The Marine Insurer. Issue 8. Jan 2022 by cannonevents

ISSUE 8

| JANUARY 2022

The Marine Insurer N AV I G AT I N G N E W S & A N A LYS I S IN THE MARINE MARKETS

: w 1 2 e i 0 2 rev In Sustainability top of agenda as we head into 2022

l State of the Environmental market: Rates at risk issues: Insurers of softening too facing key questions quickly on green shipping l

Post Covid-19? How will shipping change? l

Casualties: The numbers adding up

Supply change: Forcing major shifts in trading

Marine insurance specialists The philosophy at Ed Broking is to learn from the past but look to the future. Our clients are our primary focus and we take a global approach to searching and securing the most appropriate solutions for their needs utilising Lloyd’s, European, Middle Eastern and Asian markets. Marine insurance is the genesis of the insurance industry as we know it, and we fiercely protect that legacy, taking pride in the great industry which has such a rich history.

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Ed Broking LLP registered in England No. OC339735. Authorised and regulated by the Financial Conduct Authority. 435-0421

CONTENTS | EDITORIAL

Comment

Highlights 2021 IN REVIEW ISSUE 20 Marine market pricing

Can the London market finally break the cycle of self-defeat with more pressure on rates?

22 Time to get serious

As we approach the end of the globe’s second year of the pandemic, the journey to recovery is under way, but insurers must take InsurTech very seriously

24 Marine casualty technology 04 Risk up North

Technology can accelerate progress post Covid-19

06 The green transition

How the US cruise market sector is return to normal service after a tough period during the pandemic

The key risks and considerations for insurers when writing business in the Polar regions

If progress is to be made on decarbonisation insurers must be prepared to cover the risks that will be faced in the transition

26 Crusing risk management

08 Sustainability

How insurers and shipowners have a crucial part to play in driving sustainability

12 The cost of sustainability

How P&I clubs are facing up to economic and environmental challenges

30 Fires and explosions

Marine fires continue to rise in number and severity and the predicted increase in world trade in 2022 will inevitably see a futher escalation

32 Safety culture

Why the marine sector needs to adopt a more formalistic approach to safety culture to tackle the increasing level of incidents.

14 Chartering risk

In a world of supply chain disruption chartering may seem a good alternative but cargo owners need to look carefully at the risks involved

16 Life at sea

The escalating pressures placed on seafarers during the Covid-19 era and the need for more support

34 Automated underwriting

Is the insurance industry ready for the transition from an analogue to a digital market?

36 Digital transformation

To embrace the opportunities from digital transformation the market needs to think collectively

Editor Liz Booth liz@lizbooth.co.uk Assistant Editor Adrian Ladbury ladburya@gmail.com Art Editor Rob Crotty rob@greenlightpartners.co.uk

Commercial Director Daniel Creasey daniel@cannonevents.com tel: +44 07702 835831 Publishing Director Grant Attwell grant@cannonevents.com tel: +44 07905 933252

Challenges ahead for the marine insurance markets THAT WAS the year that was. 2021 was without doubt a tough year with some major challenges for the shipping sector. However, it also had some very bright spots for shipping entities. So, what is the consensus on what 2022 might bring? Our authors this month have put sustainability at the heart of the conversation. It is clear marine insurers cannot avoid this conversation and will be facing some challenges about what and how they insure various of their clients. But, more than that, insurers are going to have to step up themselves and ensure they can answer all the questions put to them by insureds, shareholders and stakeholders as well as an ever more curious public. 2022 is starting with yet another Covid-19 wave, this time in the form of the highly transmissible Omicron. Fears immediately surfaced of the impact on crew who are already over-stretched. As one market expert has put it “We have only just seen the tip of the iceberg in terms of the mental health impact.” Tied closely to that is the supply chain and the continuing challenges of getting the right goods to the right place at the right time. Again, fears are that this will not be solved quickly or easily and will be impacting the market in many different ways in the months ahead. Added to that, the casualties continue and the numbers are stacking up for insurers. Commercial pressures might make some insurers consider whether or not to continue with rate increases but experts are warning that the market as a whole has yet to reach sustainable levels and needs to be consistent on pricing for at least the year ahead. It seems that 2022 will be as busy and varied a year as 2021 was – hopefully this year will also be the one in which we say goodbye to Covid-19.

Liz Booth Editor, The Marine Insurer Published by Cannon Events and Publications © Cannon Events Limited 2022 Pictures: Adobe Stock

All rights reserved. No part of this publication maybe reproduced, stored in a retrieval system, or transmitted in any form or by any means, electrical, mechanical, photocopying, recording or otherwise without the prior written permission of the publishers. The views expressed in The Marine Insurer Magazine are not necessarily shared by the publisher, Cannon Events limited. The views expressed are those of the individual contributors. No liability is accepted by Cannon Events Limited for any loss to any person, legal or physical as a result of any statement figure or fact contained in this title. The publication of advertisements does not reflect any endorsement by the publisher.

The Marine Insurer | January 2022

2021 IN REVIEW | Polar risks In association with LMA

Risk up North Neil Roberts, Head of Marine and Aviation at the Lloyd’s Market Association (LMA), explains the key risk management and reputational considerations that insurers need to be aware of when writing business in the Polar regions The Arctic is self-evidently a challenging environment. So much so that insurers consider it to be at the frontier of risk. Polar risks are only written on a special acceptance basis as, quite literally, they are off the insurance coverage map.

POLAR PROBLEMS For any voyages in the High North or indeed in Antarctica, insurers will seek to establish that prospective clients are acting with professionalism, the voyage is carefully planned, the ship and crew are adequately equipped and that all reasonable loss mitigation measures have been taken. The concerns include floating and static ice, shifting ice channels, and crew being exposed to a hostile and unpredictable environment in restricted visibility, with fog and/or darkness up to 90% of the time. Weather reports are often inadequate and violent storms can occur at any time. The extreme cold can cause engine problems, affect equipment and there is reduced coverage for navigational aids such as GPS which is serious when charts are frequently inaccurate and the earth’s magnetic field disrupts compasses. A sharp look-out is needed. Disintegrating icebergs can spawn bergy bits and growlers that may not show up on the radar, very concerning when salvage facilities remain almost non-existent. Tugs are expensive and a relatively minor incident in these remote regions can easily escalate into a life-threatening problem and a very large claim. With all these factors at play, insurers must be cautious

The Marine Insurer | January 2022

when they accept risks and will ask questions to give themselves comfort that any given voyage will be conducted with sufficient attention to safety. This is simply common sense.

MITIGATION On the plus side, the comparative information vacuum of 10 years ago has been much improved by the Arctic Council’s web-based PAME Portal designed to help with the effective implementation of the International Maritime Organization’s International Code for Ships Operating in Polar Waters (Polar Code). This is a very significant resource based on truly international co-operation. There is more guidance on the necessary vessel preparation than there was. The Polar Code requires operators to carry a Polar Waters Operational Manual to demonstrate that they have catered for a worst-case scenario in the planned voyage or operations that the ship is intended for. The insurance market added the POLARIS evaluation grid to provide a standard approach for assessing risks to the ship in the ice conditions expected. Things have therefore improved in terms of a risk management tool-kit, but insurers still need to ensure that the shipowners are undertaking their due diligence depending on the specifics of the voyage.

TRANSITION FROM CARBON The UN ban on heavy fuel oil in the Arctic attracted attention and some criticism but demonstrated a heightened awareness around the problems related to Arctic pollution whether caused by the obvious and visible oil or the less obvious grey water and micro plastics.

“The UN ban on heavy fuel oil in the Arctic attracted attention and some criticism but demonstrated a heightened awareness around the problems related to Arctic pollution whether caused by the obvious and visible oil or the less obvious grey water and micro plastics.’’ Neil Roberts, Lloyd’s Market Association

2021 IN REVIEW | Polar risks In association with LMA

Climate change conference COP26 has recently provided a clear exhibition of the shared international concerns around the environment and, for business. There is undoubtedly a growing emphasis on reputational risk in this regard. The UN has turned its attention to insurers as facilitators of decarbonization, having identified $30 trillion of assets held by them. While that cannot be entirely deployed in the service of nature, shareholders will be looking for actions that clearly support stated government policy ambitions. Concerns over carbon cannot be ignored but equally, while the world depends on global interconnectivity, nor can shipping or trade be stopped. An acceptance of a transition process across multiple sectors is therefore needed. Underwriters will clearly be under increased scrutiny to understand and quantify their carbon involvements and to demonstrate how they will support that transition away from carbon.

BUILDING A PICTURE The linkages between climate change and insured losses have become ever clearer. Not only are insurers footing the rising bills for more frequent storms but increasingly, and at the same time, are being asked to justify the coverage they write from a moral perspective. Doing nothing is not an option. On top of this, the regulators are gearing up. In the UK, both the regulator, the Financial Conduct Authority, and Lloyd’s are sending very strong signals. The commercial C-Suite therefore face several challenges to meet the requirements for progress to the goal of net zero, against a conflicting range of dates. It is recognized that there will need to be measurement, so prospective insureds can expect to be asked questions around how they measure their greenhouse gas emissions and how they

plan to reduce them. How will that transition be monitored? Will an independent third party verify the transition process? Is the plan aligned with the Paris Agreement and if not, why not? Is there an allocated budget for transition and what is this as a percentage of CAPEX? Which board member is responsible for transition progress? Is the company strategy aligned with the transition goals and what progress has been made? Those are illustrative generic questions, but, from the answers given, a picture can be assembled and a comparison can be made between year on year renewals. Without being able to show progress in the risks they cover, insurers are unlikely to retain or attract investors and could struggle to survive. Measurement is therefore crucial, however subjective it might be to begin with.

ANSWERS NEEDED Insurers are also being asked to look at the Poseidon principles on green financing, a framework for assessing and disclosing the climate alignment of ship finance portfolios, adopted by the major global banks in the sector. It is helpful that the regulators have already appreciated the complications of unharmonized terms and models. One pragmatic approach would be that if a risk has been financed by a bank adopting those principles, there would be no need for insurers to replicate that process in full. Nonetheless, each insurance entity will be expected to have clear plans in the sustainability field. For those operations wishing to trade in the Arctic in the future, they will necessarily have to provide extra information to gain insurance cover. The regulators are now adding rigour to the early voluntary schemes around carbon reporting so insurers will have to be in a position to comply. The various drives toward net zero are a new reality for everyone and clients will need to do their own thinking and have answers to hand.

The Marine Insurer | January 2022

2021 IN REVIEW | Green Shipping In association with SwissRe

The transition to green shipping starts now If meaningful progress on decarbonising shipping is to be made, then insurers must be prepared to cover the risks that ship owners will face in the green transition, say Patrizia Kern, (above) Head Marine at Swiss Re Corporate Solutions, and Adam Watkins, (left) Chief Underwriter Marine & Head UK Property & Specialty Underwriting at Swiss Re Group The shipping industry is working flat out these days, driven by the surging demand for goods as the global economy rebounds from last year’s pandemic slump. But all those container ships and tankers criss-crossing the oceans are also contributing a rising share of greenhouse-gas emissions. In response, industry leaders in shipping, energy, infrastructure and finance banded together to issue a Call to Action for Shipping Decarbonisation before the COP26 climate conference in Glasgow. Their goal is for the shipping industry to be run entirely on net-zero energy sources by 2050. Major insurers and reinsurers are going further, establishing the Net-Zero Insurance Alliance. This group, co-founded by Swiss Re, will allow the insurance industry to put its underwriting expertise to work in driving the global transition to a low-carbon economy. Swiss Re is spurring shipping decarbonisation from both sides of our business. On the reinsurance side, the group is working with its clients to promote sustainable underwriting and offering assistance to help them align their businesses with net-zero goals. By adopting a partnership approach and The Marine Insurer | January 2022

developing common goals, we can jointly monitor the progress in our journey to net zero. Swiss Re Corporate Solutions is working with its insurance clients so we’re prepared to cover the risks involved in decarbonisation when new fuels and technologies are brought on line. The corporate insurance arm is also promoting safe and sustainable practices in the shipping industry through groups such as the Ship Recycling Transparency Initiative.

