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New Joint War Committee Chairman Looks Forward to Role
[October 10, 2006]

New Joint War Committee Chairman Looks Forward to Role


(BestWire Services Via Thomson Dialog NewsEdge)
For Clive Washbourn, the chairmanship of the London insurance market's Joint War Committee will offer a chance to help shape the industry's broad perceptions of maritime risk.

Washbourn, head of marine at Lloyd's underwriter Beazley Group plc (LSE:BEZ), was named to lead the committee in August. He succeeds Rupert Atkin, who had been chairman for more than a decade (BestWire, Aug. 24, 2006).

The Joint War Committee, whose membership is drawn from 16 London market underwriters, focuses on hull war risk. Its main function, Washbourn said, is the maintenance and publication of its list of excluded zones. Operators of ships headed for countries that are on this list can expect to pay more for their insurance.



"It's a little bit of a thankless task," Washbourn said of the committee. "But it's an important forum."

The list allows insurers to target their underwriting, Washbourn said, thus avoiding hitting all customers with higher prices during times of international tension.


"It is a very dynamic list," Washbourn said in an interview at Lloyd's. "People come and go because we feel we ought to be fairly reflecting the current political situation in the country."

The current list includes the Middle Eastern countries of Bahrain, Iraq, Israel, Lebanon, Qatar, Saudi Arabia and Yemen. In Asia, it includes Pakistan, Sri Lanka and parts of Thailand, Indonesia, Malaysia and the Philippines. African countries on the list include Djibouti, Ivory Coast, Somalia and Nigeria.

Sri Lanka's status illustrates the challenges facing underwriters. It had been taken off the list in recognition of peace talks between the Sri Lankan government and the Tamil Tiger rebels. But a resumption of violence put it back on.

The JWC's warnings against piracy regularly attract press attention. One focus has been on the Malacca Straits, an important shipping lane flowing between Malaysia and Singapore on one side and Indonesia on the other. Piracy "is still very much an issue" for the JWC, Washbourn said.

Inclusion on the list can affect a country's trading position by effectively driving up the costs of doing business there. Nations so included have been known to express their displeasure to the JWC, Washbourn said.

The influence of the JWC can be seen in the apparent attention the list receives from countries that find themselves on it. In August, the committee announced that it had removed the Malacca Straits from the list. The decision, the JWC said in a statement, reflected an appreciation of the efforts made by nations in the region to cooperate against piracy (BestWire, Aug. 9, 2006).

Iraq, which is on the list, is of obvious interest to the committee. Despite the continued war on land, Washbourn knows of no attack on a ship in Iraq.

The JWC is guided by the principle of "user pays," Washbourn said, noting that the ship owner is likely to hand the extra cost on to the charterer, which will pass that on to the client.

The extra premium would depend on such factors as the type and speed of the ship and the level of expected danger in the port.

To reassure anyone who might be worried about the committee's impartiality, it draws on the advice of Aegis, an outside security consultant.

"We wanted to have an independent third party helping us formulate our view," Washbourn said.

Washbourn, who described the JWC's deliberations as "dynamic and animated," noted that the discussions don't stray into the area of setting premiums. That is left up to the individual underwriters.

"It is still a fiercely competitive market," Washbourn said.

With its deep roots in marine insurance, Lloyd's remains a major factor in this market. Including reinsurance, Washbourn estimated that Lloyd's handles more than half of the world's hull war business.

The ability of Lloyd's to provide quick access to people with the power to make decisions can be very attractive, Washbourn said, to a ship owner whose vessel may be due to sail in 12 hours.

"Probably we have a greater appetite for this class of business," Washbourn said of Lloyd's. "It's a pretty volatile business."

The normal desire of underwriters to impose conditions on clients can be overruled by events on the ground. The nature of this kind of risk makes it difficult to control.

With a low level of hull war claims over the past three or four years, Washbourn said, Lloyd's faces competition from such countries as the United States, Norway and France. "Rates have not gone up," he said.

And there is also the matter of dealing with some pretty demanding customers. "The shipping industry is a very aggressive, competitive market, and they drive very hard bargains," Washbourn said.

He wouldn't be drawn on the underwriting performance of either Lloyd's or Beazley in the hull war market.

"We are happy that the amount of income that we are generating is sufficient to pay what we believe to be the ordinary, run-of-the-mill claims and make a small return on capital," Washbourn said.

Lloyd's currently has a Best's Financial Strength Rating of A (Excellent).

(By Robert O'Connor, London editor)

Copyright 2006 A.M. Best Company, Inc.

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