Ports and terminals sector entices new entrants

New players are queuing up to launch into the ports and terminals (P&T) insurance sector, attracted to a niche that is making money after a period in the doldrums.

Recent entrants include Clive Washbourn’s managing general agent Navium and Lloyd’s insurers IQUW and Volt Underwriting. Additionally, Gallagher underwriting affiliate Pen Underwriting’s BBM has recently announced plans to expand into North America.

P&T cover is designed to protect port and terminal operators from the risks they face when handling cargo. These include liability for damage to vessels, cargo and third-party property, as well as physical damage to their own infrastructure and equipment. It also usually encompasses coverage for business interruption if operations are disrupted due to an incident.

Payouts can be huge when disaster strikes, as was the case with the massive explosions at the ports of Tianjin in China in 2015 and Beirut in Lebanon in 2020.

ITC’s Deer Park tank farm in Texas, which experienced a serious chemical fire in 2019, was also a P&T account, being considered an inland port. Some of the subsequent claim came back to London.

More positively, attritional loss ratios tend to be pretty good and deductibles are in a safe place, which excludes minor dings. Also, the risks being written are normally heavily risk-managed.

The biggest established commercial providers include Axa XL, QBE, Markel, Travelers, Hartford and Munich Re, while TT Club, a Thomas Miller-managed marine mutual, offers cover on a mutual basis.

Ali Welchman, IQUW

The new lead market proposition from A-rated Lloyd’s syndicate IQUW, which is backed by two US private equity firms, is led by Ali Welchman, a P&T specialist hired from Markel last October. Welchman reports to Phil Furlong, the firm’s head of marine, energy and aviation. There have been three other senior hires, with Darren Stewart appointed head of marine, energy and aviation claims; Chris Touhey as senior underwriter, energy; and Darryl Krobel, a former engineer who provides risk analysis.

Welchman pointed out the P&T market is rapidly changing, thanks to a combination of automation, the impact of climate change and challenges presented by international political developments.

Indeed, hurricanes Harvey, Irma, and Maria caused substantial losses for some insurers, for both marine and non-marine properties, which led to some insurers pulling out. But the hit galvanised underwriters into a reappraisal of pricing, thereby restoring profit­ability, which goes some way to explaining the spate of new arrivals.

“We’ve got to strategically manage our catastrophe aggregate as we build out the book, because the last thing you want is to dive into a load of horrifically exposed property and have a big loss in year one”
_{Ali Welchman
IQUW}

“After those events, underwriting discipline started to show its strength, and rates obviously started moving upwards,” Welchman said. “That was combined with the pandemic and increased focus on inflation and the rating environment dramatically improved. We saw much better results as a product after that, so we’re starting to see a few more entrants.”

Even so, P&T is a specialised metier, with knowledge and experience conferring a competitive advantage. This is where IQUW thinks it can win out, rather than just making further capacity available.

At present, it is the larger syndicates at Lloyd’s that tend to have the bigger books.

Ultimately, IQUW hopes to take what Welchman describes as “a decent chunk” of that pie, but growth ambitions for year one are relatively modest. “We’ve got to strategically manage our catastrophe aggregate as we build out the book, because the last thing you want is to dive into a load of horrifically exposed property and have a big loss in year one,” he said.

The target is to achieve close to £25m ($31.5m) in gross written premium by the end of 2027, if not before then.

“What we’re trying to do is provide that additional lead market support and expertise while not trying to disrupt where we don’t need to,” Welchman said.

While the offering is worldwide, apart from sanctioned territories, it is also the case the firm does not yet have offices in other countries. Lloyd’s will be the main market avenue, although there are also other placement options, including consortium options.

Net line propositions will be considered on a case-by-case basis, but IQUW’s clear preference is to spread the risk. In general, the max line will be about one-third.

Energy transition

Elsewhere, Volt Underwriting was established last October. As the name implies, its initial focus was on the energy transition sector. Its recent move into P&T represents a broadening of its products base. It is a Lloyd’s-approved coverholder led by Dale Underwriting Partners’ syndicate 1729.

Gallagher affiliate Pen Underwriting took ownership of BBM Ports & Terminals, one of the marine specialist subsidiaries of Tay River Holdings, when it acquired the latter for an undisclosed consideration in April 2023. UK-based BBM will now provide insurance for ports in North America, effectively giving it worldwide coverage under the branding of BBM P&T.

The region is being defined as including everything from the Gulf of Mexico to Alaska and from the Pacific to the Atlantic, as well as US-administered territories such as Puerto Rico and Guam.

Pen co-managing director Paul Hartley said the time was right to bring the company’s expertise to the US market, as brokers are always on the lookout for new or alternative propositions to recommend to their clients in this niche area of the international marine insurance market.

Pen is backed by the A-rated security of Lloyd’s syndicates and London market capacity.

This article first appeared in Lloyd’s List, a sister publication of Insurance Day