NOT BUSINESS AS USUAL The case for cutting CO2 emissions from shipping is clear. The industry currently accounts for nearly 3% of the global total, according to the International Maritime Organization (IMO). The IMO says that by 2050, greenhouse-gas emissions from the industry should be reduced by at least half from 2008 levels. But if business continues as usual, emissions could soar by as much as 130% in the next three decades. The Call to Action for Shipping Decarbonisation ramps up the ambition. By 2030, zero-emission fuels should account for at least 5% of consumption in international shipping, and commercially viable zero-emission vessels should be operating on deep-sea trade routes. Industrial-scale projects should be carried out to demonstrate that zero-emission shipping is viable at scale as well as to push down costs related to the transition and boost demand. While the private sector is leading the way, governments and regulators will also have to take policy action that makes zero-emission shipping and fuel production commercially viable and available to all. This point is made clear in the Call to Action, which was issued by the Getting to Zero Coalition, a partnership between the Global Maritime Forum, the Friends of Ocean Action and the World Economic Forum. Swiss Re is a signatory along with more than 150 companies and organisations.

2021 IN REVIEW | Green Shipping In association with SwissRe

“As part of shipping’s transition to greener fuels, a large part of the existing global fleet will eventually have to be replaced, and that will require technological advances and greater shipyard capacity.’’

FUELING THE TRANSITION Among the challenges that must be overcome on the road to decarbonisation, the biggest by far is developing an alternative to bunker fuel that can be produced in sufficient quantities and at a reasonable price. The Coalition’s definition of zero-carbon energy sources includes green hydrogen – hydrogen made from renewable electricity-powered electrolysis - and its derivatives such as ammonia and methanol, as well as sustainable biofuels. On the reinsurance side of Swiss Re, the group is working hard within its special lines businesses to coordinate between marine and engineering colleagues on the provision of reinsurance for renewable energy assets - wind turbines, solar, wave. Swiss Re is also working with clients to assist in the transition of their portfolios from oil and gas-based to renewable sources. This all feeds directly into the technologies needed to achieve zero shipping emissions. As part of shipping’s transition to greener fuels, a large part of the existing global fleet will eventually have to be replaced, and that will require technological advances and greater shipyard capacity. Awareness of the issues must be raised across the industry, and access to new technologies must be ensured for smaller operators. Insurers have a critical role to play in the de-carbonisation drive, and to do so we must be prepared to cover the risks that ship owners - who will bear the brunt of the costs - will face in the years ahead. Since technological innovation is at the heart of this process, insurers will have to find ways to cover new ships from the prototype stage, rather than waiting until the ships have a track record of performance. To insure prototypes, insurers will need data. Swiss Re Corporate Solutions, is already working with shipping firms as well as classification societies and data companies to make sure that it has the detailed information needed to measure and model risk and make it insurable. On the reinsurance side, the group is working with clients as they grapple with the challenges of measuring the exposure and

carbon-intensity of their portfolios; and how they will report this information. Not all companies have the systems in place to capture and report this data. We emphasise the urgent need to get these systems up and running.

NEW RISKS AND SOLUTIONS The technological overhaul of shipping will create opportunities as well as challenges for insurers. Take refueling, which at present poses a minimal risk. Refueling with alternative fuels such as hydrogen could pose new dangers that insurers would have to consider. The magnitude of the risks themselves need further exploration for measurability. We can’t yet know which alternative to bunker fuel will become the new industry standard, but we need to begin weighing the potential consequences. Overhauling the shipping industry will require vast investment and commitment. For this, commercial firms and governments must work together, and international efforts such as COP26 are essential for forging consensus. The Poseidon Principles for Marine Insurance are being developed with the participation and support of Swiss Re for hull and machinery portfolios. An analogous set of Poseidon guidelines for banks was launched in 2019, while cargo owners and charterers issued the Sea Cargo Charter last year. Such standards offer a methodology for gathering information to assess climate-related risks.

INTERNATIONAL COLLABORATION Leaders at COP26 made substantial progress on the broad net-zero agenda, including the commitment of $130 trillion of private capital to transform the economy for net zero. The shipping-decarbonisation push also made headway with the Clydebank Declaration for Green Shipping Corridors, which aims to establish at least six zero-emission maritime routes by the middle of this decade. A discussion was also held on opportunities for developing countries in providing zero-carbon fuels to global shipping. Yet the pledges made in Glasgow weren’t enough to put the world unambiguously on a sustainable carbon-reduction trajectory, analysis from the Swiss Re Institute shows. And history suggests that not all countries will deliver on the promises they’ve made. So now is the time for marine insurers to redouble their efforts and deliver on their own pledges to help decarbonise the shipping industry. Marine insurers are essential to the shipping industry and global trade. To play their role in the green transition, they will have to step up and innovate just as their clients are doing. That means not just aligning their portfolios with the Paris Agreement goals, but laying the groundwork now so they’re ready to offer insurance when new green ships hit the water. The Marine Insurer | January 2022

2021 IN REVIEW | Sustainable future In association with Apollo

ESG

ESG ESG

Driving change through sustainability Cop26 was a huge opportunity for the world to face up to and act upon the realities of climate change. But while leadership from the very top is essential to drive real progress towards a more sustainable future key sectors such as shipping and insurance have a critical role to play within the bigger picture. Iain Henstridge, of Lloyd’s insurance and reinsurance group Apollo and Co-Chair of the Joint Hull Committee, argues that the shipping and insurance communities can make a real contribution right now Hype is a word that is often associated with climate change and ESG (environmental, social and governance) matters, but global warming and making the changes necessary to usher in a low carbon economy are the biggest challenges facing, not only our customers, but we, as insurers, too. Today, the measure of a company’s success is just as likely to be its green credentials, as its profitability. You only have to look at Tesla, to see the attraction of green businesses to investors. A motor company that no one had heard of 15 years ago, The Marine Insurer | January 2022

now has a market capitalisation of around $1 trillion and is more valuable than the world’s nine largest car makers combined! There are many reasons for this, but surely the most compelling is that, as a corporation, it is quite literally, driving change and is an enterprise with no perceived ‘dirty’ legacy. Companies that do not adapt to change risk extinction. Just ask a teenager if they have ever heard of Kodak. That blank look you receive in return, will make you realise just how quickly a company’s relevance can plummet. At one time the undisputed king of imaging, but a company that arguably failed to react in time to change.

2021 IN REVIEW | Sustainable future In association with Apollo

IT’S ONLY INSURANCE, OR IS IT?

the needs of those legacy assureds struggling to find cover? Insurers model risk and the big challenge will be how to derive an effective ESG score for each of our clients, enabling us to establish a benchmark. The big data companies and modellers will need to step up here to provide granularity of detail, allowing insurers to assess this previously unassessed element of the risk. I predict that within a couple of years underwriters will routinely be using these ESG scores in their pricing models. Those assureds that make progress in the green transition are certain to benefit from a rating differential and advantage. So what kind of things will make up an ESG score that insurers can use to assess a risk? The list below is just the

Underwriters are in a strong position to drive change “Marine underwriters have been the bedMarine underwriters have been the bedrock of world trade for more than rock of world trade for more than 300 300 years. We have been there on the journey with our customers, as they years. We have been there on the moved from sail via steam, to the modern diesel engines that provide journey with our customers, as they efficient propulsion to today’s ever larger ships. And we will be there for the moved from sail via steam, to the modern next generation of ships. Marine insurers potentially have real diesel engines that provide efficient leverage to help move shipping into a low carbon future. Banks do not lend propulsion to today’s ever larger ships. and ships do not sail, without insurance. The downside risk to a company’s Iain Henstridge, balance sheet and its people of sailing Apollo without cover is incredibly high. Banks can adopt a strong ESG stance tip of the iceberg: with their lending, but what about those loans already on their > The forthcoming EU Monitoring Reporting and Verification books? What can they do – call the loan in for lack of progress on regulations will mandate the transparent reporting of a ship’s sustainability? Of course not. A marine mortgage is a long-term environmental performance. Insurers will potentially be able to loan and the banks may not want to risk their own balance sheets benchmark using this data; by making waves. > The use of shoreside electrical feeds to allow vessels to But a vessel’s insurances are generally short-term power down in port. This would lead to tangible health benefits arrangements, typically 12 months. If an insurer has concerns to those living near ports; about its client’s sustainability credentials, it is in a much stronger > What type of fuel does the vessel use?; position than a banker to exit that client relationship early. > Shipping companies that reduce their potential Marine insurers do not generally turn their backs on what may be environmental impact by not navigating the Northern Sea an otherwise healthy long-term relationship, but times change and the Route and other unspoilt waters; underwriter may simply not be allowed by their management’s > Shipowners that adhere to strong crew welfare practices, ESG committee or board to continue writing that business. such as those set out in the Neptune Declaration; > External data sources, such as Glassdoor, give an insight MEASURING SUSTAINABILITY into corporate behaviours. They help insurers build a picture of Insurers will want to do the right thing, but with sustainability their client’s quality of governance; being such an amorphous concept and its public perception so > Counterparty quality. Banks, for example, will have an subjective, there will be a wealth of challenges ahead. insight into a shipping company’s credentials. This is highly This issue raises so many questions within the marine subjective, but the quality of the lender can often mirror that of insurance community. To name but a few: their client; and, > Responsible ship recycling is a noble aim, reducing pollution > Engagement. Shipowners that actively engage with their in South Asia, but at the same time denying an income for insurers rarely have much to hide. That transparency can be an workers and their families in the region. Who are we to take the indicator of good governance. moral high ground?; > How far do we go in measuring and quantifying sustainability? Refusing to insure vessels that carry coal for thermal power REPUTATIONAL RISK generation is a relatively easy decision for an underwriter, but As environmental matters come to the fore, shipping is being what about soy beans or palm oil from areas that were previously seen by the general public as a dirty industry. Insurers, and their rainforest?; and, capital providers, want to support sustainable companies. They > Where does it end? We are not policymakers, but we are want to be associated with companies that publicly declare that enablers. Existing insurers and bankers can steer responsible they are on a defined path to be more sustainable, as it is the behaviour, but does this judgemental approach then allow right thing to do. And doing the right thing is an increasingly questionable challenger players to enter the market to cater for crucial element of the insurance industry today. The Marine Insurer | January 2022

2021 IN REVIEW | Sustainable future In association with Apollo

Pressure groups, with vociferous social media campaigns, are playing their part, driving insurer behaviour. There has been online pressure, naming and shaming companies that offer insurance to new coal mines, for example. That has led to a withdrawal of insurer capacity for these massive facilities. In our world of marine insurance, the NGO Shipbreaking Platform has been successful in highlighting the illegal scrapping of ships, and the dangerous pollution arising from their disposal on the beaches of South Asia. This has caused many underwriters to review their underwriting of such risks, with a consequent reduction in capacity. Extinction Rebellion is a direct action pressure group that has staged highly visible, imaginative and disruptive protests against insurers for their perceived lack of environmental concern. Increasingly, a company’s ESG credentials are the focus of insurers and such scrutiny will only intensify as time goes on. It is only a matter of time before shipping companies themselves really come into the sights of environmental pressure groups. Only those companies that can prove they are making the change will be able to fend off these pressures. Social media has proven to be a hugely valuable tool to put pressure on insurers and their clients alike. It has given a megaphone to anyone with an opinion, without the filters that mainstream media often use to verify the facts. Lloyd’s with its 333 years of always paying valid claims is rapidly adapting to this changing world. Such a tremendous reputation could be savaged if the market did not adapt, so CEO John Neal has put sustainability and ESG front and centre of his strategy for the future Lloyd’s market.

GLOBAL PUSH FOR CHANGE The United Nations Environment Programme has also been working with the insurance industry to produce its Principles for Sustainable Insurance. It has produced four guiding principles for insurers: 1. We will embed in our decision-making environmental, social and governance issues relevant to our insurance business; 2. We will work together with our clients and business partners to raise awareness of environmental, social and governance issues, manage risk and develop solutions; 3. We will work together with governments, regulators and other key stakeholders to promote widespread action across society on environmental, social and governance issues; and, 4. We will demonstrate accountability and transparency in regularly disclosing publicly our progress in implementing the principles. These overarching principles are not mere “greenwashing”, but keep the pressure on the insurance community to push for change.

