However, the consequent reduction in premium varies widely among insurers and it is important that shipowners are aware of the basis of that variation in premium if they are to get the best deal when they come to negotiate any renewals or changes in value.

In each case, underwriters generate a specific value adjustment rate, which is applied to the difference in value to calculate the return premium due.

This value adjustment rate will be significantly lower than the Hull & Machinery rate, reflecting the fact that the risk of loss is no different, even though the value of the ship is.  The return premium will therefore not be in direct proportion to the reduction in value.

Typical of a competitive market, insurers’ value adjustment rates vary widely – by up to 500% – which significantly affects how much of a reduction in premuim the Assured will receive.

It is important that owners understand the importance of obtaining competitive value adjustment rates when they reduce their insured values.

And equally the same approach is recommended when the S&P market rebounds and premiums need to be re-calculated in response to the higher ship values.

For any shipowner who would like to discuss their current situation please contact any of our Shipping brokers who can help you further.

The maritime news continues to be filled with articles about pirate attacks in the Gulf of Aden, while piracy also continues less reported in several other key areas such as Nigeria, the Philippines and Brazil. There has been some discussion, and perhaps confusion, about what support is available to shipowners in the event of a pirate attack.

To mitigate the risk, some shipowners are avoiding the area but at substantial additional expense, and others are using organised convoys or employing security staff for the vessel.

Marine Kidnap and Ransom insurance can play a key part in any shipowner’s risk management strategy because it covers the specific costs associated with piracy attacks, however there has been some misunderstanding regarding the detail of the cover.

Andrew Brooker, director at marine insurance brokers FP Marine Risks, says: “We are often asked what insurance protection is available to shipowners in light of the increased risk of piracy. Marine Kidnap and Ransom needs to be seen as a service that shipowners can draw upon that isn’t catered for by traditional hull insurance.”

Traditional hull insurance only protects the shipowner from loss or damage to the vessel as a result of piracy and is only designed to work in a reactive manner once the claim is made after the event.

In the absence of physical loss or damage, the ransom and associated costs would be considered a General Average expense and settled by all parties against their respective values. However, the legitimacy of these costs being claimed in GA has never been tested and could be disputed by the cargo parties’ insurers.

Given the amount of shipping traffic that transits areas such as the Gulf of Aden, statistically the risk of a pirate attack is quite low. However, when it does happen, shipowners are faced with a challenging range of issues they are unlikely to have encountered before.

Brooker explains: “Shipowners suddenly find themselves with a host of questions about how to move forward – how do they find the necessary help from specialist negotiators; how do they enter into effective communications with hijackers; how do they deal with threats to their crew, vessel and cargo; how do they raise and deliver the ransom?”

Marine Kidnap and Ransom insurance is designed to specifically meet the needs of shipowners in dealing with these issues. It also provides the security of having an insurance in place that ensures the shipowner receives priority treatment from kidnap negotiators and other personnel involved. It covers all the necessary related costs that are needed to secure the safe and quick release of the vessel, crew and cargo, including the ransom and its delivery.

Furthermore, if a shipowner were to declare General Average in an attempt to raise the ransom, it could jeopardise their commercial relationships.

Brooker says: “There is generally no deductible with Kidnap and Ransom insurance, so owners are not exposed to additional costs after the premium and our cover ensures the Kidnap and Ransom insurers do not seek to recover any aspect of the costs from cargo or charterer interests, thereby preserving those commercial relationships. It also has the effect of protecting the owner’s existing Hull & Machinery or War cover from a loss which exposes them to an increase in rating for the following year – in effect, Kidnap and Ransom insurance has no memory and will not seek to recover claims through increases in premium.”

The global economic gloom is casting its shadow over insurance like everything else, with sharp rises in premiums likely across the board in the near future. We asked logistics-industry insurance expert Philip Bilney* why reducing cover is not a good idea.

Can project forwarders avoid paying more for insurance?
The temptation is always there to skimp on insurance cover. Reducing the level of cover or seeking less comprehensive policies may save money short-term but the risk is that it would be a “false economy”. It does look as though the insurance market in general will harden over the next several months – in other words premiums will rise – for a number of reasons. This applies to most sectors including Marine Cargo insurance, E&O, projects and project-related cover such as Delayed Start-Up (DSU) or Advanced Loss of Profits (ALOP) insurance. But the answer at a time like this is to look to an organisation such as the WCA Family that has the buying power to reduce the impact of any market price hikes.

