How Shipping Insurance Really Works During a War

22:01In which case, though, part of the liability includes cleaning those all up. And those types of containers are considered hazardous waste. So there's a special disposal process that has to go. It can be quite expensive. It can also cause danger to navigation in seaways. So you see what I mean? So really, you look at the type of ship that you're looking at, and you look at the type of claims that can possibly arise. But we look mainly, Steve, I would say, we look at industry, but we look mainly, each club will look at their own experience and decide what they classify as risky behavior. We analyze claims and we learn from the claims to decide what we're willing to tolerate and what we're not willing to tolerate, or what we're willing to tolerate, but we're going to charge a lot more, for example, because the risk is higher.

22:49I don't know if you wanted to add something. No, I was going to say a lot of it too is human error. So you could do all these actuarial studies to say that this vessel operating in this region is likely to have X amount of claims per year, but you can't account for a crew member not sleeping or falling asleep at the wheel, basically, and causing an accident, which has happened. So a lot of it's human error, not being trained properly, small things. I mean, as P &I insures, people look at us and think large oil spills, wreck removals, the big headline claims, but our average claim is about$20 ,000 $30 ,000 per claim.

23:22So it could be a small crew claim, a cargo claim. So these are the things that add up and determine how a P &I club is operating, not so much the one-off big incident. Sorry, I just wanted to add one more thing going back to the original question that you posed in terms of what is our role in terms of training, let's say, or loss prevention. So while we are not the primary people or group that's responsible for training crews, because there's crew managers, the operators themselves have to do that. The training that they get in the schools that they go to and stuff are really what we do though is based on our analysis of our claims though we identify gaps we identify issues we identify trends and then we do actually have programs that enhance training so we from whatever they're doing we will add things so you'll look on our website and you'll see that we have regulatory training that the owner can use to actually track the training of their crews that make sure that they know certain minimum standards of the regulatory knowledge.

24:16Let's say, are they familiar with how to handle like the collision regulations, for example, and other types of modern regulation for navigating at sea. We've also done vlogs, we've done interviews, we do seminars, and then we also do like a good catch series. So you'll see that we take our cases and we analyze near misses, and then we identify what our owners and their crews and their people ashore can do better in order to prevent that in the future.

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25:29Tracy Alloway:And now, The Laundry Hero. Brought to you by Grand Appliance. Oh, really? Okay, I'm on it. Uh-oh, what's up? Eh, laundry's piled up and my washer just died. That's a bummer. Check out GrandAppliance.com. My brother got a great deal on a Maytag washer. Grand Appliance? My parents shopped there. Mine too. Whole family. I'm on the site. Wow,$5.97 with next day delivery? Problem solved. Shop Grand Appliance. Appliance experts since 1930. Support for the show comes from Public, the investing platform for those who take it seriously. On Public, you can build a multi-asset portfolio of stocks, bonds, options, crypto, and now generated assets which allow you to turn any idea into an investable index with ai it all starts with your prompt from renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20 year over year you can literally type any prompt and put the ai to work it screens thousands of stocks builds a one-of-a-kind index and lets you backtest it against the s p 500 then you can invest in a few clicks generated assets are like etfs with infinite possibilities, completely customizable and based on your thesis, not someone else's.

26:39Go to public.com slash podcast and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash podcast. Paid for by Public Investing. Brokerage services by Open to the Public Investing, Inc., member FINRA and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete disclosures available at public.com slash disclosures. So I have a personal question, which is this is kind of odd lots lore but i'll repeat it for people that don't know the story but many years ago i guess four years ago or so it feels longer doesn't it yeah okay four years ago my furniture got stuck on a container ship called the ever forward that ran aground in the chesapeake bay and i think an investigation found that the pilot had been using his phone or something which is kind of crazy to think about i didn't see any insurance payout from that i know my property wasn't like actually damaged, but it was kind of annoying not having a couch for a couple months or however long it was.

