Neil Hopkins MSc ACII SBJ Nelson Steavenson Limited. A broker s perspective on the aquaculture insurance market

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1 Neil Hopkins MSc ACII SBJ Nelson Steavenson Limited A broker s perspective on the aquaculture insurance market

2 The historical role of brokers in the aquaculture insurance market. Lloyd s brokers AIS and RMB were instrumental in developing the market for this class of business. Brokers identified the business opportunity. Brokers developed application forms, policy wordings and business procedures. Brokers trailblazed trailblazed new territories and new species.

3 The broker s short term priorities. Identify the best cover available, taking account of the following aspects: Scope of cover. Cost of cover. Insurer security. Level of service provided by insurer.

4 The broker s long-terms priorities. Ensure that the market obtains a fair premium for the exposure it bears in order that it is not burnt by unsustainable terms and conditions and hence ceases to be able to respond to clients requirement for insurance. Encourage loyalty and long-term relationships between clients and insurers. Develop new markets and additional capacity for the expanding and increasingly aggregated industry.

5 Broker:insurer relationship - has it all gone wrong? 15 to 20 years ago there was a partnership between insurers and brokers of aquaculture insurance business based on mutual trust and respect and with a common aim to provide service to their mutual clients. Is this mutual trust and respect still in existence???? If not, all parties must accept responsibility and try to re-build a mutually beneficial partnership by respecting each other s position, ion, knowledge and added value. We must all work TOGETHER to give a good quality service to our mutual clients - if we don t, somebody else will!

6 The ongoing role for brokers in the aquaculture insurance market. The world has changed and brokers no longer have tight control of o underwriting capacity and a stranglehold on technical knowledge. To earn our commission, brokers must add value to the business. Added value must not extend towards the insured alone but also to t insurers. The current global premium from aquaculture mortality insurance is literally a drop in the ocean compared to the value of fish, shellfish s and aquatic plants that are raised. Brokers can play a crucial role in bringing more of this business to market IF insurers will trust them to do this and offer appropriate support.

7 The ongoing role for insurers in the aquaculture insurance market. Insurers have been losing money on this class of business and have consequently been looking very closely at all losses. Litigation or the threat of litigation is at unprecedented levels. Agricultural production and aquaculture in particular is an imprecise science. This leads to grey grey aspects in claims both on policy liability and quantum. These areas can be exploited by insurers prepared to use the benefit of myopic hindsight. The mindset of we have been paid an inadequate premium and are therefore entitled to look for reasons to reject claims must be changed to we now charge the right premium and terms in order that we can pay claims promptly without argument.

8 Summary. From the broker s perspective the market has now contracted to the point where it no longer fulfils the role of a market, namely to give the aquaculture ulture stock mortality buyer adequate choice for the cover that he or she requires. This is nobody s fault but it is a product of the actions of brokers, insurers and reinsurers. The resulting market competition has worked to the benefit of the insurance buyers for a long time - a fact about which they have not complained! The pendulum has now swung in the opposite direction though and competition is extremely limited. The way forward is for brokers to introduce additional responsible capacity into the market in a logical manner and to support the drive for profitable and hence sustainable underwriting. ALL LINKS IN THE CHAIN - PRODUCING BROKERS, WHOLESALE BROKERS, INSURERS, REINSURANCE BROKERS AND REINSURERS MUST PROVIDE SERVICE AND ADD VALUE FOR THE INSURANCE BUYER.

9 Market prognosis In most territories and for most species, the terms and conditions ns are already at levels that will yield acceptable profits for insurers. Reduced competition in both the direct and reinsurance markets should enable the terms in all l remaining areas to be corrected. The aquaculture industry will diversify away from mature species es such as salmon, sea bass and sea bream and new species development will rely on bank investment. Banks and other creditors will continue to require stock insurance. Improved profit margins on new species will enable clients to pay realistic premiums for realistic cover. Certain of these species, for example tuna, need exceptional capacity acity and perhaps a market-wide response or facility will be required. More insurers will enter the market, attracted by the return to profitability and the involvement of multi-national corporate clients with established relationships in other insured business lines.

10 THE END ANY QUESTIONS?