So insurers are seeking to restore their profits?
Essentially, yes, because insurance companies have to make a profit like anyone else. Here are some of the reasons why – reasons you may care to pass on to project owners tempted to cut back at this difficult time.

First, supply and demand: insurance capital is derived primarily from equity markets and when that capital dries up, the amount of risk any one insurer can accept is reduced. Less equity market capital means a reduced supply of insurance capital, which in turn leads to a higher price to buy that small part of it which you need to cover your risk. In this regard it behaves in much the same way as any other commodity, but in the opposite direction.

Similarly, there is not an abundance of capital sloshing around looking to take advantage of a perceived increase in rates. After Hurricanes Rita and Katrina, which hit the Energy and Offshore market so hard, there was a rush of new capital into the industry to take advantage of the anticipated hardening, with the result that it never actually happened. That sort of capital ingress often tends to manifest itself in the form of new start-up reinsurance companies which are effectively the wholesalers of insurance capital.

But surely premiums are already expensive?
Actually, premiums will be rising from a relatively low level. The market has been at historically soft levels for the last year or so and thus is due an upturn anyway (in my experience upturns only really happen when the market is already genuinely soft). We had the same situation immediately before 9/11, which prompted the last serious hardening of the market.

Also, major losses were unusually high in 2008. For example, claims from
Hurricane Ike alone are expected to reach USD16 billion.

Insurance companies are famously known as “investors with a bad habit” (underwriting), so many have been hit hard by a collapse in their asset values. The thing is, very few are admitting to it yet.

What other factors contribute?
Generally speaking, recessions on a scale now being encountered worldwide produce more crime, including fraudulent claims and associated losses, and that of course drives up premiums.

Insurance buyers will often ask why the cost of their particular insurance has gone up in a hard market although the risk remains the same. The answer is that all classes of insurance are connected because the source of capital is much the same, and reinsurance costs (the mechanism by which insurance companies offset their risks) tend to rise across the whole industry. So the tide of the whole market rises and falls as one, although of course individual anomalies do occur here and there.

When will the premium increases start to hit home?
Curiously enough given the depressing economic news, there is some debate over whether this hardening is actually happening as yet. The ‘rescue’ of AIG has actually had the effect of reducing some prices because AIG has to compete harder to retain market share, and in other areas some insurers are maintaining prices in order to avoid losing good business.

But in general, insurance companies are refusing to reduce premiums now and there are some areas (Marine Hull for example) where increases of 5-10 percent are already being applied. The jury is still out, but the general view in the industry is that prices will move sharply upward from early 2009.

Trade Credit premiums, on the other hand, have already doubled. If you can buy cover at all. Default & bankruptcy claims are escalating dramatically and most insurers in that sector (there are only a handful) are hunkering down and declining to accept much new business while they wait for the storm to pass. But business is still being done.

So what can project forwarders do to economise?
Despite some rising prices, now would be the worst possible time to run uninsured. Claim frequencies will rise, not only for the reasons I mentioned above, but also because more goods will be rejected by customers than would normally be the case, and if they are genuinely damaged, then cargo insurance will cover this.

FSL (freight services liability cover) also becomes more vital as people get more litigious and the nmber of disputes rises. Forwarding businesses are highly exposed at the best of times, but the risks can only worsen as the world’s economies slide into recession and trading becomes more difficult.

It’s also worth bearing in mind that insurance companies tend to give a much better deal to long-standing clients than they do to companies who are perceived to dip in and out of the market. So while there is every reason to ‘shop around’, there is also value in building and maintaining a good relationship with an insurer over time – try to work only with reputable, secure insurers and where possible leverage off the influence of those organisations who have genuine buying power.

*Philip Bilney is group executive director of FP Marine Risks, a specialist provider of insurance products and services across the entire spectrum of Marine and related sectors. Based in Hong Kong, in 2006 the company was the first Asian-based insurance broker to become a fully accredited Lloyd’s of London broker following three years of mandatory provisional accreditation. FP Marine Risks, the sole broker for WCA Family of Logistic Networks, developed Project Cargo Insurance, one of a suite of products available exclusively to members of WCA Family that includes Marine (cargo) insurance and Freight Services (E&O and legal liability) cover.

