~  A comprehensive report into the global container transport industry authored by TT Club and McKinsey ~

Coinciding with its 50^th anniversary, leading international freight transport insurer TT Club, in conjunction with global management consulting firm McKinsey, have today published ‘Brave new world? – Container transport in 2043’, a wide-ranging, qualitative report summarising the passionate thoughts and opinions of industry leaders on what the future holds for the container industry over the next 25 years.

Rather than focusing on purely quantitative research and analysis of trends, the authors of the report interviewed over 30 highly respected industry leaders and experts from a wide cross section of the industry. The aim was to gain a qualitative insight into the perceptions and confidence of the people who have greatest experience in the industry and are best placed to predict the sector’s future. These included Board Members of TT Club, but importantly other supply chain professionals, financial intermediaries, law firms, and disruptors and innovators.

Following the research, TT Club and McKinsey, in ‘Brave new world?’ have drawn five broad conclusions as to where the industry is going and then have examined four specific potential future scenarios together with their implications. Two of these scenarios centre on digitalisation and two on trade development, or the lack of it.

The development of containerisation over the past fifty years is well documented. The industry is now well-established at the centre of international trade with over 90% of consumer goods (TVs, toys, clothing, furniture) and many raw materials being shipped in these metal boxes. Yet despite the success of the container, the returns for the average container liner operator or freight forwarder have lagged the cost of capital over the last two decades. There have only been a few winners who have found a sustainable recipe for value creation.

So what will change in the future or will the familiar boom and bust cycle continue? ‘Brave new world?’ reports five broad conclusions:

1. The physical characteristics of the industry are unlikely to change, as the container and the ships that carry them will still exist over the next 25 years
2. Trade flows will become more balanced across trade lanes as incomes converge between East Asia and developed economies, and the emerging economies in South Asia and Africa “catch up”
3. Automation will be broadly adopted across the value chain, especially on the landside in ports, terminals, rail and trucking, to unlock significant efficiencies
4. Digital, data, and analytics will cause a fundamental shift in the sources of value creation and customers will expect a high level of reliability, transparency and user-friendliness
5. The industry leaders in 2043 will look very different; some will consolidate, others may change their business model. Some will be “digital natives”, either start-ups or e-commerce players optimising the container transport leg of their supply chain

Drawing together these broad conclusions, the report identifies the key sources of value creation for the industry, leading to a pivotal debate as to whether the future is fundamentally driven by trade or by digitalisation. From this, the authors derive four possible outlooks for the future in thought-provoking articulation.

Charles Fenton, Chief Executive Officer, TT Club, says:

“TT Club was founded in 1968 by some of the early adopters of the unitisation of cargo, the container. We have been keen to mark our 50^th anniversary of the start of a Member-owned, mutual insurer by launching this report. From inception, TT Club has had a philosophy of listening to its Members and sharing their experiences to make the industry safer and to minimise risk whilst lobbying for and embracing change when and where it’s required.

“Therefore this piece of research, asking industry leaders what the future of the industry may look like and issuing ‘Brave new world?’, is I think a most appropriate project. We believe the container transport industry will face challenges as technology changes the environment, but we are confident that an industry that has shown itself adept at change will rise to meet these challenges.

“The container’s simplicity and modularity has made it the mode of choice for transporting many goods across the globe. This examination of the wisdom and perceptiveness of the industry’s opinion formers is, we believe, relevant in exploring how such strengths will develop the container transport environment by 2043.”

Martin Joerss, Senior Partner, McKinsey, says:

“More than 50 years after the introduction of the container, the container transport industry faces the transformative rise of digital, data, analytics, and automation. There is a range of futures where digital fundamentally changes the industry’s economics – for the benefit of both customers and industry participants – but getting there will require vision and relentless execution.”

For further details, including a full transcript of the report please visit:

www.ttclub.com/tomorrow 

Notes to editors

About TT Club

TT Club is the international transport and logistics industry’s leading provider of insurance and related risk management services. Established in 1968, the Club’s membership comprises ship operators, ports and terminals, road, rail and airfreight operators, logistics companies and container lessors. As a mutual insurer, the Club exists to provide its policyholders with benefits, which include specialist underwriting expertise, a world-wide office network providing claims management services, and first class risk management and loss prevention advice.

