and are forecast to go higher than the 2002 policy year. The latest figures which were considered by the Board on 17th October 2005 have confirmed this position.
The mutual equation requires us to balance the incomings and outgoings. Many clubs are realising that the low return environment in investment markets of the recent past has meant a greater focus on achieving a combined ratio of 100 per cent. It is clear that the premium levels of 2004 were insufficient to cover the incurred and forecast claims for that year. Even after setting the general increase for 2005, premiums are still lower than the level needed to cover the expected level of claims and other outgoings, which can reasonably be expected in 2006.
The table showing "policy year incomings – outgoings" shows the trend in the Club's general increase policy is closer to achieving premium levels consistent with anticipated future claims and other outgoings and ensuring adequate capital to support the business. An improvement on 2004 is the current expectation, albeit one that could easily change with the impact of actual claims over the rest of the year.
Understanding the future performance of claims is an important part of the Club's financial planning. The Managers have identified five essential factors which drive the overall claims experience of the Club – attritional claims, large claims, increasing commercial pressure and commodity prices, the shipowners' legal liability environment and external events. |
|
|
|
This latest snapshot of the financial development of the last six years charts underwriting, claims and expenses but ignores the benefit of investment income. The total paid outgoings includes reinsurance premiums, management expenses and costs, as well as Members' claims. |
Attritional claims Attritional (or routine) level claims under $500,000 have been relatively stable in the past four policy years. In that period the total value of such claims in each policy year has fluctuated between $100 million and $120 million.
Active pursuit of improvements in claims performance through the activities of dedicated ship inspection and loss prevention functions, a more stringent policy on ship quality in underwriting and the re-establishment of realistic deductibles have all contributed to this stable trend. The implementation of new regulations and standards such as ISM and Port State Control inspections have had a further improving influence on ship standards.
Large claims Whilst attritional claims seem to be relatively predictable in both the total cost and their development over time, large claims follow neither pattern. The graph below shows the cumulative development over time of incurred claims for policy years 2001 to 2005.
With the difference between the best year, 2003, and the worst, 2004, being just over $60 million, the impact of the very large claims becomes apparent. 2002 and 2004 policy years had a considerable number of Pool claims in the collision/navigation and pollution categories. 2004 was a heavy claims year not only for this Club, notified claims by all clubs in the International Group are running at record levels. In contrast, in 2003 the Club has only had one notified pool claim. The main reasons behind this volatility are examined below.
Commodity prices Shipping industry prices have been affected by the boom in international trade. A broad range of commodity and shipping indices have risen markedly in the past two to three years after relatively stable performance in earlier years. Since October 2001 the Economist's index of key traded commodities has risen by 76 per cent. A review of prices of the key bulk commodities shipped internationally by our Members also bears this out (see below). Such increases impact directly on owners' claims exposure, and indirectly on freight and hire rates.
|
|
Commercial pressure Perhaps most importantly, with substantially higher freight and hire rates, there is increased commercial pressure on vessel operation. We have seen collisions arising from high speeds in confined waterways, property damage in ports where vessels did not wait for tugs or pilots, personal injuries where crew have worked longer hours and a series of other accidents where maintenance has been delayed or crews and equipment are pushed to operational limits. Readers who have seen the Club's highly praised loss prevention DVD, titled No Room For Error, will have seen realistic examples of how increased commercial pressure is often a root cause of a claim. It should therefore come as little surprise that changes in the freight market have over time translated into higher P&I claims, and subsequently the Club's need for premium adjustments.
Liability environment There is third party evidence for increasing costs of liability for shipowners. General liability claims are estimated to have risen up to twice as fast as gross domestic product.
A number of existing liability conventions are under review as pressure is exerted on the maritime community to provide increased limits, e.g. the Athens Convention. Political pressure has led to increasing demands for both civil and criminal legislation to penalise operational accidents, particularly pollution. That same pressure has led to higher standards for compensation and repair.
|
The above commodity price graph is an index tracking the annual average prices of oil, wheat, coal, steel plate and scrap. |
|
This increasingly onerous environment increases not only the actual claim but also the associated costs of legal defence, technical fees and the like as the cases become more complex.
Personal injury claims illustrate this trend. In 1999 personal injury claims overtook cargo claims as the largest single category of claims by value. Their average cost has risen by a quarter over the past five years.
