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Speaker 1: Hello, and welcome to another edition of a bots. I'm

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Speaker 1: Tracy Alloway, Executive editor at Bloomberg Markets, and I'm Joe Wisenthal,

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Speaker 1: Managing editor at Bloomberg Markets. So, Joe, what if I

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Speaker 1: told you we were going to do a whole episode

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Speaker 1: on insurance, you'd be excitedly? Oh yeah, I'd I'd be

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Speaker 1: totally thrilled. I yeah, of course that would be so exciting,

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Speaker 1: all right, I detect a touch of sarcasm. What if

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Speaker 1: I told you we were going to do a show

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Speaker 1: about insurance and pirates? So if you told me that,

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Speaker 1: I would say anything Pirates related is sure to explode

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Speaker 1: of the viral content all over the Internet, and that

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Speaker 1: people will be thrilled about this episode because I know

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Speaker 1: how the internet loves pirates, and so I would say,

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Speaker 1: I'm very excited about that. All right. Everyone loves a

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Speaker 1: good pirate story, right, and everyone loves a good pirates

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Speaker 1: market story. So let me exactly. Let me set the

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Speaker 1: scene for us. So last year, you might remember, Joe,

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Speaker 1: there was a bunch of news coverage about a ship

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Speaker 1: that sank. It was called the Thunder and it was

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Speaker 1: illegally fishing. I think it was fishing for something called

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Speaker 1: the Patagonian toothfish. Do you remember that? I have to

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Speaker 1: admit I'm not sure if I remember that one specifically. Okay,

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Speaker 1: So the interesting thing about that ship was it was

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Speaker 1: supposedly sunk by its crew, so it was sunk on purpose.

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Speaker 1: It was being pursued by another ship because it was

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Speaker 1: illegally fishing. And the really interesting thing is the Thunder

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Speaker 1: actually was insured by someone by quite a prominent London

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Speaker 1: based insurance company, and the owners of the vessel, the

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Speaker 1: self sunk vessel supposedly ended up coming after the insurance

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Speaker 1: company for compensation, which you might not expect, right, Like

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Speaker 1: pirates essentially going to insures to get compensation seems a

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Speaker 1: bit weird. Yeah, you definitely wouldn't expect it for all

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Speaker 1: kinds of reasons. I think one reason that jumps out

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Speaker 1: at me is just a fascinating story is this intersection

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Speaker 1: of something that seems rogue and outside the law and

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Speaker 1: old timey with pirates, and something like insurance, which I

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Speaker 1: think of as being highly regulated and highly sort of

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Speaker 1: this modern financial thing. And so the intersection of the

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Speaker 1: two is pretty fascinating. Exactly, So it turns out that

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Speaker 1: insurance companies ensuring illegal fishing boats is actually a lot

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Speaker 1: more common than you would think. And we have someone

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Speaker 1: here today who's going to be able to talk to

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Speaker 1: us a lot more about it. She's Dana Miller. She's

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Speaker 1: a marine scientist at the University of British Columbia and

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Speaker 1: she actually published a study just last month saying that

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Speaker 1: illegal vessels appear to be insured almost or just as

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Speaker 1: often as legal vessels. Again, very interesting dynamic that you

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Speaker 1: wouldn't necessarily expect. Dana. Welcome to the show. Thanks for

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Speaker 1: joining us. Oh yes, hi, So just to begin with,

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Speaker 1: maybe you could walk us through your expertise in this subject,

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Speaker 1: because in my mind, it's not often that marine scientists

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Speaker 1: end up looking at the world of insurance. Yeah, it's

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Speaker 1: kind of an obscure topic. UM, that's for sure. UM. Well,

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Speaker 1: I generally focus on policy issues. UM. That's where my

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Speaker 1: research has kind of led over the years. UM. I

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Speaker 1: should mention that I was previously a postdoctoral researcher at

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Speaker 1: the University of British Columbia and that's where I conducted

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Speaker 1: this research. UM. But presently i'm I'm I'm actually working

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Speaker 1: for a UM non government mental organization Oceania. UM. And

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Speaker 1: I'm taking this recent research project forward into a new stage.