TT Club is managed by Thomas Miller.

www.ttclub.com

TT Club, the leading international transport and logistics insurance provider, today announces its financial results for the year ended 31 December 2017, and A.M. Best affirms its A- (Excellent) rating

Highlights:

• $181.8 million gross earned premiums (2016: $177.8 million)
• $7.3 million surplus for the year (2016: $5.2 million)
• Total assets of $597.6 million (2016: $613.0 million)
• Total surplus and reserves $193.1 million (2016: $185.8 million)
• 2017 financial year combined ratio of 97.0% (2016: 95.3%)
• A.M. Best affirms financial strength rating  as  A- (Excellent)

Chairman of TT Club, Ulrich Kranich, said:

“The Club has taken in its stride hurricane-related claims that impacted a number of Members’ operations in the Caribbean and North America in August and September 2017. To have done so in the context of the highest ever level of insured losses on record from natural catastrophe events is a notable achievement and is especially pleasing given this year we are celebrating the 50^th anniversary of the Club.

“The Board’s key objective is to maintain at all times its A- (Excellent) financial strength rating awarded by A.M. Best. This rating was affirmed by Best on 24 May 2018.The business plan adopted by the Board is set to drive the business forward, while ensuring the rating is maintained, and financial performance in 2017 was in line with the business plan.

“In particular, the financial year combined ratio, which is the main measure of operating performance, was within the Board’s target range, despite the claims arising from the three hurricanes. As a mutual, the finances are managed to maintain a balance between Members’ premiums and claims on the Club, together with the expenses of running it. A small surplus is targeted as required to ensure the Club’s capital strength is maintained to support on-going growth.

“In December 2017, the Club repaid its $30m long-term subordinated debt which was taken out in 2006 to enhance the Club’s capital strength. This will lead to a saving in interest payable on the debt of US$ 1.2 million per annum. The capital was fully admissible for both regulatory and rating purposes and has given the Club valuable financial flexibility in the period since 2006.

“New business performance was positive in the year, and net new business was slightly higher than budget, which is in part a result of the strong retention levels achieved by the Club in 2017. The Managers are prudent in writing new business in the current, very competitive market conditions, as it is very important to prioritise managing the Club’s loss ratio.

“Attritional claims performance in 2017 was as expected. The Club’s book of business is now a healthy mix of Member sizes, sectors and geographies, and the impact of this is that in respect of attritional claims, the loss ratio fluctuates within a very small range each year.

“Large claims performance in the year was dominated by claims from the three North Atlantic hurricanes, Harvey, Irma and Maria. Aon Benfield has estimated the industry’s insured losses from these hurricanes to be around US$ 80 billion. Set in this context, the Club’s estimated losses from the three hurricanes, at less than US$ 10 million, are testament to the success in ensuring the Club is managing its gross and net exposure successfully.”

An official announcement from A.M. Best stated that TT Club’s ratings reflected: “its balance sheet strength, which A.M. Best categorises as very strong, as well as its adequate operating performance, and appropriate enterprise risk management”. The announcement also referenced TT Club as a mutual with “a strong position in its niche market, which is supported by its excellent member retention and global presence.”

The TT Club’s 2017 Annual Report and Financial Highlights can be downloaded here: https://www.ttclub.com/brokers/document-store/

– Ends  –

Notes to editors

TT Club

TT Club is the international transport and logistics industry’s leading provider of insurance and related risk management services. Established in 1968, the Club’s membership comprises ship operators, ports and terminals, road, rail and airfreight operators, logistics companies and container lessors. As a mutual insurer, the Club exists to provide its policyholders with benefits, which include specialist underwriting expertise, a world-wide office network providing claims management services, and first class risk management and loss prevention advice.

Thomas Miller

Thomas Miller is an independent and international provider of insurance, professional and investment services.

Founded in 1885, Thomas Miller’s origins are in the provision of management services to mutual organisations, particularly in the international transport and professional indemnity sectors; where today they manage a large percentage of the foremost insurance mutuals. Thomas Miller also manages insurance facilities for all the self employed barristers in England & Wales, as well as trustees of pension schemes, patent agents and housing associations.

Principal activities include:

• Management services for transport and professional indemnity insurance mutuals
• Investment management for institutions and private clients
• Professional services
• Building defects insurance

www.thomasmiller.com