A number of contributory factors have been identified in this area. Crew contracts have become increasingly onerous over the past decade. Advances in medical technology have increased the scope for treatment, intensive care and long term rehabilitation of sick and injured crew. Increasingly sympathetic courts may improve the settlements made despite traditional legal protections of limitation. Indeed there are efforts by local courts to supersede devalued or outdated liability limits under the law with more modern compensation awards.
External events There have been a number of significant events impacting on the world's insurance markets in the past few years, e.g. Asian tsunami, Hurricane Katrina, floods in northern Europe. Fortunately, few of these have directly affected our Members. However, there have been indirect effects. Firstly, the dislocation of commercial infrastructure and activity interrupts normal business and requires various contingencies, e.g. diversion of ships and cargoes increasing costs and increasing the possibility of claims and disputes. Secondly, the cost of reconstruction and compensation borne by insurers drives the cost of reinsurance higher.
Conclusion Balancing premium income with claims outgoings is a fundamental requirement for any insurer. Mutuals like our Club are no exception to that rule.
Our Club decided when the latest corporate plan was formulated that it was no longer feasible to expect gains from investments to offset underwriting deficits. That view has been reinforced by the recent volatility in investment income for all clubs. Hence, the decision to move towards a combined ratio of 100 per cent (see below).
The UK Club has a considered financial plan developed with the Board and reviewed by both the Financial Services Authority in the UK and Standard and Poor's. That financial plan incorporates the claims factors reviewed here together with regulatory demands, the competitive environment, financial rating agency standards and the future commercial development of the Club.
That planning process has set financial targets for solvency (exceeding regulatory minimum standards), underwriting discipline (a combined ratio of approx 100 per cent), security (maintaining an S&P 'A' rating) and strength (a free reserve ratio in excess of 135 per cent).
A number of areas for action have been set so as to achieve those targets. The Club continues to play close attention to costs, the efficient and economic structuring of reinsurance and an effective investment policy. However, the establishment of premium levels consistent with the anticipated volume and value of future claims and capable of ensuring adequate capital levels to support the business is the most important. Hence, the 12.5 per cent general increase for the 2006 policy year.
......................................................................................
Regional developments
The Club is giving an increasing role to its regional representative offices in New Jersey and Hong Kong offices for the delivery of service to its Members.
These changes are being made to ensure that the Club can continue to provide first class service aligned with the needs of its membership across the major time zones, by offering Club members strength in depth in those offices.
Charles Fenton, COO of Thomas Miller P&I Ltd., explained "We believe that a strengthened claims centre in New Jersey and Hong Kong supported by regional offices in different time zones and locations will offer a stronger service to Club Members in or trading to the region."
"In order to continue to deliver a first class claims service consistently, to be able to recruit and train competent staff and to offer those staff a strong career path, the expertise needs to be concentrated in larger offices."
The continuing development of service quality coupled with maintaining financial strength is central to the Club's three year corporate plan. As part of this corporate plan the Miller offices in Miami and Taiwan have been closed and the work performed by those offices transferred to New Jersey and Hong Kong respectively. All members affected by the changes were consulted in advance to ensure their servicing requirements continue to be met.
Since 1996, the UK P&I Club has provided its Members with an unparalleled network of managed offices around the world. These offices operate in addition to the traditional network of correspondents employed by the International Group P&I clubs. Indeed it both complements and supports that service to Members by providing greater levels of authority and specialist expertise in the regions where Members need them.
Both the regional offices are fully integrated into the Club's IT systems enabling access into a Member's claims files regardless of the location of the incident or primary case handler.
Asia Pacific In the last twelve months the number of claims specialists in Hong Kong has increased to provide staffing levels comparable to New Jersey. The existing claims team has three additional executives who provide a strong combination of seagoing experience and legal qualifications. The growth in trade with China has been mirrored by a growth in claims incidents with an increase of 40 per cent in the number of claims in mainland China in the past three years.
The Club has strong representation in China with its regional office in Hong Kong plus two additional representative offices in Shanghai and Beijing. Not only does this enable the provision of claims and advisory service to Members operating in and into the country, but it makes the Club well placed to build essential relationships and understanding.
The Club has cooperated closely with the tightly knit Chinese maritime community, including the Ministry of Communications, maritime courts, maritime universities and training establishments, the Maritime Arbitration Commission, the China Classification Society and the Maritime Safety Administration. The Club maintains a close relationship with the principal maritime universities in China – Dalian and Shanghai – which supply the majority of shipping company and legal personnel for the maritime community.
