Keynote speaker Andreas Bisbas, Director Tsakos Shipping (London) Ltd, made a vigorous defence of traditional underwriting methods yesterday September 14th at the Shipping Risk Forum, hosted by Maritime London as part of London International Shipping Week.
Bisbas said that if London went down the route of underwriting via algorithms, it would lose its raison d’etre, as policies could be written from anywhere. He said that insurance buyers in the marine sector came to London for policies where human beings looked at the details and relationships were key.
Bisbas accepted that the market had been evolving and seeking greater efficiency, and observed that, as face to face meetings began again, the London market “needs to get it right”. He noted that the increasing influence of data providers had run in parallel with the pandemic stopping much personal contact, but that what was unique to the London market needed to be preserved. There remained a wealth of talent that must not be stifled by overregulation. And the danger was that London might become the place where only additional capacity was sought.
“The independent niche brokers were the access route for small shipowners to the market”, said Bisbas, adding that “moist shipping clients still require a personal relationship. Trust, quality of service and personal attention must be the watchwords for the London market.”
Bisbas was also a participant in the subsequent panel on “Marine Insurance, A Dynamic Marketplace”, moderated by Louise Nevill, CEO Marine and Cargo, Marsh Specialty (UK).
In a sense the theme set out by Bisbas continued, with Andrew Yeoman, CEO of Concirrus, diligently putting forward the view of the “disruptors”.
Indeed, Yeoman said that he sometimes thought to himself, “What would happen if I woke up this morning and everyone was using our service?” Would the advantage provided by the service be negated as a result, in which case everyone would be worse off? Yeoman said that this mustn’t be the case. Any service his company provided needed to be one where there was a gain beyond advantage over a competitor not using the service. More efficiency needed to lead to greater efficiency (and therefore greater profit) all round.
The aim must be to influence behaviour, to eliminate claims, to speed up arbitration of claims. New products operate on the back of data to make insurance more efficient, Yeoman said.
The first question asked by the moderator was how had cover been affected by the pandemic and what did we need to do as future. Paul Fry, SVP and head of hull at Skuld, said that there had been a quick change in trading patterns. There had been some rapid deactivations, with some vessels being anchored in ports they had never even visited before. Maintenance, parts availability and logistical help to crew were three major problems. Skuld also saw vessels aggregating in areas where no aggregation of risk had previously been seen.
At the same time that we were worried about solvency of shipowners, we were also looking at the financial situation of insurers. It could have been a disaster, but underwriters working with brokers and stepping up communication helped everyone come through relatively unscathed. We all had a common aim, a safe return to service.
Nevill noted that the cruise sector was the most impacted. Yeoman observed that Concirrus was able to identify changes in trading patterns throughout the entire shipping industry, and that, for the cruise sector, the accumulation of risk in Caribbean was enormous.
Mark Lloyd, a partner at law firm Kennedy’s ,said that quite a few coverage issues were seen, not excluding the widely publicized disagreements over business interruption. “The BI claims seemed to become as a massive shock to some insurers”, he said.
The impact of the pandemic had been widespread, with a number of clauses still being adapted, but Lloyd thought that the market’s ability to place business continued to work “amazingly well”.
The panel noted that terms of cover had reached a dynamic stage following the Lloyd’s Decile review pre-pandemic. Several syndicates had withdrawn from the market, and the question could now be asked whether cargo cover as it currently exists is fir for purpose, or whether the way covers are constructed could be re written from the ground up.
On being asked how the virtual environment had affected the trust situation, the panel seemed to think that, for established participants in the market, the answer was “not at all”. However, this came with two caveats.
Bisbas said that trust had not been affected at all. “Trust needs to be able to survive sudden changes. We all felt that this was a temporary thing, a hurdle that we needed to get through. I think that at the moment trust is absolutely solid.”
However, Bisbas and other panel members agreed that, while this was the case when it came to maintaining existing relationships, he was not sure that the situation was the same when it came to forging new ones.
Simon Swallow, Shipowners Club CEO, said that the sector needed free-thinking underwriters and that it was important not to stifle talent. “I think that in some areas the level of trust has been enhanced. It’s been great that I have been able to talk to members around the world, and they know me. And because it has been a virtual meeting, they can see other people whom they might not have met if it had just been me getting on a plane”. However, he agreed with Bisbas that it had been “more of a challenge for new members and new people in the job, who are trying to build trust”.
The second caveat was that the virtual meetings with regulators had perhaps suffered a fraction. Insurers, it appears, like to meet regulators in person.
The panel was then asked how the industry had coped with dealing with casualties in the pandemic world, and this generated a number of unanimous responses.
The first was that the industry had coped remarkably well.
