Episode 6
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Welcome to Risk Matters, the insurance podcast
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brought to you by DWF and your global guide
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to the latest trends and issues
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in the insurance and reinsurance industry.
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Join us as we explore topical issues, emerging
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technologies and the innovative strategies that
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are shaping the global future of insurance.
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Good afternoon, welcome to Risk Matters,
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the DWF Insurance podcast.
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Today we're going to be talking about geopolitical
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tensions and the impact on marine
insurance.
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We've had quite a heavy year or so
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with escalations in violence
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in the Middle East and elsewhere.
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My name is Jonathan Moss.
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I'm a partner in the Global Risks Team at DWF.
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So if we start at the Red Sea, that's become
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a hotspot in itself of geopolitical tension.
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The Houthi militants have been targeting
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commercial vessels with over 100
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attacks reported since November 2023.
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The Houthis are a political and religious group
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which champions Yemen's Shia Muslim
minority.
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They claim to be part of the axis
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with Hezbollah and Hamas and indeed they have
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Iranian
support and are declared
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to have Iranian support by President Biden.
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The Suez Canal has been impacted and affected.
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The Suez Canal accounts for around 30 %
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of the world's container traffic.
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And what we've seen because of this disruption
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is a surge in rates, significant impact
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on global trade, and general supply chain chaos.
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In addition to that, of course, there have been
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other geopolitical tensions and problems.
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We have the Russia war with Ukraine,
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with its immense human suffering,
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but also its impact on global trade.
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There was an estimate that the trade
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figures, that's imports and exports in the
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world, would rise by 4.7 % this year, but
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in fact they've decreased to about 3 % as a
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result of the terrible war between Russia
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and Ukraine.
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In addition, we've had problems
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with the Suez Canal.
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So you'll remember that in March 2021,
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the canal suffered a blockage owing
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to a vessel that was wedged between each side.
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That was a 400 meter long vessel,
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weighing 224,000 tons, the ever given.
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And again, that caused terrible
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impact and disarray in the region.
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And I suppose to guard against all those issues,
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we have Marine Insurance.
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And Marine Insurance is there to
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facilitate world trade and to protect
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world trade and just to make sure that
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people still have access to goods, ships
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can still travel and the supply chain is
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preserved.
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So I'm delighted today to be joined by two leading
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experts, Rob Hawes and Eric Noe, and I
will pass
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over to Rob and to Eric to introduce themselves.
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Rob.
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Thank you, Jonathan.
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It's a pleasure to be here.
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Thank you very much for the invitation
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and the opportunity to talk today.
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So my name's Rob Hawes.
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I work for Liberty Specialty Markets
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in Lloyds and Company Markets.
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in London and I've been up there a couple
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of years, but I've been
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in the London insurance,
marine insurance
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market now for over 30 years.
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So that's me.
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I'll pass over to Eric.
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Yeah.
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Thank you, Jonathan.
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Very honoured and a bit terrified
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to be here, to be honest.
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I mean, I've been in this business
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for the better part of 20 years now.
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I don't think back in the days when I started,
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anyone would have told me that I was going
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to be on a podcast, God forbid.
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So delighted to be here.
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Thanks for the invitation.
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My name is Eric Noe.
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I work for Haverico.
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cargo marine insurance broker, and I've been
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in this business for a good 20 years.
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Brilliant, thank you.
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And once again, thank you for joining me today.
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So we talked about some of the disruption in
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the world, and we're going to look more
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closely at what that means for marine
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insurance, for London, for the continental
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insurance market, for Lloyd's, for the
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company's market.
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But perhaps we can also talk about wider
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problems that have been experienced recently.
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So there's been a marked rise in commodity prices
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as a result of all these issues and
tensions.
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What else have we had recently?
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We've had a drought in the Panama Canal,
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which has had a huge impact on access to probably
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about 2000 ports in say 17 countries.
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The MV Dali collided with the Baltimore Bridge.
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It was starting a 27 day journey from Baltimore
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to Sri Lanka when it struck the Francis
Scott.
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key bridge with thousands of tons
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of steel falling into the Patapsco River.
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COVID, we haven't come very far from those rather
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miserable days of COVID and rolling
lockdowns
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in different places really impacted trade.
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So 10 of the largest container ports are in China
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with Ningbo, Shenzhen and Guangzhou,
particularly
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impacted by rolling lockdowns.
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So really when we talk about what we've seen over
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the past few years, I just want to look
closely
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at how marine insurance has responded.
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Despite these accidents, despite these weather
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incidents and catastrophes, the market
still
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appears to be robust and charterers and owners
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and others are still looking at the market.
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But it'd be very interested to hear
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from both of you on your perspectives.
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Turning to Rob.
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First of all, please,
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have you seen a rise in claims in the Middle East
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as a result of these incidents?
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How has it impacted your day-to-day work?
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Thank you.
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Well, absolutely,
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we've seen an increase in claims.
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Of course we have.
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I think just going back to your point,
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know, the marine insurance market has
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always been an enabler of world trade.
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And we see that now more than ever.
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with the Houthi attacks, which as you
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say are taking place on a daily basis.
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We are, and you know, we only obviously
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see the claims for the successful attacks,
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if you want to call on that.
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Hundreds of others, I'm sure,
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have occurred that we've never heard of.
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And, know, Iran supplying weaponized
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drones and even now unmanned subs
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attacking vessels on stealth basis.
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with tenuous links to Israel being alleged,
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that's providing us with a huge
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challenge in responding to that.
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The London insurance market has
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responded extremely well to that.
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And we have a wider range of products,
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including the war risks and strikes rights
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and civil commotions coverage, which has
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certainly grown in last year or two, and
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which is in demand by ship owners who are
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choosing to, one, a better way of putting
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it, run the gauntlet of still going
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through the Suez.
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So we're enabling them to still trade and to know
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that they've got insurance coverage in
place.
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The alternative of course is to divert your
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vessel as a large number of container
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shipping lines have done around the Cape,
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which takes two to three weeks longer and
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represents a huge increase in the cost of
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running your vessel and the freight rates
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and the cost of everything is going to go
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up accordingly.
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So yes, we have seen an increase in claims.
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Obviously you get some very large headline
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losses like the Dali, which we can
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perhaps talk about a little bit later
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on but yes we have seen an increase.
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Thank you and when it comes to the
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sensitivity and the vulnerability of the
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areas of the world where these claims are
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arising does that mean that you have a
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problem investigating the claims sending
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adjusters looking at policy coverage how
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have you responded there?
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Well, policy coverage obviously something
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that the insurer will be looking at.
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investigating claims is always difficult
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when the vessels are at sea, and especially
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when a casualty is ongoing, of course.
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And we've seen some very difficult
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to manage casualties arising as
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a result of the Houthi attacks.
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One in particular, a crude oil carrier,
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incredibly difficult salvage operation,
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very difficult firefighting operation.
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and could still actually result in a major
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pollution incident, which obviously
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everyone wants to avoid, especially in
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sensitive fishing areas and the beautiful
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area that is the Red Sea and the Strait of
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Angleterre.
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So yes we are we are having some difficulty more
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difficulty investigating those types of
claims.
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Thank you.
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And you talked about how vessels are now
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sailing around the Cape of Good Hope
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and that it's taking on average,
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I think 10 days to two weeks longer in transit.
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Do you consider that because of the longer voyage,
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there's been an increase in claims?
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I haven't personally seen a major increase yet.
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But if you think about it, obviously the
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exposure to the action of the wind and
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the waves and the risks associated with
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sailing a vessel at sea are increased
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because of the length of time that it's
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taking.
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And of course, I touched on the increased
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cost of that to the owner, to the
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charterer, and that that cost is going
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to be passed on to the shippers of the
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cargo and ultimately the end buyer, the
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consumer.
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You, me, Eric?
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Yeah, everyone.
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We're all going to be suffering as a result.
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Inevitably.
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And, in your role as a broker, how have
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the tensions, the escalations of violence
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and aggression impacted what you do day to day?
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Well, it's interesting to see that
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we've witnessed a bit of a resurgence
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in terms of those
war risks.
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I think everyone...
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The markets always provide a war risk coverage,
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but it was slightly slowed under.
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mean, if you look back a few years ago, there
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was cycles of fraud cases, were cycles of
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misappropriation cases, there was a spate of
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piracy incidents, and all of a sudden, there're
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war risks which have come back to the forefront
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of events.
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And it was always there.
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The market is geared to it.
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There's capacity, there's clauses,
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there's wordings.
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But I think to have witnessed what we've seen
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first in Ukraine and more recently in the
Red
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Sea, It's been a bit of a reminder, healthy
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reminder, if not an eye-opener for the market.
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And so we're back into the old game of having
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to provide solutions for war risks.
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And I think those covers have also
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been quite extensively tested.
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think Rob was alluding to the MV Sounion,
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which was attacked and then boarded and seized
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and then used for propaganda purposes.
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she was a crude carrier.
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And the Houthis have basically
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blown up the hatchet.
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covers and made a big display of it.
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It underlines the nature of the risk.
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It shows that there's new
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weapons being used as well.
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It's no longer the floating mines
269
00:11:28,337 --> 00:11:30,607
or the traditional weapons of war.
270
00:11:30,608 --> 00:11:31,718
You've got drone attacks.
271
00:11:31,719 --> 00:11:33,388
You've got ballistic missiles.
272
00:11:33,389 --> 00:11:34,900
There's cruise missiles
273
00:11:34,901 --> 00:11:36,630
being fired at merchant men.
274
00:11:36,631 --> 00:11:39,552
So it is actually quite intense and quite
275
00:11:39,553 --> 00:11:42,896
challenging and fairly novel in that sense.
276
00:11:42,897 --> 00:11:44,593
But as a Marine peril,
277
00:11:44,594 --> 00:11:48,084
it's always been part of the job of us brokers
278
00:11:48,085 --> 00:11:50,820
and claims handlers
to deal with.
279
00:11:50,821 --> 00:11:52,194
So in that sense,
280
00:11:52,195 --> 00:11:55,362
we're not being kept aboard or idle.
281
00:11:55,363 --> 00:11:57,355
I think, if I can just add, know,
282
00:11:57,356 --> 00:12:00,038
the real tragic thing, of course, is that,
283
00:12:00,039 --> 00:12:02,109
you know, we're now seeing loss
284
00:12:02,110 --> 00:12:05,086
of life associated with the Houthi attacks.
285
00:12:05,087 --> 00:12:06,566
Vessel, the true confidence,
286
00:12:06,567 --> 00:12:08,994
and very unfortunately, three crew members lost
287
00:12:08,995 --> 00:12:10,949
their lives as a result of that attack.
288
00:12:10,950 --> 00:12:13,110
So, you know, we're not just talking about
289
00:12:13,111 --> 00:12:16,205
physical loss or damage to ships and cargo
290
00:12:16,206 --> 00:12:19,565
these are You know these real life real
world
291
00:12:19,566 --> 00:12:22,925
events running the corner as well And you know
292
00:12:22,926 --> 00:12:26,271
this yeah the escalation You know is becoming
293
00:12:26,272 --> 00:12:29,243
a real a real issue And you talk about that
294
00:12:29,244 --> 00:12:32,302
the safety of the crew which
is obviously
295
00:12:32,303 --> 00:12:35,536
crucial I mean we've looked closely over the
296
00:12:35,537 --> 00:12:38,511
years at maritime piracy and the statistics
297
00:12:38,512 --> 00:12:40,968
associated with maritime piracy and suppose in
298
00:12:40,969 --> 00:12:43,435
the last ten years there have
been and dips
299
00:12:43,436 --> 00:12:46,861
and increases depending on where you are,
300
00:12:46,862 --> 00:12:50,384
whether it's the Gulf of Aden or
Southeast
301
00:12:50,385 --> 00:12:53,155
Asia, Indonesia, Malaysia.
