Beware of bargains

Jenna Hales, Marine, Energy and Specialty Claims Manager at Hiscox London Market, explains why a marine policy issued by the London market is money well spent for shipowners

Insurance is nothing more than a promise to pay, which is only tested when a problem occurs. That is when you find out what you’ve really bought. Even if your insurer has every intention of honouring its commitment, if it doesn’t have the resources – both in intellectual and financial capital – to do so quickly. Then the accumulated fees and delays incurred by a vessel’s operator could make the premium saving meaningless in the final outcome.

There are no simple problems when you are dealing with something as complex as an offshore oil rig or an ocean-going vessel.

The quality of the claims service provided by the London market is often taken for granted. But, when there is a problem, it can step in incredibly quickly, either taking control of the situation or offering the ship owner constant advice and assistance from the wings. Not every international insurer is as responsive or as flexible.

DELAYS CREATE COSTS

Take a fairly run of the mill incident, for example, like a collision between two vessels. The owners must put up collateral to release their ships, and obviously the sooner that is put up, the quicker the ship can be released and carry on with its voyage.

A ship’s insurers will put up that collateral by way of financial security. But, what I have seen happen is that the London insurers that are on risk put up their share very quickly, whereas following insurers from emerging-markets countries often take longer to deliver their portion.

In London, all insurers are rated as financially very strong, and the system we work within is set up to move money within the blink of an eye.

Outside of London, certain other insurers are not only slower to respond, but, they also do not enjoy the same financial rating and must be measured separately by guarantors that put up the security on our behalf. Meanwhile the ship is idle, often racking up fees and legal costs in the process.

When a problem arises that will take time to resolve, such as if the ship needs to be repaired before it can sail again, then a speedy response is again vital.

As soon as it is established that the issue is covered under our policy, London market insurers will often swiftly offer the shipowner a payment on account. We’ll even make that to the shipyard directly to speed up the repair process, if necessary.

Other markets do not always have that same autonomy or authority. While London market insurers have been able to quickly put hundreds of thousands, even millions of dollars up on account without the claim having been finalised, others must go through a painful process of going through their longer and slower chain of command to get the green light.

The Square Mile houses a cluster of some of the finest insurance minds, both underwriters and brokers as well as the best maritime lawyers, surveyors and claims adjusters, creating a centre of excellence in London that is the envy of the world.

“While London Market insurers have

been able to quickly put hundreds of thousands, even millions of dollars up on account without the claim having been finalised, others must go through a painful process of going through their longer and slower chain of command to get the green light.’’

Jenna Hales, Hiscox

That creates issues that are incredibly frustrating for shipowners, who just want their vessel to be back in operation as quickly as possible so that the interruption to their business is kept to a minimum.

UNIQUE MARINE ECOSYSTEM

In a business as fast moving and complex as global shipping, it is important to be ahead of the curve. The tech world has coined a phrase for the confluence of brains, money, skills, and support that makes places like San Francisco such a global centre for the industry – ecosystem. London has a unique marine ecosystem and it is one that has developed through more than 300 years.

The Square Mile houses a cluster of some of the finest insurance minds, both underwriters and brokers as well as the best maritime lawyers, surveyors and claims adjusters, creating a centre of excellence in London that is the envy of the world.

Then there is the Lloyd’s agency network, that comprises hundreds of agents in ports and commercial centres around the world, offering round-the-clock independent marine surveying and claims adjusting to clients.

The agents are the market’s eyes and ears across the globe. They feed information on trends and problems back to London, where it is analysed and discussed by the market’s various claims and underwriting committees, along with hot topics and any issues that arise over wordings.

All in all, London is a unique hub of marine knowledge within which information is constantly being shared and processed, so that shipowners are guaranteed the best possible service. If a vessel owner has a problem, no matter how challenging it may seem, someone, somewhere within London will be able to come up with an answer.

WATCHDOGS WITH TEETH

The London market insurers must also show their watchdogs, from Lloyd’s up to the Prudential Regulation Authority, that they are upholding the highest standards and always treating their customers fairly. And, if a dispute were to arise, shipowners have the reassurance that it will be dealt with in the British courts, where again there’s a wealth of specialist maritime judges, solicitors, barristers, and arbitrators. They know justice will be done and that can’t be overstated enough these days.

That is not to say the London Market is resting on its laurels. The cost of doing business here is more than in certain other markets around the world. There is work to be done, but there is both a will and a way to do that. It is introducing new technology and operations, so it works better, faster, and cheaper. In January 2022, Lloyd’s issued its Blueprint Two, the second roadmap on its journey to becoming a truly digital marketplace.

So, what are you getting for your premium in London? A policy that has been devised by the world’s best brokers and underwriters, which comes with a best-in-class claims settlement service as well as access to a global network of technical experts. That policy is backed by top-rated financial security, policed by world-class regulators and where any disagreements are ultimately resolved in a transparent, independent legal system which is well versed in maritime disputes. That sounds like a good deal to me.