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Big Interview: Paul Chainey

On the face of it, a dwarf dressed as Superman delivering champagne on a zip wire in a Newcastle night club doesn’t have much to do with the waste industry. Except for two things: they are risky businesses and broker Miles Smith arranges insurance for both the waste and night-time entertainment sectors.

This revelation came as a bit of a sur­prise, but Miles Smith chief executive Paul Chainey uses the example of assessing the risks involved with an over-the-top drinks order as proof that the insurer has to go further than most in order to deal with clients that might otherwise struggle to get cover.

This kind of specialism and hands-on approach is something many waste companies desperately need. In 2014 the sector was warned it was “uninsur­able” by Catlin Insurance Company because of an unprecedented number of fires at waste facilities.

A number of other insurance busi­nesses have either bailed out or refuse to get involved in the first place. Miles Smith, on the other hand, currently arranges insurance services for 20% of the waste and recycling industry. In order to do so it has had to build up its own expertise, and Chainey has put in the hard graft.

“I spent a lot of time in the waste industry, particularly in the 1990s and 2000s, exploring all areas of waste pro­cessing and recycling,” he says. “We went on study tours. People at Miles Smith go on to become members of the Chartered Institution of Wastes Man­agement.”

The analogy with night clubs is a valid one. Chainey says clubs and waste businesses both need expert examination rather than buy an off-the-shelf policy. Miles Smith clients include the former venue Madam JoJo’s in Soho, most of Brighton’s gay clubs and just about every night club in Newcastle.

The venue responsible for the Super­man routine came to choose Miles Smith because of its reputation as a “boring night club insurer” that knows the industry well. It offered sage advice, such as not to use real glasses but unbreakable plastic ones, and it is this kind of detail that the company brings to the waste management sector.

In some ways, Miles Smith surveyors end up taking on a role the Environ­ment Agency (EA) also carries out. Chainey says the Health and Safety at Work Act means employers have to provide a duty of care to employees, even if an employee is “on a path to destruction”.

industry accidents

industry accidents

This view is based on a number of accidents involving people having limbs amputated – Chainey says you “would not believe what they did” for the acci­dent to occur. In many cases, it involved attempting to clear a blockage in a crushing machine or conveyor without turning off the power.

“The most lethal thing in a MRF is ‘the stick’ [unofficial equipment used to clear a blockage]. Our surveyor literally says, ‘oh, where’s the stick?’ and, in some cases, the MRF manager can’t help himself and goes over and picks up the stick. We then say to the proprietor, under no circumstances must you allow the stick – destroy all sticks and rods.

“If it isn’t attached to the machinery, it doesn’t need to go near it. What they don’t realise is that the way accidents happen is you are irresistibly cursed by a natural reaction to hold on to some­thing that is trying to pull you in. You don’t let it go like a sensible person would if they thought about it.”

Surveyors want to know how MRF operators deal with downtime issues in a compliant way: “They should know that, for instance, it takes 22 min­utes to restart the system. How many stoppages do they get in a day – if they say ‘no, never’, then they’re lying. Some­one’s going to die or lose a limb.”

Miles Smith does not alert the EA in these instances, but it does bring con­cerns to the attention of the proprietor’s risk manager, operations director or plant manager.

fire

fire

Chainey is quick to point out that he sees many well-run facilities which are “very mindful of their responsibilities”, but Miles Smith turns down around 35% of businesses because their health and safety procedures do not come up to scratch. For some companies, he says, not only are they uninsurable but fires or accidents are “inevitable”.

Is it possible to put a number on how many waste businesses get turned down for insurance in a year? “It’s probably in the hundreds – those that find it very difficult to get insurance because they don’t meet the minimum of a scheme that is going to pay their losses.”

Chainey is someone who clearly loves his work and speaks about it passion­ately. It’s not just outrageous tales from night clubs that he revels in – on his desk, boxing gloves signed by Sugar Ray Leonard are displayed in a case and his office artwork is not the usual bland offering.

“We are able to analyse a risk, minimise its impact and transfer it to an insurer for the client’s benefit.”

He describes himself as having a technical background, who came to work at the company to provide exper­tise in non-marine material damage insurance and liability.

“I started at Miles Smith 25 years ago, arriving from a bank insurance back­ground. I worked for the Banque Nationale de Paris and, before that, I was an underwriter in a liability business for the Prudential.

“Although Miles Smith is a broker, it has a lot of facilities where we can act on behalf of insurers. Many of our staff are from a technical background rather than a sales background. We are able to analyse a risk, minimise its impact and transfer it to an insurer for the client’s benefit.”

Miles Smith began life in 1925 and became incorporated as a Lloyd’s broker in 1936. It was bought by RJ Miles and CS Smith in 1965. It came to the waste sector through connections with its work with heavy goods haulage and the asbestos industries.

The company now has 100 or so corporate clients, works with around 12,500 SMEs and around 1,400 other brokers.

Chainey became managing director in 2000 following a management buy­out: “We wanted to continue to be a specialist in schemes and affinities because there was a certain lack of inde­pendent brokers doing a good job.

“We started it with 37 people, and now employ 224 in the Miles Smith Group and 85 in a sister company TUE, which underwrites businesses in the Republic of Ireland.”

Partly thanks to the influence of the Co-operative Society, for which the company brokers, 25% of Miles Smith is owned by its staff through shares. It now has fee income of around £310m and a turnover of about £48m.

Chainey on Modern Day Slavery

“We’re aware of the problem. Fortunately, our clients tend to be better regulated and more fair-minded [than in other sectors],” he says.

