Ståle Hansen has been with Norway-based marine insurer Skuld for 14 years; he has been president and chief executive officer since February 2015, when he moved up from his role as finance director and deputy to the CEO to succeed Douglas Jacobsohn. Insurance Marine News caught up with Hansen at Skuld’s London office on Lime Street.
IMN asked him about his background and his move into insurance from consultancy.
Hansen says: “My background was as an economist and in business management. So as a graduate it was a natural step to start in a consultancy. I enjoyed it a great deal, but I soon realized that I wanted to focus on one employer, rather than moving from project to project.”
As a consultant, Hansen mainly worked with larger Norwegian retail chains. On his move into insurance, he said: “To be honest, it was pure coincidence. I saw an advertisement in the paper that Skuld was seeking a business controller. I hadn’t worked in insurance before that. For me it was a new venture.”
Hansen said that, when he came to an interview and looked at the latest Skuld annual report, “it was all red”. At the time Skuld had its own financial challenges, after a heavy run of claims in the late 1990s. “So it was a decision. Did I want to jump into something completely new, but somewhere I could bring my ideas and experience from other industries? I decided that I did, and I found it fascinating to engage in a project to turn it around.”
Hansen started as a business controller before moving onto risk management, which entailed working more with underwriters. He then became CFO and, in 2015, CEO. “It’s been a good progression for me which has made it exciting to stay in Skuld, to continue building my experience and competence within the field,” he says.
IMN asked if he would make any changes if he could go back to when he began in insurance. What would he say to his younger self?
“What I would probably have said to this younger Ståle Hansen is ‘start delegating sooner’. When I took over as chief financial officer, we were already becoming a big international insurer. To try to do everything yourself is definitely not the way. I learnt the hard way that you just have to delegate more.”
Delegation, he said, meant trusting that others can do the job. “In that respect, what I learnt very quickly was, always recruit people who you think can do the work better than you. That allows you to have more oversight, and that is important for the development of the company you are working for.”
IMN asked how Skuld pulled itself out of the difficulties in which it found itself at the time Hansen joined.
Hansen says: “It was really to tighten up the controls and processes around the underwriting segment. I think Skuld went through a phase in the 1990s when there were high growth ambitions, but maybe with insufficient controls in place. What enabled us get out of a negative spiral of increased volume, but even more increasing claims levels, was to take a step back, to assess the whole portfolio, and to look at what really needed to be done on the premium side to make it work. That led to some difficult decisions, including impacting some long-term relationships, to ensure a decent quality of the book going forward. In the early millennium shift we reduced our business volume by about 50%. Then we built it up again, step by step, with a very different attitude to underwriting.”
“When I joined Skuld, it was basically a mutual P&I service provider, a member of the International Group. But the idea of diversifying — the establishment of the strategy to create commercial service products that could create a new income stream for the mutual club and its owners — was created at about the same time, 2002 and 2003. It started with an emphasis on Charterers’ P&I, which at that time developed more into a non-mutual product. Back in the day that was also a part of the poolable cover offered by the P&I Clubs. So, Charterers’ P&I developed into a separate commercial offering. Then we entered into offshore P&I. And when we saw that we were building up a successful business for non-mutual P&I, including in more recent years a service for luxury yachts, we saw that the next step would be to provide a fuller service to the shipping market and to also go into the property side, with hull & machinery, and the offerings that we now can do from our Lloyd’s syndicate.”
“At that time the question was, should we do this out of a Lloyd’s platform or should we do it on our own? And we decided that we could get easier access to the market and build up an international presence on the property side by utilizing a Lloyd’s facility.”
IMN asked about the way Skuld dealt with the basic difference in aims between a commercial insurer and a mutual club.
Hansen says: “Being a mutual owner of a P&I Club is certainly different from being a commercial client of an insurer. What Skuld saw when it decided to go into Lloyd’s was that there was an opportunity to bring some of the service elements that we provide on the mutual side into the commercial products that we were now offering through the Lloyd’s syndicate. But there is a cost in providing an additional service. What enabled us to develop a successful commercial book was to emphasize that on that book of business you need to have a profit target, because you have stakeholders who expect a return on their investment. But the biggest stakeholder was the Club itself. So what we discussed with the Members of the Club was how we could utilize the commercial element in Skuld, both to enhance the services we provided to them, but also how that could benefit their mutual premium by generating an income stream from commercial activities. That’s been an important development for Skuld, to get the support from the shipowners on that journey. Today we have built up a global book of business, which has at its core the mutual P&I, but which has a whole range of attractive services and products for the marine market outside of the mutual concept.”
IMN asked what percentage of the equity of the mutual was allocated to the commercial part of Skuld compared with equity allocated to the financial markets via bonds, equities, etc.
Hansen says: “The percentage allocated to our own commercial activities has been increasing over time, because the way we see it is that we deploy our own funds in a much better way on activities which we can control, instead of just putting it in a passive fund, with external management. But of course we still find it important to have other financial instruments. We do not want to place all of our bets on one sector.
