Success on the high seas
Thursday, 17 November 2011 | 11:00
You have probably walked past the offices dozens of times without knowing for sure what goes on inside. From inside the impressive glass and steel building overlooking the Millennium Bridge on Newcastle’s Quayside, almost 200 people insure a large chunk of the world’s shipping fleet against all manner of disasters.
There are more than 5,000 ships on the books and offices in Hong Kong, Greece, Singapore and now Tokyo, making the North of England Protecting and Indemnity Association (NEPIA) the second biggest globally but, according to its joint managing directors, the best at what it does.
But because its clients aren’t from the region, a remarkable success story, while not going unnoticed, has perhaps not received the recognition it deserves closer to home.
That success over the past decade doesn’t just have its roots in the North East, but in the people and attitude. What sets North apart from its competitors and has been the catalyst for growth is the level of service offered to members.
And according to joint managing directors Alan Wilson and Paul Jennings being based in the North East makes that easier.
“The target now is to getter better. In our particular industry we think we are the best. We think we provide the best service,” says Wilson.
“Without that we have nothing else to sell. We are a mutual insurer. We all have exactly the same terms of business. We can’t compete on price in the first year. So we can’t sell our service at a cheaper price to our competitors. We are selling exactly the same thing at exactly the same price. So the real difference is the way you provide that service.
“A key driver is the fact that we are based here. It is a friendlier area. It is a fact. As a consequence it is easier to provide a friendlier service, to provide a more caring service. It comes more naturally to look after people being based here in the North East.
“That is it in a nutshell. The unique selling point was the ability to look after people. There was a recognition that would develop the business. We became more sophisticated in the way we looked at our business.”
At first glance Newcastle might seem a strange location for a giant of the shipping industry. But it was in the North East where the concept of mutual marine insurance clubs first began. That concept has remained and protecting and indemnity mutuals like North around the world refer to themselves as clubs.
It wasn’t just Britannia that ruled the waves, the region was once a dominant force in world shipping.
The company has a proud history going back 151 years. But, from being the biggest and best by around 1900, North went into decline along with the British shipping industry. The lowest ebb came at the start of the 1980s but a change of direction led to a remarkable turnaround that has led to impressive growth over the past decade.
Before the 1980s the club’s business was based on the domestic market but that all but disappeared. To survive, the firm had to open up international markets.
Or as Jennings puts it: “It was born out of ‘let’s do this and survive or you go out of business’. What we have seen in the last dozen or so years have come off the back of the seeds that were sown in the 1980s. The foundations that were put in place then.
“We had to internationalise, taking the North East culture and service ethic that exists here and selling that globally. There were inevitably some risks along the way. When you are in that position of growing, you have to take the odd chance.
“It came down to building a team of people who were able to provide the levels of service that were different in the market. Most of the business had moved to London and clubs there. They were providing a particular type of service and it had been that way for many years. We were breaking the mould when we decided to get out on the road and introduce a new caring way. We said can we help you. We are here to serve you as opposed to your privileged to be a member of our organisation. It was completely the other way around.
“In 1900 we were considered to be the leading club but for 100 years almost we lost our way. Up until the Second World War there was a decline. Afterwards, there wasn’t the shipping around here. It was in decline.”
Wilson added: “Shipping itself was enormous here in the North East at one time. There were hundreds of shipping companies and ship builders.
“Until the 80s this company insured primarily British ships and then the guys in charge realised if they didn’t do something about this there would be no business left because British shipping just disappeared effectively and it is just a very small fleet now. In the early 80s the bosses realised they would have to go and try to find some business. We never had to in the past, business just came to us. You didn’t have to go and market yourself. They started marketing and that gave us a kick start. The club started to grow from the early 80s.”
North was not the only P&I club in the region. North’s neighbour, the Newcastle club, had undergone a similar period of decline as the British shipping industry shrank. The possibility of a merger between the two clubs had long been mooted but started to come to fruition over a meal in an Italian restaurant and Jennings for Newcastle and Wilson from North were the men chosen to lead the process which finally took place in 1998.
The foundations of the good working relationship the pair enjoy to this day started then. And it was 12 years on from the merger that the pair became joint managing directors.
In shipping insurance the size of the market share is based on the tonnage of ships insured. When North merged with the Newcastle club in 1998 it had around 20m tonnes on its books. That figure is now 116m. Over the past decade staff numbers have increased from 132 to 221 today.
And where once all the ships would have been from the North East now North insurers ships from 50 countries around the world.
Jennings said: “We celebrated 150 years in existence last year in 2010 and this is where we started and where our business started. The type of marine insurance that we do which is mutual and the club concept started here in the North East of England. There are still some common features going back to the days when it started here.
“In particular there is one date in the year when all our business renews unlike most insurance companies. Our day is February 20. Still today, 151 years after we started, all of our business and all of the other companies that do the same as us, nearly 90% of world ships renew on the same day.
“The reason for that goes back to the days when ships were trading from here. From the Tyne there was a lot of trade from the Baltic states so they would leave their safe berths from the river Tyne and the Wear on February 20 and by the time they got there it would be ice free. That date has carried on for more than 150 years. All our far-flung ship owners around the world in places like Indonesia and Australia all insure their ships on the same day.”
So where does the business go now? For Wilson and Jennings size isn’t important in the sense they don’t feel the need to get bigger for the sake of it. What is vital is maintaining those levels of service that have put the club where it is now.
Looking to the future, North has established an office in Tokyo awaiting licensing. Asia will grow in importance according to Jennings. He said: “Japan is the biggest ship owning nation in the world. It vies with Greece in terms of controlled tonnage. It is 15% of all the tonnes in the world. We have been successful in the last five years in starting relationships there. There is huge potential for development there. It is important. It is strategically very important as part of our development. We believe that shipping as with many businesses will continue to gravitate towards Asia Pacific.“
Piracy on the world’s seas has risen to record levels over recent years, with Somali pirates behind 56% of the 352 attacks reported this year. And, while not directly insuring against piracy, North, like all of the world’s shipping fleets are affected by the menace.
Jennings explains: “We insure 10 to 12% of the world fleet so it affects us as anybody. We are involved in a number of ways. We are involved in helping our members with the contracts they have with the armed guards. We have introduced a vetting system. for some of the armed guard pro providers. We provide best practice advice for our members. In terms of insurance we don’t directly insure the piracy risk we are part of a number of people who cover it. The people on board we would probably cover if anything were to happen to them and there are some specialist kidnap and ransom insurers who have developed over the last few years.
“Does it impact shipping? It doesn’t stop shipping. There is a proliferation of armed guards now. It remains a fact to this day that no ship with armed guards has been taken by pirates. In terms of the scale. At one stage we were reviewing one armed guard contract a week now that has increased to a few a day now.
“We are seeing more and more flag states allowing armed guards to be allowed on board. For shipping it is a massive inconvenience and an increasing cost. People are either having to pay additional insurance premiums or additional insurance premiums and the cost of armed guards on board.”
In particular there is one date in the year when all our business renews unlike most insurance companies. Our day is February 20. Still today, 151 years after we started, all of our business and all of the other companies that do the same as us, nearly 90% of world ships renew on the same day.
Source: The Journal
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