Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3: I'm Tracey Alloway and I'm Jill.
Speaker 4: Why isn't thal Joe.
Speaker 2: You know, I'm slightly obsessed with insurance. Maybe obsessed isn't
Speaker 2: the right word, but fascinated. Appreciative of insurers because I
Speaker 2: think there's a tendency to think of them as sort
Speaker 2: of limiting factors in the world. So, you know, if
Speaker 2: you can't get insurance in California, you can't build a house.
Speaker 2: But I also think of them as enablers of certain behaviors, right.
Speaker 4: I think that's a really good way to put it.
Speaker 4: People do a lot of things that they wouldn't otherwise
Speaker 4: do were they not able to get insurance on it. So, yes,
Speaker 4: it does cut in both directions, so we should appreciate
Speaker 4: the existence of the existence of insurance. All right, Well, now,
Speaker 4: surely you know what my daughter actually.
Speaker 3: Your daughter has insurance.
Speaker 4: She well, she asked me to explain insurance the other
Speaker 4: which I was like, you know, and then suddenly I
Speaker 4: was like, I have to explain it.
Speaker 2: Wait.
Speaker 3: First of all, tell the listeners how old your daughter
Speaker 3: is ten.
Speaker 5: I was trying.
Speaker 4: I can't remember the context exactly what it was, maybe
Speaker 4: something about fire insurance, et cetera. But I think I
Speaker 4: was actually pretty proud of myself. I was basically like,
Speaker 4: there are these risks that happen where like, save your
Speaker 4: house burns down, you could like ruin you financially, but
Speaker 4: it doesn't make sense to like save all that money
Speaker 4: in cash and always have that much savings available to
Speaker 4: be able to rebuild your house. And therefore the way
Speaker 4: you solve it by paying a small amount. I wasn't
Speaker 4: pretty like happy. I think she got it.
Speaker 2: I'm glad she's planning for home ownership at your early age. Okay, well,
Speaker 2: now is a really good time to think and appreciate
Speaker 2: insurance because, as you know, we are recording this on
Speaker 2: April eighth. I feel like, do I need to say
Speaker 2: the hour? Maybe I do twelve oh six pm on
Speaker 2: April eighth. It is not entirely clear at the moment
Speaker 2: what is going on in the strait offore moves. We
Speaker 2: don't know if ships are being allowed to pass or not.
Speaker 2: But we do know since the earliest days of this
Speaker 2: entire conflict happening, that one of the issues that's come
Speaker 2: up is war insurance and maritime insurance in general.
Speaker 4: Yeah, and we sort of like touched on it in
Speaker 4: our very first episode that related to the war. But
Speaker 4: of course one major reason why ships haven't been moving
Speaker 4: through is the direct threat being attacked and sinking. But
Speaker 4: then another element is the entire insurance element, and then
Speaker 4: beyond that, like that adds costs to everything and it's
Speaker 4: not you how do you price war insurance? Have no idea,
Speaker 4: So I have many more questions on this topic.
Speaker 2: Yeah, the whole ecosystem of maritime insurance in general. You
Speaker 2: hear these things thrown around, like whole loss protection and
Speaker 2: liability protection, and there's the reinsurers, and then there's the
Speaker 2: normal insurance, and then there are insurance clubs.
Speaker 3: Right there are all these.
Speaker 4: An insurance you belong to the SOHO club. Me I
Speaker 4: blocked to an insurance club, like.
Speaker 2: You kind of have the club jacket thing jacket today
Speaker 2: at the moment, Okay, well, we do, in fact have
Speaker 2: the perfect guests to talk about all of this.
Speaker 3: We're going to be speaking with Dorothea Yanu.
Speaker 2: She is the chief executive officer of the Managers of
Speaker 2: the American P and I Club. So amazing you can
Speaker 2: ask her if you can join as well as well.
Speaker 4: I need like one, I need one member to endorse
Speaker 4: me and another one. That's how it works, all right.
Speaker 2: Well, the second member who could potentially endorse you is
Speaker 2: Steve Oglukian. He is the reinsurance director at the American
Speaker 2: P and I Club. So truly the perfect guest. Thank
Speaker 2: you so much for coming on all thoughts.
Speaker 6: Thank you for having us. Thank you.
Speaker 2: Why don't you go ahead and tell Joe what is
Speaker 2: an insurance club and can he can he be part?
Speaker 6: Okay? Great?
Speaker 7: First of all, I love that you talked about insurance.
Speaker 7: Especially from our perspective. Clubs we're enablers. So what are clubs? Clubs?
Speaker 6: In our context?
Speaker 7: The P and I Club, which means Protection and Indemnity,
Speaker 7: is a collective. It's a not for profit, accessible mutual association.
Speaker 7: It's not a commercial insurer, and it basically, historically is
Speaker 7: a club that brought together ship owners in the industry
Speaker 7: that we're trying to fill a gap. So they came
Speaker 7: from a need for society. And really what clubs do
Speaker 7: is while they ensure the owner, they are protecting society
Speaker 7: because they are ensuring the owner. For what you refer
Speaker 7: to before as liabilities, so that would be like losses
Speaker 7: or damages that they cause to other people, not to themselves.
Speaker 7: So the clubs never pay own damages. We will not
Speaker 7: pay damage that occurs to the vessel in an accident
Speaker 7: or if they have economic loss, their own economic loss.
Speaker 7: So what P and I clubs do is they step
Speaker 7: in and they protect the owner and defend the claims,
Speaker 7: but they ultimately pay whatever is the fair compensation or
Speaker 7: whatever is adjudicated for passengers that perhaps get hurt on
Speaker 7: the ship due to negligence of the ship, claims from
Speaker 7: a crew that might get hurt in an accident. Liability
Speaker 7: is related to collisions, So if the ship hits another
Speaker 7: ship and they cause damage or personal injury to people
Speaker 7: or crew on the other ship, they'll pay that oil pollution,
Speaker 7: environmental damage, so clean up related to that. So basically,
Speaker 7: the way we like to think about P and I
Speaker 7: and you really should think about it like this.
Speaker 6: It's the safety net and it is the only.
Speaker 7: Way that a ship can trade. So for example, let's
Speaker 7: look at what you do with your car. Right, you're
Speaker 7: not allowed on the road if you don't have liability insurance. Right,
Speaker 7: you don't have to have own damages insurance, right, Yeah,
Speaker 7: but you do need to have liability because we need
Speaker 7: to know that all the cars on the road have
Speaker 7: financial security behind them that if something happens and somebody
Speaker 7: else gets hurt, there's a compensation that's going to come
Speaker 7: from somebody that's responsible.
Speaker 6: So that's the concept. Let's say of a P and
Speaker 6: I club.
Speaker 4: And you mentioned that it's structured as a nonprofit. So
Speaker 4: I take it that you're doing this just out of
Speaker 4: the goodness of your heart. No, that's a joke.
Speaker 6: But talk to us about, like, then what's the concept
Speaker 6: behind it?
Speaker 4: Well, so like why is it that? And then who
Speaker 4: is bearing your risk for which they're taking the profit?