INNOVATION Insurance is an economic and social utility. As such our The Marine Insurer | January 2022

ESG “Lloyd’s with its 333 years of always paying valid claims is rapidly adapting to this changing world. Such a tremendous reputation could be savaged if the market did not adapt, so CEO John Neal has put sustainability and ESG front and centre of his strategy for the future Lloyd’s market.’’

industry has an important role to play in advocating and supporting real and tangible change. The development of new research and development pportunities can be supported by insurance. And whilst there are ‘new’ risks, this is a challenge our industry has always risen to address. The opportunities are mutually beneficial both commercially and seen through an ESG lens of their impact on society.

CONCLUSION Shipping has become one of those things the world takes for granted. This has been the case even more since the growth of globalisation in the late 20th century, where so much of what we consume has been conveyed by ship. Out of sight and out of mind, that is, until things go wrong. The unfortunate blockage of the Suez Canal by the Ever Given earlier this year, and the subsequent chaos that ensued, showed us all just how dependent we are on shipping. Nearly three years ago my chairman asked me what our hull account would look like without fossil fuels being a part of it. I was really taken aback by such a line of questioning. Dark thoughts went through my mind, wondering how we might manage such a change. But as insurers adapt to this new order, that question proved to be more prophetic than I realised at the time. We will need accelerated action by 2030, if we are to meet the 2050 net zero target. A defined timeline is important to businesses and populations. But we must always remember that nature itself does not work to a calendar. The green revolution in shipping, and the drive towards net zero, offer not only the greatest opportunity in our lifetimes, but could be that vital part of the jigsaw that pulls humanity back from the edge of the ecological abyss.

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2021 IN REVIEW | P&I Insurance Market In association with North P&I Club

Sustainability costs money Like ignoring ESG challenges, the idea that P&I clubs have too much money is very ‘last decade’ argues Ed Davies Chief Financial Officer, North P&I Club

In 2019/20, only one club out of 13 avoided an underwriting loss. For any other sector of the insurance market, a “hard” market would have been triggered some time ago.

The Marine Insurer | January 2022

There are few organisations with histories as long as P&I clubs. The mutual P&I system seems almost by definition sustainable and one which we all may take for granted at times. Through the years, some clubs have been lost along the way, leaving us with the inauspicious number of 13 - the question of whether 13 is too unlucky a number and that there are too many clubs is best left for another day. Yet when news of major shipping casualties hit the screens of our various devices, we know that the mutual P&I system will respond with alacrity and proficiency to protect the environment, shipowners and other third parties along today’s hugely complex global supply chains, notwithstanding the financial cost.

CALL THAT VOLATILITY? And the financial cost is real. The incidents that P&I clubs are involved in where the environmental and social consequences are severe – the types of incidents that many people are aware

2021 IN REVIEW | P&I Insurance Market In association with North P&I Club

of from the news – are relatively rare, albeit not rare enough. They are also very expensive and a small number of such incidents can dominate results across the market. Standard & Poor’s signalled their alertness to the market experience of 2020, and, if the events so far are anything to go by, 2021 looks like it will offer little comfort. We might think of the natural catastrophe reinsurance markets as volatile and of course they are, triggered by those supposedly one-off “1 in 100-year” events that seem to happen every two or three years. P&I clubs are a blend of insurance for outsized claims that occur a few times each year and attritional claims that happen in their thousands. This explains how combined ratios across the International Group for 2020/2021 ranged from 101% to 150%. The year 2019/2020 saw results nearly as stomach-churning to the financially minded of us – from the just-over-theline 99.8% to 137%. That variability in results means that P&I clubs require healthy levels of capital. By way of comparison, the headline-worthy experience following COVID-19 interruption claims and an “abnormally high frequency of natural weather catastrophe events” pushed Lloyd’s of London’s property line to the dizzying heights of 135% on an accident year basis. The Marine, Aviation and Transport line reported results over the last five years between 90% and 119%, much better and less volatile than P&I clubs have been reporting yet sufficient to put marine liabilities under the spotlight.

TIME FOR A “HARD” P&I MARKET Underwriting results in the P&I market for 2020/21 were consistent in one sense – we all lost money on our underwriting books. In 2019/20, only one club out of thirteen avoided an underwriting loss. For any other sector of the insurance market, a “hard” market would have been triggered some time ago. If we are honest with ourselves, we all saw this coming. As rates steadily reduced by more than 30% in recent years, even as exposures grew, we have often returned to our essential raisons d’etre and supported our shipowner members as they navigated difficult times themselves. And shipowners are also club-owners. They have every right to demand value and support from their P&I club. Equally, shipowners recognise the unparalleled role that the P&I system plays and that it is too important to be imperilled. A “hard” market in P&I terms means fair premiums which support the clubs and the wide-ranging support they provide, as well as share the risks and financial consequences of incidents that could happen to any shipowner. Expensive pool claims and reinsurance programmes are essential to the system but becoming increasingly costly to maintain.

INVESTMENT INCOME UNDER PRESSURE Last year we reached the inflection point where investment

“The year 2019/20 saw results nearly as stomach-churning to the financially minded of us – from the just-over-the-line 99.8% to 137%. That variability in results means that P&I clubs require healthy levels of capital.’’ Ed Davies, North P&I Club

income only just kept the P&I system afloat. And that was a year when a typical P&I club achieved 6% to 7% in investment returns. At this point in the cycle, even a P&I club portfolio – typically rather “racy” compared to the mainstream insurance market – has nowhere to go to seek those levels of return. The 10-year average for returns is closer to 4%. In very rough numbers this represents a US$300m shortfall for our market compared to last year when clubs earned something near to $700m yet nonetheless lost money overall. It would take a brave CFO at present to forecast more than 1% to 2% in their business plans with equities uncertain and rising yields pushing down the value of our extensive bond portfolios. This is not a funding gap for the market to plug by tinkering with operating results but more of a yawning gulf of $500m to $600m.

SUSTAINABLE INVESTMENT The whole industry is judged on the response to major incidents which are on public view worldwide. That response relies on the network of support that today’s P&I system provides. This comes from correspondents and on-the-ground response teams through to the expertise and financial resources that P&I clubs make available combined with the backing of a unique reinsurance programme. P&I clubs work together through the International Group to promote sustainable objectives, improving safety at sea and protecting the marine environment. It is a unique system of collaboration – amidst ruthless underwriting competition – which could only have grown up over many years of continual support and guidance from shipowners. Whether we call it a “General Increase” or not, we hope that shipowners will understand the need to support their P&I club – an investment in the club that they own and in the sustainability of the P&I system as a whole. The Marine Insurer | January 2022

2021 IN REVIEW | Chartering risk In association with Marsh Specialty

In the world of supply chain disruption and traffic jams at ports chartering your own vessel may seem like a good idea. But Stephen Harris, (above) Senior Vice President, Marine & Cargo, Marsh Specialty, urges cargo owners to look carefully at the risks involved and ensure they are adequately covered Fear of supply chain disruption has led some large retailers and wholesalers to charter their own vessels and others to consider doing the same. The recent convulsions in the marine chartering market have resulted in traffic jams at ports, with ships unable to berth and discharge their goods. At the same time, some vessels are earning record-breaking fees. However, chartering a vessel is complex, involving a host of responsibilities and expenses that the unwary may not realise. Smaller traders often rely on cargo consolidation when they struggle to fill a whole shipping container with their goods, so the idea of hiring an entire ship is impractical. But for large wholesalers and retailers, chartering a ship could provide a degree of control they do not have when relying on others to carry their goods. At the outset, organizations that decide to hire their own vessels must decide whether to voyage or time charter a vessel. The two types of charter are subject to their own agreements, known as “charterparties”. Under a voyage charter, a vessel is hired for a single voyage, or a series of consecutive voyages. Under a time charter agreement, a vessel is hired for all voyages, during an agreed period of time, be it six months, a year, or longer. Retailers and wholesalers that are considering chartering vessels typically opt for a voyage charter. Unlike professional vessel charterers, they are unlikely to want to hire a vessel for long periods of time.

CHARTERER RESPONSIBILITIES There are a host of standard voyage charterparty agreements available, each requiring expert guidance as to suitability to the charterer’s needs, though they generally have common themes. All, for example, place some obligation on the charterer. Where a charterer has a responsibility, there is also the risk of incurring a liability if that obligation is badly discharged or not discharged at all. A charterer’s responsibilities include a number of key areas that need to be taken seriously from the outset.

The Marine Insurer | January 2022

Look before you leap

SAFE PORTS First there is the matter of nominating “safe” ports. The charterer is normally expected to designate a “safe” port that the vessel is to sail to with the goods. A port could be deemed unsafe if it is not deep enough for a vessel to enter safely, or where political or weather conditions expose a vessel to unacceptable danger, potentially leading to damage or even loss. There have been legal cases brought by ship operators where the port nominated by the charterer has turned out to be unsafe. For example, the so-called “capesize” bulk carrier Ocean Victory broke up after leaving the Japanese port of Kashima during a severe storm in 2006. The charterers were held liable for costs, after a judge held that the port was unsafe. In a case involving the vessel Athos 1 (Citgo Asphalt Refining Co v Frescati Shipping Co), the ship’s charterer was held responsible for costs relating to an oil spill in the Delaware River in 2004 as the charter contract established that Citgo would provide a safe berth. When chartering a vessel, care needs to be exercised in ensuring that all the ports that a vessel is nominated to enter (generally by the charterer), stay at, and leave are safe. The depth of a port, its cargo handling capabilities, the weather patterns, and political stability in the port area are all critical. Not to do so is to risk incurring a liability for damage done to a vessel visiting an unsafe port.

2021 IN REVIEW | Chartering risk In association with Marsh Specialty

“For large wholesalers and retailers, chartering a ship could provide a degree of control they do not have when relying on others to carry their goods.’’

ASSIGNING PORT AGENTS Second, under many standard charterparty agreements, the loading and unloading of goods is the responsibility of the charterer. Therefore, a charterer will need to consider appointing port agents at all the loading and discharge ports in order to safeguard their interests. A vessel held up in a port because local cargo handlers – stevedores or longshoremen – are unable to discharge the goods on time could permit a ship operator to penalize a charterer for undue and excessive delay. This would be done under a measure found in most voyage charterparties called “demurrage”. An outbreak of COVID-19, for instance, could result in inadequate numbers of cargo handlers being available in a port to discharge a vessel, as has recently been the case at some Chinese ports.

PACKING, SEALING, AND HAZARDS Third, when voyage chartering a vessel, great care needs to be exercised to ensure the goods are adequately packed and sealed at the loading port. Ensuring that there is no leakage or spillage of goods at the time of loading, or that could be reasonably expected during the voyage, is often the voyage charterer’s responsibility.

The cost of any spillage of goods during the voyage and any consequential clean-up expenses, especially if such events cause contamination of other cargoes on board or damage the vessel, could expose the charterer to liabilities. Similarly, the charterer is responsible for any goods loaded that could endanger the vessel, for example, through fire or explosion. The charterer needs to ensure the master of the vessel is fully aware that such goods are on board and agrees to continue with the voyage. Otherwise, the charterer could be held liable for any damage caused to the vessel or other consignments by volatile cargoes. Charterers often need to rely on a global network of agents at loading and discharge ports, especially where the goods are of a hazardous, volatile, or dangerous nature. The charterer needs to be confident that their local agents will pass on all relevant information to the ship operator about the nature of such goods. Otherwise, the charterer again faces potential liability for any damage to the vessel or other cargoes on board caused by those volatile goods.

DAMAGE TO SHIP Fourth, damage to hull (DTH) insurance is designed to cover a charterer’s liability for damage caused to an owner’s ship. For example, a ship could be damaged in a port, which is subsequently deemed to be unsafe; or it could be damaged during loading or unloading by a charterer’s nominated stevedores or longshoremen. If the charterer owns the cargo on board a ship and that cargo causes damage – for example, as a result of fire or explosion – DTH insurance should provide charterers with the relevant cover.

