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London market adopts a more hands-on approach - 21/04/09
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The world trade downturn has highlighted the different ways of doing business in the main insurance centres, but is also bringing some of the approaches associated with the Norwegian market into London.
The Norwegian market is associated with a ‘hands-on’ approach to underwriting as opposed to the more commercial stance at Lloyd’s and in the London market.
However, some leading insurance market participants believe that the underwriting culture in London is itself in transition and beginning to adopt some of the approaches to business traditionally associated with Nordic insurance providers.
Greek marine consultant Christina Kalimbassieris, who has extensive contacts with both market as the managing director of the Kalimbassieris Maritime, says that changes are afoot as the downturn continues.
Ms Kalimbassieris says that this change in attitude was in evidence before the present shipping slump, with London underwriters becoming much more involved in the claims process and with client service. This is becoming particularly acute as underwriters are pressured to lower premium levels amid falling vessel values.
“Over the past few years, we have seen signs that London underwriters are gradually beginning to adopt a similar mentality to that historically associated with Norway,” she contends.
“The current financial crisis may see London underwriters moving more towards the Scandinavian model. The new challenges underwriters face are likely to cement the need for them to become far more involved, or at least informed, about issues that are happening on the ground in the claims handling process.”
Underwriters are also having to deal with collapsing vessel values across the shipping spectrum, with capesize bulk carriers bought for $150m last year now typically fetching in the region of $45m. An early 1990s-built tanker worth $25m a year ago will now command as low a price as $12m. And, with banks unwilling to lend, further downward pressure is expected on ship values despite improving freight rates.
“The risk still needs to be adequately covered,” warned Ms Kalimbassieris. “Both Cefor and IUMI are reporting increases in claims levels. As replacement values fall, repair costs have not fallen at anywhere near the rate of ship values.”
Kalimbassieris Maritime has seen costs in the Black Sea and east Mediterranean region overall drop by around 10%-15% since November last year, and in Turkey by 25% in some yards. The factors behind this are a drop in steel prices, some reduction in personnel costs and increased competition between yards because the number of newbuildings has dropped.
“Insurers writing a policy on the basis of today’s ship values need to be on top of more technical details to manage this mismatch,” she adds. “They also have to consider repair prices today and also into 2010 and 2011 when repair costs may rise again.”
So how are London underwriters changing? According to Ms Kalimbassieris they are moving towards using service providers and technical consultants to gain knowledge especially around issues related to the repair market, such as availability and pricing techniques.
Kalimbassieris Maritime over the last two decades has expanded geographically, with the establishment of four overseas offices in Romania, Bulgaria and, in the last year, Turkey.

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