In recent years the Club assisted the MSA develop its plans for a China domestic oil pollution fund, in addition to China's accession to the Civil Liability Convention.
The UK Club is the only P&I club officially authorised as a claims handler in the People's Republic of China. Also, it was the first club to have Club letters of undertaking accepted in that country.
It has held seminars for the Club's non-Chinese members on Chinese maritime law and claims handling as well as sponsoring regular top-level conferences – the 2005 Shanghai International Maritime Forum – with the China Maritime Safety Administration (MSA). The fourth such conference was held in July. Details of these regular activities can be found on the Club Events section of the Club website – www.ukpandi.com.
The Thomas Miller (Asia-Pacific) network of offices is led by chairman Herry Lawford and regional director Christopher Brown. The three recent additions to the team were Peter Lau, Christopher Roberts and Helen Huang. Peter joined Millers from an international law firm after a previous seafaring and academic career.
Christopher is another experienced seafarer who joined Millers in the UK in 1997 and provides specialist expertise in tanker claims. A graduate of Dalian University, Helen's experience was gained as a correspondent in North America and an insurance company in China.
In October, the UK Club won the Best Marine Insurance Provider Award for the third year in succession at the Lloyd's List Maritime Asia awards dinner.
Japan The Club's Tokyo office, established in 1989 is unique. It is the only office managed by direct employees of the Club rather than Thomas Miller management staff.
The Tokyo office is a formal branch of the UK Club. Led by Motohiro Sugiura the office provides service and liaison to the Club's substantial Japanese membership. In 2005 approximately 19 per cent of the Japanese oceangoing fleet was entered with the Club. Moto's highly experienced team also provide invaluable support for the many Club Members whose ships trade with Japan.
The Japan branch has been recommended for quality approval under ISO 9001:2000. Moto's team are to be congratulated as at the end of his visit the quality assessor from Lloyds Register commented that he had never completed an initial assessment before without finding a single non-conformity.
Americas Thomas Miller (Americas) Inc – (TMA) handles claims for Club Members based in North and South America and provides a claims and advisory service for Club Members trading to the region. TMA is led by Mike Jarrett who moved to New York in early 1993, having previously served as syndicate manager in Millers London office. Three new claims handlers have joined the office in the last 12 months, Amy Lovseth (an attorney), Lauren Wilgus (liner shipping experience) and Jana Byron (an attorney). In addition, in October, Martyn Haines moved to TMA to take up a Senior Claims Director role for a three year secondment. Previously, Martyn had been Area Director of the L2/L6 area group of claims handlers in London for three years.
The United States' position as the world's biggest single exporter and importer of goods makes trading to or from its ports an essential feature of our Members' activities.
Many Members from both within and outside the USA are concerned about the potential liability exposure that may arise when trading there. The complexities of its Federal and State court system can appear daunting.
The TMA staff not only provide relevant legal and technical expertise but also develop contacts with various government and other agencies e.g. US Coast Guard, Immigration and Naturalization Service, US Customs Service and the Department of Homeland Security.
TMA actively participates in Member's training initiatives and also attends Member's oil spill drills.
New Jersey re-location The Club's regional representative office in the United States, Thomas Miller (Americas) has moved slightly further along the New Jersey shore.
With effect from 29th November 2005 their address and contact details are:
Thomas Miller (Americas)
Harborside Financial Center
Plaza Five, Suite 2710
Jersey City, New Jersey 07311
Telephone: (201) 557 7300
Fax: (201) 946 0167
All numbers and e-mail addresses are unchanged.
Making Contact With these new arrangements in place the UK P&I Club continues to have the most extensive international network of dedicated offices of any Group club with over 40 P&I claims executives located in Piraeus, Singapore, Hong Kong, Tokyo, San Francisco and New Jersey. In addition, the Club has its own representational offices in Shanghai and Beijing.
The range of expertise available across the Club's international network can be viewed in the Making Contact section of the UK Club website: www.ukpandi.com. The telephone and e-mail contact details of each executive together with a photograph and biographical details is provided.
......................................................................................
Renewal Online
Members and their brokers are currently accessing their 2006 renewal documentation via the Club's Renewal Online facility within the Members' Area of our website.
