Insurance Jottings

Lloyd’s mulls downsizing underwriting room

Lloyd’s of London is to undertake a consultation next year as it explores shrinking the size of the underwriting room, the Corporation’s chairman Bruce Carnegie-Brown has said.

Miller to be acquired by Cinven & GIC

Specialist (re)insurance broker Miller is to be acquired from its partners and corporate member Willis Towers Watson by international private equity firm Cinven and GIC, Singapore’s sovereign wealth fund.

The transaction is expected to complete in Q1 2021 and is subject to regulatory approval.

Founded in 1902, Miller is a specialist (re)insurance brokerage operating in the UK, Lloyd’s and Internationally. It employs more than 640 people through its offices in London, Ipswich, Brussels, Paris, Singapore and Geneva, covering the world’s major insurance hubs.

The firm operates across a number of specialist areas, including marine, energy, credit and political risks, delegated authorities, professional risks, property, casualty, sports and entertainment and (re)insurance.

The Miller transaction represents the first investment from Cinven’s new financial services sector-focused strategy, which will be looking at similar long-term opportunities across Europe.

Cinven Funds’ prior investments in the European insurance space include Guardian Financial Services in the UK, Eurovita in Italy, and Viridium in Germany.

Other UK-headquartered financial services investments by the Cinven Funds include Partnership Assurance, NewDay and Premium Credit.

GIC has invested in companies such as Rothesay and RAC in the UK, Mass Mutual Asia in Hong Kong, and China Pacific Insurance group in China.

US Sanctions to Target Insurers In Fight Against Russia-to-Germany Nord Stream 2

The US is drawing up additional sanctions on the Nord Stream 2 natural gas pipeline project, the latest obstacle in the path of the €9.5 billion (US$11.2 billion) Russia-to-Germany link which has been halted almost a year.

House and Senate negotiators agreed to target insurers and technical certification companies working on the project in a defence bill which must pass by the end of the year, according to three people familiar with the matter. The move would add to penalties that stopped work on the natural gas link under the Baltic Sea just a few weeks before it was to be completed.

The rules could inflame tensions between the US and Chancellor Angela Merkel over the project, which would bring gas into northern Germany and help Russia’s state-backed exporter Gazprom PJSC tighten its grip on energy supplies to the region.

President Donald Trump, backed by both Republicans and Democrats in Congress, have criticised Europe’s reliance on Russia and offered US cargoes of liquefied natural gas as an alternative.

By adding insurers and certification companies to face sanctions, the US will make it harder for Gazprom to complete Nord Stream 2, which will run 2,460 kilometres alongside an existing Nord Stream pipeline. Gazprom and its backers including Royal Dutch Shell Group say the pipeline will be needed to meet increasing demand and add flexibility to the system.

Opponents say it will allow Russia to choke off flows through Ukraine, the primary route to market for much of Gazprom’s gas.

All except 160 kilometres of the link were laid down when President Trump imposed sanctions late last year. Those measures prevented AllSeas Group SA from allowing its pipeline-laying ship to set down the last sections of pipe in Danish waters for Gazprom.

The new sanctions would prevent ships from getting insurance and technical certifications they require to work offshore Denmark.

That would tighten the grip of rules which so far have prevented Gazprom from finishing the pipeline. After AllSeas pulled its vessel off the Nord Stream 2 project, Gazprom said it was working on finding an alternative.

It brought its own pipelay ship, the Akademik Cherskiy, into the region. It isn’t clear whether it’s capable of finishing the project. The ship currently is in Mukran, a key logistics port in Germany for Nord Stream 2, according to Bloomberg ship-tracking data. It’s working on building a new ramp to load pipes, according to a report in Berliner Zeitung.

The Danish government requires the professional services firm Det Norske Veritas to certify the compliance of Nord Stream 2 before it can be put into operation, said Mitch Jennings, senior analyst at Moscow-based Sova Capital.

“According to my understanding, if the pipeline certification is restricted, the launch of the pipeline may become very difficult,” he said. The new sanctions “might require Nord Stream 2 AG to find a certification agency who is willing to be subject to sanctions.”

The measures would stop short of hitting German government officials who have allowed the project. New Jersey Senator Bob Menendez, the top Democrat on the Senate Foreign Relations Committee, said in an interview that members of Congress wanted “to make it clear that Germany, as an ally, and public officials within Germany, would not be part of any such sanctions.”

The language that would implement the sanctions now requires the US to notify allies before imposition. The provision was added after House Foreign Affairs Chairman Eliot Engel of New York expressed concern that the sanctions would hurt Germany and European countries while letting Russia “off the hook.”

“Spit on our closest friends, let Russia off the hook?” Mr Engel said on the House floor in July. “Doesn’t sound right to me.”

The sanctions are contained in an amendment to the defence bill and draw their language from legislation introduced earlier this year by Senators Ted Cruz, a Texas Republican, and Jeanne Shaheen, a Democrat from New Hampshire.

Mr Cruz and Ms Shaheen were instrumental in pushing through Nord Stream 2 sanctions in last year’s NDAA.

German officials have been worried of a possible escalation of the trade conflict before Mr Trump leaves office in January and have as a result tried to postpone the EU sanctions against Boeing Company but failed because of opposition from the European Commission and France.

The new sanctions legislation in the US specifies that previously enacted sanctions apply to all pipe-laying activities and insurance.

Earlier this year, the US warned energy companies taking part in Russian pipeline projects of impending sanctions. “Get out now or risk the consequences,” Secretary of State Michael Pompeo said in July.

Increasing piracy attacks at Guayaquil, Ecuador

Standard Club Bulletin 11^th November 2020

With its strategically located position along the Guayas River, the Ecuadorian capital of Guayaquil plays an important role in the region handling most of the country’s seaborne trade.

Guayaquil port has in recent years undergone a modernisation and upgrade programme following significant financial investment. These developments have not however resulted in a more safe and secure environment with foreign ships, moored along the port’s quays or transiting its narrow river passages, said to be easy targets for local criminal gangs.

Whilst Ecuador has not traditionally been known as a hotspot of global piracy, the number and maliciousness of recent attacks on vessels has led the IMB to issue a warning to vessels transiting the river passage at Guayaquil, Ecuador.

The warning comes after a spate of incidents involving armed robbers approaching and boarding vessels including those under pilotage. Most incidents are reported to have taken place during night time between the sea buoy and the channel entry and/or exit. Tactics employed by criminals including firing at vessels in order to distract the crew and allow drugs to be smuggled on board notably in containers.

In an effort to combat these activities, the Ecuadorian navy has increased its patrolling in the channel with military boats. In addition, the port authority is said to be implementing a policy of allowing armed navy personnel or private armed guards on board those vessels which have been impacted to date and vessels whose discharge ports are known as a destination ports in the illicit drug trade.

The club understands that suitable permits must be obtained for such arrangements and will be done one a case by case basis with the authorities.

Members trading in this region are urged to maintain a vigilant anti-piracy watch and take precautionary measures in line with BMP guidance. All attacks and suspicious sightings should be reported to local authorities and to the IMB.

IMB Piracy Reporting Centre (IMB PRC) – contact details

Tel: +60 3 2078 5763 / +60 3 2031 0287 / +60 3 2031 3106
24 hours Anti-Piracy Helpline: +60 3 2031 0014 (Manned 24 Hrs everyday)
Fax: +60 3 2078 5769
E-mail: imbkl@icc-ccs.org  / piracy@icc-ccs.org
The club would like to thank Roberto Barriga Maldonado of Larrea Canessa Barriga Abogados based in Guayaquil for his contribution to this news item.