ITIC in the news: Lloyd's List interview with ITIC's CEO, Tom Irving

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ITIC: marine liability cover for men in suits, not men in boilersuits

by David Osler

THE International Transport Intermediaries Club is another one of the many marine mutuals offering cost-price liability insurance to people working in the maritime industries. But as the in-joke at its offices runs, the main difference is that it provides cover to the men in suits, not themen in boilersuits.

“We insure people that sit at a desk rather than the people that are operating a crane, driving a truck or sailing a ship,” said chief executive Tom Irving. In practical terms, this means the shipbrokers that fix the charters between owners and charterers, or S&P transactions between buyer and seller, and the ship agents that look after cargoes, deal with port authorities and pilots and arrange crew changes.

The club now has 3,650 members, ranging from sole traders to substantial public limited companies, chieflyranking among the arrangers, facilitators, managers and surveyors of the maritime world. ITIC, or to be more exact, its main predecessor, was founded by the Institute of Chartered Shipbrokers in 1925 under the name of the Chartered Shipbrokers’ Protection Association.

The move came after a number of significant court cases centring on unpaid shipbrokers’ commissions.Litigation was expensive then as now, and the idea was to provide cost-price legal expenses insurance to brokers.

By the 1930s, the CSPA began to offer a second class of insurance, providing indemnity for professional negligence claims. The parallels with what P&I clubs do for shipowners should be obvious.

A merger with the International Ship Brokers & Agents P&I Club came in 1983, before ITIC reached its current form after another merger in 1992, this time with Transport Intermediaries Mutual Insurance Association.
This process has meant a diversification into similar niches in sectors adjacent to maritime, such as aviation,but shipping still accounts for 95% of those signing up.

Companies usually become members out of sober recognition that nobody’s perfect. We all make bungles from time to time, and sometimes those that lose out in consequence are entitled to seek compensation. ITIC’s policies, as Irving sees it, insure primarily against human error.

“We cover mistakes that an individual makes doing their job, where the company is being sued for loss thattheir customer or client has suffered.

“That is to say, third party liabilities arising from the negligence of the member.

“You think you’ve seen it all when it comes to claims, and then something else lands across your desk.”

For example, ship agents may face a claim for relying on out-of-date information on available draft, creatingdifficulties in berthing a ship.

A shipbroker may make too optimistic assumptions based on previous transactions and then miss somethingthat has changed, making mistakes in recaps and negotiations.

Shipmanagers may not exercise the right degree of oversight on a refit or drydocking, leading to a major costover-run for the owners.

ITIC will meet the cost of investigating a claim and defending where necessary. Often an early resolution canbe achieved. Where arbitration or court decision results in an award, it will pick up the tab for that too.

Yet compared to $2bn-plus cover provided by the International Group pool scheme, ITIC can only write up toa maximum of $30m, and doesn’t even always do that.

This is probably about right, given the nature of what it insures. There is little degree of aggregation risk, for instance.

“We obviously go through scenario planning and look at if there is one event that could cause multipleclaims. With our type of insurance, it’s difficult to see that.”

In the hypothetical situation in which a claim topped the $30m ceiling, ITIC is backstopped by $280m inreserves, a pot that could take the strain were there to be no other alternative.

Members can pick upper limits appropriate to their needs, in terms of the kind of business they are doing.

Most of ITIC’s business — around 85% of it, in fact — comes via brokers, who will often guide their clientsappropriately on the topic.

If $1m is appropriate for a sole trader, that is the level he or she will be advised to select. According to Irving,ITIC eschews so-called upselling.

“We say, let’s just look at what service you’re providing, what could go wrong, whether you are using standardterms and conditions to limit your liability. Do you really need a huge limit?”

Irving also pointed out that P&I cover for shipowners is effectively compulsory. Without the ticket to tradeprovided by a blue card, most ships won’t get into most ports.

“We’re different in that respect. If you’re a marine surveyor, you don’t have to buy our type of insurance.

“We would say, you shouldn’t be doing that. We can point to decades of claims we’ve paid on behalf ofsurveyors, but no, we’re not part of the International Group.”

ITIC prides itself on being member-owned, with a non-executive board of directors.

Management services are provided by Thomas Miller, which also manages the UK P&I Club, the UK DefenceClub, the UK War Risks Club, the Hellenic War Risks Club and the TT Club, and other mutual insurers outsidethe marine classes.

But most of ITIC’s competition comes from commercial insurers providing liability cover, especially in localdomestic markets.

“We’ve been doing this for 100 years and we have seen competitors dip in and out of the market. It will be allthe rage to come in and do this kind of business.

“And then maybe fortunes change a bit and it’s not making the kind of money they thought it would make,and someone else will come in and have a go.

“Our philosophy is steady pricing of the risk and being there to pay claims. For us, there are no third-partyshareholders to provide a profit to, and we’re only as good as the last claim we’ve paid or the last claim we’ve settled.”

Interestingly, ITIC’s combined ratio — the ratio of payouts and operating expenses against payouts, widelyused as a yardstick of underwriting performance — is on the high side, not just for a mutual but even by thestandards of commercial insurers.

While most mutuals aim to land fractionally either side of the 100% breakeven mark, ITIC’s figure isfrequently of the order of 70%.

Irving defends this, on the grounds that ITIC has to be more commercially minded than a P&I club, as it doesnot have access to a pool scheme as a reinsurance mechanism.

Moreover, it has for the last 31 years in succession provided generous continuity credits, effectively acashback to renewing members.

This time round the continuity credit will be 35% for those renewing for one year, and 45% on the first yearfor those renewing for two, with a guaranteed minimum of 30% in the second year.

Irving stressed that the level of the credit has moved both up and down over the decades, as suits ITIC’s financial situation.

“I always describe it as a tap we can turn on or off quite quickly. We like the ability to give a 45% continuitycredit, which is higher than it has been in recent years, but that’s a response to a strong combined ratio.”

ITIC’s most important recent project has been the establishment of a Brexit workaround subsidiary, in the shape of Cyprus-based International Transport Intermediaries Insurance Co (Europe).

Many UK-based marine mutuals have had to set up such affiliates simply to be able to keep selling to European clients after Britain’s departure from the European Union.

The new subsidiaries have risen to the task of fulfilling this function. Publicly, P&I club executives are wont to declare them a success; privately, they will sometimes gripe the additional expense and bureaucracy the mechanism entails.

Between November 2019 and the launch of International Transport Intermediaries Insurance Co (Europe) in February 2024, ITIC served Europe through UKNV, a Netherlands-based affiliate of the UK P&I Club and thuspart of the extended Thomas Miller family.

That set-up, known in insurance jargon as a fronting arrangement, worked well enough and could have continued, Irving insisted. But ITIC’s board felt that its longer-term best interests were best served by anindependent EU entity.

“They felt quite strongly that was the better strategic model, to be a bit more self-sufficient. That led us to Cyprus, a big shipping hub, especially for third-party ship management, where ITIC has had business foraround 30 years.

“We were very conscious of going somewhere that had that strong maritime community. Cyprus was slightlymore cost-effective for us as well.”