NO QUEUE JUMPING The above are just a few of the responsibilities that a voyage charterer can expect to take on; and they are often buried deep within the wording of standard voyage charterparty agreements. If a wholesaler or retailer is prepared to take on these risks, they need to be aware of things that chartering a vessel cannot achieve. If the port where the goods are to be discharged is suffering chronic delays – whether caused by the pandemic or any other reason – the chartered vessel may be stuck outside the port, along with others. Chartering the vessel will not enable queue jumping. The recent case of the Ever Given blocking the Suez Canal, which led to the delay of 400 vessels, is a reminder that delays and the non-arrival of vessels may be caused by events over which a charterer has no control. Chartering a vessel may not alleviate these risks and delays where no damage has occurred to the vessel generally do not represent insurable risk. If chartering a vessel is still the preferred option, then managing the associated risk — for example, by purchasing marine charterers’ legal liability insurance — is a sensible precaution to take. The Marine Insurer | January 2022

2021 IN REVIEW | Life at sea In association with MatthewsDaniel Club

Who would want to go to sea in the post-pandemic world? Simon Ward, of leading international loss adjusting and marine warranty surveying firm MatthewsDaniel, reviews the escalating pressures placed on seafarers during the Covid-19 era and argues that life at sea remains an attractive career but that more support is needed There are few organisations with histories as long as P&I clubs. The mutual P&I system seems almost by definition sustainable and one which we all may take for granted at times. Since the onset of the Covid-19 pandemic in early 2020 a number of incidents have brought the shipping industry into sharper view. The most significant effects have, however, perhaps largely been in a blind spot to all but the keenest industry watchers: the seafarer. The seafarer has been at the heart of all of this. Not surprisingly, the industry press is now commenting on potential crewing shortages with many seafarers questioning whether a life at sea remains a viable career choice. Also, more specifically, we have to ask what the experiences of the Covid-19 pandemic era means for marine claims? In recent times, the shift of global manufacturing to the The Marine Insurer | January 2022

Asia Pacific region has occurred in parallel to an increasing dependence on ‘just enough, just in time’ supply chains. This trend has been underpinned by a network of global maritime trade routes that have increasingly relied on larger and larger vessels to move goods. The TEU capacity of container ships has more than doubled since the start of this decade but manning levels have more or less remained the same. The result is a combination of large high-volume ships manned by proportionally fewer crew able. Moreover, while these vessels are able to deliver more goods per journey they also have a significantly larger impact on global supply chains when something goes wrong. No one reading this publication will need any prompting to remember the disruption caused in March 2021 when the 20,000 TEU container vessel MV Ever Given grounded in the Suez Canal. Not only did the companies with goods on board suffer

2021 IN REVIEW | Life at sea In association with MatthewsDaniel

significant disruption to their supply chain, but so did the estimated 369 other vessels that were waiting to transit the canal.

GARDEN GNOMES Aside from the anecdotal shortage of garden gnomes across Europe that ensued, this also required a major response from the markets through cargo, charter and P&I insurance that will continue, in some cases, for years to come. The commercial pressures to maximise vessel size, turnaround times and maintaining route schedules with proportionally fewer crew members against the size of the vessel and the amount of cargo has also heightened the risk of container stack collapses and losses overboard. There continue to be instances of this type of incident. There is no need to re-hash the multiple papers already in circulation exploring the root and proximate causes of container loss. But commonly reported themes remain poor lashing of large stacks, often with poorly maintained equipment, the impracticality of inspecting lashings of large stacks and the effects of poor weather while on passage. There have also been a series of well-publicised container fires through the pandemic period. This is not a new phenomenon, and certainly not germane to the pandemic. But, as with stack collapses, the immediate actions to stabilise the situation fall to small crews, generally with insufficient equipment to properly address incidents. Even where help may be close at hand in the form of a port of refuge, local authorities are often unwilling to accept the potential liability when Masters are aware that all is not well with their cargo. The story of the MV X-Press Pearl is a sobering example of this situation. This was a modern container vessel lost after only three months’ service, caused significant environmental damage. The master was arrested (and subsequently bailed) and the vessel’s insurers and P&I club were left to pick up the tab.

LIFE AT SEA What does all this have to do with the thought processes of seafarers as they contemplate a post-pandemic life at sea? The matters outlined above all signify both a dependence upon the global supply chains enabled by vessels and their crews and also the liability of those seafarers when incidents occur, many of which are beyond their ability to prevent or contain. In ‘normal’ times, this in itself is a worrying trend. Masters and crews are carrying increased levels of risk and exposure, legal and physical, because of the consequences of decisions being taken elsewhere. While many of the causes of these issues and the subsequent insurance claims have remained the same for decades, the consequences today are much bigger. Adding to the pressure on modern seafarers is the well documented treatment of them throughout the pandemic. Crews unable to sign off and return home were essentially left to ply their routes with no knowledge of when they may see homes and families again.

“The commercial pressures to maximise vessel size, turnaround times and maintaining route schedules with proportionally fewer crew members against the size of the vessel and the amount of cargo has also heightened the risk of container stack collapses and losses overboard.’’ Simon Ward, MatthewsDaniel The Maritime Labour Convention states that contracts should not exceed 12 months but many seafarers that operate deep sea sign on for voyages of much shorter duration, typically 3-4 months, in acknowledgement of the pressure and work hours they will face during that period. Regardless of anticipated voyage length though, the inability to sign off, uncertainty of when that may ultimately happen and the need to continue to operate the vessel in lieu of leave all takes a human toll. Then there is the example of vessels unable to land and repatriate the remains of crew mates who have sadly died while at sea. Imagine if this was all happening in your workplace and accommodation? I wouldn’t want to conclude this piece by saying seafaring is a career to be avoided. Far from it. A life at sea is often wonderful and provides a rewarding and fulfilling career path to many. This has been amply demonstrated by the dedication and resilience of the global seafaring community during the Covd-19 pandemic. Despite the additional stresses imposed by the international response to the pandemic, alongside the trends already evident in increased risk for seafarers, they remained ‘on watch’ and ensured global supply chains kept moving. Sadly, it often takes totemic incidents like that of the Ever Given or X-Press Pearl to remind the world at large of what these seagoing men and women facilitate. These incidents also resurrect the debate over the cost of claims versus the price of insurance within a global shipping fleet that constantly seeks to do things bigger but for less money. So, in summary, to answer the question posed in the title, I would hope the answer is ‘all of those who seek to do so today’. But I think they could be better supported. Looking ahead to 2022, let’s hope the improving international situation regarding Covid-19 also results in a return to smoother seas and calmer sailing for seafaring community. The Marine Insurer | January 2022

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2021 IN REVIEW | Marine market pricing In association with Liberty Specialty Markets

Time to stand firm Michael Burle, Head of Marine, Liberty Specialty Markets asks whether the London marine market can finally break the cycle of self-defeat as he sees worrying signs of pressure on rates There’s a point in any market cycle when rates achieve a moment of equilibrium that, for a defined period of time at least, is both stable and comfortable for all parties involved. It’s like a finely balanced seesaw, both ends hovering around the horizontal. And then something happens. A gust of wind, a child’s arrival – and the seesaw tilts, perhaps decisively. Equilibrium is lost, the moment is gone. A new cycle begins. Right now, the marine insurance market is poised at such a moment. For four years, marine cargo has enjoyed hard market conditions. But rates are starting to move. While some lines continue to rise, brokers are requesting discounts in others. Having been unable to travel during the pandemic and meet face-to-face, brokers are understandably keen to remind clients of the valuable service they perform. Placing pressure on underwriters is one way of achieving that. The Marine Insurer | January 2022

RATE INADEQUACY It is not just marine cargo affected by this nascent softening: marine hull and specie are beginning to slide, too. The issue, however, is that while marine cargo has enjoyed a degree of rate adequacy, hull and liability have yet to achieve that position. Rates in these classes are still well below where they need to be. Yet the “group-think” fueling market softening is already encroaching on their performance. While this cross-contamination would be undesirable at any time, it’s doubly so now. The marine market finds itself in what is effectively a new world. As the pandemic’s grip on the economy loosens, a range of factors is increasing the market’s exposures at the precise moment that rate momentum wanes. Some of these factors are a direct result of the pandemic. Others have their roots elsewhere. The net result is a market unlike any I’ve experienced in more than 30 years of marine underwriting. Indeed, the last time we saw this kind of tipping point was back in the mid-1990s.

2021 IN REVIEW | Marine market pricing In association with Liberty Specialty Markets

“The global supply chain crisis is certainly foremost among them. The build-up of containers at ports like Felixstowe is leading to greater port accumulations and more vessels being brought into service. One shipping line has already talked about off-loading cargo from larger vessels onto multiple smaller vessels to be moved to the UK.’’

UNFAMILIAR WATERS So, what are these factors impacting on our marketplace? The global supply chain crisis is certainly foremost among them. The build-up of containers at ports like Felixstowe is leading to greater port accumulations and more vessels being brought into service. One shipping line has already talked about off-loading cargo from larger vessels onto multiple smaller vessels to be moved to the UK. Data from London-based Drewry Shipping’s world container index showed that the composite cost of shipping a 40-foot container on eight major East-West routes hit $10,374.64 (about £7,618) in September 2021, up 323% in a year. Even though the rate then dipped, it was still at $9,146.41 in November. Port congestion is not helped by the fact that some of the vessels unloading containers are among the largest in the world. This huge influx of cargo takes time to unload and distribute. On a single day in September last year, it was reported that 73 vessels were off the coast of California waiting for berths to become available at the state’s two main ports. On one occasion, China’s Ningbo-Zhoushan Port had to be shut down following a worker’s infection with Covid-19. This shows just how vulnerable major ports are to the pandemic. The rising price of energy is also having a significant effect on the marine insurance market, increasing the cost of storage

and energy-related cargos such as liquified natural gas (LNG). European imports of LNG are expected to reach 7.6m tonnes in October, up from September’s 5.08m tonnes. Shortages of natural gas are reigniting demand for oil, which needs to be transported. Worryingly, demand is predicted to outstrip supply by 700,000 barrels a day by the end of 2021. At the same time, climate change is increasing the unpredictability of weather patterns with greater potential for extreme weather events and resultant losses.

LOSS ADJUSTERS RESTRICTED The inability of loss adjusters to travel freely because of the pandemic means that claims settlement will likely require more time. This is of great concern because loss adjusters who are on the ground quickly can mitigate claims, particularly those with an element of business interruption cover. They can also assist with business continuity, moving cargos from one vessel to another, for example. At the same time, the London Market is facing greater competition. According to 2020’s London Matters report, London’s marine market share was holding steady at 33%. But marine insurance markets are developing all around the world, some willing to drive prices lower in search of market share. That is why the quality of the claims service offered is so critical to an insurer’s positions. Any market can write a risk cheaply, but the London Market stakes its reputation on having the expertise and claims experience to provide truly world-class claims service. These factors are changing the environment in which underwriters operate. They are new and unpredictable, yet my concern is that our market insists on behaving as it has done in the past, rather than accepting that new circumstances demand new responses. If we have got one thing on our side that might sway opinions, it’s data. Today, the London Market has more metrics and data points to determine rate adequacy than ever before –note the focus is on rate adequacy, not rate rises. That’s a fundamental shift in attitude for London.

TURNING THE TIDE This explosion of data on vessel types, weather patterns, port controls, warehouse conditions and many other factors is allowing us to pinpoint the precise rate at which we can maintain a healthy and sustainable market. In addition, we have access to data from third-party vendors and other parts of our own businesses. That’s a treasure trove of information with which to illuminate the situation in which we find ourselves. If anything can prevent London’s marine market from repeating the mistakes of the past, it’s clear-headed thinking and data. The seesaw may still be hovering in the horizontal position but evidence of change is all around us. If we choose to ignore that evidence, responding instead by adopting historically rooted modes of behaviour, the market softening will spread and gather pace. If we use the new tools we’ve been given, we have a brief opportunity to break old habits. The Marine Insurer | January 2022

2021 IN REVIEW | InsurTech Trends In association with Noria

Time to get serious with InsurTech Ronny Reppe, chief executive officer of Norway-based insurance platform provider Noria argues that as we approach the end of the globe’s second year of the pandemic, businesses are starting the journey to recovery but must realise they are one failed project away from disaster. Insurers have to take InsurTech very seriously right now

As the global community slowly shifts into the next phase of post-pandemic recovery, there are three key trends in InsurTech to keep abreast of ahead of 2022. At the same time, there are risks that could cause insurers to fall behind their competitors if they are left unmanaged.