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Speaker 1: But yeah, I'm I'm very broadly focused in my research

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Speaker 1: interests and it tends to be quite applied. So I

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Speaker 1: look at different conservation problems in the marine environment, and

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Speaker 1: UM just I'm not limited to anyone discipline. I kind

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Speaker 1: of go out there, learn what I can about the problem,

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Speaker 1: and um find some tools and do some research to

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Speaker 1: try to um develop recommendations for solving that problem. So

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Speaker 1: that's in a way what led me to um, you know,

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Speaker 1: the topic of insurance and illegal fishing. So just to

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Speaker 1: put it all together, it actually makes a lot of

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Speaker 1: sense that you would look at insurance markets from this

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Speaker 1: sort of uh marine conservation standpoint, because the boats that

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Speaker 1: are being insured, they're illegal fishing boats. They're using methods

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Speaker 1: there that are illegal, they're contributing to over fishing, and theoretically,

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Speaker 1: if they're able to get insurance on that activity, then

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Speaker 1: that is sort of a de facto subsidy that could

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Speaker 1: harm the harmony ecology. Yes, yeah, that's right. Well, we

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Speaker 1: actually we came to the topic of insurance because UM,

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Speaker 1: I guess we were looking for an innovative approach at

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Speaker 1: tackling illegal fishing UM. As you may be aware, it's

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Speaker 1: an unresolved, internationally pervasive problem. It's UM. It's quite destructive

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Speaker 1: to marine habit hats and unsustainably depletes fish populations. UM.

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Speaker 1: It's it's just a big, bad problem. And common approaches

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Speaker 1: used in combating illegal fishing typically involve UM surveillance activities

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Speaker 1: inspections much more obvious UM approaches. But we decided instead

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Speaker 1: to consider the economics of illegal fishing UM and understanding

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Speaker 1: that if the costs of illegal fishing are made higher

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Speaker 1: or the benefits reduced UM, fishers may not be as

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Speaker 1: motivated to illegally fish. And insurance comes into this because

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Speaker 1: insurance can be financially beneficial to a vessel because it

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Speaker 1: eliminates the risk of large financial loss should an accident occur. So,

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Speaker 1: understanding all of this UM, we wanted to investigate whether

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Speaker 1: illegal fishing vessels use marine insurance as a financial service,

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Speaker 1: and that that was kind of our starting point. And

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Speaker 1: and then step one is to figure out can we

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Speaker 1: find those inks between illegal fishing vessels and insurance companies.

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Speaker 1: So how profitable is illegal fishing actually and how much

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Speaker 1: does insurance play a role or how big a factor

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Speaker 1: is insurance in that profitability. So I don't have numbers

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Speaker 1: in front of me, but I can tell you that

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Speaker 1: I mean, obviously, there are many different forms of fishing,

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Speaker 1: and some forms of fishing aren't very profitable at all.

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Speaker 1: It depends on what is being what species is being

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Speaker 1: fished for, UM, where the fishing is taking place, how

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Speaker 1: large that operation is UM. You mentioned earlier, UM the

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Speaker 1: incident with thunder and Thunder was fishing for Patagonian toothfish,

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Speaker 1: which is actually a highly profitable UM fish. So there

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Speaker 1: would be much more economic incentive to fish for that

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Speaker 1: particular species UM and to illegally fish in this case

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Speaker 1: for for that particular species. But that wouldn't always be

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Speaker 1: the case. You know. It is UM looking at that

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Speaker 1: UM equation of costs and benef fits and figuring out

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Speaker 1: where insurance fits in UM, how much the insurance might cost,

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Speaker 1: and whether it's a worthwhile cost to the to the

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Speaker 1: operator of the vessel and UM that you know, that

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Speaker 1: was a question that we asked, As I said, are

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Speaker 1: illegal fishing vessels utilizing insurance? Is this something that is

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Speaker 1: part of their equation? And surprisingly to me, when I

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Speaker 1: when I first did this UM the investigation, I wasn't

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Speaker 1: expecting to find find out that some of these vessels

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Speaker 1: were using insurance UM, particularly in cases where they weren't

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Speaker 1: legally required to. But as it turns out, a lot

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Speaker 1: of them were using insurance, and we were able to

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Speaker 1: find links UM to evidence supporting the existence of these policies.

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Speaker 1: So let me just ask the obvious question. I mean,

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Speaker 1: this particular vessel, it had already I would say, a

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Speaker 1: checkered past UM, it had switched its flag of origin

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Speaker 1: several times. UM. It seemed obvious there were issues with it.