302
00:12:53,156 --> 00:12:56,634
Is piracy causing any issues on the claim side
303
00:12:56,635 --> 00:12:59,290
in the context of these disputes or
304
00:12:59,291 --> 00:13:02,953
how would you place piracy in the geopolitical
305
00:13:02,954 --> 00:13:05,990
tensions of the past 12 months or so?
306
00:13:05,991 --> 00:13:08,867
I mean, obviously we had a big spate
307
00:13:08,868 --> 00:13:12,220
of Somalian piracy in Gulf of Aden.
308
00:13:12,221 --> 00:13:13,602
a little while ago,
309
00:13:13,603 --> 00:13:16,522
which seems to have abated somewhat.
310
00:13:16,523 --> 00:13:19,959
But what we are additionally seeing is
311
00:13:19,960 --> 00:13:23,718
vessel seizures by Iranian authorities,
312
00:13:23,719 --> 00:13:28,014
is now, which is, you know, causing an increase
313
00:13:28,015 --> 00:13:30,914
in vessel detentions and crews,
314
00:13:30,915 --> 00:13:34,530
cargoes and vessels are being detained.
315
00:13:35,151 --> 00:13:37,748
And sometimes they're released within a reasonable
316
00:13:37,749 --> 00:13:40,133
period of time and sometimes they're
not.
317
00:13:40,134 --> 00:13:43,185
And then, so what we are seeing is now an increase
318
00:13:43,186 --> 00:13:45,346
in blocking and trapping claims.
319
00:13:45,347 --> 00:13:47,717
So basically where a vessel owner is
320
00:13:47,718 --> 00:13:50,721
deprived or irretrievably deprived of their
321
00:13:50,722 --> 00:13:53,171
vessel for 12 months or whatever the
322
00:13:53,172 --> 00:13:56,017
specific time period in the clause allows,
323
00:13:56,018 --> 00:13:58,585
it's been agreed in the contract, that
324
00:13:58,586 --> 00:14:01,508
enables them to claim a constructive total
325
00:14:01,509 --> 00:14:02,808
loss of the vessel.
326
00:14:02,809 --> 00:14:05,830
So we are seeing an increase in that.
327
00:14:05,831 --> 00:14:09,043
And obviously you have the added complication of
328
00:14:09,044 --> 00:14:12,654
a lot of these places being sanctioned
countries.
329
00:14:12,655 --> 00:14:15,531
And if there is involvement with locals or
330
00:14:15,532 --> 00:14:18,915
facilitation payments and those sorts of things
331
00:14:18,916 --> 00:14:21,943
that owners have to make to save the lives of
332
00:14:21,944 --> 00:14:24,930
their crew, which they're going to do and is
333
00:14:24,931 --> 00:14:28,457
only right, that then causes complications for
334
00:14:28,458 --> 00:14:31,412
insurers who are subject to all sorts of
335
00:14:31,413 --> 00:14:35,121
sanctions, regimes, depending on where they're
336
00:14:35,122 --> 00:14:38,220
based, which I'm sure we'll talk about a little
337
00:14:38,221 --> 00:14:39,212
bit later on as well.
338
00:14:39,213 --> 00:14:42,675
And how about ransom payments?
339
00:14:42,676 --> 00:14:44,918
Is that something that you've been looking at?
340
00:14:44,919 --> 00:14:47,594
obviously, ransoms will be claimed
341
00:14:47,595 --> 00:14:49,735
in order to release the crew.
342
00:14:49,736 --> 00:14:52,213
The difficulty in the legislation under
343
00:14:52,214 --> 00:14:54,545
English law is that there's Section 20
344
00:14:54,546 --> 00:14:57,422
of the Terrorism Act, for example, where...
345
00:14:57,423 --> 00:14:59,673
you're not allowed to pay ransom.
346
00:14:59,674 --> 00:15:01,359
So I don't know whether this is
347
00:15:01,360 --> 00:15:03,922
something that either of you have come across
348
00:15:03,923 --> 00:15:05,676
in the past 10 years, perhaps.
349
00:15:05,677 --> 00:15:07,445
I think it sort of touches on the piracy
350
00:15:07,446 --> 00:15:09,215
business model, depending which part
351
00:15:09,216 --> 00:15:10,598
of the world you're talking.
352
00:15:10,599 --> 00:15:14,098
So in the archetypical sense of the word piracy
353
00:15:14,099 --> 00:15:17,061
is pure theft of goods on board a vessel.
354
00:15:17,062 --> 00:15:20,105
I think what the Somalis have done in terms
355
00:15:20,106 --> 00:15:22,715
of changing the revenue model was to
356
00:15:22,716 --> 00:15:26,108
basically hijack vessels, hold them ransom,
357
00:15:26,109 --> 00:15:28,153
and that leads to discussions and
358
00:15:28,154 --> 00:15:30,164
negotiations in terms of paying release
359
00:15:30,165 --> 00:15:31,406
money for crew and cargo.
360
00:15:31,407 --> 00:15:33,981
So yes, there have been a number
361
00:15:33,982 --> 00:15:35,765
of settlements made.
362
00:15:36,654 --> 00:15:40,000
under very difficult circumstances and with a lot
363
00:15:40,001 --> 00:15:43,347
of legal and compliance restraints,
obviously.
364
00:15:44,348 --> 00:15:45,008
Time will tell.
365
00:15:45,009 --> 00:15:47,511
think one of the interesting side effects of
366
00:15:47,512 --> 00:15:49,474
the Red Sea crisis, if we can call it
367
00:15:49,475 --> 00:15:51,977
that,
that there's a mild expectation that
368
00:15:51,978 --> 00:15:54,278
it's not to be ruled out that piracy could
369
00:15:54,279 --> 00:15:56,898
flare up again in that part of the world,
370
00:15:56,899 --> 00:15:59,788
simply because there being, I mean, it's a
371
00:15:59,789 --> 00:16:00,945
very poor area.
372
00:16:00,946 --> 00:16:01,996
These people are destitute.
373
00:16:01,997 --> 00:16:04,511
There's all sorts of human reasons why you could
374
00:16:04,512 --> 00:16:07,201
say there's a rationale, there's a certain to it,
375
00:16:07,202 --> 00:16:10,109
but at the same time, there'll be fewer vessels,
376
00:16:10,110 --> 00:16:13,018
some of the military convoys that were in place
377
00:16:13,019 --> 00:16:15,853
for a considerable period of time are no longer
378
00:16:15,854 --> 00:16:19,168
there, or perhaps have caught the eyes of the
379
00:16:19,169 --> 00:16:19,787
bull.
380
00:16:19,788 --> 00:16:22,609
It could easily happen again.
381
00:16:22,610 --> 00:16:24,043
It's abated somewhat,
382
00:16:24,044 --> 00:16:25,931
but it could easily come back.
383
00:16:25,932 --> 00:16:28,739
And piracy, of course, is a way
384
00:16:28,740 --> 00:16:32,936
of funding and financing terrorist groups.
385
00:16:32,937 --> 00:16:35,086
So if the terrorist groups, for example,
386
00:16:35,087 --> 00:16:37,876
feel that they're short of cash, short of money,
387
00:16:37,877 --> 00:16:40,518
then piracy might rise again, I suppose.
388
00:16:41,438 --> 00:16:44,684
Rob, you mentioned sanctions and thought we'd
389
00:16:44,685 --> 00:16:48,098
talk a little bit about the Russia-Ukraine
war.
390
00:16:48,099 --> 00:16:51,313
So end of February 2022, when the aggression
391
00:16:51,314 --> 00:16:54,472
and the violence started and the invasion,
392
00:16:54,473 --> 00:16:57,308
figures demonstrate that about eight
393
00:16:57,309 --> 00:17:00,089
million Ukrainians out of a 41 million
394
00:17:00,090 --> 00:17:02,778
population have been internally displaced.
395
00:17:02,779 --> 00:17:04,588
And I think in April 2023,
396
00:17:04,589 --> 00:17:07,640
the figure was that there were 8.2 million
397
00:17:07,641 --> 00:17:10,861
Ukrainians that had fled the country.
398
00:17:10,862 --> 00:17:12,702
So we're looking at the Middle
399
00:17:12,703 --> 00:17:14,542
East escalation in violence.
400
00:17:14,543 --> 00:17:17,785
We're also faced with the war in Ukraine.
401
00:17:17,786 --> 00:17:20,480
I don't know whether either of you can draw
402
00:17:20,481 --> 00:17:23,426
any comparisons or similarities with what's
403
00:17:23,427 --> 00:17:26,255
happening in the world of claims and marine
404
00:17:26,256 --> 00:17:28,642
insurance that's coming from there.
405
00:17:28,643 --> 00:17:30,665
mean, obviously there are sanctions which
406
00:17:30,666 --> 00:17:32,239
we'll talk about slightly later,
407
00:17:32,240 --> 00:17:34,320
but do you see
any similarities between...
408
00:17:34,321 --> 00:17:35,381
What's going on in the Red Sea?
409
00:17:35,382 --> 00:17:37,082
What's going on in the Black Sea?
410
00:17:38,991 --> 00:17:42,730
So with the Russian invasion of Ukraine in
411
00:17:42,731 --> 00:17:46,705
February 22, we saw a large number of vessels
412
00:17:46,706 --> 00:17:50,958
in the Black Sea and the Ukrainian ports, which
413
00:17:50,959 --> 00:17:54,534
were effectively seized or detained, stopped
414
00:17:54,535 --> 00:17:56,966
from leaving, some of which had cargo on some
415
00:17:56,967 --> 00:17:59,142
of which were unloading, some of
which were
416
00:17:59,143 --> 00:17:59,790
offloading.
417
00:17:59,791 --> 00:18:03,013
And there's a various number of ports
418
00:18:03,014 --> 00:18:06,133
up along the Ukrainian coast there.
419
00:18:06,134 --> 00:18:08,455
And Mariupol obviously was heavily hit.
420
00:18:08,456 --> 00:18:11,197
So some vessels were actually destroyed.
421
00:18:11,198 --> 00:18:13,018
Some were perfectly intact.
422
00:18:13,019 --> 00:18:14,439
They just couldn't leave.
423
00:18:14,440 --> 00:18:16,997
And the Russians laid a large number
424
00:18:16,998 --> 00:18:19,897
of mines in the Black Sea and the entrance
425
00:18:19,898 --> 00:18:21,603
to the relevant ports.
426
00:18:21,604 --> 00:18:24,365
And so they couldn't physically leave.
427
00:18:24,366 --> 00:18:27,181
And so what we saw there was a dramatic
428
00:18:27,182 --> 00:18:30,088
increase over a year of those blocking
429
00:18:30,089 --> 00:18:32,722
and trapping type of claims where
430
00:18:32,723 --> 00:18:35,993
the vessels were irretrievably deprived.
431
00:18:35,994 --> 00:18:38,944
And that provides insurers with its own challenge
432
00:18:38,945 --> 00:18:41,127
because we don't really want to be ship owners.
