South­ern Africa has wit­nessed a steady in­crease in projects that re­quire cover for spe­cial and over­sized cargo in tran­sit from port to end des­ti­na­tion. A soft­en­ing ma­rine in­sur­ance mar­ket may how­ever be mak­ing the un­der­writer’s task more dif­fi­cult.

RISKSA Magazine - - FRONT PAGE - Do­minic Uys

St­ef­fen Sil­jeur, ma­rine un­der­writ­ing and busi­ness de­vel­op­ment man­ager at Mu­tual & Federal, ex­plains that a new de­vel­op­ment in the in­dus­try has been the no­table in­crease in re­new­able power gen­er­a­tion projects. “There have been more so­lar- and wind- pow­ered projects that have been tak­ing place in South Africa, the com­po­nents for which are mostly be­ing shipped in from abroad since they can­not be sourced lo­cally,” Sil­jeur starts. “The rest of Africa is also de­vel­op­ing more re­new­able projects but from our per­spec­tive, the big­gest drive seems to be lo­cally. The only real chal­lenge has been to make sure that the var­i­ous projects are cor­rectly un­der­writ­ten and what we at Mu­tual and Federal have done is to co- or­di­nate the var­i­ous com­po­nents for these projects in- house, from an in­sur­ance per­spec­tive. Our ma­rine cover for the com­po­nents com­ing in from China or Europe, ties in with our en­gi­neer­ing depart­ment, and we have done a lot to be­come a one- stop provider for these kinds of projects in terms of cover,” he says. CEO of Tradesure, David Le­clezio, also notes that the de­mand for new min­ing projects has been on the in­crease, and a sig­nif­i­cant num­ber of the ab­nor­mal loads that the com­pany has un­der­writ­ten are re­lated to new plant equip­ment and min­ing in­fra­struc­ture en­ter­ing the coun­try. “There is not nec­es­sar­ily a lot of this min­ing ac­tiv­ity hap­pen­ing in South Africa, but we have seen a lot of min­ing ma­chin­ery be­ing shipped to places like Zam­bia and

Mozam­bique. One of the ab­nor­mal load spe­cial­ists that we work with, Transcor, re­ports that they have been trans­port­ing around 450 to 500 ab­nor­mal loads per month and they get about 25 times more than that, in en­quiries,” he says.

Soft­en­ing in the mar­ket

While one can­not com­plain about an in­crease in busi­ness in one’s sec­tor, one weighty prob­lem has de­vel­oped from an un­der­writ­ing stand­point. Pe­tra Fordyce, head of ma­rine at Zurich In­sur­ance, tells RISKSA that the ma­rine in­sur­ance in­dus­try cur­rently finds it­self in a soft mar­ket cy­cle, putting the un­der­writ­ing process un­der strain. “Es­pe­cially with project cargo, your un­der­writ­ing needs to be sen­si­ble and you need the right level of­ex­per­tise. We are un­for­tu­nately see­ing less and less that the un­der­writ­ing for these projects is be­ing done wisely. There are a lot of ju­niors and in­ex­pe­ri­enced play­ers en­ter­ing the ma­rine in­sur­ance mar­ket and we are gen­er­ally see­ing a lack of ap­pro­pri­ate ex­per­tise,” she starts. Ac­cord­ing to Fordyce, ab­nor­mal loads are pre­dom­i­nantly linked to sub­stan­tial projects, and is­sues aris­ing from their trans­port in­evitably have a knock- on ef­fect into the project costs and li­a­bil­ity side. “So to get that cargo from point A to point B in a sat­is­fac­tory con­di­tion is ab­so­lutely vi­tal. With the eco­nomic pres­sure be­ing what it is at the mo­ment, we see that many clients are look­ing to save money wher­ever they can. It pre­dictably leads that many com­pa­nies will go with the cheap­est in­sur­ers and poli­cies, in­stead of the most sen­si­ble ones,” she says.