“We look at it with a helicopter aspect. How much do we need to serve the financial stability of the mutual, how much do we need for our ambitions on the commercial offering, and what is left to invest in other financial instruments?
“That in turn can make us more attractive to new investors in the Mutual P&I Club because they see that they will get something more by being a member of Skuld. That is where we can build synergies ”
On Skuld SMA
((Note: From January 1st this year, Skuld’s non-Lloyd’s hull & machinery business was incorporated into the re-named Skuld Marine Agency (SMA) via Skuld’s acquisition of Scandinavian Marine Agency (SMA)/Gerling Norway. Skuld acquired the full portfolio and will integrate SMA into Skuld. Skuld Marine Agency handles claims for all Hull and Machinery Claims Lead business written by Skuld.))
IMN asked Hansen how the integration of the various parts of the business had progressed.
Hansen says: “We still do hull business from our Lloyd’s Syndicate 1897. The hull business that we had in Oslo is now part of SMA. What we saw was that at Lloyd’s we had built a good book on a subscription basis, but we did not have many lead positions on hull & machinery. In SMA it was basically the opposite — a strong claims leader for the hull & machinery market with a lower proportion of subscription business. So it was a good combination, where we acquired a strong service team that could also in the future support claims handling for clients of Syndicate 1897 where we were claims leader. This gave us the ability to build up the service side in hull & machinery in a much faster fashion than if we had done so step-by-step internally.”
“Since 80% of the client book we have in SMA is not in the P&I Club, there is a potential to utilize the relationships that SMA have for P&I. There are some strong relationships that SMA have developed over the years that currently are not with Skuld. And we have relationships at Skuld that could be interested in what SMA has available.”
“At our Syndicate, SMA enhances the service offering that we can provide in hull and machinery when compared with other hull and machinery providers in Lloyd’s. That required us to deliver a strong claims lead service, and that is where we see the strength of having the SMA team, in addition to a very strong team of underwriters sitting in the Syndicate here in London. We get a much more holistic service concept to the market.”
“The Skuld Hull team in Oslo was integrated into SMA because, before we had SMA, the Skuld hull team was performing that claims lead service for the Syndicate. We have moved all that service to the SMA platform. So they are servicing themselves, in addition to those clients that we now have as claims lead on the syndicate.”
“The percentage of claims lead is growing steadily, but cautiously. If you want to take claims lead, you need to know the client, and the client needs to trust and know the claims leader, but developing strong relationships such as this takes time. SMA has done this over many years. Skuld meanwhile has had much stronger relationships on the P&I side. We are gradually building up that relationship on the Syndicate, so that we will have a strong service platform in both hull & machinery and P&I. There’s a lot of coordination between the platforms; it is vital for us to be seen in the market to offer the full spectrum of cover. We are constantly working on improving the coordination.
On Syndicate 1897
“We established the syndicate in 2010 and started writing in 2011, initially with R&Q on a turnkey basis. Then in 2012 we got the opportunity to acquire Asta, together with two other shareholders, so it became strategically natural for us to move our syndicate to that platform, which we did after three years with R&Q.”
((Note: Skuld, Paraline and Tawa became the principal shareholders in Asta at the beginning of 2012. Asta Managing Agency took over from R&Q as Syndicate 1897’s managing agent at the beginning of 2014.))
Hansen continues: “We are really emphasizing to the team in London that the Syndicate will have the Skuld flavour going forward. It is important when you recruit to the Syndicate from the Lloyd’s market that they are introduced to the Skuld values and culture, how we want to service the market. The extent to which the Syndicate will work together with Skuld on the P&I side is getting even greater emphasis as time goes on.”
“The Skuld ‘flavour’ is really to be hands-on, to work together with the client on the challenges. We are focusing on ‘how can we pay your claim?’ rather than ‘how can we avoid your claim?’. It’s important to transfer that concept, which has been in Skuld for many years on the P&I side, into the syndicate. It’s like a mantra that we are getting together with the client, rather than facing each other on opposite sides of the table.”
“I would like to be a cautious optimist for the future. I’m not necessarily saying that insurance rates will increase in the short term, but I’m cautiously optimistic for our core client base and the shipping market. There seems to be a slowdown in new builds coming to market. There also seems to be a slight improvement on earnings for the largest shipping sectors. Scrapping levels are still fairly high, although they are reducing. World trade is still increasing at approximately 2% a year. So all of this, hopefully, will lead to less of a capacity surplus in the shipping market. Vessels are becoming more active again, so earnings should continue to rise.”
“That could also lead to more claims. We have been in a benign claims environment for some years. But, over time, an increase in claims would lead to higher insurance premiums. I am less concerned about over-capacity in the insurance market. I don’t think that rates would necessarily go up significantly if some of this capacity pulled out of the market. What would lead to increased rates would be an increase in activity.”