433
00:18:41,128 --> 00:18:42,607
We're in the insurance business,
434
00:18:42,608 --> 00:18:44,059
not the owning business.
435
00:18:44,060 --> 00:18:45,959
And we leave that to the experts.
436
00:18:46,620 --> 00:18:48,559
So yeah, so that has caused some issues
437
00:18:48,560 --> 00:18:50,763
there with ongoing crewing requirements,
438
00:18:50,764 --> 00:18:52,922
maintenance of the vessels because as and
439
00:18:52,923 --> 00:18:55,140
when they are released, you know, they need
440
00:18:55,141 --> 00:18:57,138
to be able to leave and still be in good
441
00:18:57,139 --> 00:18:57,798
condition.
442
00:18:57,799 --> 00:19:01,460
And that's a daily requirement.
443
00:19:01,461 --> 00:19:03,971
yeah, those challenges have been
444
00:19:03,972 --> 00:19:06,573
interesting for insurers and new.
445
00:19:07,384 --> 00:19:09,548
The Red Sea is different, we haven't,
446
00:19:09,549 --> 00:19:11,923
other than the Iranian situation which I
447
00:19:11,924 --> 00:19:14,227
mentioned Jonathan, we haven't seen,
448
00:19:14,228 --> 00:19:17,161
it's mainly been physical attacks on the vessels.
449
00:19:17,162 --> 00:19:20,342
So it is a different kind of kettle of fish so
450
00:19:20,343 --> 00:19:23,545
to speak, from the Red Sea to the Black
Sea.
451
00:19:23,546 --> 00:19:25,086
Thank you very much.
452
00:19:25,087 --> 00:19:26,395
Eric, any views?
453
00:19:26,396 --> 00:19:27,738
No, I wholly concur.
454
00:19:27,739 --> 00:19:29,819
I think from a market perspective,
455
00:19:29,820 --> 00:19:32,403
I think what has happened in both scenarios
456
00:19:32,404 --> 00:19:35,130
is the walkovers were obviously suspended,
457
00:19:35,131 --> 00:19:37,284
subject to notice of cancellation.
458
00:19:37,285 --> 00:19:39,423
provisions and with the market then sort of
459
00:19:39,424 --> 00:19:41,918
stepping up to the border played by
reinstating,
460
00:19:41,919 --> 00:19:43,939
offering reinstatement solutions i.e.
461
00:19:43,940 --> 00:19:46,699
will provide the war cover again
462
00:19:46,700 --> 00:19:49,562
subject to additional premiums.
463
00:19:49,563 --> 00:19:51,827
So in practice what we've seen is certain
464
00:19:51,828 --> 00:19:54,410
areas were wholly excluded, there's certain
465
00:19:54,411 --> 00:19:57,090
geographic territories or certain geographic
466
00:19:57,091 --> 00:19:59,489
areas which have been denominated as being
467
00:19:59,490 --> 00:20:03,171
unsafe and therefore warranting extra premium.
468
00:20:03,172 --> 00:20:06,204
And I think that's valid for both regions
469
00:20:06,205 --> 00:20:08,431
but I think in the in the Black Sea,
470
00:20:08,432 --> 00:20:11,154
the loss history, if I can call it that, has been
471
00:20:11,155 --> 00:20:13,808
slightly different compared to the Red Sea.
472
00:20:13,809 --> 00:20:16,570
I think you've probably seen more outright
473
00:20:16,571 --> 00:20:19,410
attacks in the Red Sea hitting the headlines
474
00:20:19,411 --> 00:20:22,173
as
well, whereas in the case of Ukraine, it
475
00:20:22,174 --> 00:20:24,628
probably started off, again, on a very
476
00:20:24,629 --> 00:20:27,312
general level as a blocking and trapping
477
00:20:27,313 --> 00:20:28,108
situation.
478
00:20:28,109 --> 00:20:29,689
And then there was the Grain Corridor,
479
00:20:29,690 --> 00:20:31,370
which was ultimately quite successful.
480
00:20:31,371 --> 00:20:32,984
weren't too many vessels
481
00:20:32,985 --> 00:20:35,213
ultimately attacked physically.
482
00:20:35,214 --> 00:20:37,074
What we're seeing the last two weeks,
483
00:20:37,075 --> 00:20:41,004
bizarrely enough is is almost like
484
00:20:41,005 --> 00:20:43,219
small actions, but quite painful.
485
00:20:43,220 --> 00:20:45,683
was one vessel, I think she was called the Ayer,
486
00:20:45,684 --> 00:20:47,832
who came out of one of the deep sea
ports.
487
00:20:47,833 --> 00:20:49,685
She was attacked just outside
488
00:20:49,686 --> 00:20:51,613
Romanian territorial waters.
489
00:20:51,614 --> 00:20:54,575
It was almost as if a statement was to be made.
490
00:20:54,576 --> 00:20:56,973
And the last few days, we're beginning to see
491
00:20:56,974 --> 00:20:59,697
vessels being attacked whilst they're
loading.
492
00:20:59,698 --> 00:21:01,776
So again, the market's sort of trying
493
00:21:01,777 --> 00:21:04,459
to keep pace in terms of providing war coverage.
494
00:21:04,960 --> 00:21:07,461
Initially, was more outside of territorial waters.
495
00:21:07,462 --> 00:21:09,534
Nowadays, we can look at options
496
00:21:09,535 --> 00:21:12,043
to cover vessels whilst they're being loaded.
497
00:21:12,044 --> 00:21:14,547
So the market is trying to keep pace
498
00:21:14,548 --> 00:21:17,396
with events as they unfold but it's true
499
00:21:17,397 --> 00:21:19,986
that it's still a very challenging
500
00:21:19,987 --> 00:21:23,071
situation by and large for both areas.
501
00:21:23,072 --> 00:21:26,472
And stepping aside from war for a moment,
502
00:21:26,473 --> 00:21:29,274
just interested to hear from both
503
00:21:29,275 --> 00:21:32,277
of you about patterns of claims.
504
00:21:32,278 --> 00:21:35,387
So there's been a lot of reports about
505
00:21:35,388 --> 00:21:38,998
explosions of lithium batteries and fires
506
00:21:38,999 --> 00:21:42,347
on ships mis-declaration of cargo,
507
00:21:42,348 --> 00:21:45,186
mis-description, out-turn losses.
508
00:21:45,187 --> 00:21:48,188
Just perhaps if I can start with you, Rob.
509
00:21:48,189 --> 00:21:50,639
Are you seeing a claim trend
510
00:21:50,640 --> 00:21:53,851
that's emerging at the moment?
511
00:21:53,852 --> 00:21:55,654
I mean, lithium ion batteries is
512
00:21:55,655 --> 00:21:57,658
an extremely interesting subject.
513
00:21:57,659 --> 00:22:00,108
We could probably spend the whole
514
00:22:00,109 --> 00:22:02,297
podcast just on that subject.
515
00:22:04,218 --> 00:22:06,039
It's interesting because...
516
00:22:07,260 --> 00:22:09,300
I was listening to some underwriters talking
517
00:22:09,301 --> 00:22:11,502
about it a little while ago and they were
saying,
518
00:22:11,503 --> 00:22:12,683
well, you know, of course,
519
00:22:12,684 --> 00:22:14,563
lithium ion batteries are in everything.
520
00:22:14,564 --> 00:22:16,135
It's not, they're in, they're in new
521
00:22:16,136 --> 00:22:17,918
motor vehicles, now used motor vehicles
522
00:22:17,919 --> 00:22:19,386
that are coming onto the market.
523
00:22:19,387 --> 00:22:20,811
They're in electric scooters,
524
00:22:20,812 --> 00:22:22,347
they're in your toothbrush.
525
00:22:22,348 --> 00:22:25,578
All of that stuff goes on on board vessels and all
526
00:22:25,579 --> 00:22:29,052
has the propensity for, you know,
thermal runway,
527
00:22:29,053 --> 00:22:30,911
which, causes those fires.
528
00:22:30,912 --> 00:22:33,064
And they are extremely difficult,
529
00:22:33,065 --> 00:22:34,773
if not impossible to put out
530
00:22:34,774 --> 00:22:38,074
with a reasonable level of safety and, time.
531
00:22:38,595 --> 00:22:41,048
And so there have been some headline
532
00:22:41,049 --> 00:22:42,765
losses of vessels such as
533
00:22:42,766 --> 00:22:45,300
the Fremantle Highway for example.
534
00:22:45,882 --> 00:22:51,895
And I do believe might be a bit controversial,
535
00:22:51,896 --> 00:22:54,883
there's some controlling of the narrative
536
00:22:54,884 --> 00:22:58,286
involved by motor manufacturers and maybe even
537
00:22:58,287 --> 00:23:01,523
governmental authorities here because all of
538
00:23:01,524 --> 00:23:03,984
the headlines have always been it's a used
539
00:23:03,985 --> 00:23:06,341
motor vehicle that's caused it or it's been a
540
00:23:06,342 --> 00:23:07,360
damaged
battery.
541
00:23:07,361 --> 00:23:10,280
And of course, risks of an aging battery or
542
00:23:10,281 --> 00:23:12,532
a damaged battery are, I'm sure,
543
00:23:12,533 --> 00:23:16,120
exponentially higher than in a new motor vehicle.
544
00:23:16,121 --> 00:23:19,082
But if you listen to some of the first
545
00:23:19,083 --> 00:23:22,251
results the narrative and there's a recording
546
00:23:22,252 --> 00:23:24,574
actually of the Fremantle Highway,
547
00:23:24,575 --> 00:23:27,713
the first responder says, it started in a car.
548
00:23:27,714 --> 00:23:30,641
So it doesn't get any clearer than that to me,
549
00:23:30,642 --> 00:23:33,254
but maybe that's a controversial view.
550
00:23:33,255 --> 00:23:35,994
But the risks are there to be covered.
551
00:23:35,995 --> 00:23:39,290
And I know there are people who are specialising
552
00:23:39,291 --> 00:23:42,174
in specifically responding to that need.
553
00:23:43,014 --> 00:23:44,877
And I think it's certainly been the case of
554
00:23:44,878 --> 00:23:47,114
the markets beginning to shy away from that risk.
555
00:23:47,115 --> 00:23:49,031
There's only so many people who still look
556
00:23:49,032 --> 00:23:51,260
at automobiles to this in general.
557
00:23:51,261 --> 00:23:53,321
But certainly EV vehicles are
558
00:23:53,322 --> 00:23:55,219
perceived to be about risk.
559
00:23:55,220 --> 00:23:56,025
Rightly or wrongly,
560
00:23:56,026 --> 00:23:57,450
there's arguments for and against.
561
00:23:57,451 --> 00:23:59,340
There's a huge debate out there.
562
00:23:59,341 --> 00:24:02,508
But on the ground in terms of finding solutions,
563
00:24:02,509 --> 00:24:05,280
it's not an easy brook to do these
things.
564
00:24:05,281 --> 00:24:07,761
Cars and cargo is a niche area
565
00:24:07,762 --> 00:24:10,140
of the reinsurance market.
566
00:24:10,141 --> 00:24:12,720
And some people have a large appetite for it.
567
00:24:12,721 --> 00:24:14,380
And of course, some people don't.
568
00:24:14,381 --> 00:24:16,352
lithium ion batteries as an emerging risk,
569
00:24:16,353 --> 00:24:18,600
I think it's probably emerged now, to be
honest.
