Ferrari hot on the P&I circuit

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08/10/2010

Ferrari hot on the P&I circuit

A Genoa-based insurer celebrates 50 years with ambitions to step on the gas.

A Genoa-based insurer celebrates 50 years with ambitions to step on the gas.

It has only just turned October but already the pace of life at PL Ferrari is gearing up for yet another renewal of protection-and-indemnity (P&I) cover.
The Genoa-based company, which has strong claims to be the world’s first P&I broker, recently turned 50 but remains ambitious and is looking for growth beyond its Mediterranean heartland.
If Ferrari was a P&I club rather than a broker, it would be the sixth biggest as it places cover on a more than 2,000-ship fleet of almost 70 million gt that pay premiums approaching $240m.
For most of the half century since the company was founded by Pier Luigi Ferrari, it has been independent, although it spent eight years as part of the big Aon broking empire before a team of 10 senior executives launched a management buy out (MBO) that took the company private again.
The MBO in late 2008 coincided with the financial market meltdown and a bank retreat from lending but the deal was still completed.
Despite this inauspicious timing, Ferrari has continued to prosper.
Managing director Federico Deodato, a former ship’s officer who has spent over 30 years with Ferrari, says the fortunes of the business are tied up with its clients, so it was a worrying time.
“If shipowners are doing well, we do well but if they suffer, we also suffer,” said Deodato.
But, fortunately, Ferrari is more exposed to the recovering bulk-shipping sectors and less to the hard-hit container trade.

Deodato says he is “reasonably optimistic” as conservative budgets were set, charterers’ business held up and Ferrari is doing fine.
“In 2008, we worried about 2009 and then about 2010 but we now see 2011 as a pretty crucial year.
“But we have a nice growth curve consistently up each year. We don’t have a desire to grow exponentially. We are happy with steady growth
“The MBO business plan is on track but you don’t become rich doing this business. Overheads are a lot higher than elsewhere but you can make a reasonably good living out of it if you are prepared to work 10 or 12 hours a day,” added Deodato.
The Ferrari management team is still in the office in the evening and many come in at the weekend to squeeze in a few uninterrupted hours.
It is a very service-intensive business with half of the 67-strong team working on claims, with the figure rising to 80% if other servicing functions are included.

According to Deodato this service focus is the real secret of Ferrari’s success.
“P&I is completely different to other areas of the insurance business. Most people perceive a P&I broker as someone transacting business but there is a lot more to it. The service commitment is vital,” he added.
“It is a big cost and it is something you come to terms with but a big broking group would struggle with the dynamics of such a service-intensive business,” he said.

An impressive list of shipowner clients validates Ferrari’s approach. In Italy, there are three D’Amatos, both D’Amicos and both Bottiglieris as well as D’Alesio, Augustea, Coeclereci, ENEL, ENI, Ignazio Messina, Moby, Premuda, Saipem, the Seaarland-Zacchello companies as well as the Grimaldi group, including wider ventures controlled by this Naples-based owner such as Finnlines, Minoan Lines and ACL.

Beyond Italy Ferrari places cover for companies that include ¿V Ships, Metrostar, Avin International, Oceanbulk, Paragon, Diana Shipping, Iolcos, Starbulk, Stealth, Hellenic Carriers, Scorpio Tankers, Globus, Emirates, Besiktas, Karahasan, Stellar Shipping, SMT, Fal Shipping, Lukoil, CNAN and Acemex.
“Turnover of clients is basically non-existent. We feel this vindicates the focus on service,” said Deodato

But Deodato also reveals there is also an edge to the business that keeps it at the top.
“If we feel we might lose something, we will fight like street dogs to keep it,” said Deodato
So where will Ferrari be in five or 10 years’ time?
Deodato sees it as a very similar business to now but significantly larger with a wider geographical reach.
Italian owners now account for less than 50% of Ferrari’s activities with Greece and Monaco each producing about 12% of the business.

The Russian market was also important around 2005 with Ferrari placing cover for about 700 vessels but it has since declined as a source of business.
An agreement has just been made with Swiss hull broker Sipex to open a joint office in Turkey from the New Year.
There is an established Ferrari presence in Naples and a recent move into London with the recruitment of prominent P&I broker Stephen Hawke from Aon.