27:39If something like that happens, what is the actual distribution of the insurance payout? So who does it actually flow to ultimately? Like, does it eventually reach the customer who's shipping stuff on these ships? It's not. And there's not like a straightforward answer. There's a lot of dependencies that go along with that. And it has to do with, the contract that you have, right, and the various insurances that are placed. Now, to a certain extent, there has to be a certain limit on what could be considered too remote, for example. And under certain regimes, you would probably have to have physical damage in order to be able to claim the economic loss related to that.

28:19That is probably the reason why a lot of times when you ship things, they ask, do you want insurance so you can insure yourself? Because there's no guarantee that ultimately that will get up to the P &I club, for example, because it just flows into contractual liabilities under that. But the shipper would have cargo insurance as a whole to get from point A to point B. And obviously part of that is it's going to be on a vessel most likely. So if the ship owner is negligent and they're found liable for that loss, so like you said, he was on the phone, vessel grounded, then the cargo underwriter would go after the owner, which ultimately gets covered by the P &I clubs.

28:57I see. Okay.

28:58Tracy Alloway:By the way, I'm on your website and you guys have some great posters, these safety posters that people should go check out. Do they say don't be on your phone when you're navigating? Yeah, there's one. Yeah, there's one that says... Something as simple as that. Yeah, there's one that says... We have some relief to fatigue. I kind of want to get one of these framed like for my house. They're really cool looking. I'll blow it up. But like there's a Feed Your Focus one, shut off personal cell phones. Right. I see you guys, you know, it's like safety stuff. Yeah. Anyway, people should go check these out.

29:23Tracy Alloway:will go out to all our members yeah that's what i'm saying so i'm telling you but also listeners should just go out and download these because they're pretty cool looking you know we also sorry just so you said that something that could also apply to people not in the maritime industry we have a whole series related also to like sexual harassment that creates awareness for you to understand what that means that simple things that even based on certain cultural or even habitual type of behaviors that can be considered sexual harassment creates awareness for it it's a really fantastic series. Yeah, there's a lot of good resources here.

29:52Tracy Alloway:All right, let's talk about, like, the context of this conversation within the war in Iran. And the reason, I mean, the issue to my mind is like, okay, so are you affected by it? Because when I think about the situation, I'm by and large not thinking about risks that ships are going to pose to others in the context of war. Yeah. As opposed to risks to the ships. So, like, talk to us about, like, the degree to which for your P &I is a factor or the Iran war is a factor in the world of P &I insurance. Well, I'm going to give you the big picture and then Steve will analyze it. We'll break it down.

30:30So traditionally, war has its own special sector of war underwriters, war insurance. The P &I standard policy excludes liabilities that arise out of war acts. However, there is an excess level of cover that is offered by the P &I club simply because the standard policies are limited by the value of the vessel. I'm going to hand it over to Steve. We've been talking about P &I and liability. But if you're a ship owner, so you come to us for your P &I insurance. You go to a hull and machine underwriter for hull and machinery for the vessel's value, what's on the ship. So you have two separate towers of insurance.

31:14So we cover the liability they cover the hull but because we exclude war risks yeah it's traditionally offered there's a few places they could go traditionally the hull underwriter will give you war risk cover for p and i and hull up to the value of the ship okay so if you have a 10 million dollar ship you're insured so the ship sinks it's a total loss you're covered for 10 million underwriter you know writes you a check there's a pollution element they'll cover 10 million of that loss as well. So that's traditionally P &I, but because we excluded the whole war underwriters.

31:50Tracy Alloway:Just to be clear, if a ship is sunk in the war, then there could also be a liability on the part of the owner for the pollution caused by their own ship having been sunk. Potentially. Potentially. Potentially. There's a lot of nuances to that too. It has to do with also convention. There's certain international conventions that exclude if it's subject to war but then there are certain national legislations that carve that out so it depends on where you might where it might happen sorry just to be clear though like when you talk about like you said there's a war exception or you don't cover war we don't cover it standard primary would exclude it but why would pni ever fact include war risk because the question is like war to my mind does not what if a crew What if a crew member dies?