570
00:24:18,601 --> 00:24:21,082
But as an emerging risk is something
571
00:24:21,083 --> 00:24:23,820
that Some people are very interested
572
00:24:23,821 --> 00:24:26,226
in specifically underwriting,
573
00:24:26,227 --> 00:24:29,078
as is the way of the insurance market.
574
00:24:29,079 --> 00:24:31,882
It's always evolving and seeking out new
575
00:24:31,883 --> 00:24:35,242
opportunities to provide products to support.
576
00:24:35,243 --> 00:24:37,264
And I suppose that leads us
577
00:24:37,265 --> 00:24:40,848
into a wider topic about autonomous vehicles,
578
00:24:40,849 --> 00:24:43,726
driverless cars,
crewless ships.
579
00:24:43,727 --> 00:24:45,774
Marine insurance is very much looking
580
00:24:45,775 --> 00:24:48,208
at innovation and technology the whole time.
581
00:24:48,209 --> 00:24:50,382
And if you are looking to underwrite risks
582
00:24:50,383 --> 00:24:52,514
in these areas, you need to be cognizant
583
00:24:52,515 --> 00:24:54,633
that the claims will come and there'll
584
00:24:54,634 --> 00:24:57,083
be new claims and you need to equip yourself
585
00:24:57,084 --> 00:24:59,132
with dealing with those claims.
586
00:24:59,133 --> 00:25:02,707
Eric, commodities, obviously commodities
587
00:25:02,708 --> 00:25:05,474
are transported largely by ship.
588
00:25:05,475 --> 00:25:08,002
Are there any trends that you're seeing
589
00:25:08,003 --> 00:25:10,148
in commodities claims or what are
590
00:25:10,149 --> 00:25:12,523
the commodities companies seeking
591
00:25:12,524 --> 00:25:15,248
when they are transacting insurance?
592
00:25:15,249 --> 00:25:16,809
Well, there's so many things you could say.
593
00:25:16,810 --> 00:25:19,115
I think the first two things that spring
594
00:25:19,116 --> 00:25:21,491
to my mind is one is value in short values.
595
00:25:21,492 --> 00:25:23,012
It's a cyclical business.
596
00:25:23,013 --> 00:25:24,112
No surprises there.
597
00:25:24,113 --> 00:25:27,978
But lots of the raw materials being traded have
598
00:25:27,979 --> 00:25:31,746
had unexpected or slightly odd price
hikes.
599
00:25:31,747 --> 00:25:35,100
If you look at what coal is doing, it warrants
600
00:25:35,101 --> 00:25:38,538
serious exposure, serious premium volumes
601
00:25:38,539 --> 00:25:42,171
and therefore potentially also claims crude on
602
00:25:42,172 --> 00:25:45,643
the other hand is possibly a bit under pressure.
603
00:25:45,644 --> 00:25:47,546
So that's the first thing I'd say.
604
00:25:47,547 --> 00:25:50,870
In terms of dovetailing that to trends.
605
00:25:51,746 --> 00:25:54,807
Data is becoming more and more important.
606
00:25:54,808 --> 00:25:57,638
So for underwriters, it's all about aggregation.
607
00:25:57,639 --> 00:25:59,656
Storage risks are being monitored
608
00:25:59,657 --> 00:26:01,396
a lot better than they used to.
609
00:26:01,397 --> 00:26:02,980
It's also being asked for.
610
00:26:02,981 --> 00:26:06,006
So for clients, and that goes for commodity
611
00:26:06,007 --> 00:26:09,074
clients or other clients, the information
612
00:26:09,075 --> 00:26:12,060
requirements are probably more onerous,
613
00:26:12,061 --> 00:26:15,003
if not extensive, compared to a while ago.
614
00:26:16,804 --> 00:26:19,170
So those would be two things I'd touch upon,
615
00:26:19,171 --> 00:26:20,617
but obviously you can talk
616
00:26:20,618 --> 00:26:22,852
about commodity marine trends for a lot
617
00:26:22,853 --> 00:26:25,200
longer than we've got time for today.
618
00:26:25,201 --> 00:26:26,160
I think I mean,
619
00:26:26,161 --> 00:26:29,122
misappropriation has always been an issue.
620
00:26:29,123 --> 00:26:30,428
I'm not here to plug it,
621
00:26:30,429 --> 00:26:33,110
but I did write a paper about misappropriation
622
00:26:33,111 --> 00:26:35,105
losses in the cargo stock market.
623
00:26:35,106 --> 00:26:38,826
And of course, know, those commodity traders have
624
00:26:38,827 --> 00:26:42,016
to access and store and ship and sell goods
625
00:26:42,017 --> 00:26:45,029
in multiple locations around the globe.
626
00:26:45,030 --> 00:26:47,385
And they have to entrust their goods
627
00:26:47,386 --> 00:26:49,426
to quite often to a third party,
628
00:26:49,427 --> 00:26:52,254
a collateral manager or warehouse keeper
629
00:26:52,255 --> 00:26:54,453
in order to access those markets.
630
00:26:55,154 --> 00:26:58,159
there is with increasing commodity prices,
631
00:26:58,160 --> 00:27:00,840
as you point out, Eric, you know, you've
632
00:27:00,841 --> 00:27:03,521
got an
increased level of moral hazard
633
00:27:03,522 --> 00:27:06,283
there and pressure on keeping that sales
634
00:27:06,284 --> 00:27:09,843
process going in order to to facilitate
635
00:27:09,844 --> 00:27:11,385
those trades.
636
00:27:11,386 --> 00:27:13,880
And over the past 18 months, two years,
637
00:27:13,881 --> 00:27:16,376
we've seen fraud actions, haven't we,
638
00:27:16,377 --> 00:27:19,496
on the
paperwork for where commodities stored
639
00:27:19,497 --> 00:27:22,148
actions against collateral managers as
640
00:27:22,149 --> 00:27:25,054
the commodity product becomes more expensive.
641
00:27:25,055 --> 00:27:27,677
Expensive than those who are looking after the
642
00:27:27,678 --> 00:27:30,368
inventories and guarding the actual
physical
643
00:27:30,369 --> 00:27:33,059
warehouses There are actions against them when
644
00:27:33,060 --> 00:27:35,952
product goes missing in different places around
645
00:27:35,953 --> 00:27:38,462
the world And we also see surveyors and
646
00:27:38,463 --> 00:27:41,678
adjusters moving away from that
market for fear
647
00:27:41,679 --> 00:27:44,424
of being sued So the commodity is just left
648
00:27:44,425 --> 00:27:45,758
there unprotected.
649
00:27:45,759 --> 00:27:49,310
So I mean those Spiraling claims will also
650
00:27:49,311 --> 00:27:52,994
have an impact on premium but interested to
651
00:27:52,995 --> 00:27:57,064
hear what you've said about commodities,
652
00:27:57,065 --> 00:28:00,788
Eric, do you think that you said that there
653
00:28:00,789 --> 00:28:04,406
was more of a burden on the insured now to
654
00:28:04,407 --> 00:28:08,557
provide information to underwriters before a
655
00:28:08,558 --> 00:28:10,315
risk is bound?
656
00:28:10,316 --> 00:28:11,116
What is...
657
00:28:11,117 --> 00:28:14,260
that burden doing to the marine insurance market?
658
00:28:14,261 --> 00:28:18,824
Are companies still keen to buy insurance?
659
00:28:18,825 --> 00:28:21,135
Do think companies are moving away
660
00:28:21,136 --> 00:28:23,069
from purchasing insurance?
661
00:28:23,070 --> 00:28:25,732
How is the market, how are commodities
662
00:28:25,733 --> 00:28:29,061
companies impacted by the pricing structures,
663
00:28:29,062 --> 00:28:31,142
the
rise in premiums and what
664
00:28:31,143 --> 00:28:33,978
are their behaviors now as a result?
665
00:28:33,979 --> 00:28:36,270
I think it all depends as the typical
666
00:28:36,271 --> 00:28:38,410
answer any broker would give you.
667
00:28:38,411 --> 00:28:39,080
all depends.
668
00:28:39,081 --> 00:28:41,511
I think the first thing I'd say is it
669
00:28:41,512 --> 00:28:43,943
depends on the size of the company.
670
00:28:43,944 --> 00:28:46,158
You'll have financially a very stable group
671
00:28:46,159 --> 00:28:48,135
and some of these commodity players are
672
00:28:48,136 --> 00:28:50,351
very
big groups indeed and they've got deep
673
00:28:50,352 --> 00:28:52,627
pockets and they're very financially solid.
674
00:28:52,628 --> 00:28:55,034
So some companies may opt for instance for
675
00:28:55,035 --> 00:28:58,061
increased retention levels or higher
deductibles
676
00:28:58,062 --> 00:29:00,400
if not outright captivation solutions.
677
00:29:00,401 --> 00:29:02,679
Captivation solutions being you build your
678
00:29:02,680 --> 00:29:04,683
own insurance company, and keep as much
679
00:29:04,684 --> 00:29:06,405
of the risk in your own books rather
680
00:29:06,406 --> 00:29:08,364
than cede it to the commercial
market.
681
00:29:08,365 --> 00:29:10,173
So there's an element of that
682
00:29:10,174 --> 00:29:12,285
that we're beginning to witness.
683
00:29:13,086 --> 00:29:15,309
The commodity world was perhaps slower
684
00:29:15,310 --> 00:29:17,195
to wake up to captive realities or
685
00:29:17,196 --> 00:29:19,554
captive
possibilities compared to more
686
00:29:19,555 --> 00:29:22,249
traditional manufacturing style businesses.
687
00:29:23,030 --> 00:29:25,842
In terms of providing the data, I like to
688
00:29:25,843 --> 00:29:28,910
think that it is certainly a cultural shift
689
00:29:28,911 --> 00:29:31,723
a
few years ago, but by and large people
690
00:29:31,724 --> 00:29:34,492
have come around to the idea of Yes, we do
691
00:29:34,493 --> 00:29:37,205
need to provide details on counterparty
692
00:29:37,206 --> 00:29:37,764
checks.
693
00:29:37,765 --> 00:29:40,914
We do need to provide official details upfront.
694
00:29:40,915 --> 00:29:42,992
We do need to provide a lot more detail
695
00:29:42,993 --> 00:29:45,137
about what is going to be shipped where
696
00:29:45,138 --> 00:29:47,014
from where
is going to be stored.
697
00:29:47,015 --> 00:29:49,254
What are the documents being provided?
698
00:29:49,255 --> 00:29:50,564
Do we hold title?
699
00:29:50,565 --> 00:29:53,734
If so, what documents do we have to substantiate?
700
00:29:53,735 --> 00:29:56,325
So I think clients have adopted that
701
00:29:56,326 --> 00:29:59,004
mindset and this procedure in place.
702
00:29:59,005 --> 00:30:01,003
And so it creates an awful lot
703
00:30:01,004 --> 00:30:03,836
of extra work compared to a few years ago.
704
00:30:03,837 --> 00:30:07,592
say but I think the industry as it always
705
00:30:07,593 --> 00:30:11,836
has done we just tend to adjust and adapt.
706
00:30:11,837 --> 00:30:14,876
And it's become the new normal.
707
00:30:14,877 --> 00:30:18,476
However laborious it's turned out to be.
