Speaker 1: Hello, and welcome to another edition of a bots. I'm
Speaker 1: Tracy Alloway, Executive editor at Bloomberg Markets, and I'm Joe Wisenthal,
Speaker 1: Managing editor at Bloomberg Markets. So, Joe, what if I
Speaker 1: told you we were going to do a whole episode
Speaker 1: on insurance, you'd be excitedly? Oh yeah, I'd I'd be
Speaker 1: totally thrilled. I yeah, of course that would be so exciting,
Speaker 1: all right, I detect a touch of sarcasm. What if
Speaker 1: I told you we were going to do a show
Speaker 1: about insurance and pirates? So if you told me that,
Speaker 1: I would say anything Pirates related is sure to explode
Speaker 1: of the viral content all over the Internet, and that
Speaker 1: people will be thrilled about this episode because I know
Speaker 1: how the internet loves pirates, and so I would say,
Speaker 1: I'm very excited about that. All right. Everyone loves a
Speaker 1: good pirate story, right, and everyone loves a good pirates
Speaker 1: market story. So let me exactly. Let me set the
Speaker 1: scene for us. So last year, you might remember, Joe,
Speaker 1: there was a bunch of news coverage about a ship
Speaker 1: that sank. It was called the Thunder and it was
Speaker 1: illegally fishing. I think it was fishing for something called
Speaker 1: the Patagonian toothfish. Do you remember that? I have to
Speaker 1: admit I'm not sure if I remember that one specifically. Okay,
Speaker 1: So the interesting thing about that ship was it was
Speaker 1: supposedly sunk by its crew, so it was sunk on purpose.
Speaker 1: It was being pursued by another ship because it was
Speaker 1: illegally fishing. And the really interesting thing is the Thunder
Speaker 1: actually was insured by someone by quite a prominent London
Speaker 1: based insurance company, and the owners of the vessel, the
Speaker 1: self sunk vessel supposedly ended up coming after the insurance
Speaker 1: company for compensation, which you might not expect, right, Like
Speaker 1: pirates essentially going to insures to get compensation seems a
Speaker 1: bit weird. Yeah, you definitely wouldn't expect it for all
Speaker 1: kinds of reasons. I think one reason that jumps out
Speaker 1: at me is just a fascinating story is this intersection
Speaker 1: of something that seems rogue and outside the law and
Speaker 1: old timey with pirates, and something like insurance, which I
Speaker 1: think of as being highly regulated and highly sort of
Speaker 1: this modern financial thing. And so the intersection of the
Speaker 1: two is pretty fascinating. Exactly, So it turns out that
Speaker 1: insurance companies ensuring illegal fishing boats is actually a lot
Speaker 1: more common than you would think. And we have someone
Speaker 1: here today who's going to be able to talk to
Speaker 1: us a lot more about it. She's Dana Miller. She's
Speaker 1: a marine scientist at the University of British Columbia and
Speaker 1: she actually published a study just last month saying that
Speaker 1: illegal vessels appear to be insured almost or just as
Speaker 1: often as legal vessels. Again, very interesting dynamic that you
Speaker 1: wouldn't necessarily expect. Dana. Welcome to the show. Thanks for
Speaker 1: joining us. Oh yes, hi, So just to begin with,
Speaker 1: maybe you could walk us through your expertise in this subject,
Speaker 1: because in my mind, it's not often that marine scientists
Speaker 1: end up looking at the world of insurance. Yeah, it's
Speaker 1: kind of an obscure topic. UM, that's for sure. UM. Well,
Speaker 1: I generally focus on policy issues. UM. That's where my
Speaker 1: research has kind of led over the years. UM. I
Speaker 1: should mention that I was previously a postdoctoral researcher at
Speaker 1: the University of British Columbia and that's where I conducted
Speaker 1: this research. UM. But presently i'm I'm I'm actually working
Speaker 1: for a UM non government mental organization Oceania. UM. And
Speaker 1: I'm taking this recent research project forward into a new stage.
