48 Maritime Reporter & Engineering News • MAY 2014
Can you give our readers an overview of your busi-
ness today.
The Premium income and growth factors in
the marine insurance industry are very stagnant right
now. And competition is quite heavy in all areas. In the
U.S. market and in the marine market in general, there
are new players. The London market has gotten more
aggressive over here.
There has been a prolonged contraction among ship
owners and operators. How has this impacted your
business?
To put it simply, there is not a big increase in
marine transportation. (While there is a boom in the
energy markets), a lot of the shale oil and gas is car-
ried via pipeline and railroad car into various ports. (In
short) today there are fewer, bigger ships.
In the long range, do you see the shale oil and gas as
having a bigger impact on the U.S. marine business,
and as a result WQIS as well?
There are two answers to that question. The
fi rst is “what is the U.S. government’s position on ener-
gy export,” because that will have an impact. And then
you have to consider how the various states will react to
the transit of the oil through their states. Barge are the
safest means to transport oil. It has the best historic loss
record and the best safety record.
What else do you count as most recently impacting
your business?
The Macondo oil spill is impacting pollution
cover fairly heavily.
How so?
BP made the decision to set up a $20B dol-
lar fund and, as a response to the spill, to throw at it
every resource that could be found, whether or not that
resource was productive or effi cient. They established
in the minds of a lot of responders who were new to
response, because we haven’t had a lot of big spills, an
idea of how a spill response should be run. And the BP
fund paid claims that are not required, per se, by law.
So today oil spill responses, especially in the areas
of the Gulf and lower Mississippi River, are taking on
a different kind of life and are becoming much more
expensive because there is an overreaction in terms of
resources being put on the spill. There is an increase in
ineffi ciencies in the responses because people trip over
each other. It’s just too much, and has built an expecta-
tion on the part of some parties that they deserve to be
paid for claims that should not necessarily be paid.
To what do you attribute this overreaction?
I think they had a terrible public relations
problem. I think they handled it brilliantly. I think
they did a very good job for their own interests. And
so that’s why they reacted that way, and I would never
criticize them for it.
How does this have a material impact on WQIS and
on insurance in general?
The trickle over is simply the expectation of
people from the liability side of insurance that have
damage, whether or not from an oil spill, potentially
may be looking for payments of claims that would not
historically have been paid.
We have always expected over time that costs, com-
paratively as all other infl atable items, would go up on
a spill. But we’ve seen a jump of expectations. To give
you an example, when the government sets up a com-
mand center you need to run a good command center
24/7 and you probably need 60 to 70 people. Today,
command centers are being set up with 300 to 400
people.
And you just have to wonder what they are all doing.
The Coast Guard offi cer who ran the Houston Astro-
dome evacuation after Katrina set up the emergency re-
sponse, set up a shelter and hospital for approximately
25,000 displaced residents. He did it with 19 people.
Because that’s what you need. You need an effi cient or-
ganization in the command center, but that’s not how it
works today. And you have to pay for all the people in
the command center.
And that’s the way it’s evolving: everybody wants a
piece of the spill. Everybody wants their input on the
spill. They want to be in the command center where all
of the action is.
Let’s discuss the price pressures you alluded to.
The price pressures are not necessarily from
the insured. Everybody would like to get the best
deal, so of course you would like a reduction in your
insurance payment, especially when you haven’t had
a claim. But what we’re in is an insurer-driven price
competition which is a little different. This is where
insurers themselves would like a bigger piece of the
market and may choose to write business at prices that,
in the fi rst instance don’t seem economic, in order to
get a larger piece of the pie.
Legislatively, there has been some big activities with
the advent of the new non-tank rules and fi refi ght-
ing rules, and the relationships between salvors and
their clients. What does this mean for insurers in the
oil pollution markets?
The diffi culty is that in a marine event, you
can have Sue and Labor under the hull policy involved,
you can have salvage involved, you can have removal
of wreck involved, you can have cargo offl oading to
save cargo, and you can have pollution.
In the pollution world, you cover the threat of dis-
charge or discharge. At what point does a vessel be-
come a threat of pollution … where the pollution un-
derwriter should respond rather than the hull or the P&I
or the cargo insurer. So when you offl oad a cargo from
a grounded barge, is that for cargo interest? Is that for
pollution interest? Is that for hull interest to refl oat the
vessel? So we have a situation where portions of a pol-
lution event could be covered by none of them or all
of them.
And therein lies a grave diffi culty. You are an insured.
You have paid to place your insurance with three best
insurance companies in the United States. Then an
event occurs. There is no doubt that you are covered,
but who’s going pay you? And that process of deter-
mining who is going to pay can take time, and you are
WQIS
An interview with Rich Hobbie,
the leader of the Water Quality
Insurance Syndicate (WQIS),
the largest underwriter of pollu-
tion liability insurance for ma-
rine vessels in the United States.
By Greg Trauthwein, Editor
INTERVIEW: SPILL RESPONSE
MR #5 (42-49).indd 48 4/30/2014 3:58:00 PM
Digital Wave Publishing