708
00:30:18,477 --> 00:30:20,796
I think if you're a global commodity trader,
709
00:30:20,797 --> 00:30:23,305
you're a risk manager of a large
organization,
710
00:30:23,306 --> 00:30:25,500
you know, when it comes to your insurance,
711
00:30:25,501 --> 00:30:26,754
I'm sure there's always
712
00:30:26,755 --> 00:30:29,876
a tension between what do I need to pay?
713
00:30:29,877 --> 00:30:31,631
What is the price and what terms
714
00:30:31,632 --> 00:30:33,116
can I get for my insurance?
715
00:30:33,117 --> 00:30:35,610
And you're probably better placed
716
00:30:35,611 --> 00:30:37,416
to comment than me, Eric.
717
00:30:37,417 --> 00:30:39,761
But as opposed to, you know, having a captive
718
00:30:39,762 --> 00:30:42,399
insurer or some other self-insurance retention
719
00:30:42,400 --> 00:30:45,250
or alternative risk transfer mechanism.
720
00:30:45,251 --> 00:30:47,766
So I'm sure it of course it's down to price,
721
00:30:47,767 --> 00:30:48,989
business efficacy,
722
00:30:48,990 --> 00:30:51,650
terms and conditions, all
of those things.
723
00:30:51,651 --> 00:30:55,794
And we have just recently seen a very large
724
00:30:55,795 --> 00:30:59,227
global commodity trade has chosen
725
00:30:59,228 --> 00:31:03,727
to
self-insure through their own CAPTIF for
726
00:31:03,728 --> 00:31:07,990
their global cargo program, which is a huge
727
00:31:07,991 --> 00:31:13,555
decision and can affect you know the cargo
728
00:31:13,556 --> 00:31:17,064
market because you know they've been insured
729
00:31:17,065 --> 00:31:20,297
for 20 plus years in the
London insurance
730
00:31:20,298 --> 00:31:23,529
market and so you know those decisions can
731
00:31:23,530 --> 00:31:26,500
happen and they do have an impact.
732
00:31:26,501 --> 00:31:28,990
There's trends and fashions in insurance as well
733
00:31:28,991 --> 00:31:31,358
believe it or not however exotic it may
sound I
734
00:31:31,359 --> 00:31:33,666
mean this period it sort of ties into the state
735
00:31:33,667 --> 00:31:35,891
of the market and sometimes the the cost of
736
00:31:35,892 --> 00:31:38,831
insurance is viewed as being acceptable or cheap
737
00:31:38,832 --> 00:31:41,700
or expensive whatever the market does and that
738
00:31:41,701 --> 00:31:44,024
will in turn drive certain decisions like you've
739
00:31:44,025 --> 00:31:44,592
described.
740
00:31:44,593 --> 00:31:47,184
So it all it all comes together.
741
00:31:47,185 --> 00:31:49,275
It's all inter independent.
742
00:31:49,276 --> 00:31:50,490
I like the way you managed to get
743
00:31:50,491 --> 00:31:51,987
the word exotic and marine insurance.
744
00:31:51,988 --> 00:31:53,434
I'm not sure I've heard that before.
745
00:31:53,435 --> 00:31:56,080
Anyway, this might use it.
746
00:31:56,081 --> 00:31:57,460
Very exotic.
747
00:31:58,441 --> 00:32:01,474
The value of the world fleet is approaching
748
00:32:01,475 --> 00:32:04,930
one point six trillion dollars in in 2024,
which
749
00:32:04,931 --> 00:32:07,627
is an increase of 13 percent from 2023.
750
00:32:07,628 --> 00:32:10,432
So there's obviously going to be a demand
751
00:32:10,433 --> 00:32:13,992
for insurance and insurance products.
752
00:32:14,493 --> 00:32:17,680
Have you seen many carriers exit the market,
753
00:32:17,681 --> 00:32:20,178
new carriers come into the market?
754
00:32:20,179 --> 00:32:21,959
Eric, maybe a question for you.
755
00:32:23,396 --> 00:32:24,772
Well, I'm obviously a cargo
756
00:32:24,773 --> 00:32:26,328
expert more than a hull expert.
757
00:32:26,329 --> 00:32:30,620
What I do know is this the world's fleet is aging.
758
00:32:30,621 --> 00:32:31,290
That's for sure.
759
00:32:31,291 --> 00:32:32,661
There's scrapping.
760
00:32:32,662 --> 00:32:34,752
The volume of tonnage being scrapped is
761
00:32:34,753 --> 00:32:36,843
less than what it's historically been.
762
00:32:36,844 --> 00:32:39,364
So it's recycled now.
763
00:32:39,365 --> 00:32:43,806
Yes, it turns into electric batteries I suppose.
764
00:32:43,807 --> 00:32:46,307
And the pace of new builds is slackening as well.
765
00:32:46,308 --> 00:32:48,154
So you end up having a world fleet,
766
00:32:48,155 --> 00:32:50,266
which I think is on average two or three
767
00:32:50,267 --> 00:32:52,510
years older
than we used to be recently.
768
00:32:52,511 --> 00:32:54,291
there's certainly that.
769
00:32:54,292 --> 00:32:56,688
Festivals are getting bigger as well by and large,
770
00:32:56,689 --> 00:32:58,914
depends on the type of vessel you're
talking.
771
00:32:58,915 --> 00:33:02,357
So the whole values would be increasing.
772
00:33:02,358 --> 00:33:05,057
all of that then translates into an insurance
773
00:33:05,058 --> 00:33:06,905
proposition at some point down
774
00:33:06,906 --> 00:33:09,251
the line and
therefore a premium cost.
775
00:33:09,252 --> 00:33:11,963
So that's certainly one consideration.
776
00:33:13,584 --> 00:33:16,172
What the industry will probably keep
777
00:33:16,173 --> 00:33:17,843
on doing is look at fleet
778
00:33:17,844 --> 00:33:20,682
composition and ownership
structures
779
00:33:20,683 --> 00:33:22,520
and flags of convenience.
780
00:33:22,521 --> 00:33:24,957
or other, so you'll have different
781
00:33:24,958 --> 00:33:27,815
makes ups in terms of or different shifts
782
00:33:27,816 --> 00:33:30,134
in fleet
makeup I would say.
783
00:33:30,135 --> 00:33:32,308
These are things that the industry will need
784
00:33:32,309 --> 00:33:33,895
to deal with very much as before.
785
00:33:35,228 --> 00:33:37,356
Yeah, so I think the ability
786
00:33:37,357 --> 00:33:40,781
of the insurance market to adapt to new risks
787
00:33:40,782 --> 00:33:43,948
that are
emerging is absolutely there.
788
00:33:43,949 --> 00:33:46,348
we've seen 300 years worth of innovation
789
00:33:46,349 --> 00:33:48,608
in the marine insurance market so far.
790
00:33:48,609 --> 00:33:49,584
I'm sure we'll be,
791
00:33:49,585 --> 00:33:51,668
another 300 years we'll still be here.
792
00:33:51,669 --> 00:33:52,148
Maybe not.
793
00:33:52,149 --> 00:33:54,088
Well, the three of us might not.
794
00:33:54,089 --> 00:33:56,648
Not after today, I think.
795
00:33:56,649 --> 00:33:59,456
The Lloyds market and other insurance markets,
796
00:33:59,457 --> 00:34:00,088
of course.
797
00:34:00,089 --> 00:34:01,068
Thank you.
798
00:34:01,069 --> 00:34:03,810
So, Eric, you talked about the aging
799
00:34:03,811 --> 00:34:06,083
fleet and perhaps we'll talk about
800
00:34:06,084 --> 00:34:08,016
the dark fleet and the ghost fleet as
801
00:34:08,017 --> 00:34:09,885
they're called a little bit later.
802
00:34:09,886 --> 00:34:13,994
But when it comes to the environment and ESG,
803
00:34:13,995 --> 00:34:16,881
obviously there's been a drive
804
00:34:16,882 --> 00:34:21,323
to cut emissions and for vessels to understand
805
00:34:21,324 --> 00:34:25,433
the importance of environmental concerns.
806
00:34:25,434 --> 00:34:29,175
To what extent have you seen the environment,
807
00:34:29,176 --> 00:34:30,947
weather, incidents?
808
00:34:30,948 --> 00:34:33,377
and a focus on ESG change the way
809
00:34:33,378 --> 00:34:35,620
that you work and what you do.
810
00:34:35,621 --> 00:34:36,610
Okay.
811
00:34:36,611 --> 00:34:38,822
Well, I think it's beginning to make its impact.
812
00:34:38,823 --> 00:34:41,033
It's beginning to make itself felt.
813
00:34:41,034 --> 00:34:44,135
We've recently been pitching for again,
814
00:34:44,136 --> 00:34:47,536
commodity business as you know, we do.
815
00:34:47,537 --> 00:34:49,675
One was petroleum related and the other
816
00:34:49,676 --> 00:34:51,167
one was old fashioned coal.
817
00:34:51,168 --> 00:34:54,580
And you do notice that some markets are beginning
818
00:34:54,581 --> 00:34:57,827
to wonder whether this is a business
they want
819
00:34:57,828 --> 00:35:00,862
to be engaged in long-term going forward.
820
00:35:00,863 --> 00:35:04,404
I wouldn't say that this is absolutely no go.
821
00:35:04,405 --> 00:35:06,413
There's still pockets of, there's lots of
822
00:35:06,414 --> 00:35:08,423
expertise, lots of know-how, but there's
823
00:35:08,424 --> 00:35:10,777
certain
pockets of capacity that are beginning
824
00:35:10,778 --> 00:35:12,730
to be withdrawn, perhaps more from an ESG
825
00:35:12,731 --> 00:35:16,163
perspective, if not more reason than for a
826
00:35:16,164 --> 00:35:17,733
technical reason.
827
00:35:17,734 --> 00:35:18,754
So that's certainly something
828
00:35:18,755 --> 00:35:19,855
that we're beginning to witness.
829
00:35:19,856 --> 00:35:22,452
I suppose it's early days, but that is
830
00:35:22,453 --> 00:35:25,133
not to be discounted going forward as a
831
00:35:25,134 --> 00:35:28,150
concern,
because obviously at some point
832
00:35:28,151 --> 00:35:31,744
those people, those assures will need to
833
00:35:31,745 --> 00:35:35,324
have protection in place no matter what.
834
00:35:35,325 --> 00:35:37,282
So that's certainly another challenge
835
00:35:37,283 --> 00:35:38,865
for the industry to address.
836
00:35:38,866 --> 00:35:41,211
again, talking about trends in fashion,
837
00:35:41,212 --> 00:35:43,074
in insurance, in ebbs and flows,
838
00:35:43,075 --> 00:35:45,006
and that's certainly
something
839
00:35:45,007 --> 00:35:47,130
that we're beginning to notice.
840
00:35:47,131 --> 00:35:50,726
There've been attempts to reduce premium
841
00:35:50,727 --> 00:35:54,014
for those companies that are striving
842
00:35:54,015 --> 00:35:57,256
to meet
their emissions targets.
843
00:35:57,257 --> 00:35:58,296
That's been...
844
00:35:58,297 --> 00:36:00,610
one way that the insurance market is
845
00:36:00,611 --> 00:36:02,924
rewarding those that are complying
846
00:36:02,925 --> 00:36:05,666
with the various
rules and regulations.
847
00:36:05,667 --> 00:36:07,954
Rob, have you seen that weather
848
00:36:07,955 --> 00:36:09,978
patterns or perhaps a focus
849
00:36:09,979 --> 00:36:13,722
on the environment has altered
what you do?