INSIGHT ANALYTICS In my experience, there’s a vast difference between blind trust and the emerging concept of “digital trust”. Blind trust involves a customer placing complete faith in an insurer’s ability to manage their affairs and act in their best interest. It is blind because typically, customers in the past had no idea what data the insurer was working with or how they reached decisions. On the other hand, digital trust is earned by providing radical transparency; sharing data rather than hoarding it. Today, stakeholders including customers, underwriters and claims handlers increasingly expect insurers to provide them with complete and constant access to useful information to boost their ability to make better decisions. As PWC writes (‘Digital Trust: Protecting and realising the value of digital assets’) digital trust is about protecting The Marine Insurer | January 2022

and realising the value of digital assets, including data. The trend I have observed as we move towards 2022 is that customers are increasingly impatient with insurers that, first, make them wait for information, and then provide information in a non-user-friendly format. Customers want 24/7 access to useful information, which is why a self-service approach is usually best. Customers don’t want to arrange a meeting with an insurer to have their questions answered. They don’t want data dumps or spreadsheets. They want to be provided with valuable and actionable information in an easy-to-comprehend format, based on advanced analytics of real-time data. Through advanced data analytics, insurers can access better information about an expected claim to help them not only provide a more exact price, but help prevent future claims by providing customers with advice on risk minimisation.

The digital customer journey If insurers intend to improve the digital customer journey at

2021 IN REVIEW | InsurTech Trends In association with Noria

“If insurers intend to improve the digital customer journey at scale, they must take a self-service approach. This means providing customers with customisable dashboards featuring realtime information on loss prevention and

Self-service tools should be seamless, user-friendly, highly intuitive and require no training to use. Building a self-service solution will not only improve the customer journey but can provide vast efficiency gains for insurers. Keep in mind, however, that a digital dashboard should not replace the human touch in customer communication.

RISE OF THE INSURANCE ECOSYSTEM

Will 2022 be the year of the insurance ecosystem? Improved data-integration and increased digital trust have led to the growth of digital ecosystems between the broker, the insurer and reinsurers. These ecosystems enable better interaction with partners, customers, and other stakeholders such as regulators. It pools the industry’s most valuable resource: customer data. McKinsey defines an ecosystem as “an interconnected set of services or products that allows users to fulfill a variety of needs in one seamless experience” (‘Ecosystems and Platforms: How insurers can turn vision into reality’). This is achieved by creating partnerships across industry boundaries to bundle together digital offering and provide customers with an end-to-end experience. Stocking an ecosystem with additional products and services beyond the core insurance offering will generate new customers and increase existing customer loyalty.

other valuable data.’’ Ronny Reppe, Noria Software

scale, they must take a self-service approach. This means providing customers with customisable dashboards featuring real-time information on loss prevention and other valuable data. Through the power of advanced analytics, hyper-personalisation (Deloitte: ‘The future of retail banking. The hyper-personalisation imperative’) will enable insurers to deliver dashboards that are highly relevant to customers’ individual needs, boosting the customer experience and increasing customer engagement. An effective dashboard could add value through the provision of an analytics tool that shows how their insurance risk benchmarks with the rest of the world, along with advice based on those benchmarks. This is in addition to insurance basics: providing clients with certificates, policies, billing, and claim capabilities, access to user-friendly admin forms, and the ability to maintain assets in their portfolio without having to call the insurer.

RISKS While the potential of the above trends is exciting, there are several risks to watch for when implementing major digital initiatives such as building a digital ecosystem or creating a hyper-personalised self-service portal. These risks are centered around poor data maintenance, ineffective talent strategies, and taking a non-agile approach.

FAILING TO MAINTAIN DATA According to Gartner (‘How to improve your data quality’), poor quality data costs organisations an average of just under $13m per year. With data quality directly linked to the quality of decision-making, poor data maintenance in insurance will inevitably result in poor business decisions, sub-quality advice to customers, inexact pricing, and a failure to reduce the number of future claims through predictive analytics. Together, these consequences can shatter the trust built

The Marine Insurer | January 2022

2021 IN REVIEW | Casualty investigations In association with Ince

Time to get to grips with tech solutions Tchnology is beginning to transform marine casualty investigations, as its adoption has accelerated significantly during the pandemic. Christian Dwyer, (above) Global Head of Admiralty, and Donal Keaney, (below) Senior Marine Manager, both at Ince, one of the leading international law firms in the maritime sector, highlight that although it is early days for the technology, if used properly, it can accelerate progress in investigating marine casualties The casualty claims investigation process has evolved in recent years, a process that has been accelerated by the COVID-19 pandemic. Recent advances in technology have enabled investigators to access relevant information remotely, collate and process electronic navigational evidence, which allows interested parties to form an early view on the scale of the casualty and likely legal issues to arise. Although these solutions can make investigations faster, more streamlined, accurate and time and cost-effective, at best, they are still under-used and at worst, can be poorly applied. Several technological developments in the field of casualty investigation have played a key role in this shift, specifically Voyage Data Recorders (VDRs) and the Automatic Identification System (AIS). Since the IMO adopted Resolution MSC.333(90) to revise the performance standards for VDRs to assist in investigations into casualties back in 2012, VDR data has become far more comprehensive and reliable. All ships with VDRs fitted after 1 July 2014 now have a longterm recording medium, capable of storing a minimum of 30 days of continuous electronic data. As a result, the preservation of VDR data is no longer a matter of urgency, particularly in a large-scale casualty where VDR data can evidence the actions of crew to mitigate loss following an incident, as well as prior.

REMOTE INTERVIEWS Improvements in telecommunications allow investigators to The Marine Insurer | January 2022

interview witnesses and parties involved in a casualty, remotely. Whether because of travel restrictions or cost concerns, witness can now often be interviewed remotely using video calling facilities and locally sourced internet ‘dongles’. The ability to do this is especially significant, given the recent introduction of amended rules for the preparation of witness statements, discussed later in this article. Additionally, AIS has proven to be an important tool in improving casualty claims processes. It grants access to a comprehensive data bank of global information in use worldwide that allows specialised legal and casualty teams to create accurate ‘film clips’ of incidents. This helpful data - combined with evidence provided by owners, reports produced by local correspondents, and further input from the crew gathered via email or remote interviewing is instrumental in allowing legal teams to concisely advise clients on liability and propose the best steps for further handling. The ability to analyse electronic navigational evidence in all its forms properly and efficiently is the key to providing shipping companies affected by casualty claims with the most accurate advice and guidance. This advice is of relevance to groundings; ‘wash damage’ cases; unsafe port cases; collisions and allisions, irrespective of the value of the claim. The utilisation of AIS, VDR and other advanced electronic evidence analysis systems facilitates a triage approach to the early stages of a casualty, enabling vessel owners and their advisors to make early decisions on the

2021 IN REVIEW | Casualty investigations In association with Ince

“All ships with VDRs fitted after 1 July 2014 now have a long-term recording medium, capable of storing a minimum of 30 days of continuous electronic data. As a result, the preservation of VDR data is no longer a matter of urgency, particularly in a large-scale casualty where VDR data can evidence the actions of crew to mitigate loss following an incident.’’ immediate response to an investigation of a casualty. Early assessments of AIS and VDR data enables the legal teams involved in the casualty claim process to correct not only initial mis-assessments of the evidence itself but also the impact of this evidence on the relevant legal tests and therefore, liability. In addition, by shortening the lead-time to advice, they can produce significant savings in time and costs. Finally, it is important to understand that electronic evidence alone is unlikely to provide the complete picture and witness evidence still plays an integral part in the claims and legal proceedings that invariably follow a casualty. However, witnesses’ recollections will deteriorate in time and can be influenced by external factors. Therefore, it is highly advisable that, in addition to preserving electronic evidence, witnesses are interviewed by an appropriate person as soon as is practical, after a casualty.

EVOLVING INSTITUTIONS AND REGULATION Courts and legal institutions worldwide are also riding the wave of modernisation in casualty investigations and keeping pace on improving technological developments. The English Admiralty Court, for example, established a ‘fast track’ collision liability procedure a few years ago which makes the early exchange of electronic track data mandatory in all

collision liability actions, thus leading to the parties’ early and accurate assessment of liability. This process lends itself to more efficient and cost-effective Court proceedings. Moreover, preliminary hearings at the English Admiralty Court - and even trials themselves – are currently being carried out remotely, with all filing done electronically. For these reasons, the English Admiralty Court is one of the front-runners leading the way in modernising the casualty claims investigation and resolution processes. In line with these efforts and the growing tendency in the sector to streamline casualty investigation, witness statements to be served in Commercial Court proceedings must comply with new rules contained in Practice Direction 57AC, which have applied to Admiralty claims since 1 October 2021. These new rules are designed to remove complex legal witness statements and statements that are designed to provide an over-arching narrative of the party’s case, including reference to documentary evidence. The court has taken the view that, in most instances, the case will be determined by documentary evidence. Therefore, witness evidence must now be confined to that narrow section of the evidence which is subject solely to the witness’ own experience of the incident. As a result, the collation of witness evidence is now more complicated to deal with, and each matter needs to be assessed on a case-by-case basis at the outset.

COMBINING INTELLIGENCE WITH INSIGHT Information without context is like putting petrol into a diesel tank: a costly mistake. That is why ship operators and insurers need experienced legal advisors who can access, analyse and apply this data in a legal context. While local correspondents and surveyors will still play an important role in responding and gathering evidence on scene, they may not have the ability to test, access and evaluate the electronic evidence, and will certainly lack specialised legal knowledge to understand how it applies to cases. More importantly, Practice Direction 57 AD requires solicitors to oversee the entire process of preparing witness evidence, so their early involvement in this process is crucial. Seeking early legal advice from practitioners who take a holistic approach to claims investigations – from accessing state of the art intelligence to having the skills and experience to apply its findings - will provide the best ultimate outcome. It will also reduce costs and uncertainty. Furthermore, as claims are often multifaceted, legal action is more likely to be successful if shipping companies partner with law firms that have in-house mariners in their team with both the relevant seaborne and legal experience. Such experts are best positioned to work together with clients’ on-scene investigations to provide a cost-effective, appropriate, and on-point report and incident analysis, as well as a clear strategy for resolution of the incident. Therefore, as with most things in life, technology can accelerate progress but only in the right hands. The Marine Insurer | January 2022

2021 IN REVIEW | Cruising risk management In association with Envista Forensics

Cruising in the US: The return to service

Kevin Byers, (left) Project Engineer, Marine Practice and Kirsten Hoedlmoser, (right) Technical Lead, Environmental and Industrial Hygiene Group, at forensic consulting and engineering services group, Envista Forensics, explain what the cruise sector is doing to return to normal after a tough few years in the pandemic The latter half of 2021 saw a return to cruising out of the US, with the largest cruise lines returning more than 50% of their ships back to service. To do so in a safe and effective manner, the US Center for Disease Control’s (CDC) Framework for Conditional Sailing Order for cruise ships established guidelines for a phased resumption of cruise ship passenger operations. Additionally, many cruise lines have implemented operational restrictions and technical changes to their engineering systems to go above and beyond these requirements. At the onset of the pandemic in March 2020, cruise ships were in the headlines for uncontrolled COVID-19 outbreaks, closed ports, and stranded crews and passengers. The initial No Sail Order issued by the CDC on March 14, 2020, was maintained through the end of 2020 and well into 2021, with the first paid-passenger cruise departing Port Everglades in June The Marine Insurer | January 2022

of this year. From that point, resumption of cruising in the US states has accelerated with major lines expected to have all ships back in service by mid-2022.