32:36That's PNI. That's live.

32:37Tracy Alloway:So that is, okay, I see, I see. Okay, so this is really important. Yeah. So a crew member's death in a war would be, or a crew member's death would be PNI. Yes. Right. But you don't, in a war, you do not. Correct. Unless. Got it. Right. And on top of it, so we mentioned pollution, we mentioned crew. Yeah. Wreck removal would be one. So, you know, vessels going through the strait. Yeah. There's mines. If it were to sink and it's a wreck and it's in a shipping channel, eventually, and let's say the conflict ends, well, now you have a wreck there that needs to be moved. So P &I clubs would have to step in and remove that wreck, which will cost a lot more than the value of the vessel.

33:21So what the P &I clubs do offer is what Dorothy mentioned, excess insurance. So excess of the hull's value, knowing that a wreck or pollution event, likely not crew, but a larger loss, could breach that$10 million or whatever the value is. But in this example,$10 million, you breach that threshold. The P &I clubs, as part of our collective reinsurance buying, we buy reinsurance for war P &I. and every ship owner who's entered in any ig club every year pays a small amount it's not a lot but they pay a small amount for that coverage so we fill that gap so just to be clear just to spell

34:01Tracy Alloway:this out in a war right you're do not provide war insurance the vessel would go to some other commercial carrier and they would have that in place and they would have that but the pni club does offer this excess based on the reinsurance purchasing power beyond what the commercial carrier may offer. Okay, this is great. And effectively, we're buying it on their behalf. Yeah, got it. So I have what might be a dumb question, but like, why are all these different risks so bifurcated between different players? Like, why is there a separate whole protection provider, a war risk provider? If I'm buying home insurance for the most part, like I just go to an insurer and it's like, okay, we're going to cover your roof damage as well as like whatever else might happen.

34:45I don't have to go to three different insurers for the most part. Yeah. I think it comes out of exclusions. So originally the Hull Underwriters didn't want to offer coverage for liabilities because like Dorothea said, they didn't know how to price it. It wasn't their forte. So there was a gap in cover. Right. Yeah. I see. So P &I clubs were born out of that. So now you have a club and what do you want? You want some kind, And you want to be able to project what your claims will be in a given year. So the club members are ensuring themselves or each other for what I'll call predictable risks. Right.

35:20Going from port A to port B with a certain cargo, accidents happen. But if something is a little more specialized, so if you have a vessel operator who's involved in drilling and production operations, that would be excluded as well because that's not a mutual pullable risk. because that might be a one-off where you may be doing that with your vessel, but the three of us may be saying, whoa, whoa, whoa, we don't want to cover that. That's a complete different risk. So war falls into that. Yeah, it makes sense. It's hard to predict. So the P &I underwriters excluded war traditionally and now created there's war clubs or Hull would step in and offer limited war cover.

35:59I mean, it's important to keep in mind, too, that war risk is not actuarially stable, right? It's not like the rest of the risks. It's really just subject to geopolitics and national relations between countries. And it's just based on that. Whereas most other types of insurance is actuarially stable. Not always predictable, but actuarially you can analyze it. You can't really do that for war. And then one thing I think is important to note, and this has been a topic of discussion, I think, on the war side, is that during the year in peacetime, it's very cheap. Yeah. Okay. It's very cheap. And so I know that there was a lot of talk about the cancellations and stuff like that.

36:41It's really, they have to do that because they're not underwriting based on the ships transiting war areas. They're underwriting based on trading in peaceful areas. So once an area then becomes subject to a war act, they do have to be able to re-rate that. And so even though they gave a notice of cancellation that so these are the headlines we saw at the beginning of the conflict saying that like war risk insurance has been pulled right at the start of a war which was very confusing yeah a lot of people me included yes yes yeah yeah i was getting instagram reels sent to me of people trying to explain it and complete misconception yeah and when you're getting reels on pni insurance oh yeah you know something big is going on and yeah yeah i don't know if you want to explain why the pni clubs had to give that notice that we gave because everybody said, oh, the P &I clubs are canceling war.

