01 FEB 2008
Spreading the Norwegian roots
This was extremely far-sighted since, by April 1976, 32 per cent of the Norwegian fleet was idle, as the world shipping crisis made its presence felt. It was a drive for international business that saved the day as the decline in Norwegian tonnage to 1.9 million GT in 1978 was more than balanced by new international members.
With a growing foreign membership, Gard became more international in its communications. In 1973 Herlofson stopped the presses on the in-house information leaflet Medlemsblad and in 1976 re-launched it in English as Gard News. It was also essential that foreign members became more involved at a leadership level. The statutes were amended in February 1978 to create what became known as the Committee, and in June 1978 the Committee met for the first time, in English. Elected at the annual general meeting, the Committee was given the highest authority, sitting directly above the board, which was slimmed to six members and re-named the Executive Committee.
Spanning the globe
Following the grant of a licence in Japan, Gard P&I Japan and Far East was opened in Tokyo 1991. In 1996 Gard established its Gothenburg office to service customers in Sweden and in 1997 Gard set up an office in Hong Kong, establishing a base to handle P&I claims for members in Asia. A branch office in Helsinki was established in 2003 through the purchase of Baltic Protection, to be responsible for underwriting and claims handling services in Finland and the Baltic states. 2006 saw Gard purchase Trimar Defense Services in New York, which had handled Gard P&I claims in North America for several decades.
Gard’s focus on the offshore market continued unabated. P&I cover for mobile offshore units (MOUs) and other liability covers for members in this market had been an area of growth and emphasis for the organisation for a number of years. In 2005 Skuld withdrew their P&I cover for MOUs, a business it had underwritten jointly with Gard for 32 years and which had become a market leader. It was a natural development for Gard to offer continuity of cover and service by renewing cover for all Skuld’s MOU members, as if the entries had been continuously with Gard.
Covering more ground
Gard has always responded to clients' changing needs through innovative product development, starting in 1977 with the introduction of the Defence Cover as a supplement to P&I. As well as covers tailor-made to suit the requirements of individual operators, Gard is well known for its many additional covers. The Comprehensive Charterers' Cover and the Comprehensive Carriers' Cover have been continually updated and refined, and the trend for product innovation has continued to the present day with the introduction of P&I cover for supply vessels, specialist craft and divers, as well as a combined P&I and hull and machinery cover for small craft.
When Bernander took over as managing director in 1995, a careful examination of Gard’s position raised questions about the future direction of the club. The entered tonnage was stagnating and claims were rising. A report to the Committee in October 1998 described a sea change in the conditions of the P&I industry. The traditional distinction between banking and insurance was breaking down and the Nordic financial market was consolidating.
In the late 1990s members of Gard’s management met the managing director of UNI Storebrand to discuss possible opportunities around their marine and energy (M&E) business and it was suggested that Gard create a jointly-owned company to take over the management of the Storebrand/Vesta M&E portfolio. This proposal had a number of benefits. For Gard, it would increase the volume of business over which the costs could be carried and enable the management to develop insurance products. It also offered a significant benefit to the Norwegian shipping community, in that it kept the combined Storebrand/Vesta M&E portfolio, with its seven per cent market share, inside Norway – a competitive bonus for owners. In October 1999 the proposal to form Gard Services was unanimously endorsed by the Committee.
Cross-selling and cost reduction
The imminent task at that point was to align Gard Services’ three product areas more closely so that the organisation was better suited for cross-selling and realising cost reductions. The re-structuring that followed succeeded in forming a coherent and integrated organisation with a common focus. The organisation was headquartered in Arendal, with marine business centred in Bergen and energy in Oslo. The result was an organisation whose emphasis was firmly on financial strength, the development of new products and the ongoing process of loss prevention. The problem, however, lay in the fact that Gard was only managing the business, and this lack of control ultimately led to a sense of frustration that the business could not be taken to the next level.
An opportunity not to be missed
Despite some concern over the volatile nature of M&E insurance, the Committee resolved to proceed and to invest USD 110 million to buy If’s shares in Gard Services. The deal was closed in 2004 and the company was rated A- with a stable outlook by Standard & Poor’s.
The acquisition of the M&E business included an option for Gard to acquire the minority If stake before the end of a nine year contract period. However, the Committee expressed its strong support for Gard to exercise its option early and by February 2005 the deal was done. This allowed Gard to gain full control of the business and be able to reduce its overall capital requirements due to diversification benefits between P&I and M&E and realise significant savings in other areas. The creation of Gard M&E as a wholly-owned part of the group was as significant for the industry as it was for the group. It brought together P&I and M&E in one organisation; a mutual P&I association had also crossed the line to take ownership of a fixed-price marine insurance company.
When Gard was founded in 1907 as a P&I insurer for sailing ships, it was a small part of a large group of Arendal-based insurers covering a range of products from hull and machinery to cargo. It is fitting that this focus on meeting clients’ needs for the last century has brought the group full circle again from a mono to multi-line insurer.