‘Brinkmanship’

Potential mergers, acquisitions and takeovers have always been talk of town in our marine insurance industry. Whether something is really happening or not, the end result usually does not come as a surprise thanks to the rumor machine. Nevertheless, witnessing two great P&I Clubs merge wasn’t something that people imagined would actually happen. It is the servicing industry -insurance, finance and banking in the end are all servicing – and all involve some exchange of hearsay. Talking behind closed doors is a quintessential part of our life, and the Leadenhall market is always abuzz. It’s always been 13 IG Clubs for decades; but now it is down to 12 – a strange feeling. Brinkmanship

P&I Clubs have always been known for their structurally robust, traditionally durable structures with minimum exposure to financial turmoil thanks to their founding principles. Thus one wouldn’t imagine a merger happening for real, in spite of the rumors that preceded it. However, it happened. Standard Club and North of England are now ONE and they are now the NorthStandard Club. Brinkmanship

I was thrilled when I heard it was happening. The city was becoming dull with every new day, and the leadership had long left London and gone abroad. I believe this change will help bring servicing shipowners back to their roots, where important negotiations and talks are carried out during liquid lunches among brokers and club professionals in pinstripe suits. The result of these deals would always favor the shipowner, while the broker would promise to bring in more business in return.    Brinkmanship

Some observers object to this merger, expressing concern that it will lead to a monopoly in the long run. There is already speculation surrounding the P & I Group of P&I Clubs, suggesting that they are cartels. It is funny how no one talks about the IACS despite its enormous and indispensable input into trade globally. Needless to say, the word “cartel” has a negative association in peoples’ minds. However, it seems to me that no one is paying attention to a more serious monopolization threat looming over the horizon from a different angle; that of P&I Brokers!  Brinkmanship

We, brokers, are in a sense, clients to P&I Clubs. We represent shipowners and can be considered as owners’ insurance managers within their companies. Our revenue is settled by the insurance companies but this doesn’t change the structure. We work for and on behalf of the shipowners, look for alternative insurance arrangements, analyze the future of each Club based on its financials and claims handling behavior, and other data. There is always never-ending work for brokers. It is fundamentally different from being an insurance agent. They are merely representatives of insurance companies. In a nutshell, we are, in a sense, shipowner clients to P&I Clubs. Brinkmanship

I am sure everyone has noticed that, especially during the pandemic, lately consolidations amongst brokers have increased – a development that is continuing – to such an extent they are almost becoming ONE. Is this good or bad for Clubs and shipowners? Time will tell. However, I am not sure the clubs would be happy to work with just ONE broker/shipowner. For me, this is like shipowners having to work with only ONE charterer. I don’t believe this can bring added value to the industry or to its professionals in the long run.

I am inclined to continue to believe that “It is not the size of the ocean but the motion of the ocean” and think that this idea should be upheld.

What does it have to do with BRINKMANSHIP? Nothing, I just like the sound of it.