37:32We don't cover war, but in certain instances we do. Why don't you explain where we cover it? Yeah. Right. Well, just to kind of back up a bit on what the cancellation means. It's really a cancellation of the rate, not of the cover. So everyone was saying, oh, these vessels are trapped because they don't have insurance. And, you know, Lloyd's in London is almost doing this to get back to the U.S. First of all, all those, not all, but many of the underwriters at Lloyd's are American companies. So it wasn't the UK saying, you know, we're going to get the US back for this. We don't support the war.

38:03Pull insurance coverage. The vessels are trapped. That's not the case. Every war policy, even though we're not war experts or war underwriters, the way it works, every war policy has a notice of cancellation clause saying if basically if a war were to break out like you have here and vessels are now in the Gulf, well, we didn't price for that. We gave you a cheap rate because you're sailing around the world now you're in a war zone the risk changes so we cancel your policy and meaning we cancel the rate you paid give you three-day notice you're covered if something happens so if you're struck okay you're still covered right but now after that three days lapses you have to buy your cover back at a higher rate based on if you're trading there yeah if you're not trading there it doesn't affect you at all yeah yeah so if you're trading there right so that's what we those were the headlines the notice of cancellation so it looks like this is so helpful yeah um but why why the p and i clubs give a notice right so p and i yeah because i think that confused people our mutual risks were not so anything that's pooled and has this excess war was not impacted but we also offer cover to charterers so not just ship owners if you're chartering a vessel and that do we know what a charter is so for no okay trace is not okay a Charter, it's kind of like when you lease a car, it's like you're chartering it.

39:24So if you don't own it, you're paying somebody to use it. Okay. So go ahead. And the owner is liable most of the time for big oil spills, wreck removal, whatever it may be. But a charter could be found liable for some of this. So a charter is risk because it's not pooled with an EIG and there's separate reinsurances for that. That includes war. Right. So that's always been a pass through. So we will include charterers P &I war cover. and because we received a notice of cancellation from our reinsurers we tell them we have to cancel your war cover in the persian gulf but give us two days and then we're going to come up with a solution which is what came up yeah we had a solution they could buy it back at a higher rate yeah how much did the premium actually change um it depends on where they were calling but it was to give an example there was like one vessel we saw their war slip their traditional war before the war broke out they were paying about fifteen thousand dollars a year for that and then when the rates first came out from the underwriters to get the vessel out of the gulf it was going to cost about sixty thousand dollars just for a seven-day period to get it out and then once the straight closed and there were mines in a straight there was a separate notice given if you're transiting the strait.

40:42So now you have a war, we call it a buyback. It's a reinstatement of the cover. You have your war buyback for the Persian Gulf. You're covered in there. But if you're transiting the strait, there's a new exclusion that may apply with new rating. Sorry, you said mines in the strait. A, are there definitely mines? Because I think there's been some discussion of that. And then B, this kind of gets to the question that Joe mentioned at the intro i know i talked about insurers as enablers of behavior but when you're in a war situation i assume people also don't want to be killed exactly even if they can get insurance that's what we wanted to get to yeah the vessel they weren't trapped because there was no insurance or because the rates went up they it's they just don't want to put your crew at risk you don't want to put your crew yes and it should people should know though too that ultimately the decision to do that type of course is for the master of the vessel to decide.

41:37It's not, you know, you can't direct him to do something that he believes will put the crew and the ship at risk. That is rule number one. I did want to comment. This is a core maritime principle. Yeah, yes, exactly. The other thing I wanted to mention is that actually I was speaking to one of our colleagues that manages our European subsidiary, and he has extensive experience in Holland on war. And I was given to understand that the ships that were trapped on the inside were given different rates than ships that were looking to go in and out. So the ships that were trapped, it was taken into account that this is not a voluntary, it's not an initiative to trade in a high risk area, that they are trapped.