Speaker 7: Okay, so let's go a little bit to the history
Speaker 7: of it so you can understand it. So basically, if
Speaker 7: you go back in time, let's say, up until the
Speaker 7: eighteen hundreds, up to a certain point, there was no
Speaker 7: liability for most of your marine liability insurans. As things
Speaker 7: started to change and they started to impose strict liabilities,
Speaker 7: regulatory changes started to happen in various countries, Passenger liabilities
Speaker 7: started to increase, and also the liability started to get
Speaker 7: a lot more volatile. Your regular commercial insurance did not
Speaker 7: want to touch it, they couldn't price it, they didn't
Speaker 7: want to deal with it. And also your classic policy
Speaker 7: would have a limit of the value of the ship,
Speaker 7: and a lot of times liabilities would exceed that. So
Speaker 7: what happened was the shipowners came together to say, well,
Speaker 7: we can't allow like you said before, you know, number one,
Speaker 7: you can't put all of this money aside until the
Speaker 7: time is needed. And you also can't risk becoming financially
Speaker 7: destitute right in the instance that you have a catastrophe.
Speaker 7: So the shipowners came together and said, let's pool our risks.
Speaker 7: So then not for profit element is this. So the
Speaker 7: concept goes to, in principle, we each put a certain
Speaker 7: amount of money into a pool. It's based let's say
Speaker 7: on factors that they agree club members they have to
Speaker 7: be shipowners, by the way, so if you do have
Speaker 7: an ocean going vessel, we could consider making you a
Speaker 7: member to say, so there's a formula or an underwriting
Speaker 7: formula where everybody pays a certain rate per ton, okay,
Speaker 7: And then dating back from the beginning of time when
Speaker 7: they started this, if all of the losses were less
Speaker 7: than the amount that they had put aside into the pool.
Speaker 7: Then they could either have it returned or they could
Speaker 7: save it for the next year and pay less the
Speaker 7: next year, and each year there would be a reconciliation.
Speaker 7: But if the losses were more, they each had to
Speaker 7: put in you know, pro rata based on their tonnage
Speaker 7: and based on the formula. So that's the concept of
Speaker 7: not profit now. Of course, back then regulation wasn't the
Speaker 7: way it is today. So now you're not allowed to
Speaker 7: just keep enough to pay your losses. So now there's
Speaker 7: regulatory requirements. So now the not for profit is kind
Speaker 7: of increased to you need to be healthy not for profit,
Speaker 7: so you have to meet certain solvency ratios under regulation.
Speaker 7: So that's the concept. So I don't know if you
Speaker 7: wanted to add anything.
Speaker 8: Ultimately, it's providing at cost insurance for the members of
Speaker 8: the club. So like you said, you want to join
Speaker 8: the club. If the four of us have vessels and
Speaker 8: we want to form our own P and I club,
Speaker 8: you could theoretically do that, pull our money together, as
Speaker 8: Dorothea said, and say hopefully it's enough.
Speaker 5: To meet the claims for the year.
Speaker 8: If not, we're fine putting in more but it's better
Speaker 8: than going through commercial underwriter who's going to charge double
Speaker 8: that because they need to make a profit and they
Speaker 8: don't want to take a loss.
Speaker 6: So it's kind of like self insurance.
Speaker 7: Right, So it's kind of like self insurance.
Speaker 4: You might think of something that exists at the firm level,
Speaker 4: and this is self insurance kind of at the industry level.
Speaker 6: Right, exactly, right, exactly.
Speaker 2: So one of the things that comes up immediately if
Speaker 2: you type in American P and I Club into Google
Speaker 2: is it says it's the only americanan club. There are
Speaker 2: a bunch apparently in London. And actually I would like
Speaker 2: to talk about how London became like a big insurance
Speaker 2: capital in general, but why is there only one American
Speaker 2: insurance club.
Speaker 7: Okay, well then we'd have to go back and talk
Speaker 7: about how the American club was born, right, So yeah,
Speaker 7: So historically the origins of organized insurance really are into
Speaker 7: the financial center of the London market actually started I
Speaker 7: think with REMIAMEI st with some brokers in a coffee
Speaker 7: shop in London that you know, started to decide well,
Speaker 7: you know, we actually it's the same concept of how
Speaker 7: the clubs developed, but at the more fundamental level of
Speaker 7: the basic well, we don't want to risk losing the
Speaker 7: cargo or the ship en route. So you know, underwriters
Speaker 7: were kind of born through that process, but the American
Speaker 7: club actually was born much later. So the American operators
Speaker 7: historically were insuring with the London clubs. And then nineteen sixteen,
Speaker 7: the Americans were not in World War One yet, right,
Speaker 7: the UK was, So the UK at that time passed
Speaker 7: what was called the UK Trading with the Enem Act,
Speaker 7: which basically says, you know, if you are, you know,
Speaker 7: trading with my enemy, then you're my enemy. And at
Speaker 7: that time the United States was not in certain American
Speaker 7: operators were still involved in certain types of trades, and
Speaker 7: the UK then this act prohibited a lot of American
Speaker 7: operators from continuing to have their insurance with the UK
Speaker 7: clubs at that time.
Speaker 6: So back then, I.
Speaker 7: Think was the largest US broker, Johnson and Higgins, I
Speaker 7: think at that time came together with shipowners, industry, lawyers,
Speaker 7: and lobbyists and legislators and realized that they were going
Speaker 7: to have to create something in the United States. And
Speaker 7: I think that this it's very interesting how it's kind
Speaker 7: of very timely of what's going on in the United
Speaker 7: States right now, because we're seeing that, you know, in
Speaker 7: terms of our peers, in terms of other countries, even
Speaker 7: our allies or even non allies, we've kind of fallen
Speaker 7: behind on the maritime side, right so in the industry,
Speaker 7: like we used to be the number one maritime nation
Speaker 7: in the world, and now we're definitely not. And so
Speaker 7: they came together and they surveyed the American opers to
Speaker 7: see would you be interested and would you join an
Speaker 7: American P and I club that would fundamentally work the
Speaker 7: way the London clubs would already work. And they got
Speaker 7: a lot of favorable response, and then within the year
Speaker 7: they had enabling legislation in New York State which created
Speaker 7: the structure because it didn't exist before that and needed
Speaker 7: to have a regulatory structure. And on February twentieth, February fourteen,
Speaker 7: sorry Valentine's Day, nineteen seventeen, the American Club was born.
Speaker 7: And since then it's not an easy thing to put
Speaker 7: together a club, you know, because you have you start
Speaker 7: from scratch, really, and so since then we have been
Speaker 7: the only club, and we've brought we've taken the United
Speaker 7: States through two World wars since then, but also been
Speaker 7: a part of this whole ebb and flow of the
Speaker 7: American maritime industry.
Speaker 5: Yeah, and I was gonna.
Speaker 8: Say, that doesn't mean that our members are only American now,
Speaker 8: so historically.
Speaker 4: Explain this, Yeah, so explain why that it's just.
Speaker 5: The name now is the American Club.
Speaker 8: Then you have the Swedish Club, you have the London Club,
Speaker 8: you have the japan Club.
Speaker 4: But there were members who are.
Speaker 8: Global, global, all over the world, right, So I would
Speaker 8: say maybe thirty years ago we were probably eighty percent,
Speaker 8: maybe even more.
Speaker 7: Yeah, in the base member the nineties we went more
Speaker 7: of a global station effort.
Speaker 5: In the nineties.
Speaker 3: How do ship owners decide which club to be a
Speaker 3: member of?
Speaker 8: A lot of it's service oriented again, who you know, right?
Speaker 8: Do you have a friend who owns a ship and
Speaker 8: he's I'm with the American Club, I'm with this club,
Speaker 8: have a great experience with them, close with the tam handlers, underwriters.
Speaker 8: If I need something, they pick up the phone, I
Speaker 8: can talk to them. I'll make the introduction. So it
Speaker 8: could be as simple as that, or some people just
Speaker 8: go on Google and say I need to join I
Speaker 8: need P and I insurance. Where could I go and
Speaker 8: maybe if they're American, they see American.
