Where Tyneside was once famed for shipbuilding, one Newcastle firm has helped establish its prowess in another maritime niche. The $750m (£617m) merger of North P&I and Standard Club in early 2023 created one of the world’s largest shipping insurers.
The combined business - which employs about 300 people on Newcastle Quayside and insures about 20% of world shipping - is now into its second year and the going is good, according to managing director Paul Jennings.
“We have ambitions to grow cautiously,” says Mr Jennings. “Looking back, when I started off in this strange industry, the company I worked for was Newcastle P&I - based in the Cloth Market - our income at the time was $4m and we’re projecting $850m of income this year. So, it’s grown a bit over that time.”
The making of NorthStandard involved two historic firms, with North P&I’s story stretching back more than 160 years to 1860 when it was established to insure some of the 260 or so local ship owners based on the Tyne. London-based Standard Club traces its roots back more than 140 years.
Both mutuals were well established in what is known as the “blue water” protection and indemnity market - the insuring of ocean-going merchant ships. Their coming together offered up the chance to expand beyond that longstanding business into other areas such as providing products for the offshore and renewables markets.
The merger of equals was months in the making with the proposal going to a vote of members of both clubs before it could proceed. Mr Jennings explained: “The focus was on making sure our client base was comfortable with it and that they remained with us. We’ve had one very good renewal which happened last February and over that period we’ve actually grown the business. So it’s not just a case of hitting that continuity theme.
“And we’ve been getting really good feedback, not only from our clients - or members as we call them - but also from brokering intermediaries and other stakeholders in the business about how well the merger has gone and about how comfortable everyone is from an external point of view.”
NorthStandard’s subsequent footprint is global with offices throughout Asia, Europe, the US and Australia and New Zealand. But Tyneside has remained the beating heart of the operation - with much of the huge integration effort being steered from the organisation’s offices overlooking the Tyne Bridge.
Mr Jennings said: “I’ve used this analogy a few times but it’s a bit like the proverbial swan swimming along effortlessly on the surface - which is what it has looked like from the outside. Underneath the feet are going rapidly, and that’s really what’s happened over the last 18 months with the business and everyone in it. We’ve asked a huge amount of the people in terms of integration and getting the two businesses together, whilst giving a seamless service at the same time. That’s gone extremely well and hats off to everyone in the business who has helped to do that.”
NorthStandard’s merger was not just one of huge commercial scale, but came at a time of global geopolitical upheaval which wrought impact on the global shipping industry.
“I think about two days before we announced the merger, or just afterwards, Putin decided to invade Ukraine,” Mr Jennings explained. “It was really, really close. That stoked up a lot of geopolitical tensions and for us, a whole raft of sanctions coming in that made it more difficult for the shipping industry to trade as western Governments tried to use sanctions to show their annoyance with what Putin was doing and also limit his income.
“Sadly what has happened in the Red Sea and also the conflict with Israel has impacted on shipping routes. In a perverse way, it’s actually shown the benefit of us coming together as a large organisation. Because we’ve got the scale to deal with this.”
That scale includes the extensive expertise - much of it from former sea faring employees - that can help operators navigate everything from safety threats to sanctions complexities.
Mr Jennings acknowledges that in the two years since the start of the Ukraine war, international shipping has done well financially. He said: “It’s a moral dilemma…I don’t think it's profiteering, it’s just the fact that shipping needs to keep global trade going. Around 90% of everything we touch or use comes by sea. And shipping has to find ways of getting around these conflicts and alternative routes often mean increased costs for consumers and more money for a ship owner.”
The backdrop has led to growth in NorthStandard’s war risks business - a service it says is helping to get essential foodstuffs and aid to developing parts of the world, not just finished luxury goods to Europe.
And the mutual is looking to another contested part of the world for growth. Its Asia-Pacific book is worth more than 30% of the business by premium. Meanwhile the region accounts for about 50% of the world’s shipping industry and has two of the world’s largest ship owning nations in China and Japan - suggesting there is still headroom for NorthStandard to expand.
Mr Jennings explained: “We’ve used [the merger] as an opportunity, using the complementary relationships the two clubs had coming together and we’ve expanded a bit further since then, opening an office in Seoul [in Apri, 2024]. It’s very much an area we want to develop further.”
NorthStandard is also looking to play a role in the decarbonisation of the shipping industry - a major global priority of the energy transition. It has a dedicated team and resources that aim to help ship owning members to make the transition to alternative fuels.
“We need to make sure this organisation is still relevant and has a role in supporting and supply to the shipping industry,” explained Mr Jennings. “I think the merger gives us the greater skillset to do that. What are we looking at going forward? Shipping is, on most measures, about 3% of global greenhouse gas emissions and the target from the United Nations is to be on a pathway to reduce that to zero by 2050.
“We’ve got two things coming along: a chain of fuel and engine type for our owners - the use of alternative fuels and decarbonisation more generally. And we’ve got, globally, the reduction of reliance on fossil fuels. Probably 20% of what we insure is moving fossil fuels about. That’s not going to happen in the future.”