Speaker 1: But yeah, I'm I'm very broadly focused in my research
Speaker 1: interests and it tends to be quite applied. So I
Speaker 1: look at different conservation problems in the marine environment, and
Speaker 1: UM just I'm not limited to anyone discipline. I kind
Speaker 1: of go out there, learn what I can about the problem,
Speaker 1: and um find some tools and do some research to
Speaker 1: try to um develop recommendations for solving that problem. So
Speaker 1: that's in a way what led me to um, you know,
Speaker 1: the topic of insurance and illegal fishing. So just to
Speaker 1: put it all together, it actually makes a lot of
Speaker 1: sense that you would look at insurance markets from this
Speaker 1: sort of uh marine conservation standpoint, because the boats that
Speaker 1: are being insured, they're illegal fishing boats. They're using methods
Speaker 1: there that are illegal, they're contributing to over fishing, and theoretically,
Speaker 1: if they're able to get insurance on that activity, then
Speaker 1: that is sort of a de facto subsidy that could
Speaker 1: harm the harmony ecology. Yes, yeah, that's right. Well, we
Speaker 1: actually we came to the topic of insurance because UM,
Speaker 1: I guess we were looking for an innovative approach at
Speaker 1: tackling illegal fishing UM. As you may be aware, it's
Speaker 1: an unresolved, internationally pervasive problem. It's UM. It's quite destructive
Speaker 1: to marine habit hats and unsustainably depletes fish populations. UM.
Speaker 1: It's it's just a big, bad problem. And common approaches
Speaker 1: used in combating illegal fishing typically involve UM surveillance activities
Speaker 1: inspections much more obvious UM approaches. But we decided instead
Speaker 1: to consider the economics of illegal fishing UM and understanding
Speaker 1: that if the costs of illegal fishing are made higher
Speaker 1: or the benefits reduced UM, fishers may not be as
Speaker 1: motivated to illegally fish. And insurance comes into this because
Speaker 1: insurance can be financially beneficial to a vessel because it
Speaker 1: eliminates the risk of large financial loss should an accident occur. So,
Speaker 1: understanding all of this UM, we wanted to investigate whether
Speaker 1: illegal fishing vessels use marine insurance as a financial service,
Speaker 1: and that that was kind of our starting point. And
Speaker 1: and then step one is to figure out can we
Speaker 1: find those inks between illegal fishing vessels and insurance companies.
Speaker 1: So how profitable is illegal fishing actually and how much
Speaker 1: does insurance play a role or how big a factor
Speaker 1: is insurance in that profitability. So I don't have numbers
Speaker 1: in front of me, but I can tell you that
Speaker 1: I mean, obviously, there are many different forms of fishing,
Speaker 1: and some forms of fishing aren't very profitable at all.
Speaker 1: It depends on what is being what species is being
Speaker 1: fished for, UM, where the fishing is taking place, how
Speaker 1: large that operation is UM. You mentioned earlier, UM the
Speaker 1: incident with thunder and Thunder was fishing for Patagonian toothfish,
Speaker 1: which is actually a highly profitable UM fish. So there
Speaker 1: would be much more economic incentive to fish for that
Speaker 1: particular species UM and to illegally fish in this case
Speaker 1: for for that particular species. But that wouldn't always be
Speaker 1: the case. You know. It is UM looking at that
Speaker 1: UM equation of costs and benef fits and figuring out
Speaker 1: where insurance fits in UM, how much the insurance might cost,
Speaker 1: and whether it's a worthwhile cost to the to the
Speaker 1: operator of the vessel and UM that you know, that
Speaker 1: was a question that we asked, As I said, are
Speaker 1: illegal fishing vessels utilizing insurance? Is this something that is
Speaker 1: part of their equation? And surprisingly to me, when I
Speaker 1: when I first did this UM the investigation, I wasn't
Speaker 1: expecting to find find out that some of these vessels
Speaker 1: were using insurance UM, particularly in cases where they weren't
Speaker 1: legally required to. But as it turns out, a lot
Speaker 1: of them were using insurance, and we were able to
Speaker 1: find links UM to evidence supporting the existence of these policies.
Speaker 1: So let me just ask the obvious question. I mean,
Speaker 1: this particular vessel, it had already I would say, a
Speaker 1: checkered past UM, it had switched its flag of origin
Speaker 1: several times. UM. It seemed obvious there were issues with it.