Speaker 2: And is there like a maritime insurance comparison site where
Speaker 2: you get all the different rates or something like that.
Speaker 6: Yeah. No, But there is an international group of B
Speaker 6: and I clubs.
Speaker 7: I don't know, Steve, if you want to talk about that,
Speaker 7: how that works.
Speaker 8: So there's collectively now there's twelve international group clubs known
Speaker 8: as the International Group of P and I Clubs. Collectively
Speaker 8: we ensure ninety percent of ocean going tonnage. So being
Speaker 8: a member of one of those clubs it effectively the
Speaker 8: same way the clubs work together.
Speaker 5: They pool risks. The group works.
Speaker 8: Together in the same way. So being a member of
Speaker 8: the International group it allows you. And there's a few
Speaker 8: core functions of the IG. As the reinsurance director selfishly,
Speaker 8: I'll say the most important is the reinsurance purchasing power
Speaker 8: that the group clubs have. So collectively, the twelve clubs
Speaker 8: come together every year and they purchase policies. I think
Speaker 8: it's the largest reinsurance policy in the world. There's roughly
Speaker 8: eighty five separate reinsurers on this various points of the world,
Speaker 8: and we ensure risks up to what we provide cover
Speaker 8: about for about eight billion dollars per incident, but we
Speaker 8: buy reinsurance collectively with the other clubs up to three billion,
Speaker 8: so it's fairly unique because they are competitors of ours.
Speaker 8: But together we realize the best thing for an individual
Speaker 8: shipowner is to have this group purchasing power and allows
Speaker 8: us to buy high levels of reinsurance. It's pretty pretty
Speaker 8: an expensive cost.
Speaker 4: It's so interesting because I guess, like insurance per se,
Speaker 4: it's all about pooling right.
Speaker 5: Risk.
Speaker 4: So I certainly want to get more soon to like
Speaker 4: the sort of the role of this P and I
Speaker 4: insurance within the context of the war right now and
Speaker 4: so forth. But one quick question. I have you mentioned
Speaker 4: that entities contribute based on their tonnage? And you know
Speaker 4: when I when you use the driving insurance analogy to
Speaker 4: talk about liability, you know there are various factors that
Speaker 4: go into how much, how old are you if you
Speaker 4: take a defensive driving, how many tickets you've gotten, et cetera.
Speaker 4: Why is tonnage, which is not a metric that would
Speaker 4: suggest risk to others in my mind, an important proxy.
Speaker 6: No, it's not that it's not a risk factor.
Speaker 7: It is how we multiply the rate is per ton,
Speaker 7: but the rate per ton comes from all of those
Speaker 7: risk factors.
Speaker 6: I don't know if Steve you get it.
Speaker 7: Yeah, so what might be one dollar a ton, somebody
Speaker 7: else to pay two dollars a ton, so we may
Speaker 7: five dollars a ton.
Speaker 4: Oh so it's not that there's like a fixed prote
Speaker 4: no talk about I mean of got it?
Speaker 5: Not all tonnage is yes, exactly right.
Speaker 8: So if you have a small barge, since that doesn't
Speaker 8: have any crew, it's just carrying coal up and down
Speaker 8: a river, versus a large cruise ship. We have multiple
Speaker 8: crew members and passengers on there. You know that one ton,
Speaker 8: if you will, on each vessel is not the same.
Speaker 4: So they're gonna get you it priced differently different. Okay,
Speaker 4: it's just really about it's not.
Speaker 7: About it's just a measuring tool. Yeah, it's just a
Speaker 7: measuring tool. But like let's say you have the same sect,
Speaker 7: you have the same type of ship, a lot of
Speaker 7: the same factors. The smaller ship's going to pay less
Speaker 7: than the larger ship simply because of the tonnage. Let's say,
Speaker 7: so they might both be charged at five dollars a ton,
Speaker 7: for example, but because also that is also a factor
Speaker 7: in assessing limitation of liability.
Speaker 4: Do the clubs play a role in like ensuring training
Speaker 4: of the crew and things like that that would be
Speaker 4: proxies for safety.
Speaker 2: Well, this is going to be my question because one
Speaker 2: of the other reasons we appreciate insurance here is because
Speaker 2: like they're arbiters of behavior, right, and especially at a
Speaker 2: time when a lot of governments seem to be, you know,
Speaker 2: stepping back from certain markets. It's often like the private
Speaker 2: insurers who are saying, like, this is what you need
Speaker 2: to do in order to get insurance. What are the
Speaker 2: requirements for ship owners in order to be eligible for
Speaker 2: club membership?
Speaker 6: Great? Great, that's a great question.
Speaker 7: So one, there are a lot of requirements, and yes,
Speaker 7: loss prevention is a big thing, and that also differentiates
Speaker 7: us from commercial andre As you go to the website,
Speaker 7: you'll see whole section and loss prevention.
Speaker 6: So we do look at the quality of the operation.
Speaker 7: We do look at the experience of the people that
Speaker 7: are running the management. There are warranties as well, so
Speaker 7: number one, you have to be of a technical level
Speaker 7: in terms of quality. So that we're going to get
Speaker 7: a little bit complicated here, but okay, so ships are
Speaker 7: also subjects to other requirements independent of the club, and
Speaker 7: that's subject to the requirements of their classification society. So
Speaker 7: the classification society are like the surveyors, the technical arbiters.
Speaker 7: Let's say that comments and make sure that the ship
Speaker 7: is of certain quality technically, so you have to be
Speaker 7: in we call it in class is what we call it.
Speaker 7: That's definitely a requirement. And then of course we also
Speaker 7: require that you are conducting only legal trade, so that
Speaker 7: is another aspect of that. I will hand it over
Speaker 7: to Steve to add other aspects.
Speaker 6: On the underwriting side, the main I.
Speaker 8: Mean, we do management audits as well, obviously, so we
Speaker 8: bring because sometimes it's a startup, right, which is tough
Speaker 8: because there's no history there to see where they've been. Ideally,
Speaker 8: as an underwriter, you're looking at a client who's been
Speaker 8: with another club and is looking to switch. So they
Speaker 8: come over, you see a loss record, you have a pattern,
Speaker 8: you know where they're operating, what they're doing. When it's
Speaker 8: a startup, it's a bit more difficult than that. Where
Speaker 8: will go out And again sometimes it could just be proactively,
Speaker 8: we haven't met this member, Let's see them in person,
Speaker 8: what they're up to.
Speaker 5: Get on their ships with other condition surveys.
Speaker 7: Yeah, from that perspective, quite often we would do a
Speaker 7: conditioned survey.
Speaker 8: So we would do in that case like a pre
Speaker 8: entry condition survey where if the vessel is older than
Speaker 8: ten years of age, we'll say we need to see
Speaker 8: it even though it's in class.
Speaker 5: We just want to make sure that from a P and.
Speaker 6: I perspective requirements that there's certain.
Speaker 5: Things that check all the boxes to come into the club.
Speaker 2: Wait, what actually constitutes risky behavior on the part of
Speaker 2: a ship, because again, if we go to the driving analogy,
Speaker 2: like okay, speeding is bad, that would be risky. Driving
Speaker 2: drunk would be very bad.
Speaker 3: What's equivalent.