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Speaker 1: So why was it able to insurance? That's a very

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Speaker 1: good question. UM, That's a question I've asked myself many

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Speaker 1: times and UM, and I think that the simplest answer

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Speaker 1: is that I believe I feel that the simplest answer

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Speaker 1: is that the due diligence process UM involved in, you know,

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Speaker 1: screening a vessel prior to UM providing it with insurance

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Speaker 1: just simply doesn't include searching for information on illegal fishing.

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Speaker 1: So there are lists of official lists of illegal fishing

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Speaker 1: vessels that exist that are publicly accessible, but insurers UM

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Speaker 1: are not checking these lists. That this problem is just

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Speaker 1: simply not on their radar. UM, which is it's surprising

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Speaker 1: when there's such notorious, publicly visible illegal fishing vessels that

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Speaker 1: are still able to gain insurance. But but it just

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Speaker 1: seems as though it's not part of their process. It's

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Speaker 1: really surprising. I mean, just thinking about getting insurance on

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Speaker 1: a car, and the car is not a very expensive

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Speaker 1: item to ensure relative to a boat. But you know,

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Speaker 1: you instantly would get checked for the driving record, the

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Speaker 1: record of the driver, and the history of the car

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Speaker 1: and all kinds of things. So it seems surprising that

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Speaker 1: on these boats, which are much bigger deals than h

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Speaker 1: than cars, that there isn't much due diligence on that, right.

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Speaker 1: Or you think about the financial industry in general, right,

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Speaker 1: and we have all these rules, especially for companies like

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Speaker 1: banks about know your customer, all of that. Has that

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Speaker 1: not fed into the insurance industry at all? Oh, certainly,

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Speaker 1: I think obviously it has. But in concerning illegal fishing

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Speaker 1: as an issue, I don't. I don't think that insurers

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Speaker 1: feel that they're responsible for this particular issue. That it's

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Speaker 1: it's just not on their radar yet. Probably nobody has

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Speaker 1: ever brought up this issue. Um, you know, to the industry,

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Speaker 1: it's it's not something they've ever thought about. I thought

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Speaker 1: that that had concerned them so UM, but that can change, obviously,

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Speaker 1: UM because of this research for bringing attention to the

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Speaker 1: issue and showing that insurers can potentially have a more

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Speaker 1: active role in regulating the fishing industry and cutting off

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Speaker 1: access to financial services such as insurance UM to illegal

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Speaker 1: fishing vessel operators. But yeah, I mean it is very

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Speaker 1: it was very surprising. But like I said, it's just

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Speaker 1: it simply was being missed and I think that's as

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Speaker 1: I think that is as simple as as it is.

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Speaker 1: So we mentioned the example of the Thunder notorious illegal

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Speaker 1: vessel caring insurance. How many vessels did you actually find

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Speaker 1: illegal vessels that had insurance policies on them or links

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Speaker 1: to insurers? Yeah, So we screened the internet for sources

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Speaker 1: of information and in total we had we were looking

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Speaker 1: for information on four hundred and eighty vessels that have

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Speaker 1: either been officially listed or they're suspected by UM governments

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Speaker 1: or non governmental organizations for involvement in illegal fishing UM

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Speaker 1: and in total we identify the insurance of sixty seven

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Speaker 1: vessels that have been known for their involvement in illegal

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Speaker 1: fishing illegal fishing activity sixty seven. Wow. Keeping in mind

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Speaker 1: UM that list that we began with a four vessels UM,

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Speaker 1: some of those vessels we had very little information on,

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Speaker 1: so it was difficult to search for any information on them.

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Speaker 1: But but I was of course very surprised at the

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Speaker 1: high number sixty seven UM that we were able to

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Speaker 1: find information on. So when you think of pirates, you know,

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Speaker 1: and why piracy on the high seas exists to the day,

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Speaker 1: there's the obvious problem that nobody really really regulates the oceans, right,

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Speaker 1: I mean, there are these treaties and stuff where people

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Speaker 1: try to do it in various entities, but ultimately oceans

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Speaker 1: are sort of the last sort of truly lawless place

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Speaker 1: left on Earth. Does that problem of the difficulty of

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Speaker 1: regulating oceans applied to regulating the insurance companies that would

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Speaker 1: have to provide financing for the oceans that nobody has?