Despite the importance of the Far East shipping market, Deodato thinks exporting the Ferrari service concept might be a step too far, so growth is more likely to be in the Middle East, Northern Europe or perhaps Spain.
There is a historic understanding with Genoa-based hull-insurance broker Cambiaso Risso that they will co-operate but not stray into each other’s speciality with the deal cemented with a 10% cross shareholding and a director from each sitting on the other’s board.

Ferrari will, however, still stick to its philosophy of remaining a specialised P&I broker and not be tempted into hull or other areas of insurance.
“That we don’t do anything other than P&I is a strong point in terms of developing relationships with other brokers. We are always open for the right commercial relationship,” he added.
At 54, Deodato is the oldest of the MBO partners, although most of the Ferrari managers are 20 or 30-year veterans of the business.

There is no MBO exit plan that involves selling Ferrari and collecting the proceeds.
“This is not part of the business plan but another 50 years of independence is”, Deodato adds.
The concept is, instead, that Ferrari will be run like a professional partnership with the stakes of retiring shareholders bought back and redistributed to up-and-coming members of the team.

By Jim Mulrenan Genoa
Published: 20:04 GMT, 06 Oct 10 | updated: 20:04 GMT, 06 Oct 10


 
Palatial premises live up to reputation
Every office should have one. When PL Ferrari’s protection-and-indemnity (P&I) palazzo gets a little too hot at the peak of the Italian summer, staff and clients can retreat to the Nymphaeum.

If you are unfortunate enough to be reading this in premises without even the most basic of grottos, you can only envy the watery temple that lies at the base of Ferrari’s “office”.
PL Ferrari is one of the classiest of P&I brokers and their premises certainly live up to this reputation.
The firm occupies the Villa Pallavicino delle Peschiere, a palatial 16th century summerhouse built for one of Genoa’s ruling families.

The talk may be about the many things that go wrong when ships go to sea and how insurance can at least mitigate some of the problems.
But there are no paintings of ships on the wall or ship models.
Instead, there is total immersion in another world with walls and ceilings richly decorated with classical scenes.
It is a magnificent place to do business but the palazzo has a few snags such as the need to improvise with ideas such as running computer cables down chimneys.

By Jim Mulrenan Genoa
Published: 20:04 GMT, 06 Oct 10 | updated: 20:04 GMT, 06 Oct 10

 
 
Transatlantic loss inspired first P&I steps
The tragic loss of the pride of the Italian fleet in 1956, the passenger liner Andrea Doria, was fresh in shipowners’ minds when Pier Luigi Ferrari took his first steps in the protection-and-indemnity (P&I) world.


The 29,000-gt Andrea Doria (built 1953) sank after colliding with the 12,000-gt Stockholm (built 1948) off Nantucket in the last of the great transatlantic liner disasters.

It was potentially another Titanic disaster but 1,660 passengers and crew were rescued and only 46 lives were lost. The Stockholm, incidentally, is still afloat as the Portuguese cruiseship Athena.
More than half a century later, Ferrari is still to be found in the chairman’s office at the palatial Villa Pallavicino in Genoa with the 71 year old having no timetable to retire.

Ferrari was the son of a manager of the Generali insurance group who in the wake of the Andrea Doria loss thought the developing world of marine liability cover looked interesting and proposed his 19-year-old son go to London and find out about P&I.
It was inspired thinking as Italian owners were also becoming aware of their liabilities and receptive to Ferrari’s approach.
There has always been a rivalry between Ferrari and Rotterdam-based Post & Co over who was the very first P&I broker. But Ferrari is convinced he was and still has the Standard Club commission note that gave him three farthings a ton for the very first vessel he placed with the club in 1959.

The 7,176-gt war-time Liberty Ship Honestas, owned by Ausonia di Nav dei Fratelli Ravano di Alberto, was only insured from 1 June to the 20 February renewal, so Ferrari was paid 264/365ths of the annual commission — the magnificent sum of £16 4s 5p in the pounds, shillings and pence of Britain’s pre-decimalisation currency.
The Genoese have a reputation for being careful with money, so it was second nature for Ferrari to show his clients that he looked after their lira as though it was his own. For many years, he would buzz around on a Vespa scooter sometimes with a portly English club underwriter clinging to the pillion seat. And then when he traded up, it was not to a sporty red number from Maranello but to a small black Fiat saloon.