Speaker 7: Well, no, other thing that we look at is the
Speaker 7: history and the claims record, right, so we would see
Speaker 7: the incidents and the types of incidents. So if we
Speaker 7: see patterns or trends, a lot of times it has
Speaker 7: to do with their trading. So certain trades might be
Speaker 7: a little bit riskier than others, and that just comes
Speaker 7: from our actuarial analysis. So each club also takes their
Speaker 7: portfolios and analyzes the trends on the claims and you'll
Speaker 7: determine the levels of risk and your risk appetite with that.
Speaker 7: So like, for example, our experience has shown us that
Speaker 7: container ships have certain types of risk that might not
Speaker 7: be the same as others.
Speaker 6: So while some people might.
Speaker 7: Look at a containership and say, okay, well they do
Speaker 7: liner business, so they're quite organized, right, They're quite sophistical,
Speaker 7: so going from one port to another often right, So
Speaker 7: that means that they're very familiar with the two ports.
Speaker 7: The people are very familiar. The approach of management is
Speaker 7: quite sophisticated. And then you might look at it from
Speaker 7: a risk perspective and say, okay, how much are each
Speaker 7: of the containers worth in case there's an accident they fall,
Speaker 7: But you have to think bigger than that. So, for example,
Speaker 7: if there's a casualty on a container ship and it's
Speaker 7: a total loss in any seaway in any ocean in
Speaker 7: the world, the catastrophe risk is much different than let's
Speaker 7: say a bulker that might sink or a tanker, because
Speaker 7: those individual containers, for example, will start to pop up
Speaker 7: and float to all different places on all different coasts
Speaker 7: wherever whatever is adjacent to the sea that it has sunk,
Speaker 7: that it's sank in, in which case, though part of
Speaker 7: the liability includes cleaning those all up, and those types
Speaker 7: of containers are considered hazardous waste, so there's a special
Speaker 7: disposal process that has to go can be quite expensive.
Speaker 7: It can also cause danger to navigation in seaways.
Speaker 6: So you see what I mean.
Speaker 7: Really, you look at the type of ship that you're
Speaker 7: looking at, and you look at the type of claims
Speaker 7: that it might that can possibly arise. But we look mainly,
Speaker 7: Steve I would say at we look at industry, but
Speaker 7: we look mainly.
Speaker 6: Each club will look.
Speaker 7: At their own experience and decide that, you know, what
Speaker 7: they classify as behavior. We look, we analyze claims, and
Speaker 7: we learn from the claims to decide what we're willing
Speaker 7: to tolerate and what we're not willing to tolerate, or
Speaker 7: what we're willing to tolerate. But we're going to charge
Speaker 7: a lot more, for example, because the risk is higher.
Speaker 6: I don't know if you wanted to add I.
Speaker 5: Was going to say a lot of it too, is
Speaker 5: human error.
Speaker 8: So you could do all these actual, a real studies
Speaker 8: and say that this vessel operating in this region is
Speaker 8: likely to have x amount of claims per year, But
Speaker 8: you can't account for a crew member not sleeping or
Speaker 8: being or falling asleep at the wheel basically and causing
Speaker 8: an accident which has happened. So a lot of its
Speaker 8: human error, not being trained properly. Small things. I mean,
Speaker 8: as P and I ensures, people look at us and
Speaker 8: think large oil spills, reck removals, the big headline claims.
Speaker 8: But our average claim is about twenty or thirty thousand
Speaker 8: dollars per claim, so it could be a small crew claim,
Speaker 8: cargo claim. So these are the things that add up
Speaker 8: and determine how a P and I club is operating,
Speaker 8: not so much to one off big incident.
Speaker 4: Yeah.
Speaker 7: Sorry, I just wanted to add one more thing going
Speaker 7: back to the original question that you post in terms
Speaker 7: of what is our role in terms of training, let's say,
Speaker 7: or loss prevention. So while we are not the primary
Speaker 7: people or group that's responsible for training crews, because there's
Speaker 7: crew managers, the operators themselves.
Speaker 6: Have to do that.
Speaker 7: The training that they get in the schools that they
Speaker 7: go to and stuff are really what we do though,
Speaker 7: is based on our analysis of our claims. Though we
Speaker 7: identify gaps, we identify issues, we identify trends, and then
Speaker 7: we do actually have programs that enhance training. So from
Speaker 7: whatever they're doing, we will add things. So you'll look
Speaker 7: on our website and you'll see that we have regulatory
Speaker 7: training that the owner can use to actually track the
Speaker 7: training of their crews that make sure that they know
Speaker 7: certain minimum standards of the regulatory knowledge. Let's say, are
Speaker 7: they familiar with how to handle like the collision regulations
Speaker 7: for example, and other types of modern regulation for navigating.
Speaker 6: Navigating at see.
Speaker 7: We've also done vlogs, We've done interviews, we do seminars,
Speaker 7: and then we also do like a good Catch series,
Speaker 7: so you'll see that we take our cases and we
Speaker 7: analyzed near missus and then we identify what our owners
Speaker 7: and their crews and their people are sure can do
Speaker 7: better in order to prevent that in the future.
Speaker 2: So I have a personal question, which is this is
Speaker 2: kind of Oddlot's lore, but I'll repeat it for people
Speaker 2: that don't know the story.
Speaker 3: But many years ago, I guess four years ago or
Speaker 3: so it feels longer.
Speaker 2: Okay, four years ago, my furniture got stuck on a
Speaker 2: container ship called the ever Forward that ran aground in
Speaker 2: the Chesapeake Bay. And I think an investigation found that
Speaker 2: the pilot had been using his phone or something which
Speaker 2: is kind of crazy to think about. I didn't see
Speaker 2: any insurance pay out from that. I know my property
Speaker 2: wasn't like actually damaged, but it was kind of annoying
Speaker 2: not having a couch for a couple months or however
Speaker 2: long it was. If something like that happens, what is
Speaker 2: the actual distribution of the insurance payout? So who does
Speaker 2: it actually flow to ultimately, Like does it eventually reach
Speaker 2: the customer who's shipping stuff on these ships?
Speaker 7: And there's not like a straightforward answer. There's a lot
Speaker 7: of dependencies that go along with that, and it has
Speaker 7: to do with the contract that you have right and
Speaker 7: the various insurances that are placed. Now to a certain extent,
Speaker 7: there has to be a certain limit on what could
Speaker 7: be considered too remote, for example, and under certain regimes
Speaker 7: you would probably have to have physical damage in order
Speaker 7: to be able to claim the economic loss related to that.
Speaker 7: That is probably the reason why a lot of times
Speaker 7: when you ship things, they asked you want insurance so
Speaker 7: you can so you can insure yourself, because there's no
Speaker 7: guarantee that ultimately that will get up to the P
Speaker 7: and I club, for example, because it just flows into
Speaker 7: contractual liabilities.
Speaker 6: I sink under that.
Speaker 8: The a shipper would have cargo insurance as a whole
Speaker 8: to get from point A to point B. And obviously
Speaker 8: part of that is it's going to be on a
Speaker 8: vessel most likely. So if the ship owner is negligent
Speaker 8: and they're found liable for that loss, so like you said,
Speaker 8: he was on the phone, vessel grounded, then the cargo
Speaker 8: underwriter would go after the owner, which ultimately gets covered
Speaker 8: by the P and I clubs.
Speaker 4: I see, by the way, I'm on your website, and
Speaker 4: you guys have some great posters, these safety posters that
Speaker 4: people should go check out.
Speaker 3: They say, don't be on your phone.
Speaker 4: Yeah there's one. Yeah, there's one. Yeah, there's one that's
Speaker 4: I kind of want to get one of these framed,
Speaker 4: like from my house. They're really cooler thing. I'll blow
Speaker 4: it up. But like there's a feed your focus on
Speaker 4: shut off personal cell phones. I see you guys. You
Speaker 4: know it's like safety stuff.