COVID-19 PROTOCOLS The Framework for Conditional Sailing Order requires cruise ships to adhere to a minimum set of standards which aim to mitigate COVID-19 risk to passengers and crews, prevent community spread, and protect public health and safety. Requirements range from testing and vaccinations prior to boarding a cruise, efforts to mitigate spread on the ship and during shore excursions, and planning and preparation for controlling an outbreak and evacuating a person who requires immediate medical attention not available on board. This includes designation and preparation of guest and crew cabins specifically for quarantine and isolation for people who

2021 IN REVIEW | Cruising risk management In association with Envista Forensics

“The initial No Sail Order issued by the CDC on March 14, 2020, was maintained through the end of 2020 and well into 2021, with the first paid-passenger cruise departing Port Everglades in June of this year.’’ display COVID-19-like symptoms. Simulated cruises with non-paying guests for each ship have been conducted prior to returning to service to demonstrate that these measures are implemented appropriately. Once approved to sail by the CDC, many cruise ships have reduced passenger capacities as low as 50% to provide additional space and comfort for their guests. For crew onboard, who are integral to the experience and often interact closely with guests throughout the cruise, the CDC requires vaccinations, physical distancing, increased hand hygiene and face masks. Passenger requirements vary by cruise line, but in general require proof of COVID-19 vaccination (if eligible) and a negative test prior to boarding. Masks and social distancing are encouraged, especially during the boarding process and pre-departure drills where queues are likely to form. These requirements for individuals aboard cruise ships work in tandem with a host of operational sanitation measures. Behind the water slides, staterooms and restaurants, many cruise lines have also improved ventilation and sanitation systems to control the spread of infectious disease. Even before the start of the pandemic, cruise lines were keenly aware of the risks of improper sanitation with respiratory infections, GI infections and varicella (chickenpox) outbreaks having made headlines in years past.

INDUSTRIAL HYGIENE PERSPECTIVE From an industrial hygiene perspective, these engineering changes represent tier-three on the hierarchy of controls – a system used to determine effective and feasible solutions, often relating to the control of occupational hazards that workers may be exposed to. The tiers of the hierarchy are arranged such that the most effective controls are to be considered first, whereas the less effective controls are considered and implemented last. Quite often, as many individual controls are not 100% effective in managing a hazard, a control strategy will involve several tiers from the hierarchy to control occupational exposures to hazards. The first two tiers on the hierarchy, and thus the most effective

controls, are elimination of the hazard and substitution of the hazard, wherein the hazard is removed or replaced with a less harmful alternative. The remaining tiers, listed in decreasing order of effectiveness, include engineering controls, administrative controls and personal protective equipment (PPE). In the case of COVID-19, elimination of the hazard is not reasonably achievable by the cruise ship industry alone. Vaccine mandates could arguably be considered an elimination tool, although breakthrough infections can still occur. Substitution of COVID-19 for a less harmful disease is also not something the cruise industry reasonably can do. This leaves the balance of the control tiers available for implementation where feasible. As noted above, improvements to the ventilation systems represent an engineering control, where the control is intended to isolate people from the hazard. Administrative controls, where the manner in which people interact is changed, is reflected in physical distancing and quarantine requirements, and the wearing of masks and face coverings represents the use of PPE controls. In an effort to reduce occupant exposures to infectious droplets and aerosols, operators have implemented a variety of ventilation system changes. These changes include increased ventilation and air changes per hour and upgraded filters within the ventilation system. Unpublished data from ventilation assessments on a cruise ship has reportedly indicated that, through a combination of six or greater air changes per hour and the use of MERV-13 filters, the dispersion of airborne contaminants could not be detected in less than an hour outside of the room in which they were released. The findings indicated that air management strategies can reduce the transmission of infectious aerosols. Other recommendations made to cruise operators includes air is not to be recirculated and is to be exhausted to the outdoors. Typically, a cruise ship is designed to prevent recirculation of air between spaces. Air intake and exhaust are positioned in a manner to prevent recirculation via pressure differentials. Where this is not possible because of design constraints of the ventilation system, air is recirculated through MERV-13 filters. Additionally, it has been recommended that isolation rooms be kept under negative pressure to prevent the migration of infectious aerosols to surrounding areas, have between 6-12 air changes per hour, and exhaust air to the exterior of the ship. Where needed, portable HEPA filtration systems may be used to augment other ventilation control strategies. These engineering control strategies, used in combination with physical distancing and PPE, as well as other administrative controls, provide a blended hazard control strategy. In this blended strategy, when implemented consistently, the various components work together to reduce the transmission of COVID19 and other infectious aerosols on cruise ships.

CONCLUSION As cruise ships continue to return to service, the travel industry has building momentum and pent-up demand for vacations. The health and safety of crew members and guests will continue to be at the forefront and the preparation and reaction to infectious disease outbreaks onboard ships will remain a priority. Moving forward, expect smaller ships, new technologies (ie, touchless payments and keycards), and private destination islands to lead the way. The Marine Insurer | January 2022

22 March 2022 etc Venues 155 Bishopsgate, London

We are pleased to announce that the market-leading event in marine insurance is back as a face-to-face conference in March 2022! Our aim is to bring together insurers, reinsurers, brokers, shipping companies, service providers and others from the marine world with an interest in the London market in a relaxed setting, where the focus is on examining the current state of the marine insurance market and in this case, London’s role in it.

2020 Total Attendees = 720

1.94% 0.28% 0.97% 3.89%

8.06%

Sponsors:

3.47%

1.94% 0.14%

23.75%

New York | Houston | Miami | Athens | Cyprus

25.14% 0.97% 2.36% 0.97%

3.75%

Africa (0.56%)

RoW (0.28%)

Americas (16.81%)

Asia Europe Middle East (0.83%)

NordicsUK (48.47%) RoW

Asia (3.75%) Middle East Nordics (13.61%)

Made with

Claims Management Legal

P&I Club

Bank

Consultants Reinsurer Sur veyor

Broker

Forensics Salvage

Insurer Shipping

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L T SA VAG &

Africa Americas Europe (15.69%)

Association

Adjuster

22.36%

Global Partners:

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www.marineinsurancelondon.com www.marineinsurancelondon.com

22 March 2022 22 March 2022

All times are in Greenwich Mean Time (GMT) All times are in Greenwich Mean Time (GMT)

Tuesday 22 March 2022 Tuesday 22 March 2022

07:50 - 9:00 : Registration and Coﬀee in the Pre-Function Area 07:50 - 9:00 : Registration and Coﬀee in the Pre-Function Area 12.40-13.00: PRESENTATION: 08.05-09.00: P&I BREAKFAST BRIEFING: 12.40-13.00: PRESENTATION: The EverGiven – Front Page News 08.05-09.00: P&IP&I BREAKFAST BRIEFING: The Future of

The Future of P&I Moderator: Demian Smith, Managing Director, Head of Mutual, Agency and Moderator: Demian Smith, Managing Director, Head of Mutual, Agency and Captive Reinsurance Solutions Global Marine and Energy, Guy Carpenter Captive Reinsurance Solutions Global Marine and Energy, Guy Carpenter Panellists: Guy Pierpoint, Portfolio Manager, British Marine P&I, Panellists: Guy Pierpoint, Portfolio Manager, British Marine P&I, Thya Kathiravel, Chief Underwriting Officer, North P&I Club, Thya Kathiravel, Chief Development Underwriting Officer, P&I Club, Nick Adams, Business Leader,North Marsh, Nick Adams, Business Development Lars Lislegard, Chief Legal Counsel, Leader, Gard Marsh, Lars Lislegard, Counsel, Gard Joseph Hughes,Chief ChiefLegal Executive Officer, American P&I Club Joseph Hughes, Chief Executive Officer, American P&I Club 09.02-10.00: PANEL DISCUSSION: 09.02-10.00: PANEL DISCUSSION: London – The Centre of the Marine World?

London The Centre of theSenior Marine World? Moderator:–Julian Clark, Global Partner, INCE

Moderator: Julian Clark, Global SeniorInternational Partner, INCE Panellists: Richard Turner, President, Union of Panellists: Richard(IUMI), Turner, President, International Union of Marine Insurance David Cox, Chief Executive Oﬃcer, Marine InsuranceIain (IUMI), David Cox, ChiefofExecutive Oﬃcer, MatthewsDaniel, Henstridge, Head Hull, Apollo MatthewsDaniel, Iain Henstridge, Head Hull, Apollo Underwriting, Paul Greensmith, Head ofof Global Specialty, AIG Underwriting, Paul Greensmith, Head of Global Specialty, AIG 10.00-11.00: PANEL DISCUSSION: 10.00-11.00: DISCUSSION: The Cost ofPANEL Becoming Sustainable

The CostLars of Becoming Sustainable Panellists: Lange, Secretary General, International Union of

Panellists: Lars Lange, Secretary General, Union of Marine Insurance (IUMI), Nick Shaw, ChiefInternational Executive Oﬃcer, Marine Insurance (IUMI), Nick Shaw, ChiefKern Executive Oﬃcer, International Group of P&I Clubs, Patrizia Ferretti, Head of International Group of P&I Clubs, Kern Ferretti, Head of Marine Corporate Solutions, SwissPatrizia Re Marine Corporate Solutions, Swiss Re 11.00-11.30: COFFEE AND NETWORKING 11.00-11.30: COFFEE AND NETWORKING 11.30-12.00: FIRESIDE CHAT: 11.30-12.00: FIRESIDE and CHAT: Fuels: Opportunities Threats – The Latest State of Play

Fuels: Opportunities Threats – TheAssociation Latest State Presenter: Nick Brown,and Chair, International of of Play

Spanu, Senior Risk Engineer, Presenter: Nick Brown,, Robert Chair, International Association of Classiﬁcation Societies Classiﬁcation Marine, SwissSocieties Re Corporate Solutions 11.30-12.00: FIRESIDE CHAT: 11.30-12.00: FIRESIDE Global Supply ChainCHAT: Disruption – Implications on Stock

Global Supply Chain Disruption – Implications on Stock Throughput and Warehouse Accumulation Throughput and Warehouse Accumulation Presenters: Juan Carlos Martinez, Chief Executive Oﬃcer, Cargo

Presenters: Juan Carlos Chief ExecutiveMarsh Oﬃcer, Cargo Risk Corporation, Sarah Martinez, Dyer, Head of Logistics, Risk Corporation, Sarah Dyer, Head of Logistics, Marsh 12.00-12.40: CASE STUDY SESSION: 12.00-12.40: STUDY SESSION: War Risks –CASE The Reality of Digital Underwriting

War Risks – The Reality ofManaging Digital Underwriting Panellists: Svein Ringbakken, Director, DNK, Panellists: SveinChief Ringbakken, Director, DNK, Irene Phillips, ExecutiveManaging Oﬃcer, Osprey Solutions Irene Phillips, Chief Executive Oﬃcer, Osprey Solutions 12.00-12.40: PANEL DISCUSSION: 12.00-12.40: PANEL–DISCUSSION: Cargo Insurance Fit for Purpose?

Cargo – Divisional Fit for Purpose? Panellist:Insurance Will Ripley, Director Marine and Cargo,

Panellist: Ripley, Divisional Marine and Cargo, GAWS ofWill London, Aimee Nolan,Director Cargo Line Underwriter, Hiscox GAWS ofBuitendag, London, Aimee Nolan,Director Cargo Line Underwriter, Melanie Associate Cargo, Gallager Hiscox Melanie Buitendag, Associate Director Cargo, Gallager 12.40-13.00: PRESENTATION: 12.40-13.00: PRESENTATION: Crew Welfare and Quality of Crew

Crew Welfare and Quality of General, Crew International Chamber Presenter: Guy Platten, Secretary Presenter: of ShippingGuy Platten, Secretary General, International Chamber of Shipping

The EverGiven – Front Page News Presenter: Alan McKinnon, Chief Claims Oﬃcer, U.K P&I Club Presenter: Alan McKinnon, Chief Claims Oﬃcer, U.K P&I Club 13.00-14.00: LUNCH 13.00-14.00: LUNCH 14.00-14.30: FIRESIDE CHAT: 14.00-14.30: FIRESIDE CHAT: Branch Lloyd’s Salvage Arbitration

Lloyd’s Salvage Arbitration Branch Presenters: Ben Harris, Head of Claims – London Branch,

Presenters: Head of Claims – London Branch, ShipownersBen P&I Harris, Club, Phil Norwood, Senior Executive Technical Shipowners P&I Club, Market Phil Norwood, Senior Executive Technical Underwriting, Lloyd’s Association Underwriting, Lloyd’s Market Association 14.00-14.15: PRESENTATION: 14.00-14.15: CMA- CGMPRESENTATION: Libra: Unseaworthiness and Navigation- A

CMALibra: Unseaworthiness and Navigation- A shift inCGM Judicial Thinking? shift in Judicial Thinking? Presenter: John Russell QC, Barrister, Quadrant Chambers

Presenter: John Russell QC, Barrister, Quadrant Chambers 14.15-14.30: PRESENTATION: 14.15-14.30: CMA- CGMPRESENTATION: Libra: Unseaworthiness and Navigation- A