Minimising the Risks for Charterers
Avoiding the area entirely will limit a vessel’s exposure to the risk of piracy although, as in the high profile case of the Sirius Star, it is not always successful.  Sirius Star had chosen to sail via the Cape of Good Hope, but was still captured by Somali pirates over 450 nautical miles off the coast of Kenya.

Moreover, significant deviations are a costly and time consuming alternative for Charterers, who pay hire costs for the additional time taken to sail past the Cape.

In the event of a hijacking, the vessel could remain on hire for the duration of the detention with any off-hire likely to lead to a dispute.  The average period for vessels to be detained is six to seven weeks, so the Charterers’ exposure to hire charges whilst the vessel is detained is significant.

Charterer’s Piracy Trade Disruption Insurance ensures that if a vessel is captured and the Charterer remains liable for the hire, the Charterer is covered for that payment whilst the vessel is seized.

The Cover
Importantly, the cover is available on both a single breach and annual basis.  This allows Charterers to declare vessels for the specific period, whilst transiting or calling at ports in high risk areas.

The premium is based upon the limit of liability required, the number of calls or transits and voyages contemplated and is fully supported by ‘A’ rated London insurers with a proven track record in specialist marine insurance.

___________________________________________________________________________
The above information is intended solely as a summary of the cover – for full details regarding the conditions of cover, exclusions and definitions, please email or telephone your usual FP Marine Risks contact or call the Hong Kong office on +852 2544 3410, the London office on +44 (0) 207 397 4920 or email info@fp‐marine.com

With growing trade volumes, vessel sizes and government legislation, supply chain managers face increasing risks and liabilities in their industry. Insurance is an important risk management tool, but one that has yet to be fully utilised in Asia. For an effective insurance purchasing strategy, supply chain managers should be aware of the changing risk exposures, the breadth of cover available and the long-term benefits that insurance provides by protecting profitability.

Supply chain management, by the diverse nature of the business, is exposed to constantly changing and, in most cases, increasing risks and liabilities. Depending upon the geographical spread of the business, those risks are likely to range from political risks to business interruption and the more specific threats of piracy or theft.

The insurance market has always been keen to respond to these varying and changing risks, not only with more sophisticated products, but also greater expertise and knowledge. In the increasingly competitive environment that the trade insurance market has become, differentiation is a key driver for insurance solutions that can dovetail with existing covers and/or risk management devices already in place.

What remains constant and critical is for supply chain managers to be able to identify the risks and react to them positively. That requires a high degree of both understanding of the exposures as well as the resources required to implement the required risk management procedures. As part of that process, the involvement of the insurance market and its knowledge base can be invaluable not only to determine the possible solutions available, but as a cost-efficient external resource.

Changing Exposures

Supply chain managers have become more risk averse in recent times due in part to the falling cost of insurance, but also due to an increase in the understanding of risk and the constantly evolving legislative environment.

A gradual, but steady, improvement in the understanding of the liabilities of service providers and the courts’ willingness to find new areas of liability or affirm previously held views has focused more attention on the involvement of insurance as a risk management tool. But, is there sufficient focus or understanding on this area?

There can be no doubt that it is difficult to maintain adequate knowledge of new risks and the evolution of existing risks. As the size and demands of the industry continue to develop, both in Asia and globally, so too does the list of potential losses that might arise.

One such example is the risk of accumulation brought about by the increased volume of trade. Accumulation arises where a series of shipments are in the same place at the same time, whether that be a warehouse, vessel or other conveyance.

For supply chain managers, this is a difficult exposure to monitor on an ongoing basis, yet can give rise to a significant underlying exposure in the event of just one single incident. Whereas this used to be predominantly the preserve of static risk insurers, due to the progress of, specifically, the shipping sector of the industry, it now has a broader effect across the supply chain.

As the size of vessels increase to meet the cost efficiency demands of global trade, so does the possibility of an accumulation of risk on those very vessels. The capacity of the ‘Emma Maersk’ and her 11,000 twenty-foot equivalent units (TEUs) is a forebearer of things to come. It is perhaps noteworthy to compare her with the recent losses incurred by cargo interests alone on the ‘Hyundai Fortune’ of potentially USD75m and the ‘MSC Napoli’ in the region of USD66m, both of which were unavoidable losses from the point of view of the supply chain managers unlucky enough to be involved.