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Speaker 1: You know that the various insurers out there who might

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Speaker 1: be providing this maritime insurance don't have a single regulator

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Speaker 1: that could command them to implement something like know your

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Speaker 1: Customer or something like that. That there's no any you know,

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Speaker 1: sort of governing body for them. Well, I don't I

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Speaker 1: don't think that that's necessarily the issue here, because I

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Speaker 1: wouldn't say that marine insurers aren't well regulated, it's just

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Speaker 1: that they're not made to pay attention to this particular issue. UM.

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Speaker 1: It is true that that fishing vessels are often overlooked

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Speaker 1: in international legislation, particularly when they're operating in what we

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Speaker 1: call the high seas so um waters that are outside

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Speaker 1: the reach of any one nation. They operate um outside

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Speaker 1: of uh two nautical miles of any coastal state, that's

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Speaker 1: what we call the high seas um. And often these

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Speaker 1: vessels under international law, they they aren't required to have

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Speaker 1: the same UM safety they don't have a safety same

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Speaker 1: safety requirements um UH, they're not required to have an

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Speaker 1: International Maritime Organization number affixed to the vessel. They're not

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Speaker 1: necessarily required to have UM any kind of vessel tracking

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Speaker 1: technology in use. UM. So there's a very there's various

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Speaker 1: things that are normally required of vessels UM that aren't

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Speaker 1: necessarily required of fishing vessels because they just kind of

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Speaker 1: slipped through the cracks, and particularly when they're operating in

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Speaker 1: the high seas um and they're not being watched by

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Speaker 1: anyone particular country, that well, there's a whole variety of

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Speaker 1: different issues that play here. UM. I won't get into

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Speaker 1: detailed with them here, but vessels they are registered under

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Speaker 1: countries as well, and we have a common practice um

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Speaker 1: UM within the maritime world of using a flag of convenience,

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Speaker 1: and that's registering a vessel under a country that that

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Speaker 1: vessel may not have any obvious affiliation to UM and

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Speaker 1: it's a way of kind of skirting some of those regulations.

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Speaker 1: I'm kind of getting off track here, but you mentioned

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Speaker 1: Ase loves nerdy in the weed stuff, so this is

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Speaker 1: all really important. You just kind of mentioned the lawlessness

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Speaker 1: nature of the high season and particularly with fishing vessels.

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Speaker 1: You you touched on something there, because there are a

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Speaker 1: whole number of issues that that we within the NGO

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Speaker 1: community and also academics are trying to UM discuss and

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Speaker 1: improve the situation. So if Joe and I bought a

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Speaker 1: ship of some sort and registered it under the most

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Speaker 1: convenient flag of convenience and then we went out illegally fishing,

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Speaker 1: how easy would it actually be for us to get insurance?

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Speaker 1: Would anyone kind of ask questions or check the background?

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Speaker 1: What's the actual process here? Yeah, So that was one

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Speaker 1: question also that I was interested in. I'm interested in

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Speaker 1: UM whether insurance companies UM prefer a vessel to have

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Speaker 1: UH be registered under the flag of one country versus

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Speaker 1: the flag of another, so that you know, the flag

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Speaker 1: of a country that is more reputable in terms of

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Speaker 1: adhering to various different regulations UM as opposed to another

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Speaker 1: country that is known for UM for not being so

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Speaker 1: good in that department. So UM, that was one question

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Speaker 1: that I was trying to figure out, whether you know

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Speaker 1: insurers or aware of that, and I am still involved

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Speaker 1: in that work now where UM within this new role

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Speaker 1: at the Oceania UM that I'm not now in UM,

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Speaker 1: I'm hoping to work with the insurance industry to engage

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Speaker 1: with insurers and try to learn more about the policies

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Speaker 1: and procedures that are in place UM UH for ensuring

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Speaker 1: fishing vessels and UM whether they can UM introduced new

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Speaker 1: policies to pay attention to some of these things that

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Speaker 1: may not be so obvious UM maybe screen against UM

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Speaker 1: some of the characteristics that are more common amongst illegal

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Speaker 1: fishing vessels. So have you seen any evidence yet that

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Speaker 1: you know, perhaps due to the publicity that the thunder

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Speaker 1: incident got that insurance companies want to start taking this

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Speaker 1: issue more seriously. UM. Yes, I do believe that that

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Speaker 1: the media attention that has been gained UM through the

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Speaker 1: publication of um our manuscript, which occurred about the UM

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Speaker 1: just over a month ago. UM, I believe that we

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Speaker 1: have gotten the attention of UM individuals within the or

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Speaker 1: contacts within the insurance industry. UM. I have been in

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Speaker 1: touch with UM some contacts representatives from various insurance companies

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Speaker 1: to share that manuscript UM and UH, I'm optimistic I UM.