“Getting to the bottom of the use of gang labour, very often from eastern Europe, is very difficult. With health and safety legislation, we have to get involved in how companies are carrying out their processes, and we are very aware of the [criminal] element.”

When told that an MRW survey revealed nearly 10% of respondents – individuals from the waste sector – said they had witnessed an incident they thought was forced labour, Chainey responded that the figure seemed about right: “I think it’s just the same as operating illegally: it’s the same minority and it seems to involve the same type of business. It’s a sector of the industry we are able to avoid but sometimes not until we’ve had a look.”

He says Miles Smith surveyors would know what to look for: “We spot workplace notices – are they in a foreign language? Do the workers all happen to be Albanians or Kosovans, for instance?” Chainey, who has occasionally visited MRF picking lines, recounts one incident where a business’s entire workforce was from a single eastern European country but all the safety notices were in English.

“Many large proprietorial waste com­panies are our core business because we are able to take that worry out of their life,” says Chainey. “I’ve certainly seen the waste industry dramatically change in the past 25 years – from a complex haulage, scrap yard and rubbish dump business to very much a process-led industry. The recycler has become an asset, and there are many methods and systems.

“We insure 75% of the [testing] labs and asbestos strippers in the UK,” adds Chainey. “That is very difficult to do, and we’ve been successfully insuring that industry since 1972.

“[Working with the waste industry] blossomed in the early 1990s when we became associated with the Environ­mental Services Association. There were few solutions for waste and recy­cling, so we went to our markets and worked on the product for five years.

“Our insurance portfolio provides the recycling sector with very ‘warranty-light’ business. We don’t want to tell them how to run their business – we want to help them run it more effec­tively and we really do help to reduce the amount of administration they have to go through.”

Where waste businesses come face-to-face with the public most often is on the road. Thousands of refuse vehicles (RCVs) make collections across the UK every day, from homes and businesses. The risks to employees, the public and property are obvious.

The Health and Safety Executive (HSE) has repeatedly flagged accidents involving vehicles as a particular hazard of the industry following several deaths.

There are scores of examples. In Jan­uary, for instance, Veolia was fined £1m after one of its employees was run over and killed by an RCV in 2013 at a waste transfer station. And there was the trag­edy in Glasgow in 2014, when six people died after being struck by an RCV which crashed in the city centre.

“Any licensed driver can operate under a Miles Smith deal with very high limited indemnity,” says Chainey. “Third-party property is an issue for all businesses involved in collection. If you’re in a major shopping centre, you are dealing with a property worth tens to hundreds of millions of pounds.

“Most people’s insurance indemnities only go up to £5m. That business will go down if a lorry reverses into a building. In our case it will not because we indemnify them for £50m and we can handle all those claims.”

The waste sector in general is one of the most dangerous to work in. In 2017- 18 there were 12 fatal injuries to workers and 5,000 non-fatal injuries.

Accordingly, Miles Smith has borne witness to some of worst cases. It has dealt with the aftermath of major incidents of fire and criminal sites of abandoned waste although, of course, Chainey is bound by client confiden­tially not to name the companies involved.

He refers to a fatality that occurred “in very tragic circumstances”, when Miles Smith helped a staff member to go through the courts and defend a criminal action taken against them as well as a civil action by the HSE.

The incident involved a vehicle, sadly all-to common in the sector. “That indi­vidual was blameless, but it was a very harrowing situation,” Chainey says.

“There is a famous quote that you’ve got more chance of being killed in the waste and recycling industry than in the British Army. It’s only worse in trawler work and industrial farming. For us, the challenge is to make the risk acceptable to an insurance industry which knows that fact.”

The financial imperative of the insur­ance game is simple: insurers want to back businesses that are not likely to make claims. This can mean getting involved in the planning stage to design out the flaws in processes and working practices in order to minimise risks.

Indeed, some companies are now involved in the sector because of the help they received from Miles Smith, according to Chainey. This included bringing in fire detection and suppres­sion equipment. Such things can be substantial investments, but the money can be saved over a period because the reduced price of premiums.

In common with an increasing num­ber of companies across the waste sec­tor, Miles Smith is now backed by a private equity firm. It was acquired by Pollen Street Capital in 2018, which also owns ‘challenger’ banks that specialise in the sector. This means Chainey is able to introduce waste firms to a source of finance for expensive machinery.

Chainey has a wider view of where the sector is going, but says he will not be contributing to Defra’s consultations on the resources and waste strategy, instead keeping a “watchful eye” in order to stay one step ahead. He is open about the need for more infrastructure, however, and the need for tax and Gov­ernment intervention to make the recy­cling market more viable.

He also points to Scandinavia, where there is a route for waste that is accept­able to citizens: energy from waste. “Many people in Europe and Scandina­via who cope with it [waste] better do so because they have a better solution. Incineration, power – that’s what it is about.”

Chainey’s ambition for Miles Smith is to see it become the insurer of first choice in the sector. The asbestos indus­try, he says, was turned into a “much more compliant place” thanks to efforts from insurance companies. The same can be achieved for waste.

“We need to spread best practice, especially for the smaller firms. And insurance needs to be available to the whole sector.”

CV: Paul Chainey

Chainey began his career in underwriting in the 1980s working at Cornhill and Prudential before later moving to Corporate Risks at Banque Nationale de Paris. He was introduced as a client to Miles Smith before joining them in 1994.

He has held a number of positions at Miles Smith, and was responsible for the company’s restructure in 2000 when he became chief executive officer.

Chainey is responsible for the Group’s strategic direction, overall performance, fiduciary duties and is the principal contact for the Financial Conduct Authority.

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