850
00:36:13,723 --> 00:36:15,682
I mean, we've seen a big increase
851
00:36:15,683 --> 00:36:18,004
in losses associated with convective
852
00:36:18,005 --> 00:36:19,965
storms over the
last few years.
853
00:36:19,966 --> 00:36:22,296
There's been a large increase.
854
00:36:22,297 --> 00:36:25,214
I mean, we've just literally come out of two
855
00:36:25,215 --> 00:36:28,700
hurricanes, Lane and Milton, which have
affected
856
00:36:28,701 --> 00:36:32,024
the insurance market across Florida and Georgia
857
00:36:32,025 --> 00:36:34,802
and North Carolina and various other places.
858
00:36:34,803 --> 00:36:37,560
I mean, and we've seen a general increase
859
00:36:37,561 --> 00:36:39,832
in that globally flooding claims
860
00:36:39,833 --> 00:36:41,942
that's for
cargo warehouses,
861
00:36:41,943 --> 00:36:44,017
windstorm damage, all of those things.
862
00:36:44,018 --> 00:36:47,086
So yes, there's definitely an increase in those.
863
00:36:47,087 --> 00:36:50,385
mean, just going back to the point about...
864
00:36:50,894 --> 00:36:53,185
electric propulsion, zero emissions.
865
00:36:54,246 --> 00:36:57,101
It would be interesting in the circumstances
866
00:36:57,102 --> 00:36:58,754
of the MV Dali, which stuck
867
00:36:58,755 --> 00:37:01,008
in Baltimore
Bridge, for example.
868
00:37:01,524 --> 00:37:04,046
I think the original NTSB investigative report
869
00:37:04,047 --> 00:37:06,694
said that it was caused by an electrical
failure,
870
00:37:06,695 --> 00:37:08,018
which may have been a crew
871
00:37:08,019 --> 00:37:10,099
negligence issue, or may not have been,
872
00:37:10,100 --> 00:37:11,524
may have been a maintenance issue.
873
00:37:11,525 --> 00:37:14,295
We haven't got to the bottom of that yet.
874
00:37:14,296 --> 00:37:16,407
But what would have happened in that instance
875
00:37:16,408 --> 00:37:18,130
if it was an autonomous vessel with no
876
00:37:18,131 --> 00:37:19,908
crew
on board, or if it was an electric
877
00:37:19,909 --> 00:37:21,953
propulsion vessel or would the steering gear
878
00:37:21,954 --> 00:37:23,896
still have failed if there was an electrical
879
00:37:23,897 --> 00:37:25,839
failure in the bus
board that was alleged to
880
00:37:25,840 --> 00:37:27,677
have caused the steering gear failure for
881
00:37:27,678 --> 00:37:28,098
the Dali?
882
00:37:28,099 --> 00:37:29,818
Don't know the answer.
883
00:37:30,438 --> 00:37:32,774
So yeah, so I think there are lots
884
00:37:32,775 --> 00:37:34,998
of considerations there.
885
00:37:34,999 --> 00:37:38,133
It was interesting, just on the Baltimore Bridge
886
00:37:38,134 --> 00:37:41,422
incident, I was again listening to an
underwriter
887
00:37:41,423 --> 00:37:44,099
and a claims person discussing it shortly
888
00:37:44,100 --> 00:37:46,718
after the incident in March of this year.
889
00:37:46,719 --> 00:37:49,230
I think it was the beginning of April, just
890
00:37:49,231 --> 00:37:51,802
after the owners, Grace, had filed for
891
00:37:51,803 --> 00:37:55,574
limitation under the Merchant Shipping Act in
892
00:37:55,575 --> 00:37:58,959
the States of 1851, which
sought to limit
893
00:37:58,960 --> 00:38:02,635
their liability to the sound sale value of the
894
00:38:02,636 --> 00:38:05,409
vessel, which is about 90 million plus less
895
00:38:05,410 --> 00:38:07,288
the cost of alleged repairs, which is going to
896
00:38:07,289 --> 00:38:08,130
be about 50 million.
897
00:38:08,131 --> 00:38:11,071
So then the number looks about 42 million.
898
00:38:11,812 --> 00:38:14,159
that law has been in place
899
00:38:14,160 --> 00:38:16,730
for a very long time and has,
900
00:38:16,731 --> 00:38:20,978
I'm not sure it's ever actually
been broken.
901
00:38:20,979 --> 00:38:23,495
It was there to support the US merchant
902
00:38:23,496 --> 00:38:26,249
shipping fleet in the mid 19th century and
903
00:38:26,250 --> 00:38:29,161
it
became rather famous, famously known as
904
00:38:29,162 --> 00:38:31,993
the Titanic law because the White Star Line
905
00:38:31,994 --> 00:38:35,128
sought to limit their liability under that
906
00:38:35,129 --> 00:38:38,323
Merchant Shipping Act of 1851 as a result of
907
00:38:38,324 --> 00:38:41,518
the
sinking of that very famous vessel and
908
00:38:41,519 --> 00:38:42,583
it was upheld.
909
00:38:42,584 --> 00:38:44,949
you know what was interesting
910
00:38:44,950 --> 00:38:47,978
in the conversation was the liability
911
00:38:47,979 --> 00:38:50,818
under own perspective,
it's okay.
912
00:38:50,819 --> 00:38:53,796
It's a 42 million dollar loss, but actually,
913
00:38:53,797 --> 00:38:56,292
you know, the federal government has
914
00:38:56,293 --> 00:38:59,351
started
a civil action directly against the
915
00:38:59,352 --> 00:39:02,169
owners in the states to try and reclaim the
916
00:39:02,170 --> 00:39:04,894
100 million that the federal government's
917
00:39:04,895 --> 00:39:07,528
money, which they spent in cleaning up the
918
00:39:07,529 --> 00:39:08,246
incident.
919
00:39:08,247 --> 00:39:10,651
And of course, the Baltimore state
920
00:39:10,652 --> 00:39:13,222
themselves have filed an opposition
921
00:39:13,223 --> 00:39:16,290
against the limitation seeking privity of
922
00:39:16,291 --> 00:39:18,364
the owner to try and break that
923
00:39:18,365 --> 00:39:21,196
limitation, in which case, depending on
924
00:39:21,197 --> 00:39:23,046
who you talk to, the loss is going to be
925
00:39:23,047 --> 00:39:24,600
two, three or $4 billion.
926
00:39:24,601 --> 00:39:26,840
So, you know, that's far from over yet.
927
00:39:26,841 --> 00:39:28,310
I don't, yeah.
928
00:39:28,311 --> 00:39:29,948
So I think that's going to be very
929
00:39:29,949 --> 00:39:31,830
interesting to see how that pans out.
930
00:39:31,831 --> 00:39:34,587
And if limitation is broken, that's going
931
00:39:34,588 --> 00:39:37,660
to have a pretty huge knock on effect on the P&I
932
00:39:37,661 --> 00:39:40,340
market and liability market for owners.
933
00:39:40,341 --> 00:39:43,384
Well, I'm interested to hear what you're saying
934
00:39:43,385 --> 00:39:46,124
because you talk about 1851 and you keep on
935
00:39:46,125 --> 00:39:48,940
going back to 1851 as the law that's in place.
936
00:39:48,941 --> 00:39:50,494
And then we talk about innovation.
937
00:39:50,495 --> 00:39:53,589
And 1851 was a very long time ago and for us
938
00:39:53,590 --> 00:39:56,503
in insurance to talk about innovation
939
00:39:56,504 --> 00:39:59,964
but still refer to that year seems quite odd.
940
00:39:59,965 --> 00:40:02,078
It was also the year of the great
941
00:40:02,079 --> 00:40:04,924
exhibition in the UK where innovation and
942
00:40:04,925 --> 00:40:07,770
technologies were displayed and we find
943
00:40:07,771 --> 00:40:10,454
that we hop back to 1851 as well but maybe
944
00:40:10,455 --> 00:40:12,709
we should be going slightly faster and
945
00:40:12,710 --> 00:40:14,475
move forward to see how the world is
946
00:40:14,476 --> 00:40:15,694
evolving and changing.
947
00:40:15,695 --> 00:40:18,286
You talk about limitation.
948
00:40:18,287 --> 00:40:20,197
in the context of the Dali.
949
00:40:20,198 --> 00:40:22,497
But I just want to talk more broadly
950
00:40:22,498 --> 00:40:24,480
about limitations in general
951
00:40:24,481 --> 00:40:26,701
and then to move on to sanctions.
952
00:40:26,702 --> 00:40:29,726
Because since the beginning of the war,
953
00:40:29,727 --> 00:40:32,569
so February 2022, Russia's invasion
954
00:40:32,570 --> 00:40:35,686
of Ukraine, there's been a whole series
955
00:40:35,687 --> 00:40:38,529
of sanctions that have been imposed.
956
00:40:38,530 --> 00:40:41,175
So in the UK, we've had the Russia
957
00:40:41,176 --> 00:40:43,332
EU exit regulations 2019.
958
00:40:43,333 --> 00:40:44,627
and SAMLA 2018,
959
00:40:44,628 --> 00:40:48,414
which set the framework for sanctions rules.
960
00:40:48,415 --> 00:40:51,192
And what we've seen particularly are,
961
00:40:51,193 --> 00:40:53,536
I suppose, sectoral sanctions.
962
00:40:53,537 --> 00:40:57,538
So sanctions relating to nuclear energy, we've
963
00:40:57,539 --> 00:41:01,340
seen the oil price cap, dual use
technology.
964
00:41:01,341 --> 00:41:03,507
So there are restrictions on goods
965
00:41:03,508 --> 00:41:05,601
that are moving around the world.
966
00:41:05,602 --> 00:41:07,148
And then we get the designated
967
00:41:07,149 --> 00:41:09,377
individuals and the designated entities,
968
00:41:09,378 --> 00:41:10,864
those that appear on a list.
969
00:41:10,865 --> 00:41:11,684
So you can't...
970
00:41:11,685 --> 00:41:14,690
transact with them or trade with them.
971
00:41:14,691 --> 00:41:18,238
Just interested to hear from both of your angles
972
00:41:18,239 --> 00:41:21,344
how sanctions are influencing your work.
973
00:41:21,345 --> 00:41:22,923
I don't know whether I should
974
00:41:22,924 --> 00:41:24,174
start with Rob or Eric.
975
00:41:24,175 --> 00:41:25,215
I'm happy to keep off.
976
00:41:25,216 --> 00:41:25,985
Thank you.
977
00:41:25,986 --> 00:41:28,516
It's made it a lot more complicated,
978
00:41:28,517 --> 00:41:29,867
the simple answer.
979
00:41:29,868 --> 00:41:33,484
And the slightly longer answer is, is that as
980
00:41:33,485 --> 00:41:36,809
a claims person in an insurance company,
981
00:41:36,810 --> 00:41:40,427
you
are very cognisant that you are subject
982
00:41:40,428 --> 00:41:43,653
to an ever changing world and sanctions
983
00:41:43,654 --> 00:41:46,928
imposed on designated national estates, SDNs,
984
00:41:46,929 --> 00:41:49,631
you've got OFAC, you've got European law,
985
00:41:49,632 --> 00:41:50,917
you've got
UK.