Speaker 5: Check will go out to all our members.
Speaker 4: Yeah there's I'm saying. But also listeners should just go
Speaker 4: out and download these because they're pretty cool looking.
Speaker 7: You know. We also sorry, just so you said that
Speaker 7: something that could also apply to people not in the
Speaker 7: maritime industry. We have a whole series related also to
Speaker 7: like sexual harassment that creates awareness for you to understand
Speaker 7: what that means. That simple things that even based on
Speaker 7: certain cultural or even habitual type of behaviors that can
Speaker 7: be considered sexual harassment creates awareness for it. It's a
Speaker 7: really fantastic.
Speaker 4: Yeah, there's a lot of good Uh, there's a lot
Speaker 4: of good resources here. All right, let's talk about like
Speaker 4: the context conversation within the war in Iran and the
Speaker 4: reason I mean, yeah, the issue to my mind is like, Okay,
Speaker 4: so are you affected by it? Because when I think
Speaker 4: about the situation, I'm by and large not thinking about
Speaker 4: risks that ships are going to pose to others in
Speaker 4: the context of war as opposed to risks to the ship.
Speaker 4: So like, talk to us about like the degree to.
Speaker 6: Which, for your guess and I okay, is a.
Speaker 4: Factor or the around war is a factor in the
Speaker 4: world of piano insurance.
Speaker 6: Well, I'm going to give you the big picture and
Speaker 6: then step will analyze it. It will break it down.
Speaker 7: So traditionally, war has its own special sector.
Speaker 6: Of war underwriters war insurance.
Speaker 7: The p and I standard policy excludes liabilities that arise
Speaker 7: out of war acts. However, there is an excess level
Speaker 7: of cover that is offered by the P and I club,
Speaker 7: simply because the standard policies are limited by the value
Speaker 7: of the vessel.
Speaker 6: I'm going to hand it over.
Speaker 8: We've been talking about P and I and libility. Yeah,
Speaker 8: but if you're a ship owner, so you come to
Speaker 8: us for your P and I insurance, you go to
Speaker 8: a hull and machine underwriter for hull and machinery for
Speaker 8: the vessel's value that's on the ship, right, So you
Speaker 8: have two separate towers of insurance. So we cover the liability,
Speaker 8: they cover the hull. But because we exclude war risks,
Speaker 8: it's traditionally offered. There's a few places they could go. Traditionally,
Speaker 8: the hull underwriter, we'll give you war risk cover for
Speaker 8: P and I and hull up to the value of
Speaker 8: the ship. So if you have a ten million dollar ship,
Speaker 8: you're insured. So that ship sinks, it's a total loss
Speaker 8: for ten million underwriter, you know, yeah, rights, you would
Speaker 8: check there's a pollution element. They'll cover ten million of
Speaker 8: that loss as well. Okay, so that should traditionally P
Speaker 8: and I. But because we excluded the whole war.
Speaker 4: Underwriters, if a ship is sunk in the war, then
Speaker 4: there could also be a liability on the part of
Speaker 4: the owner for the pollution caused by their own ship potent.
Speaker 5: It depends.
Speaker 6: There's a lot of nuances to that too.
Speaker 7: It has to do with also convention that there's certain
Speaker 7: international conventions that exclude if it's subject to war, but
Speaker 7: then there are certain national legislations that carve that out.
Speaker 7: So it depends on where you might where it might happen.
Speaker 4: So just to be clear though, like when you talk
Speaker 4: about like you said, there's a war exception or you
Speaker 4: don't cover war.
Speaker 5: We don't cover it. The standard primary would exclude it.
Speaker 4: But why would P and I ever include war risks?
Speaker 4: Because the question is like war, to my mind, is
Speaker 4: not what.
Speaker 6: If a crewper what if a crew member dies?
Speaker 4: So that is okay, I see, I see okay, So
Speaker 4: this is really important. So the a crew member's death
Speaker 4: in a war would be or a crew member's death
Speaker 4: would be P and I right, But you don't in
Speaker 4: a war that you do.
Speaker 5: Not correct unless got it.
Speaker 8: And on top of it, so we mentioned pollution, we
Speaker 8: mentioned crew wreck removal would be one. So you know,
Speaker 8: vessels going through the Strait there's minds if it were
Speaker 8: to sink, and it's a wreck, and it's in a
Speaker 8: shipping channel essentially, and let's say the conflict ends, Well,
Speaker 8: now you have a wreck there that needs to be moved.
Speaker 8: So P and I clubs would have to step in
Speaker 8: and remove that wreck, which will cost a lot more
Speaker 8: than the value of the vessel. So what the P
Speaker 8: and I clubs do you offer is what Darthey mentioned,
Speaker 8: excess insurance, so excess of the hull's value. Knowing that
Speaker 8: a record pollution event likely not crewe, but you know
Speaker 8: a larger loss could breach ten million or whatever the
Speaker 8: value is. But in this example ten million, you've breached
Speaker 8: that threshold. The P and I Clubs, as part of
Speaker 8: our collective reinsurance buying, we buy reinsurance for war P
Speaker 8: and I and every ship owner who's entered in any
Speaker 8: IG club every year pays a small amount. It's not allowed,
Speaker 8: but they pay a small amount for that coverage, so
Speaker 8: we fill that gap.
Speaker 4: So, just to be clear, just to spell this out,
Speaker 4: in a war, you do not provide war insurance. The
Speaker 4: vessel would go to some other commercial carrier and they
Speaker 4: would have that in place, and they would have that,
Speaker 4: but the P and I club does offer this excess
Speaker 4: based on the reinsurance purchasing power beyond what the commercial
Speaker 4: carrier may offer.
Speaker 5: And effectively we're buying it on their behalf. Yeah.
Speaker 2: Guy, So I have what might be a dumb question,
Speaker 2: but like why are all these different risks so bifurcated
Speaker 2: between different players?
Speaker 3: Like why is there a separate whole protection.
Speaker 2: Provider a war WHISP If I'm buying home insurance for
Speaker 2: the most part, like I just go to an insurer
Speaker 2: and it's like, Okay, we're going to cover your roof
Speaker 2: damage as well as like whatever else might happen. I
Speaker 2: don't have to go to three different insurers for the
Speaker 2: most part.
Speaker 5: Yeah, I think it comes out of exclusions.
Speaker 8: So originally the hull under writers didn't want to offer
Speaker 8: coverage for liabilities because, like Dorothea said, they didn't know
Speaker 8: how to price it. It wasn't their forte so there
Speaker 8: was cover, right, Yeah, I see. So P and I
Speaker 8: clubs were born out of that. So now you have
Speaker 8: a club and what do you want? You want some
Speaker 8: kind You want to be able to project what your
Speaker 8: claims will be in a given year. So the club
Speaker 8: members are ensuring their themselves or each other for what
Speaker 8: i'll call predictable risks. Right, going from port A to
Speaker 8: port by with a certain cargo, accidents happened. But if
Speaker 8: something is a little more specialized, So if you have
Speaker 8: a vessel operator who's involved in drilling and production operations,
Speaker 8: that would be excluded as well, because that's not a
Speaker 8: mutual pullable risk because that might be a one off
Speaker 8: where you may be doing that with your vessel, but
Speaker 8: the three of us may be saying, who wha, whoa,
Speaker 8: we don't want to cover that. Yep, that's a complete
Speaker 8: different risk. So war falls into that makes hard to predict.
