Postcard from Carlisle

Snorting and bellowing with bewildered confusion, the pedigree bulls gallumph around the auction ring.

The scene is Carlisle livestock market, where farmers in tweeds eye the bulky Aberdeen Angus cattle and place their bids.

Interest in the bulls is high, prices are strong and it is difficult to believe that a year ago the ring was empty and silent. Foot and mouth disease closed this livestock market in Carlisle until February this year.

Thousands of cattle were slaughtered, so now the farmers are restocking.

Earlier this month, a Limousin bull sold for 20,000 guineas - against a top price of about 12,000 guineas before the outbreak wreaked havoc with British agriculture.

Having made their bids, the farmers walk into an office by the side of the sale ring to pay, that's where they are offered insurance on their new purchases from the people at Borderway Insurance Brokers.

Most don't bother if they're buying ordinary cattle, but for pedigree animals such as the Aberdeen Angus bulls sold last week, take-up runs at about 50%.

The broking business is part of the company that owns and runs the market, Harrison & Hetherington, so it's natural that it's close to agriculture. But little over 10% of its business comes from anything else, so when the market closed, things were grim.

All the staff in the group took a voluntary pay cut as business dried up to little more than renewals.

"This time 12 months ago we didn't know what the hell was going on," says Kevin Coulthard, a director of the broking business.

"We couldn't even go out of the front door. We thought at one time we would be thrown out of the premises if they closed the whole building."

Cows to carcasses
From handling 500,000 animals in the year before the outbreak, a horrible twist of irony brought a new purpose to the market building.

Instead of housing some of Britain's finest cattle, it temporarily became a store for the coal and timber used in pyres fuelled by the carcasses littering the countryside.

The destruction did, however, bring in some business for Borderway. The company arranged cover for the contractors disinfecting farms after the stock had been disposed of and this brought some compensation for the lost business.

Borderway had just four farmers who had insured against foot and mouth before the epidemic and their claims were easily dealt with.

One of the claims totalled well over £100,000 from three insurers, but a cheque was on Coulthard's desk within five days. He has nothing but praise for the insurers' handling of the matter. Just after the market reopened in March, Borderway became the first company in the country to sell foot and mouth cover as new business. To the best of his knowledge, the position is still unrivalled.

Cumbria was particularly badly hit by foot and mouth. It is just 50 miles from Carlisle to Heddon-on-the-Wall, Northumberland, and the farm where the disease is thought to have first taken hold.

The disease came quickly and took a long time to leave. Cumbria's first case was confirmed on 28 February and gave the country its last infection in September at Appleby, just 34 miles south of Carlisle.

So what did it take for an underwriter to offer capacity for foot and mouth cover exclusively through Borderway to farmers in Cumbria, Dumfries & Galloway and Northumberland?

Is Borderway planning to get out of the core business on which it has relied for so long?

Farming in the blood
Agriculture is so deeply part of the Cumbria, its landscape and history, it is impossible to separate the two.

Marauding Scots were raiding the county for the cattle that were grazing on its dry summer pastures a thousand years ago. Having established a tradition, they continued long after the locals started pulling blocks of stone out of Hadrian's Wall to help build the city's castle.

Not only is Borderway a local business steeped in the traditions of the area, many of its customers have had farming in their families for generations.

Talking to the staff, it's obvious that pulling out of agriculture entirely was never an option.

Its close relationship with its customers helps Borderway to know its market backwards, but Coulthard says another factor in was the longstanding relationship it had with Heath Lambert livestock specialist at Bill White. It was White who offered the cover from Lloyd's.

Borderway has enough capacity to be going on with, but managing director Philip Pagin says underwriters are nervous about giving foot and mouth protection and expects it will be a year before rates start to come down.

Even now, a quote for foot and mouth cover is only good for 72 hours. If a farmer fails to take it up, he has to resubmit his application.

Coulthard argues the cover is good value at current prices - a farmer with an average herd could pay about the price of a decent animal for cover that delivers 25% of the herd's value if the worst happens. And that's on top of government compensation for culled animals.

Coulthard says that he's delighted with the take-up, but believes many farmers simply won't buy insurance against another epidemic.

"While there's still government compensation on the table, I can't see take-up being massive," he says.

Talk of compulsory insurance against foot and mouth caused a stir last year - if eventually implemented, such a scheme could be good for brokers, but Coulthard says: "We're not holding our breath."

For the moment, the foot and mouth cover has brought praise and free publicity for Borderway and helped underpin an energetic bounce-back from the dismal days of 2001.

The company has even taken on a third broker in order to cope with new business.

An unforeseen benefit of offering the foot and mouth cover has been strong sales of insurance against TB and brucellosis - the threat of both cattle diseases is higher, particularly when animals are flooding into the area as farms are restocked.

The foot and mouth cover has also increased the sense that Borderway is loyal to its core market. Such loyalty pays off - the company loses less than 2% of its customers per year.

Doubling value
Such high retention has also helped with the post-foot and mouth bounce-back.

It is now taking on the business of retiring local broker Keith Routledge. Likely to bring in at least another 120 clients, managing director Pagin estimates Borderway can double the value of the book.

He sees the future in using Borderway's strong relationships to grow with its customers as they find ways of recovering from the effects of the foot and mouth crisis.

He says: "That's the way forward for Borderway - our core business will stay related to agriculture.

"Farmers are having to diversify and we are doing the same. A lot of farmers are going into farm shops, or getting dirt tracks, or something else to supplement the income.

"We're being flexible as well. Agriculture will continue to be the core industry, there's no doubt about that, but as farmers have to adapt, so will Borderway."