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ANALYSIS | INSURANCE & COMPLIANCE


“Compliance has become much more open and transparent. Matters are not being resolved with a case of Marlboros anymore.”


Captain Andrew Kinsey, Allianz


result of the massive explosions and fires at the Chinese port of Tianjin in 2015. Sean M. Dalton, head of marine underwriting at Munich


Re North America and chair of the cargo committee at the International Union of Marine Insurance (IUMI), said: “In project cargo there have not been any major losses or natural catastrophes that have driven changes. However, the notable losses in other sectors have made the industry more aware of the risk in aggregation of value,” hence the insistence of most underwriters on DSU coverage. “Underwriters have learned lessons from small losses, even near misses,” said Dalton. “Te complexities of project cargo, loading and transportation change from project to project, but there is good risk engineering in the segment. Survey warrantees are essential, and there are high-quality surveyors.”


He also noted a change in claims as the market soured.


“When demand went down, claims went up dramatically. People were trying to recover from insurance what they were not making in business. In a strong market most people tend only to make claims for substantial losses. Smaller losses they tend to work out themselves. But when markets are down you find higher claims because some people tend to use insurance to try to recover their business.” Tere were also several high-profile losses in the past ten


years, including 2010’s Deepwater Horizon drilling rig explosion in the US Gulf, as well as non-industrial casualties such as the Costa Concordia cruise vessel tragedy in 2012 and several shocking containership fires and strandings. Even so, WTW’s Austen said he is positive about the financial robustness of marine insurance, and in particular the heavy lift sector. “Te resilience of the financial backing of the insurance sector is such that event-driven market reactions to losses like those are not anywhere near where they were in previous decades.” As an example, there was not a huge spike in rig premiums after the Deepwater Horizon disaster, even though a full-limit check was written. “One of the lessons learned from that loss was that some of the same underwriters had policies with several of the companies involved,” which concentrated the risk rather than diversifying it, Austen recalled. “Te Costa Concordia was a USD2.5 billion wreck-removal loss. You might think that would have a market-driving impact. But the industry can bear the loss and move on.” He also noted that there has been no major spike in premiums or reduction in capacity as a


34 | HLPFI10


Shifting focus An important development in the last ten years is the increased focus on compliance with anti-corruption laws and practices. 2010 saw criminal penalties of more than USD156 million, plus USD80 million in civil disgorgement, interest, and penalties, issued against Panalpina and five oil and gas service companies and subsidiaries for fraudulent activities it had undertaken between 2002 and 2007. In a separate development, during 2017, the UK’s Serious


Fraud Office (SFO) secured convictions against F.H. Bertling Ltd and six individuals for making corrupt payments to an agent of the Angolan state oil company, Sonangol. “Responses have been variable and diverse, but there has been a noticeable change. Our clients have stringent internal compliance controls with due diligence on counterparties and contractors,” said Austen. At the granular level, Capt. Kinsey of Allianz concurs.


“Compliance has become much more open and transparent. Matters are not being resolved with a case of Marlboros anymore. Tings have changed a lot for the better.” And the experts agree. “Overall there is no question we


have seen more concern and more investment in compliance in all communities,” said Alexandra Wrage, president and founder of anti-corruption business alliance TRACE. “In project cargo, the reputation issue has been leading this. In other sectors it has been the legal risk of prosecution, but because heavy lift and project cargo are high-profile sectors, being seen as meeting compliance standards is a competitive advantage.” Historically corruption has been different in project cargo. It’s not so much petty graft on the waterfront as higher level


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