Mark Lloyd of Kennedys said that there had been some major casualties since the pandemic started, and that the already growing use of technology had been accelerated. While this meant that the damage could be seen more quickly via a remote camera, the fact remained that claims were becoming more complex. And if there is a complex large casualty, how do you investigate it to protect every party’s interest.
Because quarantine had sometimes prevented experienced surveyors from attending in person, Lloyd was concerned that, five years down the line, if a case came to court, how would a local inexperienced surveyor stand up on behalf of the client in an English court when being questioned by a QC? Experienced international surveyors most likely would have been there before, but a local surveyor might not have. So in terms of logistics and practicalities there could be problems, but the various parties have worked together to try to make sure that these are minimized, said Lloyd.
The panel in general agreed that a major factor in the increase in costs was not so much the increase in the cost of materials and labour in the repair, as the massive increase in time taken to obtain materials and to get the skilled workforce in and out. It was noted that if you had a surveyor or superintendent who had to stay on site for four weeks rather than one, and had a quarantine period added on to that, then the cost of the repair increased massively. Similarly, storage fees in the yard while the repair was taking place could be three or four times as great.
Paul Fry said that it had not been as bad as some had feared, but Simon Swallow said that the indirect impact of pandemic had been enormous. He too noted the problems of getting salvage teams on site. There had certainly been claims inflation.
Andrew was asked how technology could play a part.
Andrew Yeoman said that when it came to casualties, Zoom had its limitations. “For casualties there is an element of instinct that is missed”, he said, although he accepted that there was an advantage of having someone walking round with a camera as near as possible to the time of the incident.
Returning to the topic of technological change advancing in tandem with the pandemic, Yeoman said that an interesting point about the Ever Given grounding was that there was an independent expert witness to hand — the data. He felt that this could become an interesting aspect of future disputes, and that, when both sides are looking at the same data, arguments about the facts could become fewer, which could lead to more cases being settled earlier.
Concluding the hour-long discussion, Swallow said that he didn’t think that the pandemic accelerated change, but there were changes.” We just had more time. We were available more often. We couldn’t escape, so we had to think about things”, said Swallow. He felt that some of the more out of date practices needed to be taken away, but without removing from the London market the flare, the innovation and the talent. He felt that data going forward would have a big impact in the London and marine market and that it would enhance what the underwriters could offer.
Yeoman also said that Concirrus wanted wants underwriters to use their judgment. He noted that if something went wrong and the regulator asked “why did you write at that price?” you can’t really answer “because the algorithm told me to do it”. He also gave something of a warning to the meeting, that being that we could like the change or not like it, but it was not in our gift to decide whether or not it would happen.
Swallow said that the International Group had masses of data and in the future “we must extract that for the benefit of shipowners”.
Lloyd said that, in whatever way the use of data progressed, we needed to keep in mind the need for regulation to keep up. The availability of new techniques and new sources of information are no use if the law prohibits you from using them. And he too ended with something of a warning. “The law is not necessarily as quick as the insurance industry”, Lloyd said.
Bisbas said that one needed to remember the client. He worked for a shipowner who asks Bisbas to insure the company’s fleet. If the broker Bisbas goes to see just pings 20 submissions to different underwriters to try to find the best price (as Yeoman observed, one offshoot of the pandemic and virtual working was that it was as easy to email 20 submissions as it was to email five, whereas visiting 20 boxes on a floor was not the same as visiting five), then the shipowner might say to Bisbas “why do I need you? Why do I need the broker?”
Bisbas said that he saw the advantage of gathering extra data, of reducing claims, but he maintained his position, as set out in his keynote speech, that replacing the physical relationship with virtual risk placement was not the way forward. “I think that shipowners will resist that — they will look for someone creating a bespoke policy”, Bisbas said.
Louise Nevill said that, from the broker’s point of view, all clients were different. While some of them got really excited at the potentials of cutting edge technology, others wanted their hands held by the same person when going through the buying process, and were suspicious of anything new.
The panel, and a questioner from the floor, agreed that if virtual meetings meant that there would be a gradual deterioration in personal relationships as older people retired and newcomers had no experience of building relationships face to face in the quarter of a mile that surrounds the Lloyd’s building, then data would take over, and that would eliminate the need for London. There’s an algorithm somewhere else in the world that can do it cheaper.
Paul Fry said that the last 18 months had been functional, but not dynamic. He observed that when you got to the end of a Zoom meeting, all of which were scheduled to last an hour, and say “any questions”, there tended not to be. In a face-to-face meeting a junior underwriter tended to be more willing to pipe up. Speaking in a Zoom meeting somehow seemed more aggressive.
Swallow predicted, only partially tongue in cheek, that the return of Lloyd’s as a meeting place, with contracts still signed electronically, would see the disappearance of boxes. The building would become a workspace where people met to discuss. It would be just like the old coffee shops of the 18th century.