Speaker 1: So why was it able to insurance? That's a very
Speaker 1: good question. UM, That's a question I've asked myself many
Speaker 1: times and UM, and I think that the simplest answer
Speaker 1: is that I believe I feel that the simplest answer
Speaker 1: is that the due diligence process UM involved in, you know,
Speaker 1: screening a vessel prior to UM providing it with insurance
Speaker 1: just simply doesn't include searching for information on illegal fishing.
Speaker 1: So there are lists of official lists of illegal fishing
Speaker 1: vessels that exist that are publicly accessible, but insurers UM
Speaker 1: are not checking these lists. That this problem is just
Speaker 1: simply not on their radar. UM, which is it's surprising
Speaker 1: when there's such notorious, publicly visible illegal fishing vessels that
Speaker 1: are still able to gain insurance. But but it just
Speaker 1: seems as though it's not part of their process. It's
Speaker 1: really surprising. I mean, just thinking about getting insurance on
Speaker 1: a car, and the car is not a very expensive
Speaker 1: item to ensure relative to a boat. But you know,
Speaker 1: you instantly would get checked for the driving record, the
Speaker 1: record of the driver, and the history of the car
Speaker 1: and all kinds of things. So it seems surprising that
Speaker 1: on these boats, which are much bigger deals than h
Speaker 1: than cars, that there isn't much due diligence on that, right.
Speaker 1: Or you think about the financial industry in general, right,
Speaker 1: and we have all these rules, especially for companies like
Speaker 1: banks about know your customer, all of that. Has that
Speaker 1: not fed into the insurance industry at all? Oh, certainly,
Speaker 1: I think obviously it has. But in concerning illegal fishing
Speaker 1: as an issue, I don't. I don't think that insurers
Speaker 1: feel that they're responsible for this particular issue. That it's
Speaker 1: it's just not on their radar yet. Probably nobody has
Speaker 1: ever brought up this issue. Um, you know, to the industry,
Speaker 1: it's it's not something they've ever thought about. I thought
Speaker 1: that that had concerned them so UM, but that can change, obviously,
Speaker 1: UM because of this research for bringing attention to the
Speaker 1: issue and showing that insurers can potentially have a more
Speaker 1: active role in regulating the fishing industry and cutting off
Speaker 1: access to financial services such as insurance UM to illegal
Speaker 1: fishing vessel operators. But yeah, I mean it is very
Speaker 1: it was very surprising. But like I said, it's just
Speaker 1: it simply was being missed and I think that's as
Speaker 1: I think that is as simple as as it is.
Speaker 1: So we mentioned the example of the Thunder notorious illegal
Speaker 1: vessel caring insurance. How many vessels did you actually find
Speaker 1: illegal vessels that had insurance policies on them or links
Speaker 1: to insurers? Yeah, So we screened the internet for sources
Speaker 1: of information and in total we had we were looking
Speaker 1: for information on four hundred and eighty vessels that have
Speaker 1: either been officially listed or they're suspected by UM governments
Speaker 1: or non governmental organizations for involvement in illegal fishing UM
Speaker 1: and in total we identify the insurance of sixty seven
Speaker 1: vessels that have been known for their involvement in illegal
Speaker 1: fishing illegal fishing activity sixty seven. Wow. Keeping in mind
Speaker 1: UM that list that we began with a four vessels UM,
Speaker 1: some of those vessels we had very little information on,
Speaker 1: so it was difficult to search for any information on them.
Speaker 1: But but I was of course very surprised at the
Speaker 1: high number sixty seven UM that we were able to
Speaker 1: find information on. So when you think of pirates, you know,
Speaker 1: and why piracy on the high seas exists to the day,
Speaker 1: there's the obvious problem that nobody really really regulates the oceans, right,
Speaker 1: I mean, there are these treaties and stuff where people
Speaker 1: try to do it in various entities, but ultimately oceans
Speaker 1: are sort of the last sort of truly lawless place
Speaker 1: left on Earth. Does that problem of the difficulty of
Speaker 1: regulating oceans applied to regulating the insurance companies that would
Speaker 1: have to provide financing for the oceans that nobody has?