Speaker 8: So the P and I underwriters excluded war traditionally, and
Speaker 8: now created there's war clubs or all would step in
Speaker 8: and offer limited war cover.
Speaker 7: I mean it's important to keep in mind too that
Speaker 7: like war risk is not actually stable, right, It's not
Speaker 7: like the rest of the risks. It's really just subject
Speaker 7: to you know, geopolitics and you know national relations, you
Speaker 7: know between countries, and it's just.
Speaker 6: Based on that.
Speaker 7: Whereas most other types of insurance is actually stable, not
Speaker 7: always predictable, but actually you can analyze it.
Speaker 6: They can't really do that for war.
Speaker 7: And then one thing I think is important to note,
Speaker 7: and this has been a topic of discussion I think
Speaker 7: on the war side, is that during the year in peacetime,
Speaker 7: it's very cheap. Okay, it's very cheap. And so I
Speaker 7: know that there was a lot of talk about the
Speaker 7: cancelations and stuff like that.
Speaker 6: It's really they have to do that.
Speaker 7: Because they're not underwriting based on the ship's transiting war areas.
Speaker 7: They're underwriting based on trading in peaceful areas. So once
Speaker 7: an area then becomes subject to a war Act, they
Speaker 7: do have to be able to re rate that. And
Speaker 7: so even though they gave a notice of cancelation that.
Speaker 2: These are the headlines we see the public saying that
Speaker 2: like war risk insurance has been pulled right at the
Speaker 2: start of a war, which was very confusing.
Speaker 6: Yeah, yeah, yeah.
Speaker 8: Yeah, I was getting Instagram reels, said to me, people
Speaker 8: trying to explain it and complete misconception. And when you're
Speaker 8: getting reels on P and I insurance, you know something
Speaker 8: big is going on.
Speaker 6: Yeah.
Speaker 7: I don't know if you want to explain why the
Speaker 7: P and I clubs had to give that notice that
Speaker 7: we get because everybody said, oh, the P and I
Speaker 7: clubs are canceling war. We cover war, but in certain
Speaker 7: instances we do. Why don't you explain where we cover it, right.
Speaker 8: Just to kind of back up a bit, and what
Speaker 8: the cancelation means. It's really a cancelation of the rate,
Speaker 8: not of the cover. So everyone was saying, oh, these
Speaker 8: vessels are trapped because they don't have insurance, and you
Speaker 8: know Lloyd's in London is almost doing this to get
Speaker 8: back to the US. First of all, all those not all,
Speaker 8: but many of the underwriters at Lloyd's are American companies.
Speaker 8: So it wasn't the UK saying, you know, we're going
Speaker 8: to get the US back for this. We don't support
Speaker 8: the war pull insurance coverage. The vessels are trapped. That's
Speaker 8: not the case. Every war policy, even though we're not
Speaker 8: war experts or war underwriters, the way it works, every
Speaker 8: war policy hasn't notice a cancelation clause saying if basically,
Speaker 8: if a war were to break out like you have
Speaker 8: here and vessels are now in the Gulf, well we
Speaker 8: didn't price for that. We gave you a cheap rate
Speaker 8: because you're sailing around the world. Now you're in a
Speaker 8: war zone, the risk changes, so we cancel your policy
Speaker 8: and meaning we cancel the rate you paid, give you
Speaker 8: three day notice cover if something happened. So if you're struggling,
Speaker 8: you're still covered, right, but now after that three days lapses,
Speaker 8: you have to buy your cover back at a higher
Speaker 8: rate based on if you're training.
Speaker 6: There, you're not you at all. Yeah, so if you're
Speaker 6: trading there.
Speaker 8: So that's what those are the headlines to notice the cancelations.
Speaker 4: So it looks like this is so helpful.
Speaker 6: Yeah, but why the P and I clubs give a notice?
Speaker 5: Right?
Speaker 8: So and I confused, our mutual risks were not. So
Speaker 8: anything that's pulled and has this excess war was not impacted.
Speaker 8: We also offered cover to charters, so not just ship owners.
Speaker 8: If you're chartering a vessel.
Speaker 6: And do we know what a charter is for?
Speaker 7: Okay, charter it's kind of like when you lease a car,
Speaker 7: you're kind of it's like you're chartering it.
Speaker 8: You're paying something to use it, okay, and the owner
Speaker 8: is liable most of the time for big oil spills,
Speaker 8: reck removal, whatever it maybe, but a charter could be
Speaker 8: found liable for some of this. So a charter is
Speaker 8: risk because it's not pulled within the IG and there's
Speaker 8: separate reinsurances for that that includes war so that's always
Speaker 8: been a pass through. So well we will include Charters
Speaker 8: P and I war cover. And because we received a
Speaker 8: notice of cancelation from our reinsurers, we tell them we
Speaker 8: have to cancel your war cover in the Persian Gulf,
Speaker 8: but give us two days and then we're going to
Speaker 8: come up with a solution, which is what came up.
Speaker 5: We had a solution that could buy it back at
Speaker 5: a higher rate.
Speaker 3: How much did the premium actually.
Speaker 8: Change, It depends on where they were calling, but it
Speaker 8: was to give an example, there was like one vessel
Speaker 8: we saw their war slip, their traditional war. Before the
Speaker 8: war broke out, they were paying about fifteen thousand dollars
Speaker 8: a year for that. And then when the rates first
Speaker 8: came out from the underwriters to get the vessel out
Speaker 8: of the golf, it was going to cost about sixty
Speaker 8: thousand dollars just for a seven day period.
Speaker 6: To get out.
Speaker 8: And then once the straight closed and there were minds
Speaker 8: in a strait, there was a separate notice given if
Speaker 8: you're transiting the straight, so now you have a war
Speaker 8: we called a buyback.
Speaker 5: It's a reinstatement of the cover.
Speaker 8: You have your war buyback for the Persian Gulf, you're
Speaker 8: covered in there. But if you're transitting the straight there's
Speaker 8: a new exclusion that may apply with new rating.
Speaker 2: Sorry you said minds in the Strait r A. Are
Speaker 2: there definitely minds because I think there's been some discussion
Speaker 2: of that. And then b this kind of gets to
Speaker 2: the question that Joe mentioned at the intro. I know
Speaker 2: I talked about insurers as enablers of behavior, but when
Speaker 2: you're in a war situation, I assume people also don't
Speaker 2: want to be killed exactly, even if they can get insurance.
Speaker 5: That was exactly that's what we wanted to get to.
Speaker 8: Yeah, the vessel, they weren't trapped because there was no
Speaker 8: insurance or because the rates went up.
Speaker 5: It's they just don't want to put. You want to
Speaker 5: go through, you want to put your.
Speaker 7: Career and it should People should know though too, that
Speaker 7: ultimately the decision to do that type of course, is
Speaker 7: for the master of the vest to decide. It's not
Speaker 7: you know, you can't direct him to do something that
Speaker 7: he believes will put the crew and the ship at risk.
Speaker 7: That is rule number one. I did want to comment, Yeah, yeah, yes, exactly.