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Speaker 1: So far there has been a positive response UM from

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Speaker 1: those I've been in touch with, and most contacts have

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Speaker 1: acknowledged the importance of this work and showed some interest

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Speaker 1: in engaging in future discussions with me on this topic.

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Speaker 1: So I feel that there is an opportunity here for sure,

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Speaker 1: UM and I'm very optimistic. All right, Well, Dana, thank

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Speaker 1: you so much for joining us today. That was really

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Speaker 1: really interesting and topic that I think a lot of

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Speaker 1: our listeners will enjoy as well. Yeah, it is really fascinating.

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Speaker 1: Thank you very much. Thanks so much. Trizy. That was

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Speaker 1: awesome and I got really excited about that part where

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Speaker 1: you talked about us buying a ship together and get

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Speaker 1: an insurance because now I think we should totally do

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Speaker 1: that just as a big, a big stunt, a big

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Speaker 1: act of performative journalism. Should this be our summer project.

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Speaker 1: We'll go to Nigeria, get a up, we'll go fishing,

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Speaker 1: and we'll see if we can get insurance. Excellent, all right,

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Speaker 1: On a slightly more serious note, I mean, I thought

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Speaker 1: the whole topic was really interesting, and again mostly because

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Speaker 1: you never really think about the role that insurers might

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Speaker 1: have in piracy or in illegal fishing, and certainly not

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Speaker 1: on you know, the environmental landscape, which is obviously suffering

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Speaker 1: from illegal fishing quite a lot. So I wonder if

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Speaker 1: in the future this will be the kind of thing

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Speaker 1: where we have criminal based um bitcoin based insurers, because

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Speaker 1: if you think about, you know, insurance reduces the cost

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Speaker 1: of doing business for crime. But typically criminals can't get insurance.

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Speaker 1: But if you could theoretically have an insurance company that

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Speaker 1: was completely outside of the purview of regulators, uh, there

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Speaker 1: would probably be an opportunity there to ensure extra legal businesses.

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Speaker 1: And I wouldn't be surprised if at some point in

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Speaker 1: the future whether we see UH, the Internet enables such activities.

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Speaker 1: So I have to No, it's not. Actually, so I

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Speaker 1: have two responses to that. One is which Christine Legard

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Speaker 1: actually gave from the I m F gave a speech

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Speaker 1: on a similar topic last week about banks and the

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Speaker 1: know your Customer rules and how because of these new rules,

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Speaker 1: banks were retreating from certain areas of the world, certain

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Speaker 1: geographical areas, and so that left a whole for illegal

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Speaker 1: operators and potentially bitcoin based banks to come in. Uh

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Speaker 1: So it's not that out there. My second thought though,

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Speaker 1: and this is related, is that there's a school of

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Speaker 1: thought about how insurers could eventually grow to become the

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Speaker 1: arbiters of human behavior and business behavior, because after all,

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Speaker 1: they're the ones who have their money on the line

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Speaker 1: and they end up actually shaping human behavior. So in

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Speaker 1: the future, rather than having you know, potentially laws be

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Speaker 1: the most important factor over human behavior, you could actually

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Speaker 1: have insurers who end up being the driving force. So

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Speaker 1: who knows, like there's been talking about, you know, insurers

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Speaker 1: bearing the most risk from say climate change, for example,

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Speaker 1: and so perhaps they, more than anyone else, have the

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Speaker 1: incentive to uh push businesses and individuals towards climate friendly activities.

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Speaker 1: Exactly alright, So we managed to veer from piracy to

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Speaker 1: bitcoin to insurers as a global political forces. So um,

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Speaker 1: that was fun. That was a successful podcast, I would say.

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Speaker 1: I would say I would say that's the mark of

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Speaker 1: a successful episode. Excellent. Thanks for listening everyone to the

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Speaker 1: latest episode of Odd Lots. I'm Joe wi Isn't though

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Speaker 1: you can follow me on Twitter at the stall Wart,

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Speaker 1: and I'm Tracy Halloway. I'm on Twitter at Tracy Alloway.

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Speaker 1: Thanks for listening. Are are two? Are well and keep