“However, if the shipping market remains quiet, and margins continue to reduce for owners, then there is the concern that this could lead to less maintenance, and a lower quality of operations and crew, which could lead to even more claims. But that would also push up premium levels.”
IMN asked Hansen about the new alliances and merger activity.
Hansen says: “There is definitely consolidation in the shipping sector. The increase in the number of mergers and acquisitions will lead to new entities in the shipping market, and that will lead to more tenders for insurance. That is something that we see as an opportunity for Skuld. We are well-established in the market, so we are invited when these tenders occur. This allows us to present our competitiveness on premium levels and also our full-service concept. ”
On faster growth in some parts of the world than others
“I don’t think that we would make any changes to our office structures. We have a global reach already with offices around the world. We are constantly dynamic on where we should be present, but we feel that we have a good reach on what is developing in the various geographical markets. When it comes to sectors, we see that growth is more evenly spread. So the 2% growth in trade is more or less evenly spread between bulk, tankers and containers. And the cruise sector is doing very well.”
“We started off the year with some big claims, but this was an opportunity to prove the service that we can provide when these casualties occur, and we received very positive feedback from our Members. But it led to a weak start in P&I for the first two quarters, and also in hull the Syndicate experienced a few large claims. There were also some losses on ports and terminals and cargo. Then during the latter part of the year, especially during the last quarter, we had a very quiet period, with no large claims. The frequency of smaller claims has been quite stable – perhaps slightly reducing over the year.
“On the P&I side, reporting to the IG pool was at a record low. That is another reason that we are seeing some fairly good results coming out of the P&I industry.
“At the Syndicate it has been a tough year, due to competition on premiums reducing margins and a few big claims that distorted our result overall.
“Investments have been strong ((return of 3.4% for 2016/17)). All insurers have seen their returns pick up again in 2016. There may have been a ‘Trump effect’ in that. We expect volatility on investments going forward. All of that in combination led to a very strong result at Group level for Skuld. We ended up above $50m for the bottom line ((up from $18m the previous year)). That was the result of a significant improvement in the last quarter, and that quarter pushed us to the third-best year in Skuld’s history. So, overall, we are very pleased, but we see the challenges in the current commercial environment in Lloyd’s. That has led to a number of consolidations in our book of business in the commercial field during 2016 that we are confident will improve the syndicate’s performance for the coming year. Financial strength is vital, but we think that Skuld’s competitive advantage is the strength of the service it provides”.
On autonomous vessels.
“I think that they will develop, possibly more quickly than some people expect. Perhaps not for world trade, but for coastal vessels, for ferries, I think that the development will go faster than expected. Just a few days ago we saw that one of our Norwegian clients (Yara) was planning to introduce a fully autonomous coastal trading vessel by 2020. Skuld will continue to offer cover for these vessels. Obviously you will have fewer crew injuries, but there are other risks to consider. Cybercrime is one of them. So it might lead to some adjustments and changes in the way the cover is put together. But that is where Skuld likes to be, in touch with developments in the market and offering clients suitable products. But the big question is, how much will risks such as cyber-crime come in, and how much will the traditional risks go out?”
“Also, bear in mind that we are insuring the vessel, so the question is, how far back will that cover reach? Will it travel onshore, to a person sitting with a joystick in an office? Will it reach all the way back to the programmers? There’s a lot of interesting topics here, and a great deal of debate about it is taking place within the insurance industry. I think that, if we see a massive increase in autonomous shipping, we will see changes in the way cover is composed for shipowners. Some of the risk will be onshore, physically distant from the vessel. But you would still have the old challenges, with the traditional bad-weather claims, and probably you would still have some pollution claims when things go wrong. So there are elements of traditional P&I and hull & machinery that will remain.”
“Maybe we will see a future of more combined covers – a full operational cover – relating to autonomous ships. It’s a complicated area, but the important thing is that we are willing to offer cover and to look at how that cover should be put together.”
“For the Syndicate, we are basically following what Lloyd’s is doing. It will be the central hub for its Brexit strategy and it has decided to open a subsidiary in Brussels. That will solve many of the challenges that our Syndicate could have faced. Skuld group is covered by the Norwegian regulators. We have subsidiaries or branches around the world. I don’t foresee any Brexit challenges for our non-syndicate operations in London, because we already have a structure in place to accommodate it.”
Reinsurance prices are coming down, ships are getting safer, everything’s benign, why isn’t everyone happy? As an insurer, you should be delighted.
Hansen says: “And we are! As I said, we are cautiously optimistic, we are happy with what we see on the claims side – the development of better quality risks, and more focus on loss prevention. Yes, reinsurance rates have gone lower because of an absence of large claims. But there is a challenge with the highly competitive premium environment. But over time I am optimistic that Skuld will be able to adjust. In the short term, yes, some of the margins are extremely low for some of the commercial marine products. But I would rather be an optimist than a pessimist.”