Speaker 7: The other thing I wanted to mention is that actually
Speaker 7: I was speaking to one of our colleagues that manages
Speaker 7: our European subsidiary, and he has extensive experience in hull
Speaker 7: and on war, and I was given to understand that
Speaker 7: the ships that were trapped on the inside were given
Speaker 7: different rates than ships that were looking to go in
Speaker 7: and out. So the ships that were trapped, it was
Speaker 7: taken into account that there this is not a voluntary
Speaker 7: it's not an initiative to trade in a high risk area,
Speaker 7: that they are trapped and if they want, the rates
Speaker 7: were significantly lower to come out if you were trapped
Speaker 7: than it was for those ships looking to actually transit
Speaker 7: to do regular trade through the high risk And in
Speaker 7: those cases when they were looking to trade, the rates
Speaker 7: were ranging from anywhere from three to ten percent of
Speaker 7: the hull value the ones that were initiating this type
Speaker 7: of trade, whereas compared to the ones on the inside,
Speaker 7: the average rate I was told was about point five
Speaker 7: It's it's a big difference, So that is very important
Speaker 7: to understand. And insurance was always available, it's just whether
Speaker 7: you wanted to do it really ultimately, and the operators
Speaker 7: and our members that we spoke to all made it
Speaker 7: very clear that the safety of their crew was much
Speaker 7: more important and then everything else.
Speaker 4: It makes a lot of sense to me that like
Speaker 4: certain types of insurance that are like that end up
Speaker 4: in this sort of reinsurance or sorry, self insurance model,
Speaker 4: are the types that are like highly stable and predictable. Tracy,
Speaker 4: do you remember twenty fourteen AOL it was still a
Speaker 4: public company. Wow, And I don't know if anyone remembers that.
Speaker 4: It's a little bit of insurance history. The CEO said
Speaker 4: on its earnings call that the company's profits had taken
Speaker 4: a hit because one of their employees had a very
Speaker 4: high complicated pregnancy and it was so big that they
Speaker 4: actually noted and then everyone sort of figured it out
Speaker 4: I think who it was, and it was like a
Speaker 4: pretty egregious like privacy violation. But they were self insured
Speaker 4: because it's a large company and over time, you're like,
Speaker 4: you know, your health insurance costs are going to be
Speaker 4: stable from one year to another. But it was just,
Speaker 4: I guess, such an expensive pregnancy that he mentioned it
Speaker 4: on the call as having affected earnings that quarter. But
Speaker 4: it does seem Yeah, but this really put clicked that
Speaker 4: when you have a type of insurance in which distribution
Speaker 4: payout distributions are roughly stable on a year to year basis,
Speaker 4: that is the natural time for the sort of nonprofit
Speaker 4: self in assurance model of some sort.
Speaker 6: Well, actually, though there is a nuance of that.
Speaker 7: Yeah, so because it's not it's not really away stable, Okay,
Speaker 7: it's just spread out enough.
Speaker 6: It's spread out that there's a resiliency to it.
Speaker 7: Okay, they're able to withstand the volatility. The model is
Speaker 7: able to withstand the volatility since there are.
Speaker 4: Multiple clubs that carriers can choose. Do clubs risk like
Speaker 4: sort of snowball effects? Carriers defect and then suddenly have
Speaker 4: fewer members, and then the risk is like magnified, Like
Speaker 4: is that attention from one club to another? Like, I
Speaker 4: wouldn't want to be part of a small club.
Speaker 6: We're a small club.
Speaker 4: I wouldn't want to be a member of all I
Speaker 4: mean like, I mean like a really like timey club
Speaker 4: where it's like the two of us were going to
Speaker 4: ensure each other that what I'm saying, no club is
Speaker 4: that this is what I'm saying. Yeah, it feels like
Speaker 4: you need some critical mass.
Speaker 8: Right, Well, Like I said, the clubs collectively ensure ninety
Speaker 8: percent of ocean going to so being a small club
Speaker 8: is still a big club.
Speaker 7: Level in which, yeah, mutual insurances are there are rules
Speaker 7: in place to deal with certain things like that. Like
Speaker 7: you actually it's true, you actually don't want because P
Speaker 7: and I has a long tail, right, so like some
Speaker 7: things to take some claims are still open ten years
Speaker 7: after and sometimes even longer. So that's why, actually the
Speaker 7: mutual system allows for a multi year openness. But yes,
Speaker 7: there are there are we you know, we do have
Speaker 7: agreements in place that protect us from things like that.
Speaker 8: Yeah, And the way the pooling and reinsurance mechanism works,
Speaker 8: it's all relative to your size.
Speaker 5: Okay, So the club's collectively pool.
Speaker 8: Claims individual claims between ten million and one hundred million
Speaker 8: dollars and then beyond that they're buying this reinsurance up
Speaker 8: to three three and a half billion. But what you
Speaker 8: pay is there's a there's a formula which we're not
Speaker 8: going to go through now it gets complicated, but it's
Speaker 8: based on your relative size. So if you're a smaller club,
Speaker 8: act right, you're paying less for these large marathon casults.
Speaker 5: Larger club is going to take a big hit, even
Speaker 5: if it's not their claims. So it's all scale.
Speaker 7: It's all scale, then it's quite fair. And the concept
Speaker 7: actually is that everybody pays their share over time. What
Speaker 7: you what you take out, you need to put back in,
Speaker 7: and that's at the at the club level and at
Speaker 7: the at the the group level.
Speaker 6: The group level, let's say.
Speaker 2: Yeah, just going back to the straight up oar moves
Speaker 2: for a second, there are some ships from certain companies
Speaker 2: that have been like running through despite everything going on,
Speaker 2: And the one that springs to mind is Dinacom and
Speaker 2: I actually I sent an email to them asking if
Speaker 2: if I could get their owner on odd lots and
Speaker 2: I haven't received a response, perhaps unsurprisingly, but like, what
Speaker 2: is enabling them to get through versus other ships?
Speaker 7: Yeah, I don't think that that's something that we'd be
Speaker 7: able to. Really, they're not our members, we're not familiar.
Speaker 7: We do have another member though that was hit. But
Speaker 7: the other thing I wanted to mention is that despite
Speaker 7: the fact that the P and I clubs are not
Speaker 7: the primary ensure on a case of war, we actually
Speaker 7: do take an active part, so we are involved. We
Speaker 7: are close to the member because We have a very
Speaker 7: close relationship with all of our members to begin with, right,
Speaker 7: we are most of the time copied on all the correspondence.
Speaker 7: So we also provide some guidance because besides the P
Speaker 7: and I side, we also have what's called an FD
Speaker 7: and D cover, and that's freight to margin defense, and
Speaker 7: so that helps the owners with disputes that may arise
Speaker 7: contractual disputes. We don't ensure the claims themselves, but we
Speaker 7: provide the guidance, the legal guidance.
Speaker 6: We have a lot of lawyers within the club, but
Speaker 6: we also.
Speaker 7: Support them if we have to hire lawyers outside to
Speaker 7: defend or to pursue any claims that they may have,
Speaker 7: and that's a.
Speaker 6: Legal costs cover.
Speaker 7: So a lot of the times, even on cases that
Speaker 7: we are not directly responsible for or not directly not
Speaker 7: responsible for but covering, we're usually quite involved because like
Speaker 7: I said, we're protection and indemnity. The protection part of
Speaker 7: it involves standing next to the member and guiding them,
Speaker 7: but the intricacies of any particular owner being able to
Speaker 7: cross the strait is not something that we're actually privy to.
Speaker 7: So but yeah, I mean, the only thing I can
Speaker 7: say is that I know that there are certain factors
Speaker 7: that are looked at by the Iranians when they are attacking.
Speaker 4: You know, this is such an interesting conversation, can go
Speaker 4: a lot. I'm looking at a this article about Doynacom,
Speaker 4: the owner of the billionaire's shipping magnate, Greek buccaneer George Procopiu.