42:18And if they want the rates were significantly lower to come out if you were trapped, then it was for those ships looking to actually transit to do regular trade through the high risk. And in those cases, when they were looking to trade, the rates were ranging from anywhere from three to 10 percent of the whole value. The ones that were initiating this type of trade, whereas compared to the ones on the inside, the average rate I was told was about 0.5. It's a big difference. So that is very important to understand. And insurance was always available. It's just whether you wanted to do it really ultimately.

42:54And the operators and our members that we spoke to all made it very clear that the safety of their crew was much more important than everything else.

43:18And now the No Panic Party Save, brought to you by Grand Appliance. Your party is safe. Wow, Amy, great party. and the food? Incredible. Thanks. And did I tell you my stove died two days ago? What? Did you panic? Nope. I called Grand Appliance and got a great deal with next day install on the Frigidaire gallery I wanted. Next day? Wow. Grandappliance.com, right? That's it. My family's shopped there for decades. Shop Grand Appliance. Appliance experts since 1930. Support for the show comes from Public, the investing platform for those who take it seriously. On Public, you can build a multi-asset portfolio of stocks, bonds, options, crypto, and now generated assets, which allow you to turn any idea into an investable index with AI.

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45:18Tracy Alloway:It makes a lot of sense to me that like certain types of insurance that are like that end up in this sort of reinsurance or sorry, self-insurance model are the types that are like highly stable and predictable. Tracy, do you remember 2014 AOL? It was still a public company. Oh, wow. And I don't know if anyone remembers this. A little bit of insurance history. the ceo said on its earnings call that the company's profits had taken a hit because one of their employees had a very high complicated pregnancy and it was so big that they actually he noted and then everyone sort of figured it out i think who it was and it was like a pretty egregious like privacy violation but they were self-insured because it's a large company and over time you're like you know your health insurance costs are going to be stable from one year to another, but it was just, I guess, such an expensive pregnancy that he mentioned it on the call as having affected earnings that quarter.

46:19Tracy Alloway:But it does seem, yeah, but this really clicked that when you have a type of insurance in which payout distributions are roughly stable on a year-to-year basis, that is the natural time for the sort of nonprofit self-insurance model of some sort well actually though there is a nuance to that okay yeah so because it's not not it's not really always stable okay it's just spread out enough it's spread out that there's a resiliency to it okay they're able to withstand the volatility the model is able to withstand the volatility well since there are multiple clubs that carriers can choose do clubs risk like sort of snowball effects, couriers defect, and then suddenly you have fewer members and then the risk is magnified.

47:07Tracy Alloway:Is that a tension from one club to another? I wouldn't want to be part of a small club. We're a small club. Oh, sorry. I wouldn't want to be a member of a five. I mean a really tiny club where it's like, oh, the two of us are going to insure each other. No club is that small. This is what I'm saying. It feels like you need some critical mass. It's relative. Like I said, the clubs collectively insure 90 % of ocean-going tonnage. So being a smaller club is still a big club. Yeah, yeah. I'm just saying there would be a level in which mutual insurance doesn't make any sense. There are rules in place to deal with certain things like that.

47:47It's true. You actually don't want – because P &I has a long tail, right? So some claims are still open 10 years after and sometimes even longer. So that's why actually the mutual system allows for multi-year openness. I wouldn't be part of that. Yeah, yeah, yeah. But yes, we do have agreements in place that protect us from things like that. And the way the pooling and reinsurance mechanism works, it's all relative to your size. Okay. Right. So the clubs collectively pool claims, individual claims between$10 million and$100 million. And then beyond that, they're buying this reinsurance up to$3,$3.5 billion.

48:27But what you pay is there's a formula, which we're not going to go through. It gets complicated, but it's based on your relative size. So if you're a smaller club, you're paying less for these large marathon casualties. Where a larger club is going to take a big hit, even if it's not their claim. So it's all scaled. It's all scaled. And it's quite fair. And the concept actually is that everybody pays their share over time.