Ferrari’s entire adult life has centred on P&I, from his initiation in the business with former Standard Club chief Colin Harris and brothers Cyril and Dawson Miller, whose family at the time ran both the UK and Standard clubs.
There used to be a small Genoa P&I club, Sindacato Internazionale, but Ferrari always favoured the English-managed clubs and frequently travelled by train (on a second-class ticket) and ferry to London.

The idea of Ferrari creating his own P&I club has been suggested by a number of shipowners over the years but the broker was never seriously tempted.
Ferrari says he always thought rivalries between owners meant it was better to be insured with foreigners.
In the early days, his entire business fitted into a brief case but he gradually signed up bigger owners, some with fleets of 25 or more ships, and then he made a breakthrough into the big time, winning Italy’s state-owned tanker fleet. By his late twenties, he was firmly established as a P&I broker.

The advice he got from Harris paid dividends with as much as 85% of his business in the early days being placed with this club, although he later diversified and used the UK Club, Steamship Mutual, North of England, Gard and everyone else.
Many of his clients from the early days such as D’Amato and Deiulemar are still Ferrari accounts today.

By Jim Mulrenan Genoa
Published: 19:59 GMT, 06 Oct 10 | updated: 19:59 GMT, 06 Oct 10

 

Antitrust investigation puzzles broker
A top broker such as PL Ferrari might benefit from the market turmoil that might accompany the break up of the International Group P&I cartel.


But the prospect of such an outcome to the European Commission (EC)’s current antitrust investigation of the International Group is not something that Federico Deodato or his colleagues relish.
“We are strongly supportive of the International Group structure. It would be crazy to destroy something that is serving the shipping industry so well,” said Deodato.

The broker finds the decision in Brussels to launch an investigation almost puzzling.
“This is something that concerns the authorities more than the actual customers, the shipowners,” he adds.

Ferrari nails its colours to the P&I club mast with the launch of the broker’s market review somewhat ominously entitled “Still Waters”.
There are indications that the EC is taking an interest in the high release calls that the clubs set to allow shipowners to move to other clubs.

But Deodato says the concept of a release call is now wrong in itself.
“If there is a problem, it is that the message from the clubs should be coherent. If finances are strong and claims stable, why should a club need a high release call?” he noted.

Deodato compares discontent about release calls to football where complaints about referees are often down to a lack of consistency rather than the rules of the game.
Still waters is a reference to superficially calm seas but with a number of threats lurking beneath the surface.

These include the claims trend where a downturn may be due to reduced shipping activity rather than an end to claims inflations or other change in the underlying environment.

The broker also sees convention-driven liabilities rising, technology advances making wreck recovery in even the deepest waters more likely and identifies an upward trend in higher value pool claims as a reason for “excessive optimism” to be avoided.
The Ferrari market report estimates the general increase in prospect at the February 2011 renewal will be in the zero to 5% range but should really be higher at up to 10% as there are still clubs that need to take remedial action over underwriting deficits.

Ferrari is also forecasting that there will be specific attention on deductibles at the renewal and also more focus on individual records rather than the general environment.
But the broker argues that there is a need to revalidate terms, so that the raising of deductibles is matched by logical premium discounts.

Ferrari calculates that at the February 2010 renewal the 13 International Group clubs achieved a pure premium increase of 2.4% against a target of 3.2% and suggests the difference is more likely to be changes in deductibles and other terms rather than weak underwriting.
The figures broadly fit with the clubs achieving a year-on-year increase in premium of 6.62% against a background of a tonnage rise of 4.25% and average P&I premiums rising from $3.11 per gt to $3.386 per gt, an increase of 2.4%.

A feature of the Ferrari review is that much of the comparative data for the different clubs are displayed on similar scales to permit easy comparison.

By Jim Mulrenan Genoa
Published: 20:06 GMT, 06 Oct 10 | updated: 20:06 GMT, 06 Oct 10


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