Sailaway success

Sailaway success

North East waterfronts look quieter than they once did, but the region’s marine insurance sector has a new unity, Geoff Parkinson tells BQ.

No seagull in sight, no whoop from a ship. We’re on a wooded business park, 13 miles inland, visiting elated insurers of more than 12,500 fishing vessels – and thousands of other craft working around the world besides.

They’re elated because they’re celebrating their 130th anniversary with an entry into a strategic partnership, an “exciting opportunity” that promises to progress their own global networks and raise the North East region’s growing stature as a major hub of marine insurance.

Elated, too, because Sunderland Marine Mutual Insurance Company, amid challenges from the global financial crisis, sees new markets and opportunities and new products of global potential.

The firm insures boats against damage and ship owners against financial loss in more than 50 countries. It’s the eldest provider of insurance to fish farming and a global leader in aquaculture markets.

Yet its auspicious anniversary falls not in the coastal city it’s named after but inland at Durham City, to which it relocated its international headquarters in 2005.

Success and necessity dictated the move. It previously operated from a row of nine Victorian houses on the Esplanade at Sunderland, six of which it owned.

With staff numbers and overseas business rising, space ran out. Chief executive Geoff Parkinson recalls: “We tried to relocate within Sunderland on several occasions. But it wasn’t that easy. We discussed three sites with Sunderland Council.

“One offered to us we spent some time and money researching, only for it to be pulled away with no real reason given.” Sunderland’s different now.

Sunderland Council’s business investment team, by attracting inward investment and supporting and developing home grown companies, has attracted 5,500 new jobs and £900m of capital investment during the past three years.

That didn’t cover Sunderland Marine’s hour of need however and, frustrated, it contacted County Durham Development Company. The CDDC responded the same day. Parkinson had noted a site previously used by Sport England and yes, County Durham could consider that. The deal was done.

“Such wonderful co-operation, it was incredible,” Parkinson says.

“It was a very easy choice for us to move here.” Here is Aykley Heads, where neighbours include North East Chamber of Commerce and the Vardy Group of Companies.

Sunderland City Council, had it been championing the private sector and the city port’s regeneration as it does now, would probably have moved heaven and earth to keep on its patch this company with £73m turnover and international renown.

But as Parkinson says: “We were welcomed to Durham with open arms.” Many employees have relocated into the county. And building the new headquarters cost amazingly little.

“We were able to pay for it within a year and still show a record year of financial results.” It worked like this. The Georgian buildings in Sunderland needed reroofing, rewiring and reheating, with new windows throughout. Total cost: £2.5m, yet no extra space.

Instead the company sold the six buildings it owned for the same price, put the two sums together and developed its modern premises for £5m. The land was freehold, and no developer was hired. A four-strong team including Geoff, Angela Vipond the chief risk officer and Alan Rowland the company secretary, did the job.

Architects Tony Nicolson and Garfield Nairn of Whickham relished designing a new building with a maritime feel. While external appearances are fairly conventional, the boardroom has a wall like a ship’s side, ribs and all.

Many windows are virtual portholes, marine paintings proliferate and the entrance suggests a bow. The award-winning building was delivered on time and to budget, 15 months from breaking ground.

An entrance model of the lighthouse at Roker Pier reflects the Sunderland link and London, Capital of Risk, was never considered for relocation.

As the company is a mutual, with policyholders the owners too, it represented, as Parkinson says, excellent investment.

Its prestigious look and setting impresses visitors, often from abroad, as do its air, rail and road communications.

Progress since the inaugural meeting in 1882 might astound the attendees, could they see it now. They were ship owners and brokers largely into fishing, and from Sunderland and North Shields.

Meeting at John Street, Sunderland, they formed an organisation. At the time Sunderland was the country’s fourth biggest port after Newcastle, Liverpool and London.

Their objective was better financial protection in event of loss or damage to their sailing drifters. Their banner was the red pennant forming today’s logo of Sunderland Marine.

Distressed members flying it then could expect, in any crisis afloat, another member would come to help and, if necessary, tow them back to port for free.

The company spread benefits south to Whitby, Scarborough and Bridlington, and north to Amble, Eyemouth and other parts of Southern Scotland.

With diesel power, it became a national company insuring in Cornwall, the North East of Scotland and Ireland.

Yet even in 1972, when Parkinson joined as a junior claims clerk, the operation was modest, despite already being the UK’s major insurer of fishing vessels.

Parkinson was its first new employee for 15 years, joining four operational and two support people working from four rooms rented in just one of the Esplanade buildings.

Business then, as now, hinged on quality, not high volume. Parkinson, not yet 18, was fascinated; every day brought something new.

“The company let me visit fishermen claiming for damage, unlike in earlier years when this was done through marine surveyors,” Geoff recollects.

“This way we developed a closeness with clients, sharing their problems and concerns face to face. I spent many holidays fishing as a crew member.

“I learned, working closely, what winch damage or engine damage was all about. I experienced the arduous life. Fishing’s still probably one of the most dangerous industries. It’s important we fully understand its workings.”

Geoff got interested in diving, did lots of the salvage work. It was comforting, literally, when the company replaced his wet suit with a dry version; comforting, too, when he was made executive director in 1993.