Members can interactively compile copies of their Loss Record (as at 20th October 2005). These onscreen reports can be interrogated for claims details. Ship Report provides a fleet listing specifying key details of each ship including entry status, period of cover and premium. The Terms Summary provides a listing of the specific clauses, terms and deductibles applicable for each ship in the fleet.
These documents can be compiled as a 'pdf' file and read on screen with Adobe Reader. Such files can also be saved to your own computer and copied to other colleagues or printed off as a hard copy.
This service complements the Club's ClaimsTrac service which provides powerful analysis and reporting on a Member's claims history. The complete claims record can be downloaded as data for local analysis by Members on a spreadsheet. Alternatively, specific reports can be downloaded, providing detail on the most recent claims records, claims performance of individual ships or policy years.
The online services include a ship inspection benchmarking service. This compares the results of ship inspection data on a Member's ships with the overall data for either the total inspected Club membership or the relevant trade sector within that group.
The combination of these flexible and immediate online services provides a powerful tool for Members to review in some detail the information necessary to progress the forthcoming renewal of their entry with the Club.
Renewal Online is accessible with your existing username and password. If you do not have a username and password, simply visit the Members' Area and click Register Now. The registration process is a short series of guided steps. The only information you will need to hand is your name, company name and contact details plus the name of your regular Club contact.
Anyone experiencing difficulty registering for or accessing the UK Club's online services should contact Nick Whitear (tel: +44 20 7204 2334) or by e-mail nick.whitear@thomasmiller.com
Frequently Asked Questions
|
Q. My user ID and password don't seem to work? A. The commonest problem is a mistake in entering the ID and password. They are case-sensitive which means that the correct capitalisation as well as spelling is needed for the details to be accepted.
If you have forgotten your password you can ask for your password prompt to be sent to you as a reminder. If you still cannot recall the password or you think there is some other fault with your login identity call Nick Whitear at the London office. |
Q. I can get into the online services but I can't see any menu on my screen? A. A number of Members and brokers have secure firewall systems to prevent their IT from attack via the internet. These systems block the mini-program known as a "Java applet" which runs the menu from being received by your PC. Check with your IT supervisor if this is the case and ask if he can permit such applets to be received on the basis that the UK Club is a trusted supplier. |
Q. I have logged on to the Club's Member Area but I cannot find ClaimsTrac or Renewal Online on the screen. What do I do? A. Only Members and authorised brokers are provided with ClaimsTrac access. This is defined by the relationship box in the registration form. If it has been incorrectly filled in to describe the user's occupation rather than relationship with the Club e.g. some Members select Lawyer or Surveyor, then the ClaimsTrac function is not activated. Call your usual underwriting contact or Nick Whitear for this to be rectified. |
Q. Not all of our entered groups are showing on ClaimsTrac? A. Many Members have varying degrees of access permitted to their staff or departments for different business operations e.g. in the case of joint venture services. If you have a query about the fleets you are permitted to see you should call your usual Club contact. |
Q. How do I work on this information offline? A. The information displayed in reports and analysis within ClaimsTrac can be downloaded as a CSV file. This is a file of raw numerical data which can be opened by most spreadsheets such as Microsoft Excel. Look for the grey "Download" button. Click on this and you will be given the option to Open or Save the data in a spreadsheet format. Remember to select the correct option in the "Save as type" box that appears. |
Q. How do I know who else can see this information? A. ClaimsTrac has a menu option labelled 'Authorised Users'. Click on this and it lists all those non-Club staff who have access to that entry's claims information. If you have any query about anyone who appears on that list call your regular Club contact for clarification. |
......................................................................................
Profile of new Chairman and Directors
Tullio Biggi
V.Ships
After graduating from the Nautical College in Genoa, Tullio Biggi served on board a number of vessels until 1968 when he started to work in the Vlasov Group Headquarters in Monaco. There he held various positions in different departments and was nominated Director of Shipping Management SAM in 1978.
V.Ships was then formed in 1984 and Mr Biggi became Managing Director and subsequently President in 1987. In 2003, Mr Biggi was nominated President of V.Holdings Ltd. He holds a Bachelor of Economics degree from the University of Genoa, Italy.