986
00:41:50,918 --> 00:41:55,051
It's a, yeah, it's an extremely wide and change
987
00:41:55,052 --> 00:41:58,730
a set of sanctions that changes every day
988
00:41:58,731 --> 00:42:03,058
and basically makes our job more
complicated.
989
00:42:03,059 --> 00:42:04,698
It takes longer.
990
00:42:04,699 --> 00:42:06,918
Each and every claim takes longer.
991
00:42:06,919 --> 00:42:09,584
And you know, if they have designated
992
00:42:09,585 --> 00:42:12,508
touch points in certain areas, you know,
993
00:42:12,509 --> 00:42:15,518
then
there's nothing you can do about it.
994
00:42:15,519 --> 00:42:20,676
And you know, what we do see is that...
995
00:42:20,677 --> 00:42:22,921
We have every insurance company is different,
996
00:42:22,922 --> 00:42:24,533
has their own internal sanctions
997
00:42:24,534 --> 00:42:26,317
checking procedures, has their own
998
00:42:26,318 --> 00:42:28,160
internal legal and compliance teams.
999
00:42:28,161 --> 00:42:30,439
And every time we get a claim which might have
1000
00:42:30,440 --> 00:42:32,904
a touch point or might be involved in
something
1001
00:42:32,905 --> 00:42:34,752
like the Russia Ukraine thing, have
1002
00:42:34,753 --> 00:42:37,444
to go through that sanctions checking process.
1003
00:42:37,445 --> 00:42:41,850
And we cognizant that we absolutely have to comply
1004
00:42:41,851 --> 00:42:45,848
100 % with all of those sanctions
regimes.
1005
00:42:45,849 --> 00:42:48,419
And if that means we can't pay the claim
1006
00:42:48,420 --> 00:42:51,154
because of that, because it would the law
1007
00:42:51,155 --> 00:42:53,174
to do so, we absolutely can't.
1008
00:42:53,175 --> 00:42:55,491
And you know, we have to discuss that
1009
00:42:55,492 --> 00:42:58,272
with the underwriters and with the brokers
1010
00:42:58,273 --> 00:43:01,440
and with
the assures, you know, and be very clear
1011
00:43:01,441 --> 00:43:03,990
and transparent about what that means.
1012
00:43:04,708 --> 00:43:07,949
I can see it becomes a much more convoluted
1013
00:43:07,950 --> 00:43:11,931
process and perhaps doesn't help the end insured.
1014
00:43:11,932 --> 00:43:14,223
But obviously you've got your contractual
1015
00:43:14,224 --> 00:43:16,387
obligations that come from the contract
1016
00:43:16,388 --> 00:43:18,234
of insurance, but you've also got
1017
00:43:18,235 --> 00:43:20,335
to comply with sanctions legislation.
1018
00:43:20,336 --> 00:43:23,382
And there are sanctions exclusion clauses,
1019
00:43:23,383 --> 00:43:25,441
which are suspensory or final
1020
00:43:25,442 --> 00:43:28,077
in the way that they're interpreted,
1021
00:43:28,078 --> 00:43:31,020
but they add another layer of complexity.
1022
00:43:31,021 --> 00:43:33,682
Eric, have you experienced sanctions issues?
1023
00:43:33,683 --> 00:43:36,140
Same thing, same I would say I think what you're
1024
00:43:36,141 --> 00:43:38,325
also finding is that the is the nature of the
1025
00:43:38,326 --> 00:43:40,572
beast I suppose business tends to adopt and
1026
00:43:40,573 --> 00:43:42,758
we've always playing catch-up being in the
1027
00:43:42,759 --> 00:43:45,335
insurance industry and it's a very fine line to
1028
00:43:45,336 --> 00:43:47,569
try and a stay abreast and certainly not
1029
00:43:47,570 --> 00:43:50,209
trespass or
make any mistakes in that respect
1030
00:43:50,210 --> 00:43:52,781
but the same time finishes one of the one of the
1031
00:43:52,782 --> 00:43:55,496
trends we're witnessing is just some of the
1032
00:43:55,497 --> 00:43:58,731
other Russian entities or Russian individuals or
1033
00:43:58,732 --> 00:44:02,071
Russian trading companies or whatever they they
1034
00:44:02,072 --> 00:44:05,702
are tend to uproot sticks and move to a place
1035
00:44:05,703 --> 00:44:07,612
like Turkey, the Middle East.
1036
00:44:07,613 --> 00:44:09,776
So for us that presents with a challenge
1037
00:44:09,777 --> 00:44:11,022
in terms of keeping up.
1038
00:44:11,023 --> 00:44:13,498
It's more than just vetting a ship
1039
00:44:13,499 --> 00:44:15,532
or a particular trade deal.
1040
00:44:15,533 --> 00:44:16,821
It's also the individuals
1041
00:44:16,822 --> 00:44:18,932
and the corporate structures behind them.
1042
00:44:18,933 --> 00:44:21,512
And sometimes they're absolutely okay.
1043
00:44:21,513 --> 00:44:24,182
But you just still need to go through the checks.
1044
00:44:24,183 --> 00:44:27,072
It's a very cumbersome and risky process.
1045
00:44:27,073 --> 00:44:29,132
And it's not, again, where prisoners are taken.
1046
00:44:29,133 --> 00:44:30,852
You've got to be very, very careful.
1047
00:44:30,853 --> 00:44:32,885
And like you were saying, Rob, I think it
1048
00:44:32,886 --> 00:44:35,085
starts off And chronologically, it starts
1049
00:44:35,086 --> 00:44:37,219
off from the moment that you are presented
1050
00:44:37,220 --> 00:44:39,230
with a new piece of business or even the
1051
00:44:39,231 --> 00:44:41,425
existing piece of business that you need to
1052
00:44:41,426 --> 00:44:41,974
validate.
1053
00:44:42,606 --> 00:44:44,062
permits all the way through
1054
00:44:44,063 --> 00:44:46,278
to a potential claim that needs handling.
1055
00:44:46,279 --> 00:44:48,764
So, and it's not because the business was rich
1056
00:44:48,765 --> 00:44:51,447
in the first place that that will automatically
1057
00:44:51,448 --> 00:44:53,803
entail a loss being legitimately settled.
1058
00:44:53,804 --> 00:44:56,840
Again, in that sense, it's linked,
1059
00:44:56,841 --> 00:45:00,628
but not necessarily an automatic result.
1060
00:45:00,629 --> 00:45:03,879
And at this moment, it's probably worth mentioning
1061
00:45:03,880 --> 00:45:06,828
that the dark fleet or the ghost fleet
figures
1062
00:45:06,829 --> 00:45:10,860
change, but that's possibly 1,100 ships that
1063
00:45:10,861 --> 00:45:15,736
are sailing old, uninsured, under the radar.
1064
00:45:15,737 --> 00:45:19,225
Vessels now themselves have been sanctioned,
1065
00:45:19,226 --> 00:45:21,802
which is a new wave of sanctions.
1066
00:45:21,803 --> 00:45:24,707
And of course, if an insurer is associated
1067
00:45:24,708 --> 00:45:26,118
with the dark fleet,
1068
00:45:26,119 --> 00:45:29,189
then the penalties and fines are enormous.
1069
00:45:29,190 --> 00:45:31,332
Custodial sentences.
1070
00:45:31,333 --> 00:45:32,260
We've had...
1071
00:45:32,261 --> 00:45:34,649
million pounds mooted as a potential fine
1072
00:45:34,650 --> 00:45:36,971
could be six, seven times more than that.
1073
00:45:36,972 --> 00:45:39,725
So brokers, insurers, solicitors need
1074
00:45:39,726 --> 00:45:42,397
to tread very carefully about working
1075
00:45:42,398 --> 00:45:45,486
out who their counterparty is and carrying
1076
00:45:45,487 --> 00:45:48,263
out the necessary due diligence.
1077
00:45:48,264 --> 00:45:48,845
Thank you.
1078
00:45:48,846 --> 00:45:51,697
So if you could polish your crystal balls
1079
00:45:51,698 --> 00:45:54,382
and look into the future, we'll do a bit
1080
00:45:54,383 --> 00:45:57,067
of future gazing perhaps just to end.
1081
00:45:57,068 --> 00:46:02,088
Now I have looked at various elements.
1082
00:46:02,089 --> 00:46:05,080
and what might be lying ahead for us,
1083
00:46:05,081 --> 00:46:08,872
there are tensions between China and Taiwan.
1084
00:46:09,913 --> 00:46:13,329
And we've seen that there are potential acts
1085
00:46:13,330 --> 00:46:15,914
of aggression and that might lead
1086
00:46:15,915 --> 00:46:19,098
to sanctions in that region as well.
1087
00:46:19,099 --> 00:46:21,652
The sanctions on Russia have led
1088
00:46:21,653 --> 00:46:24,721
to different trading relationships.
1089
00:46:24,722 --> 00:46:28,057
So China has come to the fore, India has come
1090
00:46:28,058 --> 00:46:31,024
to the fore and we've seen that evolve.
1091
00:46:31,025 --> 00:46:34,966
potential sanctions also for Belarus.
1092
00:46:34,967 --> 00:46:37,618
And we've seen tension and friction
1093
00:46:37,619 --> 00:46:41,269
between North Korea and South Korea and missiles
1094
00:46:41,270 --> 00:46:43,809
flying in different directions.
1095
00:46:43,810 --> 00:46:47,178
So I think that those perhaps are some
1096
00:46:47,179 --> 00:46:49,243
of the risks that we see
1097
00:46:49,244 --> 00:46:53,553
with geopolitical tensions on the horizon.
1098
00:46:53,554 --> 00:46:55,054
Are there any other risks?
1099
00:46:55,055 --> 00:46:57,924
What do you see for the future in terms
1100
00:46:57,925 --> 00:47:01,761
of geopolitical tensions and marine insurance?
1101
00:47:02,422 --> 00:47:04,589
Well, I think, I mean, if you just look at it
1102
00:47:04,590 --> 00:47:06,826
from a purely economic point of view or even
1103
00:47:06,827 --> 00:47:09,358
business perspective, it starts with, there's
1104
00:47:09,359 --> 00:47:12,078
all this talk about near-shoring and on-shoring
1105
00:47:12,079 --> 00:47:15,194
and French-shoring and is deglobalisation an
1106
00:47:15,195 --> 00:47:16,073
actual fact?
1107
00:47:16,074 --> 00:47:18,310
it happening or what's going to happen
1108
00:47:18,311 --> 00:47:20,547
to physical trade flows to begin with?
1109
00:47:20,548 --> 00:47:22,800
You've got a lot of countries putting
1110
00:47:22,801 --> 00:47:24,980
up trade barriers and what have you,
1111
00:47:24,981 --> 00:47:27,743
so that's certainly going to have an impact.
1112
00:47:27,744 --> 00:47:31,034
At the same time, A lot of the big economies
1113
00:47:31,035 --> 00:47:32,742
are still growing at a healthy rate.
1114
00:47:32,743 --> 00:47:35,209
So God knows where the balance is going
1115
00:47:35,210 --> 00:47:37,985
to tilt and then throw in all the other bits.
1116
00:47:37,986 --> 00:47:40,404
And there's the challenges posed
1117
00:47:40,405 --> 00:47:43,514
by digitalization and AI and you mentioned
1118
00:47:43,515 --> 00:47:46,279
geopolitical and regulatory risks.
1119
00:47:46,280 --> 00:47:49,091
They're certainly not going to become any less.