Fordyce at­tributes the in­flux of ca­pac­ity in the mar­ket to the fact that ma­rine in­sur­ance has al­ways been viewed as the sec­tor with the most prof­itable lines. “There are a lot of com­pa­nies en­ter­ing this sec­tor in or­der to di­ver­sify from the less prof­itable lines, like the mo­tor portfolios that have been ex­pe­ri­enc­ing a lot of dif­fi­culty lately. The bar­ri­ers for en­try into the sec­tor are per­cieved to be low, and it has re­sulted in in­creased pres­sure on our rates,” she says. Fordyce says that on Zurich’s side, the com­pany does not com­pro­mise on pric­ing for these poli­cies. “One can­not com­pro­mise on sen­si­ble pre­mi­ums and cover but as a large com­pany, we have the ben­e­fit of be­ing able to of­fer bet­ter value- adds and global sup­port, so we are still able to make a good case with clients on why they should be cov­ered by us.” The ef­fect of this soft­en­ing in this mar­ket is a ma­jor source of frus­tra­tion to other play­ers as well and Le­clezio points out that it has im­paired the abil­ity to ac­cu­rately un­der­write cover for the over­land trans­porters as well. “The big­gest chal­lenge here is quot­ing and in­sur­ing cor­rectly and there is a ma­jor prob­lem that creeps in when clients ( trans­porters) are mak­ing an en­quiry. They can give you the weight and di­men­sions of the cargo but they gen­er­ally don’t know the value of the cargo un­til the last minute. These clients now need in­sur­ance but they don’t know how much cover they need,” he says. “In the case of in­ter­me­di­aries, we’ve found that they of­ten do not take the time to gather all the in­for­ma­tion that they need for a proper val­u­a­tion. Part of the prob­lem is that a trans­porter and an un­der­writer can’t hold out on a quote un­til a client pro­vides all the re­quired in­for­ma­tion, be­cause the com­pe­ti­tion in the mar­ket is such, that this client can sim­ply take his busi­ness to some­one who of­fers a looser ap­proach to un­der­writ­ing the risk and a lower price,” he says. An­other in­dus­try in­sider com­ments that the short lead times re­gard­ing cargo in­for­ma­tion has meant that some trans­port com­pa­nies do not have enough time to ac­quire the proper per­mis­sions. “We have seen more than a few ab­nor­mal loads be­ing trans­ported with­out li­cences be­cause they sim­ply didn’t have enough time,” he says.

Ed­u­cat­ing the in­dus­try

“We have cov­ered our share of ab­nor­mal loads go­ing to the ma­jor coal- fired power sta­tions un­der con­struc­tion. We have also seen the in­crease in ab­nor­mal cargo in­tended for min­ing projects in sub- Sa­ha­ran Africa. The modes of trans­port have ob­vi­ously changed very lit­tle over the years but project cargo and the nec­es­sary skills to man­age their risks have cer­tainly be­come more com­plex,” says Andrew Walker, AIG’s ma­rine loss con­trol man­ager for Africa and the Mid­dle East.

“We have found that ev­ery sin­gle as­pect of the trans­port needs to be scru­ti­nised, from the lash­ings and trans­port used, to the port where the cargo is off­loaded. It has hap­pened be­fore that the project cargo could not fit through the exit gate of the har­bour,” he continues. Walker states that, along with that, risk man­age­ment has started tak­ing on an in­creas­ing role. “Ob­vi­ously get­ting these project loads to their des­ti­na­tion in­tact and on time is be­com­ing more and more im­por­tant. Get­ting the route planned and mapped out is a huge part of man­ag­ing this risk and some of the big­gest chal­lenges for us have been when one of these loads gets stuck un­der a bridge or sim­i­larly we have cargo shift­ing be­cause of un­even road sur­faces,” he starts. Walker also points out that cor­rect route plan­ning in South Africa has its own com­plex­i­ties. “A road may look fine on paper but we need to make sure that there are no road works planned on that route and that all the traf­fic ar­range­ments are in place. Even then, there could some­times be un­ex­pected sur­prises and last minute route changes that once again in­crease the risk to the cargo,” he says. Walker adds that the need for de­tailed in­for­ma­tion re­gard­ing the project cargo is para­mount to man­ag­ing risk in this re­spect. “AIG now pro­vides pre­sen­ta­tions aimed at in­ter­me­di­aries, clar­i­fy­ing ex­actly what the value- adds are that clients can ben­e­fit from, how our cover works and what kind of in­for­ma­tion we need to ac­cu­rately un­der­write that risk,” Walker con­cludes.

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