CMALibra: Unseaworthiness and Navigation- A shift inCGM Judicial Thinking? shift in Judicial Thinking? Presenter: Ian Teare, Partner, Hill Dickinson LLP Presenter: Ian Teare, Partner, Hill Dickinson LLP 14.30-15.10: PANEL DISCUSSION: 14.30-15.10: PANEL of DISCUSSION: Keeping Abreast Our Ever-Changing World

Keeping of Our Ever-Changing WorldLloyd’s Moderator: Abreast Neil Roberts, Head of Marine and Aviation, Moderator: Neil Roberts, Head of Marine and Aviation, Lloyd’s Market Association Market Association Panellists: Michelle Linderman, Partner, Crowell and Moring,

Panellists: Michelle Linderman, Partner, Crowell Daniel Tadros, Chief Legal Oﬃcer, American P&I and Club,Moring, Daniel Chief Legal Oﬃcer, American P&IList Club, RosanaTadros, Boyle, Senior Product Manager, Lloyd’s Intelligence Rosana SeniorName Product QuadrantBoyle, Chambers TBCManager, Lloyd’s List Intelligence Quadrant Chambers Name TBC 14.30-15.10: PANEL DISCUSSION: 14.30-15.10: PANEL DISCUSSION: Vessels and Container Casualties

Vessels Casualties Panellists: and MarkContainer Russell, Vice President Head of Cargo Claims, Gard Panellists: Mark Russell, Vice President of Cargo Dr Nick Chapman, Marine Loss ControlHead Engineer, AIG Claims, Gard Dr Nick Chapman, Marine Loss Control Engineer, AIG 15.10-15.50: PANEL DISCUSSION: 15.10-15.50: PANEL DISCUSSION: Ship Detention and Seizure

Ship Detention Seizure Panellists: Georgeand Chalos, Principal and Founder, Chalos & Co

Panellists: George Chalos, Principal and Founder, Chalos & Co International Law Firm, Francesco Zolezzi, Claims Manager, CR International Firm,Young, Francesco Claims CR International,Law Richard HeadZolezzi, of Marine Hull Manager, and War, Beazley International, Richard Young, Head of Marine Hull and War, Beazley 15.10-15.50: CASE STUDY SESSION: 15.10-15.50: CASE STUDY SESSION: MV GOLDEN RAY, the largest wreck removal in US history

MV GOLDEN RAY,Garrido, the largest wreckT&T removal in US history Presenter: Mauricio President, Salvage Presenter: Mauricio Garrido, President, T&T Salvage 15.50-16.15: COFFEE AND NETWORKING 15.50-16.15: COFFEE AND NETWORKING 16.15-17.00: PANEL DISCUSSION: 16.15-17.00: PANEL DISCUSSION: The Changing Role of the Broker

The Changing of the Broker Panellists: AndersRole Johannessen, Managing Director, Edge Group

Panellists: Anders Johannessen, Managing Director, Edge Group Norway, Nick Wolfe, Deputy Global Director, North P&I Club, Norway, Nick Wolfe, Deputy Global Head Director, North P&I Patrick Jordan, Managing Director, of Marine, Ed Club, Broking Patrick Jordan, Managing Director, Head of Marine, Ed Broking

17.15-18.00: Drinks Reception 17.15-18.00: Drinks Reception

2021 IN REVIEW | Fires and Explosions In association with Jensen Hughes

In search of a safer future at sea

Marine fires and explosions continue to rise in number and severity and the predicted increase in world trade in 2022 will inevitably see a futher escalation in events. Highly experienced fire investigator John Gow based in our European Region of Jensen Hughes the global safety, security and risk based engineering and consulting firm says that practical and effective solutions that will help reduce the number and impact of onboard fires are needed With more than 50,000 ships registered in more than 150 nations, the international shipping industry is responsible for about 90% of world trade. Yet, as the industry expands, the sector faces significant safety challenges, including those related to fire and explosion. The fire peril is never far from the mind of the maritime sector. The Allianz Global & Corporate Speciality (AGCS) “Safety and Shipping Review 2021 ” reports that fire claims “buck the positive overall trend for hull losses.” In 2019 there were 40 cargo-related fires - equivalent to one fire every ten days . The Nordic Association of Marine Insurers (Cefor) noted a slight fall in the number of ship fires in 2020, but this is still above average, with approximately one fire The Marine Insurer | January 2022

occurring every two weeks. 2021 has seen several ship fires thus far. The X Press Pearl fire off the coast of Sri Lanka in May 2021 has been described as the country’s worst maritime ecological disaster. After burning for around 12 days, the vessel sank and reportedly lost approximately 15 tonnes of nitric acid. Other cargo was lost following the fire with some spillage into the sea. In October 2021, a fire broke out on the MV ZIM Kingston, a fully cellular container ship built in 2008. While sailing off the coast of British Columbia, at least 10 of the ship’s cargo containers caught fire, two of which were carrying dangerous mining chemicals. Additionally, rough weather caused 40 containers carrying potentially hazardous materials to fall overboard, putting mariners at significant risk.

2021 IN REVIEW | Fires and Explosions In association with Jensen Hughes

Fires on container vessels continue to be a problem and, as the industry returns to normal, I do not doubt that more incidents are on the horizon. Providing a safe working environment for ships and workers is a continuous challenge, with crew fatigue cited as a contributory factor leading to human error with potentially severe outcomes, including fire. The cruise ship industry is seeing a return to normality, but there is a long road to full recovery. During the pandemic, many vessels have been laid-up with skeleton crews on board, and as ships return to service, the potential is greater for machinery breakdown and fire to occur if protocols are not followed.

THE INDUSTRY RESPONSE Several organisations are undertaking actions to study and understand container ship fires and explosions. The European Maritime Safety Agency (EMSA) has put out a tender for a “Study Investigating Cost Efficient Measures for Reducing the Risk from Cargo fires on Container Vessels (Cargosafe)”. The International Union of Marine Insurance (IUMI) has also gathered an expert group looking into the issue of container ship fires. As part of IUMI expert group, I look forward to contributing to developing practical and effective solutions that will help reduce the number and impact of onboard fires. Increased understanding of the problem and lessons learned from past casualties are critical to enacting these solutions. It should be noted that misdeclaration of cargo and increasing container ship size are just two of the factors that need to be addressed when considering the problem of fires and explosions on board ship.

WHY INVESTIGATE Incident investigations, including those identified as near misses, can uncover a great deal about the reality of a situation. As well as establishing facts surrounding the origin (where a fire or explosion started) and cause (how it started) of an incident, the investigation can identify the adequacy of existing control measures, why they failed, and what improvements or additional measures may be required. An investigation is part of the feedback loop that helps improve regulatory standards and risk management. They ensure that safety management systems evolve to cope with the changing environment and hazards. Understanding the circumstances and the adequacy of the emergency response can also be invaluable to identifying gaps in training or existing emergency response plans. Establishing legal responsibility and contributory factors should be high on the list of any interested party. The accurate determination of the origin and cause of a fire or explosion is key to any subrogation that may follow such an event.

THE INVESTIGATION A marine casualty investigation is perhaps one of the most complex investigations involving any expert. There will be many

“In 2019 there were 40 cargo-related fires equivalent to one fire every ten days . The Nordic Association of Marine Insurers (Cefor) noted a slight fall in the number of ship fires in 2020, but this is still above average, with approximately one fire occurring every two weeks.’’ Jon Gow, Jensen Hughes contradictory views about what type of expert should undertake such an investigation. In my view, any complex investigation should incorporate a team approach with each member providing different technical expertise. The first thing to recognise in any fire/explosion incident is that the origin of the fire/explosion must be identified. The origin and cause investigator must be able to understand how fire develops and spreads and reliably observe and interpret the fire damage patterns that remain. The next step is to determine how the incident occurred. It is here that other expertise may be required from specialists like marine engineers, marine chemist, materials experts and others. Each contributes to an overall understanding of the circumstances that led to the fire or explosion event.

ASSISTING THE INVESTIGATION PROCESS Whilst the safety of the crew and ship are paramount, some early steps can be taken to assist the investigation: > Appointing forensics early in the process; > Liaison between forensics and appointed salvors; > Documenting firefighting activities of crew and others when possible and safe to do so; > Recovering and preserving relevant documentary and electronic evidence; > Documenting formal and full witness statements as soon as reasonably possible; > Collating and preserving any digital imagery that may be available; and, > Engaging and liaising with forensics appointed by other parties. Container ships are continually confronted with the threat of fire and explosion, which can have serious consequences for the crew, ship, environment and other mariners. We must seek to understand these incidents through thorough investigations. By utilising the lessons learned, we can help prevent and reduce the impact of ship fires and explosions and create a safer future at sea. The Marine Insurer | January 2022

2021 IN REVIEW | Safety Culture In association with The Shipowners Club

Safety culture The maritime industry continues to see incidents at sea despite increasing regulations, standards and safety equipment. Other industries, however, have successfully improved their safety records. Take, for example, the aviation industry’s continuous reduction in the five-year average of fatal incidents and the hugely successful London Olympic development campaign which was the first campaign with zero fatalities in Olympic history. How do these industries achieve these improvements? According to these projects the answer lies in the safety culture that was developed and established in these areas. It is apparent that the maritime industry, by learning from others, could benefit from reviewing how a healthy safety culture can most efficiently be established on board. So how can a vessel operator improve the safety culture within their operations? To assist, the Shipowners’ Club has created a roundup of some of the key considerations in developing a healthy safety culture that will not only assist in improving safety for the crew and improve efficiency but also contributes to the improvement of wellbeing on board [https://www.youtube.com/watch?v=cea-wLaDgX0].

VISION, MISSION AND VALUES A healthy safety culture is not something that is limited The Marine Insurer | January 2022

The Shipowners Club explains how the marine sector needs to adopt a more formalistic approach to safety culture to tackle the ever-rising level of incidents.

to the vessel’s crew. It should be reflected throughout the company, from the senior leadership team to the support staff ashore as well as the crew on the vessels. This can be achieved by ensuring that the company has a well-defined and understandable vision, a clear mission and values which reflect the company’s core principles. The vision of a company should be short and simple, often a single sentence to highlight the future goals with safety as the key component. The mission expands on the vision, describing how the company intends to achieving its vision through practical day to day means. Finally, the values should reflect the attitudes and behaviours of the people working there, implementing safety at a personal level. The vision, mission and values of a company should be coherent and encourage safety and should not overlook safety measures when they become inconvenient. By openly promoting safety related values and creating a positive vision for the company, crew can believe and work towards the goals of the company, not only being safer but also working more efficiently and with more unity. Seafarers will better understand the aims of company initiatives and therefore be more willing to assist with their implementation on board. It is vital that the company’s vision, mission and values are individual to that company, and should be carefully considered, showing exactly what

2021 IN REVIEW | Safety Culture In association with The Shipowners Club

“SMS may be part of the International Safety Management (ISM) Code, but this does not mean they are solely for vessels to which the ISM code applies. They can be used on vessels of any size, operation and trading pattern to assist in the development of a healthy safety culture.’’

the company hopes to achieve and how they can achieve it.

SAFETY MANAGEMENT SYSTEM This vision, mission and values can be implemented on board in numerous ways, but one of the key methods would be through the vessel’s safety management system (SMS). SMS may be part of the International Safety Management (ISM) Code, but this does not mean they are solely for vessels to which the ISM code applies. They can be used on vessels of any size, operation and trading pattern to assist in the development of a healthy safety culture. The SMS should be ship specific and assist the crew in reducing the risks associated with the operations of the vessel. It should incorporate contingency plans should an incident occur, and include forms and checklists that help to ensure that procedures are followed. SMS may not be followed if the procedures are incorrect, too voluminous or overly complicated. Procedures must be simple, easy to understand and process oriented. The best way to achieve this is by involving the crew in the development process as this gives ownership of the SMS to the people who will be using it, helping them understand the benefits and the safety advantages. Comprehensive policies and procedures encourage and formalise the culture on board the vessel. Coherency with the vision, mission and values of the company ensure that the healthy safety culture is seen as being an important part of the operation and elevates the system beyond something purely developed for regulatory purposes.

