Filed Under:Markets, E&S/Specialty

Giant Risk: Supertankers Could Breathe Life Into Surplus Industry

NU Online News Service, Oct. 13, 11:16 a.m. EDT

SAN DIEGO—A large vessel carrying what looked to be dozens of cargo containers was docked in the San Diego Bay during the first day of the National Association of Professional Surplus Lines Offices convention here.

Donald Harrell, senior vice president of marine for Liberty International Underwriters, points out that a new line of “supertankers,” set for launch next year, could be the next opportunity in the marine-specialty market.

On these new vessels could potentially be billions of dollars in risk—from the cargo being shipped to the value of the vessel, he says.

“You have to wonder if there is enough capacity in the market to handle the risk,” says Harrell. It’s a big statement to make during a time of excess capacity, but with these supertankers, “there is a huge potential for loss,” he adds.

Harrell says the supertankers are hundreds of yards long and a hundred yards wide—with the capability of transporting more than 15,000 containers.

Cost savings are behind the movement to massive tankers. “Companies reduce shipping costs, going from a shipment every month to one every quarter,” Harrell says.

The surplus industry will be contemplating how to handle the total accumulation of losses in a worst-case scenario. Think of the business interruption (loss income and brand erosion) as well as contract liability floating along with the various amounts of goods.

“In terms of cargo, there could be thousands of policies on one ship,” Harrell contemplates. “Maybe one company has 100 clients with 100 different limits.”

The new risk is likely a “much bigger reinsurance-accumulation issue” in order to fill in the gaps at the top of the risk transfer.

The risks associated with these supertankers, however, could breathe some new life into a segment of the specialty market that has been marred in a decade of stagnant growth.

Harrell says there has been “the same number of vessels” and writing the line has been “fairly straightforward.” Innovation has been limited to finding ways to repackage existing products and automating services and underwriting.

It’s part of a dynamic that has created a gap between upper-level executives and newcomers to the industry. There is a “gap in the middle” of middle-managers, says Harrell.

It’s a concern as older executives get ready to retire. Harrell says he has instituted a “comprehensive training program to allow underwriters to move through the ranks.”

“If you don’t offer a progression, your challenge is keeping people motivated,” he adds. Talent may leave. So Harrell offers employees not only the opportunity to move up in position, but in location.

“You have to offer other incentive-based things,” Harrell says.

The industry is younger than it was 10-15 years ago, Harrell observes. Because of the job market, a higher-educated entrant—who previously had a career outside of the industry—“has been coming to insurance than they ever had before.”

Top Story

What does TRIA denial mean for workers’ compensation?

What does the denial of a TRIA renewal mean to the workers’ compensation industry?

Top Story

Shock, dismay and disappointment: P&C insurance industry's reaction to TRIA news

The U.S. Senate adjourned for the year on Dec. 15 without passing the Terrorism Risk Insurance Program Reauthorization Act.

More Resources

Comments

eNewsletter Sign Up

Specialty Markets Insight eNewsletter

Receive updates and analyses on hard to place and challenging coverages. Sign Up Now!

Mobile Phone
         

Advertisement. Closing in 15 seconds.