Speaker 1: You know that the various insurers out there who might
Speaker 1: be providing this maritime insurance don't have a single regulator
Speaker 1: that could command them to implement something like know your
Speaker 1: Customer or something like that. That there's no any you know,
Speaker 1: sort of governing body for them. Well, I don't I
Speaker 1: don't think that that's necessarily the issue here, because I
Speaker 1: wouldn't say that marine insurers aren't well regulated, it's just
Speaker 1: that they're not made to pay attention to this particular issue. UM.
Speaker 1: It is true that that fishing vessels are often overlooked
Speaker 1: in international legislation, particularly when they're operating in what we
Speaker 1: call the high seas so um waters that are outside
Speaker 1: the reach of any one nation. They operate um outside
Speaker 1: of uh two nautical miles of any coastal state, that's
Speaker 1: what we call the high seas um. And often these
Speaker 1: vessels under international law, they they aren't required to have
Speaker 1: the same UM safety they don't have a safety same
Speaker 1: safety requirements um UH, they're not required to have an
Speaker 1: International Maritime Organization number affixed to the vessel. They're not
Speaker 1: necessarily required to have UM any kind of vessel tracking
Speaker 1: technology in use. UM. So there's a very there's various
Speaker 1: things that are normally required of vessels UM that aren't
Speaker 1: necessarily required of fishing vessels because they just kind of
Speaker 1: slipped through the cracks, and particularly when they're operating in
Speaker 1: the high seas um and they're not being watched by
Speaker 1: anyone particular country, that well, there's a whole variety of
Speaker 1: different issues that play here. UM. I won't get into
Speaker 1: detailed with them here, but vessels they are registered under
Speaker 1: countries as well, and we have a common practice um
Speaker 1: UM within the maritime world of using a flag of convenience,
Speaker 1: and that's registering a vessel under a country that that
Speaker 1: vessel may not have any obvious affiliation to UM and
Speaker 1: it's a way of kind of skirting some of those regulations.
Speaker 1: I'm kind of getting off track here, but you mentioned
Speaker 1: Ase loves nerdy in the weed stuff, so this is
Speaker 1: all really important. You just kind of mentioned the lawlessness
Speaker 1: nature of the high season and particularly with fishing vessels.
Speaker 1: You you touched on something there, because there are a
Speaker 1: whole number of issues that that we within the NGO
Speaker 1: community and also academics are trying to UM discuss and
Speaker 1: improve the situation. So if Joe and I bought a
Speaker 1: ship of some sort and registered it under the most
Speaker 1: convenient flag of convenience and then we went out illegally fishing,
Speaker 1: how easy would it actually be for us to get insurance?
Speaker 1: Would anyone kind of ask questions or check the background?
Speaker 1: What's the actual process here? Yeah, So that was one
Speaker 1: question also that I was interested in. I'm interested in
Speaker 1: UM whether insurance companies UM prefer a vessel to have
Speaker 1: UH be registered under the flag of one country versus
Speaker 1: the flag of another, so that you know, the flag
Speaker 1: of a country that is more reputable in terms of
Speaker 1: adhering to various different regulations UM as opposed to another
Speaker 1: country that is known for UM for not being so
Speaker 1: good in that department. So UM, that was one question
Speaker 1: that I was trying to figure out, whether you know
Speaker 1: insurers or aware of that, and I am still involved
Speaker 1: in that work now where UM within this new role
Speaker 1: at the Oceania UM that I'm not now in UM,
Speaker 1: I'm hoping to work with the insurance industry to engage
Speaker 1: with insurers and try to learn more about the policies
Speaker 1: and procedures that are in place UM UH for ensuring
Speaker 1: fishing vessels and UM whether they can UM introduced new
Speaker 1: policies to pay attention to some of these things that
Speaker 1: may not be so obvious UM maybe screen against UM
Speaker 1: some of the characteristics that are more common amongst illegal
Speaker 1: fishing vessels. So have you seen any evidence yet that
Speaker 1: you know, perhaps due to the publicity that the thunder
Speaker 1: incident got that insurance companies want to start taking this
Speaker 1: issue more seriously. UM. Yes, I do believe that that
Speaker 1: the media attention that has been gained UM through the
Speaker 1: publication of um our manuscript, which occurred about the UM
Speaker 1: just over a month ago. UM, I believe that we
Speaker 1: have gotten the attention of UM individuals within the or
Speaker 1: contacts within the insurance industry. UM. I have been in
Speaker 1: touch with UM some contacts representatives from various insurance companies
Speaker 1: to share that manuscript UM and UH, I'm optimistic I UM.