LEADERSHIP AND COMMUNICATION A healthy safety culture on board is one which is open, caring and fair and encourages learning and honest reporting of incidents and near misses. This culture can best be developed through the leadership, both ashore and on board. As well as assisting in

developing the company’s values and the SMS, the leadership team should ensure values are implemented and that they actively listen to feedback. By allowing themselves to be challenged on their ideas at all levels and being open to change, the crew will feel empowered with a sense of responsibility towards the safety of all on board – a vital part of a healthy safety culture. The creation of this just culture and reporting culture can be achieved through proper communication. Learning communication methods and using them when appropriate ensures that we are communicating effectively, especially while solving conflicts, which helps develop the team. One useful communication tool is The Empowerment Dynamic. The Empowerment Dynamic can be valuable in solving conflicts and ensuring communication helps develop crew rather than create further conflict. This works by recognising the roles that people take when communicating and learning to take up different roles more conducive to healthy dialogue. Furthermore, methods to raise problems can empower the crew into feeling they can be responsible in preventing developing situations. The PACE method (Probe, Alert, Challenge, Escalate) is a tool for raising concerns and helps crew understand how they can prevent dangerous situations developing by ensuring all individuals involved in a task are communicating effectively and have a common understanding of the ongoing situation. > Further information on the above topics is available in a v ariety of formats on The Shipowners’ Club’s dedicated safety culture page https://www.shipownersclub.com/safety-culture. To inform this campaign, the Club has collaborated with industry experts Rachit Jain (managing director, Safe Lanes Consultants Pte Ltd), Karen Passman (director, Impact Crew) and Dr Claire Pekcan (director, Safe Marine Ltd). The Marine Insurer | January 2022

2021 IN REVIEW | Automated underwriting In association with Concirrus

The rise of the bionic underwriter The media is awash with articles discussing digital transformation and the importance of data in decision making. The industry is being convinced of the benefits of turning insurance from an analogue into a digital market – ‘it’ll be quicker and will reduce costs’. But can we be confident that the market is truly ready for such an approach and is it what’s best for the market? Andrew Yeoman, CEO of insurtech, Concirrus, considers what automation might mean for the market and the people working in it With a growing appetite for operating efficiency, the insurance market has reached a point where a natural next step is that of automation. The availability of vast new sources of data, more advanced data analytics and digital tools opens a world of potential benefits for both insurers and their customers. However, automated underwriting is a change that strikes at the very heart of a traditional insurance business. Rather than it being a utopian technology that will solve every business problem, it is a tool that can, where applicable, help make better decisions faster. No-one would want to have a job that could be done better by a computer yet there are many such tasks in each and every insurer that could be automated. Take submissions for example. With hundreds of submissions a day, automation technology can review those submissions without human involvement and triage them against a set of criteria. Technology can analyse the proposed premium versus the technical price of the risk and assess on past performance whether this is a broker that they are likely to bind with. This is technology that leaves you in control but takes away mundane tasks with ease. If a risk meets your criteria, that you control, the binding process can also be automated. More business can be written with the same amount of resource and this ultimately improves The Marine Insurer | January 2022

operating efficiency and protects jobs. Automation has a huge part to play in better managing the manual processes that currently characterise underwriting and claims. Hundreds of hours are being spent on reading documents, attachments and emails to then key and rekey that data. With the use of automation technology, those hours can turn into minutes. This frees up time that can be given to tasks which uniquely require the underwriter’s experience and skillset to the benefit of the company.

IS THE MARKET READY? Candidly, this is an existential need. The ‘digital future’ for the market is not optional, it is where we will end up. At an individual level, it is natural to be concerned as we enter this ‘brave new world’. But simply put, if we don’t do it, it will be done to us. Technology fuelled competition is entering the market with advantageous expense ratios. Automation can drive efficiency and this efficiency is necessary to ensure that the market thrives. Rather than automation being perceived as threatening the fundamentals of the industry, the reality is that it is a tool that should be embraced to improve the efficiency of the market. Arguably, the role of the underwriter is changing, in the best possible way. Insurers can reap a number of benefits by using the tools

2021 IN REVIEW | Automated underwriting In association with Concirrus

“Automation has a huge part to play in better managing the manual processes that currently characterise underwriting and claims. Hundreds of hours are being spent on reading documents, attachments, and emails to then key and rekey that data.’’ Andrew Yeoman Concirrus

and benefits that automation can deliver. The first is giving underwriters time back to leverage that wealth of experience where it can make the most impact. The time freed from the tasks that can be assumed by automation can be spent where it truly leverages the talents of the team in negotiating the nuances of complex risks.

LONG ROAD AHEAD Each insurer CEO we talk to has a clear mandate to reduce expense ratios, increase return on capital, and leverage technology for an operating advantage. However, the burden of proof for the ROI of an automation solution and the ease of implementation lies with the vendors, not the insurers. We, the vendors, live every day in a technology ‘bubble’ and it’s our responsibility to understand our customers’ business and translate technology capability to business advantage. Underwriting is set to undergo a fundamental change with data-fuelled, algorithmic-powered solutions maturing from only being capable of handling simple risks to coping with more complex risks.

BIONIC UNDERWRITERS The underwriters of tomorrow will be bionic (a phrase coined by BCG) and digital technologies will seamlessly interact with traditional processes. We’re used to this in our personal lives

using Siri, Alexa, Amazon, Monzo and the like, solutions that we interact with and make us more productive. Now is the time for these solutions to come into the workplace. However, it is only natural that some people feel uncertain about their ability to adapt and develop new skillsets as the pace of technological change rapidly increases. For this reason, it is up to the tech vendors to talk in a language that the (re)insurance industry will not only understand but can also buy into. The message they need to deliver is that technology is not a threat. Instead, it must be made clear that technology is there to create efficiencies, making their lives easier through the automation of laborious, and time-consuming manual processes.

ENSURING PREPAREDNESS The industry should be asked to consider if they were to build their organisation from scratch today, what parts of the current operational process would you replicate? Which parts cause you to be less effective? These would be the prime candidates for automation. Another way to find realistic ways to implement technology is by conducting a future visioning workshop. Insurers can use this type of workshop to inform the scope of capabilities and what ‘could’ be done in a perfect world and see how those capabilities can be used in real-world situations. Ultimately, the adoption of new technologies is changing the industry at a rapid pace. In the future, innovation will be viewed as the norm as the seismic shift to advanced ways of working continues. The bottom line is that in the future, AI will power the majority of insurance processes and in turn, free up time for skilled staff across organisations to focus less on the process and more on informed decision making. The key will be to understand its true capability to transform the business and make sure we all follow the same narrative. The Marine Insurer | January 2022

2021 IN REVIEW | Digital Transformation In association with DNK

Co-innovating business models for the future The Marine Insurer | January 2022

2021 IN REVIEW

| Digital Transformation In association with DNK

Irene Philipps, Chief Digital Officer at The Norwegian Shipowners’ Mutual War Risks Insurance Association (DNK), argues that the time is now for digital transformation in the marine insurance sector. To embrace the opportunity the market needs to think collectively and look elsewhere for inspiration

With more than 50,000 ships registered in more than 150 nations, the international shipping industry is responsible for about 90% of world trade. Yet, as the industry expands, the sector faces significant safety challenges, including those related to fire and explosion. Digital transformation is not about automating business as we do it, but about radically changing the way we do business. We have all heard it many times, but do we truly understand it?

the effect of technology in the short run and underestimate the effect in the long run”. What is often referred to as “Amara’s Law” explains how people typically believe that the impact of technology increases at a consistent, linear rate through time. In reality, most technology-driven development starts slow, leaving people immediately disappointed at the lack of effect while surprising them later with unexpected force and scope of impact. The marine insurance industry seems to have come to a point where we experience a certain fatigue related to all things digital. We feel that we have attended enough conferences and read enough articles about the topic. To this extent, we are probably slightly disappointed that all our investments in technology have not yet brought along the fundamental transformation we were expecting to see in the short term. We may sit with a feeling that all the digital buzzwords we were so excited to talk about a few years ago, may be just that – buzzwords. We probably start thinking that we may have come as far as we could in digitizing our industry.

SAME, BUT DIFFERENT The global pandemic has increased the speed of technology adoption in even the most remote corners of the marine insurance industry. When the old model simply no longer works, even those generally reluctant to change realize that we need operations that enable digital service delivery. From implementing basic infrastructure for remote work to developing smart placement and underwriting platforms, the marine insurance industry has in the last two years seen a rush towards new technology that makes transactions less dependent on human interaction. But is this really digital transformation? Or have we simply been “electrifying paper”, doing what we have done for hundreds of years, just a bit faster and online? Organizational long-term studies on how corporations adopt new technology, suggest that first movers often make short-term gains from using new technology to increase productivity and improve their current business model. However, they tend to fail in seeing the long-term transformation potential of technology and may therefore become even more susceptible to disruption than those who adopt slower.

DIGITALLY DISAPPOINTED

“From implementing basic infrastructure for remote work to developing smart placement and underwriting platforms, the marine insurance industry has over the last two years seen a rush towards new technology that makes transactions less dependent on human interaction.’’ Irene Philipps, DNK

Stanford University researcher and futurist Roy Amara stated back in the 1960s that “we tend to overestimate The Marine Insurer | January 2022

2021 IN REVIEW | Digital Transformation In association with DNK

CO-INNOVATING A NEW PLATFORM In digital terms, insurance is a platform business model, a network that connects people, services and things in exchange for money. Insurance as a product has traditionally been seen by its buyers as a must have-investment or a “necessary evil” to avoid worse things from happening. If purchasing the same old product faster and online is the best digital value proposition marine insurance can offer to its stakeholders, we fail to fundamentally understand the benefits and challenges of digital transformation for the industry platform as a whole. What if we instead try to turn insurance into a positive experience that buyers are excited to engage in? Digital changes the way we interact, the way we innovate collaboratively or internally, and how we organize ourselves – across the entire marine insurance platform, not within one company or business line. The new tools we have available are intelligent, autonomous and collaborative, and enable us to work together and innovate in new and more integrated ways, beyond the limitations of a single organization. Insurance companies that think the introduction of digital delivery channels for their traditional products is building a platform tend to overlook that, from a stakeholder’s perspective, the marine insurance platform is the entire industry, a cross-functional, cross-company value chain. If we use digital only to focus on short-term economic value within our own organization, we will not be able to develop or deliver the increasingly complex solutions that are needed from our industry. However, if we start to better understand our platform as a whole, we will be able to provide a more seamless, positive and exciting experience to those who engage with us.

GETTING IT RIGHT Amara’s Law implies that between the early disappointment and the later underestimation there must be a moment when we get it about right, after the first hype subsides. For marine insurance this moment is now. This does not mean that we are suddenly able to predict technological change to our industry - nobody is. It means that the marine insurance network has the opportunity to get it right if we tap into our collective experience from the first wave of digitization to start co-innovating our future platform. As a mutual owned by shipowners, DNK has traditionally looked at how the value chain can benefit all stakeholders. Through our insure-tech company Osprey Solutions and through the Norwegian Maritime Cyber Resilience Centre (NORMA), we are engaged in various co-innovation initiatives with thought leaders from in- and outside marine businesses. Together, we try to identify new insurance solutions to the challenges that digital transformation will bring to the The Marine Insurer | January 2022

“Insurance companies that think the introduction of digital delivery channels for their traditional products is building a platform tend to overlook that, from a stakeholder’s perspective, the marine insurance platform is the entire industry, a cross-functional, cross-company value chain.’’

marine industry, such as increasing cyber risk. One of the most important insights we have gained from these processes and experiments so far is that we need to constantly test our hypotheses and create new data rather than just look for what has been collected already. We have also learned that we often view our problems from too narrow lenses and tend to look for answers in our own backyard, believing that marine is so different from anything else that we can’t possibly take any advice from “outsiders”. But as history has shown, industry disruption often comes from the least expected outsiders. The more we test and try and the wider the network, the stronger the platform and the more rewarding the experience for its stakeholders. Maybe there is a way to get it right.

The Marine Insurer. Issue 8. Jan 2022

Articles inside

Automated underwriting

Digital transformation

Fires and explosions

Safety culture

Crusing risk management

Marine casualty technology

Sustainability

Chartering risk

Marine market pricing

Risk up North

Life at sea

The green transition

Time to get serious

The cost of sustainability