Speaker 4: Is that's the name of the firm. I noticed, so
Speaker 4: the American Club, you have office locations in New York, London,
Speaker 4: also in Piraus in Greece, and then also Shanghai in
Speaker 4: Hong Kong. And I'm just curious, like I guess I
Speaker 4: had of this current moment a sad We alo sort
Speaker 4: of know that Greece specifically is one of the centers
Speaker 4: of shipping number for a long time, but has it
Speaker 4: moved east over time? Okay? We know that a lot
Speaker 4: of the ship building has happening in Asia, and we
Speaker 4: also know that so many of the routes are Asia dominated,
Speaker 4: et cetera. Have the financial flows of insurance moved east
Speaker 4: in the same way the physical flows. Have the financial
Speaker 4: flows of insurance moved towards Asia? I should say specifically
Speaker 4: read the insurance side has insurance.
Speaker 6: Not from an international towards.
Speaker 4: Asia in the same way that the trade flows.
Speaker 7: Not from an international perspective, China does have its own
Speaker 7: p and I club. It's not a member of the
Speaker 7: international Group of P and I Clubs. They do have
Speaker 7: reinsurance relationships with some of the clubs that are members
Speaker 7: of the group. It's very large p and I club,
Speaker 7: but it generally ensures Chinese managed and.
Speaker 4: Building and trade is so Asia dominated. The financial element
Speaker 4: of the insurance has not.
Speaker 7: And the insurance no, it hasn't really, not from the
Speaker 7: international side of things, not yet. Not from the international
Speaker 7: side of things. I think even all the major traders
Speaker 7: are still ensuring with the UK, Navian and.
Speaker 6: The American American clubs.
Speaker 7: Yeah, I would say, let's Dave, I don't know if
Speaker 7: you've seen anything different.
Speaker 6: I've not seen anything different.
Speaker 2: If the US starts building ships again, yeah, is that
Speaker 2: great for the American P and I Club? Does you
Speaker 2: would your like membership automatically increase.
Speaker 7: It wouldn't automatically increase, No, because there's no directive as
Speaker 7: no directive in any country that you need to that
Speaker 7: your insurance has to be you know, domestic. But it
Speaker 7: would probably increase our potential to grow if we.
Speaker 6: Began to build ships in the United States.
Speaker 2: Yeah, do you see any signs of that actually happening.
Speaker 2: We've done a number of episodes on how people who
Speaker 2: wanted people who want.
Speaker 7: To Yes, yes, I mean we wanted to happen to
Speaker 7: what we want the American maritime industry generally to become stronger.
Speaker 7: We think it's we do think it's a shame how
Speaker 7: it's developed over time. The American Club also was a
Speaker 7: part of that, you know, like I said, up until
Speaker 7: we internationalized, you know, our membership was very very small
Speaker 7: because it was only American and the maritime fleet was
Speaker 7: shrinking at that time. Obviously, we are the only we
Speaker 7: are the only club. While while all the clubs have
Speaker 7: a presence in the United States, not all of them,
Speaker 7: but many of them, they don't have an actual regulatory
Speaker 7: domicile like we do. So the American Club and all
Speaker 7: of its people in the United States are probably the
Speaker 7: most significant and the deepest bench in terms of know
Speaker 7: how of managing and underwriting maritime casualties. And we're very
Speaker 7: proud of that when we've been doing that for almost
Speaker 7: one hundred and ten years now. So we're not as
Speaker 7: personally the company itself. But yet obviously we are very
Speaker 7: supportive and we are actually very active, and we have
Speaker 7: relationships also with all the agencies. We actually ensure all
Speaker 7: of the marad training vessels. We know all of the
Speaker 7: agencies very very well. We have active relationships, and we
Speaker 7: are very much a part of that American industry that
Speaker 7: is looking to bolster what's happening here in the United States.
Speaker 3: Joe, you need to build a ship and then join
Speaker 3: the club.
Speaker 4: You mentioned the ship startup, so it could happen.
Speaker 2: All right, Dorothea Ioanu and Steve Oka Lukian, thank you
Speaker 2: so much for coming on all thoughts.
Speaker 6: Really appreciate it.
Speaker 7: Thank you so much for having us really good.
Speaker 2: Thank you all right, Joe, that was a fascinating episode.
Speaker 3: For sure.
Speaker 2: I feel like I am slowly getting a better handle
Speaker 2: on the maritime insurance industry. It is interesting to me
Speaker 2: how like divided all those different risks are, and to
Speaker 2: Steve's point, the idea being that like, well, if you're
Speaker 2: a P and I club, you can kind of price
Speaker 2: out the risks of going from A to B with
Speaker 2: like a certain type of cargo in a certain like
Speaker 2: predictable manner. But if you're doing war risk insurance. That's
Speaker 2: a very different kettle of fish. You know, it's a
Speaker 2: maritime expression for you.
Speaker 4: Oh yeah, good job, thanks it, And she made that's
Speaker 4: a lot of sense to me, this idea that like war,
Speaker 4: the pricing for war insurance would reset very quickly, right,
Speaker 4: because one could imagine say, like buying a multi year
Speaker 4: you know, oh, you're going to buy this insurance and
Speaker 4: it's going to cover you for the next few years.
Speaker 4: Most of the time there's not war, and so most
Speaker 4: of the time you don't want to be paying a
Speaker 4: war premium, right, et cetera. So it's all just like
Speaker 4: a trade off. It's like, okay, like no one loves it,
Speaker 4: a war breaks out, so suddenly, like your premiums are
Speaker 4: going to surge the next week. I don't think anyone
Speaker 4: is very excited about that. But that's just the flip
Speaker 4: side for getting really low war risk insurance the vast
Speaker 4: majority of the time when war is not going to
Speaker 4: be an issue for you, it's just a trade off
Speaker 4: in terms of like how long do you want to
Speaker 4: be paying for it and so forth. So that actually
Speaker 4: made quite a bit of sense.
Speaker 2: Well, it also seems like the limiting factor on ships
Speaker 2: getting through the straight at the moment isn't In fact,
Speaker 2: it's not all it's like whether you can and survive.
Speaker 4: Yeah, they survived. Yeah, the captives of the safety of
Speaker 4: the crew and just being sort of like the same.
Speaker 2: So even though insurers run the world, there are limits
Speaker 2: to the abilities of insurers.
Speaker 3: I would say to affect you, no, I.
Speaker 4: Think it's really interesting. I also, like, you know, at first,
Speaker 4: I was like, well, how is a ship and their
Speaker 4: liability like a car where there's you know, but you know,
Speaker 4: then you see like all their posters and it's saying
Speaker 4: all of these very safety. They're really interesting because it's
Speaker 4: something like, you know, make sure you're getting enough.
Speaker 3: Sleep, Are your hatches tight?
Speaker 7: Yeah?
Speaker 4: Are your hatches tight? Don't don't check your email all
Speaker 4: the time. I think there's a drinking one too. Oh yeah,
Speaker 4: take control of fatigue, everything in moderation. So it's actually
Speaker 4: very similar to car to sort of liability insurance for
Speaker 4: a car, just in the fact that like the basics
Speaker 4: of safety apply to a ship as well.
Speaker 2: I'm going to print out the cell phone one and
Speaker 2: get it framed and put it on your desk, Jock.
Speaker 4: That would be I would like that I would like, all.
Speaker 3: Right, shall we leave it there?
Speaker 4: Let's leave it there.
Speaker 2: This has been another episode of the aud Loots podcast.
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 4: And I'm Joe Wisenthal. You can follow me at the Stalwart.
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