48:53Tracy Alloway:Right. Yeah. Yeah, yeah. And it works. What you take out, you need to put back in. Right, right. And that's at the club level and at the group level. Yeah, the group level, let's say. Yeah. Just going back to the Strait of Wormuz for a second, there are some ships from certain companies that have been running through despite everything going on. And the one that springs to mind is Dynacom. And I actually sent an email to them asking if I could get their owner on odd lots. And I haven't received a response, perhaps unsurprisingly. But like what is enabling them to get through versus other ships?

49:30Yeah, I don't think that that's something that we'd be able to really. OK, they're not our members. We're not familiar. We do have another member, though, that was hit. The other thing I wanted to mention is that despite the fact that the P &I clubs are not the primary insurer on a case of war, we actually do take an active part. So we are involved. We are close to the member because we have a very close relationship with all of our members to begin with, right? We are most of the time copied on all the correspondence. So we also provide some guidance because besides the P &I side, we also have what's called an FD &D cover and that's freight to margin defense.

50:04And so that helps the owners with disputes that may arise, contractual disputes. We don't ensure the claims themselves, but we provide the guidance, the legal guidance. We have a lot of lawyers within the club, but we also support them if we have to hire lawyers outside to defend or to pursue any claims that they may have. And that's a legal costs cover. So a lot of the times, even on cases that we are not directly responsible for or not directly not responsible for but covering, we're usually quite involved because, like I said, we're protection and indemnity. The protection part of it involves standing next to the member and guiding them.

50:40But the intricacies of any particular owner being able to cross the strait is not something that we're actually privy to. So, but yeah. I mean, the only thing I can say is that I know that there are certain factors that are looked at by the Iranians when they are attacking, you know.

50:54Tracy Alloway:This is such an interesting conversation. It can go a lot longer. I'm mindful of the time. I'm looking at this article about Dynacom. The owner of the billionaire shipping magnate, Greek buccaneer George Prokopiu. That's the name of the firm. I noticed, so, at the American Club, you have office locations in New York, London, also in Piraeus, in Greece, and then also Shanghai and Hong Kong. And I'm just curious, like, something aside of this current moment, we all sort of know that Greece specifically is one of the centers of shipping for a long time. It's the number one Asian, yeah. But has it moved east over time?

51:32Tracy Alloway:Okay, we know that a lot of the ship building is happening in Asia. And we also know that so many of the routes are Asia-dominated, etc. Have the financial flows of insurance moved east in the same way the physical flows? Have the financial flows of insurance moved towards Asia? I should say specifically rather than the same east. On the insurance side? Yeah, on the insurance side. Has insurance finance moved towards Asia in the same way that the trade flows have? No, not from an international perspective. China does have its own P &I club. It's not a member of the international group of P &I clubs.

52:06They do have reinsurance relationships with some of the clubs that are members of the group. It's a very large P &I club, but it generally insures Chinese managed and own tonnage.

52:16Tracy Alloway:So even though shipbuilding and trade is so Asia dominated, the financial element of the insurance has not. On the insurance, no, it hasn't really. Not from the international side of things. Not yet. Not from the international side of things. I think even all the major traders are still insuring with the UK, Scandinavian, and American clubs. Yeah, I would say. Dave, I don't know if you've seen anything different. I've not seen anything different. If the U.S. starts building ships again, is that great for the American P &I club? Would your membership automatically increase? It wouldn't automatically increase.

52:54No, because there's no directive in any country that you need to, that your insurance has to be, you know, domestic. But it would probably increase our potential to grow if we began to build ships in the United States. Do you see any signs of that actually happening? We've done a number of episodes on how to get. People who want it to happen. People who want it to happen. Yes, yes. I mean, we want it to happen too. We want the American maritime industry generally to become stronger. We do think it's a shame how it's developed over time. The American Club also was a part of that. You know, like I said, up until we internationalized, you know, our membership was very, very small because it was only American and the maritime fleet was shrinking at that time.