But the issues of accumulation do not stop once the cargo is discharged from the overseas vessel. As trade volumes continue to rise, specifically to and from China, so consolidation and deconsolidation points become more congested and/or capacity increases.

If we add to the equation the risks of port congestion either through natural or man-made causes such as the recent strike in the US Pacific Northwest, those exposures can result from a number of causes making them difficult to predict.

Being able to calculate these exposures, with a degree of accuracy, requires a high level of risk management capability, which may not be viable within certain areas of the supply chain. It is, of course, difficult enough to manage risk successfully where all the information is available; where that information is not available, it becomes a considerable challenge.

The result of this is that there is only a limited level of protection for even the most sophisticated risk manager. Offsetting risk in the form of insurance should, therefore, play a pivotal role in the overall risk management strategy.

Insurance in Asia

To this end, the insurance market in Asia continues to grow as more and more insurers enter the arena, either as additional offices to bases in London or the US, or Asian headquartered and capitalised. The London and Lloyd’s market is and will remain the epicentre for the complex risks that the supply chain management industry requires, but there is significant shift in knowledge as insurers place expertise on the doorstep of the risks they write.

Indeed, Lloyd’s itself now has hubs in Singapore and Shanghai, allowing Lloyd’s markets to utilise their capital based in London to set up at minimal additional cost in Asia. While the spread of insurance placements is often global, insurers are seeing a real benefit to a presence geographically alongside the risks they are writing.

This provides insurance buyers in the supply chain sector with the services and knowledge base that, all too often, remains under-utilised. While the insurance market is keen to provide this support, generally speaking it has not been considered a traditional option for the supply chain industry. This, though, needs to change if the supply chain sector is to benefit from all the available tools, including insurance, and meet the risk management challenges that Asia will continue to present.

Regulatory and Legislative Environments

The concern, however, has to be that Asia’s trade volume is increasing at a pace considerably in excess of other markets, while regulation and legislation in many of the region’s countries remain in their  infancy. However, this has not dampened the expectation of clients of the supply chain industry in the region, who demand the highest levels of service.

Given the current pace of growth in countries such as China and India and the relative lack of focus on ensuring that the regulatory environment keeps pace with that growth, the protection of that exposure becomes ever more difficult. The changes in regulatory practice will take some time to gain traction and is, perhaps in part, contrary to the desire of those who wish to reap the benefits of the regional growth in trade.

This is likely to continue to have a negative effect on the ability of the supply chain industry to manage their exposures in the developing economies for some time to come.

However, the news is not all bad as insurers have an equal desire to be involved in trade to those regions and, to do that, they want and need to understand the risks involved. This is, in part, the reason for the increase in focused expertise being brought in or propagated in the region by insurers.

To properly understand the environment, they want to be accessible to their assureds and to the risks they face. Whether this proximity will give rise to a consequent increase of insurers’ involvement in the risk management strategies of the supply chain industry remains to be seen.

At present, there remains a relatively low penetration of insurance purchasing in Asia but a change is unlikely to be driven by the regulatory bodies, even with the full support of the supply chain management sector.

Ultimately, an effective risk management strategy needs to be seen as an asset to any company before the costs involved will be accepted. That will require a fundamental change in thinking in some sectors regardless of the regulatory environment.

Premium versus Risk Management

An effective risk management strategy that is able to react to new risks and control existing ones can expect to have a long-term beneficial effect on the insurance costs.

When this is compared to the falling cost of insurance even as trade levels continue to climb to some of the highest levels ever achieved, the actual costs of risk management can be eroded, in some cases, to a large degree.

This also gives rise to more specific options within the insurance programmes to create greater premium efficiencies as the risk management strategy provides more predictable results. Increases in self-retention of risk, for example, can mean a beneficial reduction in premium.

Other, significantly more sophisticated, products start to be made available as the risk management strategy becomes a key aspect of the profile of the insurance buyer. The equation between a reduction in claims experience and a reduction in premium becomes weighted in favour of the insurance buyer with a history of successful risk management.

The Impact of Unused Risk Management Tools on the Balance Sheet

Experience shows that, even where a strong risk management structure is in place the understanding and knowledge may not be filtering across to operational levels. This will reduce the ability of companies to extract the most from their risk management strategy and, ultimately, will have a negative effect on profitability. Put in insurance terms, opportunities to recover losses from insurers are simply not identified on an all too often basis. This can be either due to a lack of knowledge of the breadth of cover available or, perhaps, a perception that making insurance claims will increase premiums in the future.