Already a decade before, Sunderland Marine had been evolving from insuring vessels 100% in the UK to the position where, today, 85% of the business is international.

The company, with 10 offices abroad, can respond 24/7 if, for example, a ship runs aground.

Parkinson says: “By the time we’d almost saturated the UK market it was a question of: What now? Drop our criterion of quality to bring in more business, or look overseas?” Abroad, was the answer.

First, some re-insurance in The Netherlands - business which is ongoing today. Then on to developing English speaking countries.

“We were invited into the United States,” Parkinson points out. “The industry there was finding premiums might jump 30% one year, drop to 20% the next, then go up by 15% the year after.

“But we give good security and stability. If you’re a fisherman or a charter vessel owner, or a commercial vessel operator in general, you’ve the comfort of knowing your premiums aren’t going to jump around wildly.”

Now Sunderland Marine, doing all its own risk assessment, is the dominant insurer for commercial fishing vessels in the USA, Canada, Australia and New Zealand.

“I think this projects the right kind of image for an international company,” Parkinson observes – and claims a 95% retention level of members year on year.

There’s no cover for vessels in the pirate infested Somali region - “there have been one or two incidents, but nothing where vessels have been taken and seized.”

Fraud is no great concern either, though Parkinson admits: “You get the odd case that’s not as it should be. We take appropriate action. If someone has a genuine claim we pay it quickly. If someone has a claim we believe is fraudulent then we aren’t very nice people to deal with. We’re protecting the interests of all members, not just one member.” Establishing a presence overseas was challenging.

“The biggest thing we could offer in the like of Australia and the USA was the ethos and the ethics of doing business where the company always strongly desires to protect the client. We do lots of risk and enquiry assessment before people are allowed to join the company. We try to select the cream.

“The mutual ethos is important where we take people on as policyholders and members of the company. It’s a different approach from a normally composite company. Many members have been with us for generations. It’s almost a family atmosphere.

“If someone has a claim we look for a way to pay, rather than try to avoid. That gives us strength and membership loyalty.” Staff loyalty plays its part too. Many have given 20 to 30 years’ service, and often clients have dealt with the same person throughout.In a three-year cycle, probably about 80% of members will be seen.

“It’s a hands-on, close control business, all about people and relationships,” Parkinson says.

Anything from a 30ft Amble-type coble up to the modern supertrawler, 116m or longer, is on the books, entire large trawler fleets too.

On the Thames, about 80% of local traffic – cruise and sightseeing vessels, ferries, pilot boats, refuse collectors – are entrusted to the denizens of Durham.

About 30% of business covers non-fishing now - tugs, barges, harbour craft, chartered vessels.

The yacht portfolio is growing too. Thus Sunderland Marine has adapted to a fishing industry which, for a century plus, has been downsizing through efficiencies, and fewer vessels – many of them computerised trawlers – are needed to net the same catches.

And, adds Parkinson: “The industry also works with scientists now, so there’s close control to avoid overfishing.

“There’s common ground as to how many days they can spend at sea, and allocated quotas of catch per year.

Incomes are still good and reasonable, there’s fuel efficiency and a sustainable industry that serves the biomass of fish in the sea.”

Sunderland Marine spotted early on a resultant potential for fish farms, and for a quarter of a century now has also covered them, their stock and their equipment.

Parkinson says: “There’ll always be a catching sector. But diversifying into farms for us has also been beneficial.”

Indeed, Sunderland Marine covers members in over 15 countries for more than 50 species, and has become world-leading insurer for aquaculture products and stocks in Canada, Scotland, Australia and Chile – with their colder, clear waters.

The UN considers aquaculture the world’s fastest growing animal food-producing sector, with a market value of around £50bn yearly, and yearly growth of almost 7% looking certain to accelerate.

Proximity of the Scottish industry was an incentive for Sunderland Marine to stay in the North East.

But also, Parkinson adds: “The North East remains very conducive to our kind of business. We’ve not only easy communication with our many clients across the border but also, with Newcastle Airport near, if we must be in Australia, New Zealand, Singapore or South Africa, we’ve the wonderful Emirates airline services.

Or we can be into Amsterdam or Paris – Heathrow if we must use it - within an hour to go on to our offices abroad.”

Through its Vancouver office, the firm is also diversifying into cover for marine trades, such as diesel and boat repairers, and equipment suppliers.

A UK tailoring is under way in conjunction with UK broking and underwriting partner, Knighthood Corporate Assurance Services.

Cargo insurance may also be developed beyond stock throughput.

Sunderland Marine is encouraged that already since the start in January of its collaborative agreement and partnership with North of England P&I (protection and indemnity) Association, “very interesting” opportunities have appeared.

Nepia, headquartered on Newcastle Quayside, is 152 years old - the world’s second largest P&l, insuring 12.5% of the world’s tonnage. It focuses on freighters and other larger vessels.

“A competitive situation has never existed,” Parkinson says. “We insure hull and machinery. They insure owners’ legal liabilities, not ships. It’s two distinct but important sides of marine insurance. The companies have long enjoyed an open relationship. Now clear cultural and service synergies also give exciting opportunities,” he adds.

Nepia employs 226 people - 192 in the region, 34 abroad. Sunderland Marine employs 113, 78 of them in the region.