Speaker 1: So far there has been a positive response UM from
Speaker 1: those I've been in touch with, and most contacts have
Speaker 1: acknowledged the importance of this work and showed some interest
Speaker 1: in engaging in future discussions with me on this topic.
Speaker 1: So I feel that there is an opportunity here for sure,
Speaker 1: UM and I'm very optimistic. All right, Well, Dana, thank
Speaker 1: you so much for joining us today. That was really
Speaker 1: really interesting and topic that I think a lot of
Speaker 1: our listeners will enjoy as well. Yeah, it is really fascinating.
Speaker 1: Thank you very much. Thanks so much. Trizy. That was
Speaker 1: awesome and I got really excited about that part where
Speaker 1: you talked about us buying a ship together and get
Speaker 1: an insurance because now I think we should totally do
Speaker 1: that just as a big, a big stunt, a big
Speaker 1: act of performative journalism. Should this be our summer project.
Speaker 1: We'll go to Nigeria, get a up, we'll go fishing,
Speaker 1: and we'll see if we can get insurance. Excellent, all right,
Speaker 1: On a slightly more serious note, I mean, I thought
Speaker 1: the whole topic was really interesting, and again mostly because
Speaker 1: you never really think about the role that insurers might
Speaker 1: have in piracy or in illegal fishing, and certainly not
Speaker 1: on you know, the environmental landscape, which is obviously suffering
Speaker 1: from illegal fishing quite a lot. So I wonder if
Speaker 1: in the future this will be the kind of thing
Speaker 1: where we have criminal based um bitcoin based insurers, because
Speaker 1: if you think about, you know, insurance reduces the cost
Speaker 1: of doing business for crime. But typically criminals can't get insurance.
Speaker 1: But if you could theoretically have an insurance company that
Speaker 1: was completely outside of the purview of regulators, uh, there
Speaker 1: would probably be an opportunity there to ensure extra legal businesses.
Speaker 1: And I wouldn't be surprised if at some point in
Speaker 1: the future whether we see UH, the Internet enables such activities.
Speaker 1: So I have to No, it's not. Actually, so I
Speaker 1: have two responses to that. One is which Christine Legard
Speaker 1: actually gave from the I m F gave a speech
Speaker 1: on a similar topic last week about banks and the
Speaker 1: know your Customer rules and how because of these new rules,
Speaker 1: banks were retreating from certain areas of the world, certain
Speaker 1: geographical areas, and so that left a whole for illegal
Speaker 1: operators and potentially bitcoin based banks to come in. Uh
Speaker 1: So it's not that out there. My second thought though,
Speaker 1: and this is related, is that there's a school of
Speaker 1: thought about how insurers could eventually grow to become the
Speaker 1: arbiters of human behavior and business behavior, because after all,
Speaker 1: they're the ones who have their money on the line
Speaker 1: and they end up actually shaping human behavior. So in
Speaker 1: the future, rather than having you know, potentially laws be
Speaker 1: the most important factor over human behavior, you could actually
Speaker 1: have insurers who end up being the driving force. So
Speaker 1: who knows, like there's been talking about, you know, insurers
Speaker 1: bearing the most risk from say climate change, for example,
Speaker 1: and so perhaps they, more than anyone else, have the
Speaker 1: incentive to uh push businesses and individuals towards climate friendly activities.
Speaker 1: Exactly alright, So we managed to veer from piracy to
Speaker 1: bitcoin to insurers as a global political forces. So um,
Speaker 1: that was fun. That was a successful podcast, I would say.
Speaker 1: I would say I would say that's the mark of
Speaker 1: a successful episode. Excellent. Thanks for listening everyone to the
Speaker 1: latest episode of Odd Lots. I'm Joe wi Isn't though
Speaker 1: you can follow me on Twitter at the stall Wart,
Speaker 1: and I'm Tracy Halloway. I'm on Twitter at Tracy Alloway.
Speaker 1: Thanks for listening. Are are two? Are well and keep