With an otherwise effective risk management strategy in place, it becomes even more important. The reimbursements not only provide financial recompense, but provide the insurer with valuable knowledge of the operational or commercial risks that are occurring. More importantly, it tests the insurance to ensure that it responds as it should do when it is required. The cost benefit to the assured is clear, but the long-term risk management benefits of stressing the insurance purchasing strategy are perhaps not as obvious, until a significant loss arises.

The challenge for credit and political risk insurers is considering the numerous factors that affect the markets in which they operate. Global trends affect the demand for business and local issues determine how they structure cover for their clients. Oliver O’Connell looks at a snapshot of the Asian credit and political risk insurance market and the wider external factors and detailed internal issues that affect it.

“The first trend to take into account in the region is the increase in intra-Asian trade. This has been increasing over the last few years, and while business between Asia and Europe and North America has always been there, intra-Asia business is certainly a much greater percentage of the total than it was two or three years ago,” observes Jeremy Hampshire of Hong Kong-based Trade Line, the specialist trade credit and political risk insurance broker.

“The second trend, which follows on from that, which is obviously a global trend – is the movement from LC to open account. In Asia this has manifested itself as European and US buyers saying that this is the only way we are going to trade from now on. If you combine these two trends you end up with higher credit and political risk, especially credit, for companies within Asia, and their trading. It doesn’t matter where they’re trading, but this has led to an increased requirement for trade credit insurance,” he adds.

In terms of the most affected trade sectors, the trend began a few years ago with the transition to open account in the electronics industry. Following on from this was also a shift in the textiles industry amounting to approximately 65% of transactions by early 2005. Other trade sectors showing a similar trend include plastics, chemicals, steel, and some soft commodities.

This is also leading to a trend in which payment terms are being pushed out. Starting with a move extending payment terms from 15 days to 30, this has eventually been pushed as far as 60 days. These companies now have higher accounts receivables on their balance sheet for the same amount of business than they did one or two years ago. This means higher risk and supposedly more trade credit insurance opportunities.

In the last 18 months underwriters report to have seen a 25% increase in business, if not 30% in some areas, and in line with global trends, brokers have seen a 25-35% increase in enquiries over the same period.

Increased competition
Greater demand for insurance has seen an increase in interest in Asia from insurers, with a number of new office openings, cooperation agreements and new initiatives. Says Hampshire: “The main brokers have never made a big commitment to this class of insurance. They may have done so in Singapore for example, but they don’t have a significant presence. So things have been left largely to individual operators.”

In March, Trade Line entered into a strategic alliance with Cosmos Services Company giving the company access to a network of offices across Asia, as well as in London. For Cosmos, part of Japan’s Itochu Corporation, the aim of alliance is to expand its trade credit and political risk insurance field to better serve its client base. Trade Line still operates as a separate independent unit but now is a greater presence within the industry.

On the more specialist side of the industry, FP Marine Risks, the Hong Kong-headquartered specialist marine insurance broker, has launched a new trade finance initiative aimed at providing specifically designed marine insurance products for the industry.

Philip Bilney, executive director of FP Marine Risks, says: “There’s no doubt that in Hong Kong and Asia there is a growing need for trade financing banks to protect their marine exposures. By launching this initiative, we are leveraging our existing portfolio of specialist marine insurance services to address this need.”

Spearheading the new initiative is Audrey Poon, a broker with 16 years of experience in the insurance industry who joins FP Marine Risks as manager, trade finance. Having spent the past decade specialising in marine cargo insurance for trade financiers and international commodity traders in Singapore, Poon is aiming to help similar companies in Hong Kong minimize their risk in what FP Marine Risks see as an increasingly volatile market.

In the underwriting section of the insurance business, the major players are increasing their presence in the region. Atradius is establishing an office in Hong Kong at the moment and is investigating obtaining a license for China as well. Bermuda-based Exporters Insurance Company is establishing a representative office in Hong Kong in what is described as a prelude to the expansion of Exporters’ activities in the region through growing contact with local brokers. It is expected that Ace will also look to develop in Asia, perhaps using Japan as a platform for expansion into the rest of the region.