53:34Obviously, we are the only club. While all the clubs have a presence in the United States, not all of them, but many of them, they don't have an actual regulatory domicile like we do. So the American Club and all of its people in the United States are probably the most significant and the deepest bench in terms of know-how of managing and underwriting maritime casualties. And we're very proud of that. We've been doing that for almost 110 years now. So not us personally, but the company itself. But, yeah, obviously we are very supportive and we are actually very active. and we have relationships also with all the agencies.

54:17We actually insure all of the MARAD training vessels. We know all of the agencies very, very well. We have active relationships and we are very much a part of that American industry that is looking to bolster what's happening here in the United States. Joe, you need to build a ship and then join the club.

54:33Tracy Alloway:You mentioned the door shipping startup, so it could happen. All right, Dorothea Ioannou and Steve Ogolukian, thank you so much for coming on AllBots. Really appreciate it. Thank you so much for having us. That was so great. Great conversation. That was really good. Thank you.

54:59All right, Joe, that was a fascinating episode. Yeah, it was great. For sure. I feel like I am slowly getting a better handle on the maritime insurance industry. It is interesting to me how, like, divided all those different risks are. And to Steve's point, the idea being that, like, well, if you're a P &I club, you can kind of price out the risks of going from A to B with, like, a certain type of cargo in a certain, like, predictable manner. But if you're doing war risk insurance, that's a very different kettle of fish. You know, it's sort of— That's a maritime expression for you.

55:32Tracy Alloway:Oh, yeah. Good job. Thanks. It actually makes a lot of sense to me, this idea that like war, the pricing for war insurance would reset very quickly. Right. Because one could imagine, say, like buying a multi-year war. You know, oh, you're going to buy this insurance and it's going to cover you for the next few years. Most of the time there's not war. And so most of the time you don't want to be paying a war premium, et cetera. So it's all just like a trade off. It's like, OK, like no one loves it. A war breaks out, so suddenly your premiums are going to surge the next week. Yeah. I don't think anyone's very excited about that.

56:10Tracy Alloway:But that's just the flip side for getting really low war risk insurance the vast majority of the time when war is not going to be an issue for you. It's just a tradeoff in terms of like how long do you want to be paying for it and so forth. So that actually made quite a bit of sense to me. Well, it also seems like the limiting factor on ships getting through the strait at the moment isn't in fact— It's not insurance at all. It's like whether you can survive. Yeah, the captives of the safety of the crew and just being sort of like a sane. So even though insurers run the world, there are limits to the abilities of insurers, I would say, to affect humanity.

56:48Tracy Alloway:No, I think it's really interesting. I also like, you know, at first I was like, well, how is a ship and their liability like a car where there's, you know. But, you know, then you see like all their posters and it's saying all of these very safety things. You love those posters. No, they're really interesting because it's something like, you know, make sure you're getting enough sleep. Are your hatches tight? Yeah, are your hatches tight? Don't check your email all the time. I think there's a drinking one too. Oh, yeah, take control of fatigue, everything in moderation. So it's actually very similar to car, to sort of liability insurance for a car, just in the fact that, like, the basics of safety apply to a ship as well.

57:29I'm going to print out the cell phone one and get it framed and put it on your desk, Joe. As a present.

57:35Tracy Alloway:I would like that. I would like that. All right. Shall we leave it there? Let's leave it there. This has been another episode of the Odd Lots podcast. I'm Tracy Allaway. You can follow me at Tracy Allaway. And I'm Joe Weisenthal. You can follow me at The Stalwart. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashiell Bennett at Dashbot, and Kale Brooks at Kale Brooks. And for more Odd Lots content, go to Bloomberg.com slash Odd Lots. We have a daily newsletter and all of our episodes. and you can chat about all these topics 24-7 in our Discord, discord.gg. And if you enjoy Oddbots, if you like it when we talk about maritime insurance, then please leave us a positive review on your favorite podcast platform.

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