1120
00:47:49,092 --> 00:47:53,453
So we'll be kept busy, I think, going forward.
1121
00:47:53,954 --> 00:47:55,184
Especially you, it claims, Rob.
1122
00:47:55,185 --> 00:47:56,094
Thanks.
1123
00:47:58,716 --> 00:48:00,863
Yeah, I mean, obviously I agree
1124
00:48:00,864 --> 00:48:03,836
with everything you just said there, Eric.
1125
00:48:03,837 --> 00:48:07,043
I mean, it does feel like the world
1126
00:48:07,044 --> 00:48:10,136
has gone geopolitically crazy.
1127
00:48:11,036 --> 00:48:12,724
And, you know, we've had Israel,
1128
00:48:12,725 --> 00:48:13,976
Gaza, Russia, Ukraine.
1129
00:48:13,977 --> 00:48:16,816
We've had North Korea now.
1130
00:48:16,817 --> 00:48:20,676
We've had civil uprisings in Haiti, Myanmar.
1131
00:48:20,677 --> 00:48:22,096
You know, we're just seeing
1132
00:48:22,097 --> 00:48:23,516
more and more and more of it.
1133
00:48:23,517 --> 00:48:25,976
Obviously, we've got US elections and, you know...
1134
00:48:25,977 --> 00:48:29,056
ex-President Trump's attempted assassination.
1135
00:48:29,057 --> 00:48:31,399
know, I mean, it just seems like there is an awful
1136
00:48:31,400 --> 00:48:33,508
lot of that going on in the world right
now.
1137
00:48:33,509 --> 00:48:36,562
And whether, you know, I mean, obviously
1138
00:48:36,563 --> 00:48:39,705
that requires a reaction by the insurance
1139
00:48:39,706 --> 00:48:42,490
market in order to provide relevant
1140
00:48:42,491 --> 00:48:45,454
products and services to people who are
1141
00:48:45,455 --> 00:48:48,076
caught up in that as part of their daily
1142
00:48:48,077 --> 00:48:48,763
business.
1143
00:48:48,764 --> 00:48:51,227
So, you know, it's up to us to innovate
1144
00:48:51,228 --> 00:48:53,692
and make sure we're there to support.
1145
00:48:53,693 --> 00:48:57,032
you know, on the ongoing global trade.
1146
00:48:57,033 --> 00:49:00,393
I mean, I don't know what the future holds
1147
00:49:00,394 --> 00:49:03,952
in terms of, you know, emerging economies.
1148
00:49:03,953 --> 00:49:06,162
I mean, obviously now we have India as the most
1149
00:49:06,163 --> 00:49:08,592
populous country in the world now, I
believe.
1150
00:49:08,593 --> 00:49:11,054
So, you know, I'm sure that that's going to,
1151
00:49:11,055 --> 00:49:13,859
you know, there's going to be a trend
associated
1152
00:49:13,860 --> 00:49:16,321
with as they become more and more developed
1153
00:49:16,322 --> 00:49:20,332
and they produce more and more commodities and...
1154
00:49:20,333 --> 00:49:21,613
goods for the world.
1155
00:49:21,614 --> 00:49:24,481
Maybe there'll be a shift in the balance
1156
00:49:24,482 --> 00:49:27,437
of power maybe from the Far East to there.
1157
00:49:27,438 --> 00:49:28,277
I don't know.
1158
00:49:28,278 --> 00:49:30,459
It's difficult to say.
1159
00:49:30,460 --> 00:49:33,366
But we do, as a marine insurance market,
1160
00:49:33,367 --> 00:49:35,657
of course, we do need to provide
1161
00:49:35,658 --> 00:49:38,565
solutions for the future of shipping.
1162
00:49:38,566 --> 00:49:41,229
And that might be vessels with no one
1163
00:49:41,230 --> 00:49:43,928
on board, electric propulsion.
1164
00:49:43,929 --> 00:49:47,437
all of those kind of problems that
1165
00:49:47,438 --> 00:49:51,412
require solutions for the future.
1166
00:49:51,413 --> 00:49:54,259
But yeah, I'm sure that we'll be here
1167
00:49:54,260 --> 00:49:57,296
for a very long time in order to do that.
1168
00:49:57,297 --> 00:49:58,631
It's easy to forget, isn't it,
1169
00:49:58,632 --> 00:50:00,287
the importance of marine insurance?
1170
00:50:00,288 --> 00:50:02,642
Because marine insurance protects
1171
00:50:02,643 --> 00:50:04,840
global and international trade.
1172
00:50:04,841 --> 00:50:07,379
So it's there to pay the losses and it's
1173
00:50:07,380 --> 00:50:09,919
there to facilitate the trade because
1174
00:50:09,920 --> 00:50:13,439
without insurance these large companies
1175
00:50:13,440 --> 00:50:16,190
would not be able to transact business
1176
00:50:16,191 --> 00:50:19,200
and continue because it's the safety net.
1177
00:50:19,201 --> 00:50:22,016
So in that respect, think marine
1178
00:50:22,017 --> 00:50:25,354
insurance is a constant and a constant
1179
00:50:25,355 --> 00:50:28,693
support for world trade, which makes
1180
00:50:28,694 --> 00:50:32,031
sure that people have their luxuries,
1181
00:50:32,032 --> 00:50:34,848
they have their food and they can
1182
00:50:34,849 --> 00:50:36,799
operate in a normal way.
1183
00:50:36,800 --> 00:50:40,622
We saw disruptions through COVID-19 and the
1184
00:50:40,623 --> 00:50:44,072
list that you actually just, I suppose,
1185
00:50:44,073 --> 00:50:47,681
provided to us of all these geopolitical
1186
00:50:47,682 --> 00:50:51,184
disasters is in contrast to just
how we
1187
00:50:51,185 --> 00:50:54,581
still seem to operate thanks to marine
1188
00:50:54,582 --> 00:50:55,643
insurance.
1189
00:50:55,644 --> 00:50:58,444
But as we close, I just wondered whether I
1190
00:50:58,445 --> 00:51:01,583
can pass perhaps first to Eric and then to Rob,
1191
00:51:01,584 --> 00:51:04,707
just to understand what you think the future
1192
00:51:04,708 --> 00:51:07,179
of marine insurance will look like.
1193
00:51:07,180 --> 00:51:09,527
Are we going to see any big changes
1194
00:51:09,528 --> 00:51:12,380
in the way that perhaps brokers operate?
1195
00:51:12,381 --> 00:51:14,804
carriers operate, reinsurance,
1196
00:51:14,805 --> 00:51:18,353
alternative risk, is the market gonna contract,
1197
00:51:18,354 --> 00:51:20,446
is it gonna get bigger?
1198
00:51:20,447 --> 00:51:23,414
Just be very interested in your closing thoughts,
1199
00:51:23,415 --> 00:51:23,768
Eric.
1200
00:51:24,789 --> 00:51:28,191
I'd be struggling to draw up one conclusion.
1201
00:51:28,192 --> 00:51:30,152
It could be any of that or all
1202
00:51:30,153 --> 00:51:32,114
of that in varying degrees.
1203
00:51:32,115 --> 00:51:35,010
think what is for sure is that the market
1204
00:51:35,011 --> 00:51:38,258
will continue to adapt as we've always done,
1205
00:51:38,259 --> 00:51:40,980
in which ways it's hard to foretell.
1206
00:51:41,796 --> 00:51:44,277
but I'm sure we'll, we'll do what is
1207
00:51:44,278 --> 00:51:46,759
required and do what is necessary.
1208
00:51:48,340 --> 00:51:51,507
so yeah, business as usual, most, I think for
1209
00:51:51,508 --> 00:51:54,503
me, if I, if I look back to when I started
in
1210
00:51:54,504 --> 00:51:57,842
the market, market 30 something years ago, the
1211
00:51:57,843 --> 00:52:01,385
Lloyd's market, for example, the Lloyd Lloyd's
1212
00:52:01,386 --> 00:52:04,770
market was a nine or $10 billion premium
1213
00:52:04,771 --> 00:52:05,489
income.
1214
00:52:05,490 --> 00:52:08,836
Now it's 50, 2023 is 51 billion.
1215
00:52:08,837 --> 00:52:11,292
I mean, that's a huge increase.
1216
00:52:11,293 --> 00:52:15,052
I don't see that abating, I think.
1217
00:52:15,053 --> 00:52:18,601
a lot of that increase was predicated on what
1218
00:52:18,602 --> 00:52:22,822
happened in the global economic crisis
2008-2009.
1219
00:52:22,823 --> 00:52:25,973
It was a real kickstart for Lloyd's Market, which
1220
00:52:25,974 --> 00:52:28,972
was seen as the solid benchmark for
insurers.
1221
00:52:28,973 --> 00:52:31,482
And I think the same is true of marine insurance,
1222
00:52:31,483 --> 00:52:32,612
marine insurance...
1223
00:52:32,613 --> 00:52:35,263
obviously started the market 300 years
1224
00:52:35,264 --> 00:52:37,975
ago is now only nine or 10 or 11 % of it.
1225
00:52:37,976 --> 00:52:39,917
So, you know, it's a smaller part,
1226
00:52:39,918 --> 00:52:42,597
but it's nevertheless a very key part of it.
1227
00:52:42,598 --> 00:52:45,347
And you'll find that a lot of insurance companies
1228
00:52:45,348 --> 00:52:47,761
who want to start a Lloyd's syndicate, for
1229
00:52:47,762 --> 00:52:49,908
example, will be interested in marine
1230
00:52:49,909 --> 00:52:52,591
insurance because it's the traditional class.
1231
00:52:52,592 --> 00:52:55,983
the one that's solid.
1232
00:52:55,984 --> 00:52:58,394
whilst you have a number of liability classes
1233
00:52:58,395 --> 00:53:00,868
where your results might be like that,
marine
1234
00:53:00,869 --> 00:53:03,446
insurance does seem to be more like that.
1235
00:53:03,447 --> 00:53:05,729
So it provides a solidity
1236
00:53:05,730 --> 00:53:08,612
and capital spread of risk.
1237
00:53:08,613 --> 00:53:09,934
So I see a bright future
1238
00:53:09,935 --> 00:53:12,440
for the London insurance market and global
1239
00:53:12,441 --> 00:53:14,839
marine insurance market actually.
1240
00:53:14,840 --> 00:53:18,528
And I think we can continue to adapt and change,
1241
00:53:18,529 --> 00:53:21,177
as we have done for very long time,
1242
00:53:21,178 --> 00:53:24,037
to
these new and emerging risks.
1243
00:53:24,038 --> 00:53:24,517
Terrific.
1244
00:53:24,518 --> 00:53:27,166
Well, thank you very much indeed, both of you
1245
00:53:27,167 --> 00:53:29,732
for your insights and your comprehensive
1246
00:53:29,733 --> 00:53:32,036
answers and for joining me here today.
1247
00:53:32,037 --> 00:53:32,516
Thank you.
1248
00:53:32,517 --> 00:53:32,857
Pleasure.
1249
00:53:32,858 --> 00:53:33,801
Thank you very much.
1250
00:53:35,700 --> 00:53:36,766
Thank you for listening
1251
00:53:36,767 --> 00:53:39,466
to Risk Matters, the DWF insurance podcast.
1252
00:53:39,467 --> 00:53:41,200
We hope you join us again soon
1253
00:53:41,201 --> 00:53:43,766
for future podcasts in our series.
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