Hampshire adds: “A lot of the other majors are here already so perhaps some of the niche players will want to increase their presence here. We certainly get more visits of representatives from the majors coming through than three or four years ago. The general feeling is that there is more business going on in Asia and Latin America than elsewhere, and given the situation in Latin America at the moment, Asia seems preferable.”

In conjunction with this increased interest in the region is an increase in people moves within the industry. There is a level of opportunity, but with factors such as the cultural difference between Europe and Asia it is difficult for companies to simply parachute someone in and expect them to be able to create new business in a short time. Underwriters claim that with a lack of ‘home-grown’ specialist brokers, they have to spend more time on direct marketing and direct sales and cannot just rely on broker channels to drive business.

Active markets
In terms of the markets within the region that are driving business, China, unsurprisingly, leads the way in generating enquiries. Business coming from China is more for credit insurance rather than political, but most other active markets in the region are weighted more in the favour of requests for political risk coverage. For example, the Philippines, Indonesia and Vietnam all generate more political than credit insurance requests.

The challenge of low pricing that has featured across the world has been especially prominent in Asia with rates falling dramatically in most countries. Of the above mentioned countries, Indonesia and Vietnam have dropped quite significantly, though the Philippines and China have maintained similar pricing levels to the recent past.

Indonesia is of particular concern in that some brokers feel that margins have dropped to the extent that perhaps things have gone down by too much against the potential risk in the country. Mining has proved an especially strong sector for political risk insurance, Martin Phelan, head of political risk for the Pacific region at Marsh in Melbourne, comments: “We’ve done a number of transactions in lease and asset finance for mining equipment. For example in the coal sector in Kalimantan, Indonesia, where the client is supporting international contract mining companies by using asset finance as an alternate structure to pure project finance or traditional on balance sheet debt.”

In this instance the mining company required limited recourse project finance to develop $300 million copper-gold project on which it had completed a bankable feasibility study. The project is located in a sparsely populated country with limited infrastructure – physical, commercial and legal – very low income levels and virtually no history of foreign investment or financing other than that provided by development agencies. The mining laws and regulation that did exist was untested at the time.

Understandably the banks were concerned with the risks involved – the stability of key property rights including government commitment on issues such as royalties and the right to export minerals, the reliability and transparency of the legal system and the remoteness, and therefore possible vulnerability, of the project.

Marsh brought together a syndicate of political risk insurers to ensure that commercial lenders had the appropriate coverage against a range of actions and events that could affect the project.

High commodity prices across the globe over the last two to three years have been driven this mining and oil and gas boom causing a reasonably pronounced upturn in new projects and investment. This is channelling into copper, gold and other base metal mine development and the consolidation of project financing schemes in addition to new exploration and extraction of oil and gas deposits.

Phelan highlights the opportunities available for insurers: “A lot of the transactions we’ve been involved in are still creating further opportunities, medium to large project finance-based copper and gold projects, including in some new countries such as Laos. The commercial market facilitated the entry of foreign investment into the country over the last three years, and by the close of this year, total foreign investment over the last five years – largely from Australian companies in the mining sector – amounts to over $1 billion.”

As demonstrated by the Kalimantan mining project, it is localised issues, not global trends that determine the details of political risk coverage. The Philippines and Papua New Guinea tend to be both the hottest and most contentious markets for enquiries and are dominated by local risk factors.

On a national level the Philippines is a highly attractive country geologically for mine development, but is also a challenging country politically with a range of cultural-cum-political issues. The influence of the Catholic Church is just one of the political and cultural challenges faced by foreign investors in new mining projects, as it is a strong vocal force and strident agitator against new projects because of their environmental, social and cultural impacts.

Phelan comments: “At Marsh we get involved in very distinct regional, national, provincial and even local issues. Political risk is not just about sovereign government issues. For example Papua New Guinea has very high levels of tribal diversity especially in the southern highlands – nationally there are as many as 700 tribes and 700 different dialects. The devil is in the detail when providing cover to projects in regions such as this. It doesn’t necessarily stop deals getting done, but it can be highly intimidating as a challenge in the market. So you need to have the knowledge and ability to come to grips with what the issues are and how they can be managed.”

While it may be wider global factors that moderate the wider market trends and flows of business, it is the location-specific issues and the ability of both the underwriters and brokers to come to grips with them that determines success and failure in a regional market. There is no shortcut to developing workable market knowledge.