V.Ships have been members of the Club since 1927. In October 1998, Tullio Biggi was elected to the board and in October of 2001, he became Deputy Chairman. Tullio now succeeds Aleco Kairis as Chairman of the board. |
MM |
Amir Hamzah Bin Azizan
American Eagle Tankers
Mr Amir Azizan was appointed President and CEO of American Eagle Tankers in April this year. Prior to this Mr Azizan was Regional Business Director of MISC and worked for the Shell Group of Companies previous to that for 10 years. He is a Council Member of Intertanko and the American Bureau of Shipping. |
MM |
Sergey Frank
OAO Sovcomflot
Mr Sergey O. Frank is President and CEO of OAO Sovcomflot. Mr Frank graduated from the Faculty of Navigation of the Far- East State Maritime Academy, Commercial School of the State Academy for Foreign Trade, the Faculty of Law of the Far-East State University. Since graduating Mr Frank has been actively involved in shipping business. For over six years Mr Frank occupied the top positions in the Far-East Shipping Company, including five years as the Executive Vice-President & Chief Financial Officer. From 1998 to 2004 Mr Frank served as the Minister of Transport of the Russian Federation. Mr Frank is President and Chief Executive Officer of OAO Sovcomflot. |
|
Anastassis Margaronis
Diana Shipping Services S.A.
Mr Anastassis Margaronis is Director of Diana Shipping Services S.A. Mr Margaronis joined Diana Shipping Agencies S.A. in 1980. He holds a Masters of Science in Maritime Law from UWIST (University of Wales Institute of Science and Technology). He is also president of Diana Shipping Inc, and a member of the governing council of the Greek Shipowners Union. |
|
Nikolaos Inglessis
Samos Steamship
Mr Nikolaos Inglessis, is Vice-President and Director of Samos Steamship Co. of Athens, of which he is a founding member. He began his shipping career in 1979. Mr Inglessis joined Pegasus Chartering Ltd of London in 1981 as a Director. |
......................................................................................
The Mission to Seafarers
The UK Club has made a Christmas donation to The Mission to Seafarers. This donation was in place of Christmas cards. This organisation cares for seafarers of all nationalities and creeds, in some 300 ports around the world.
The organisation maintains a network of chaplains, lay staff and volunteers who offer seafarers a welcome, friendship and practical and spiritual help. Details of their work can be obtained on the web at: www.missiontoseafarers.org and e-mail: pr@missiontoseafarers.org
Thomas Miller staff would like to wish all Club members and friends a happy and prosperous 2006.
......................................................................................
OASIS claims system wins award
The UK Club's electronic claims handling system, OASIS, developed by Thomas Miller, won the Legal Week 2005 award for "Best use of IT".
 The OASIS system triumphed over some powerful and much larger companies on the awards shortlist including BP, Banking Legal Technology Group, Cisco Systems, FMC Technologies and Virgin.
In the awards OASIS was described as "more sophisticated – and arguably more successful – than anything developed by a law firm or a legal software supplier, delivering serious value... to all of its major clients around the world."
The OASIS system converts all claims documents into an electronic format. This enables the claims file to be accessed by claims handlers across the Club's international network. Such accessibility facilitates international teamwork within the Club and provides a powerful support to Members.
It also provides the information that Members need to keep abreast of all their claims via the ClaimsTrac system. ClaimsTrac provides virtually real-time access for Members to monitor the progress of individual claims and interrogate that data to show claims performance in respect of individual ships, types of claim, changes in estimates or payments.
The latest development of the system is the Renewal Online service which enables Members and their brokers to access their renewal information electronically. Downloading renewal information enables Members to analyse it on spreadsheets and incorporate it into other management software.
Legal Week is a British newspaper for the legal community. Its website is www.legalweek.com
......................................................................................
UK Club News is published by
Thomas Miller & Co Ltd
International House
26 Creechurch Lane
London
EC3A 5BA
Tel: +44 20 7283 4646
Fax: +44 20 7283 5614
Editor: Nick Whitear
Tel: +44 20 7204 2334
Fax: +44 20 7283 8006
e-mail: nick.whitear@thomasmiller.com
|
MM |
Thomas Miller P&I Ltd
Tel: +44 20 7283 4646
Fax: +44 20 7283 5614
Thomas Miller (Hellas) Ltd
Tel: +30 210 429 1200
Fax: +30 210 429 1207/8
Thomas Miller (Americas) Inc
Tel: +1 201 557 7300
Fax: +1 201 946 0167
Thomas Miller (Hong Kong) Ltd
Tel: +852 2832 9301
Fax: +852 2574 5025 |
 |
|
|
