Ep322 Ståle Hansen Skuld: How can we help?

0:02I'm Mark Gagan and you're listening to The Voice of Insurance podcast, produced in association with Advantage Go, now part of Sapiens. Release your underwriters to underwrite with the Sapiens Advantage Go underwriting workbench. As an insurance journalist, I've always been particularly fond of the mutual sector. That's because mutuals usually have a really strong history, and because they often derive from particular industrial activities and distinct geography, they also tend to have a very clear sense of purpose. The absence of a pure profit motive and the imperative to grow and please investors also brings a greater focus on other metrics such as service and customer satisfaction.

0:43All of the above I think explains why today's guest makes for such a strong and insightful interviewee. Storla Hansen is the President and CEO at Norwegian P &I Club Skouled and this podcast will bring you right up to date with the marine insurance world. It's refreshing to speak to someone as client-focused and straight-talking as Stawler. From the latest on the major Dali-Baltimore bridge claim, to the challenges of dealing with war, AI and marine cyber exposures, as well as the ongoing modernisation, professionalisation and consolidation of the P &I world itself, Stawler is direct and unequivocal.

1:19This is one of those interviews that will make you feel good about insurance, because Storla and the PI world he represents remain absolutely true to our industry's core virtues of risk pooling, problem solving, and maintaining a bias towards giving cover rather than excluding it. Storla is also a great company, and the time will fly by. Enjoy the podcast. Storla, welcome to the Voice of Insurance. Thank you for having me. It's really great to be here. We're sitting in a wonderful office in the Gherkin. I notice now it's now called the Gherkin. I think they spent the first 15 years of their existence desperately clinging on to the idea that it was called 30 St.

1:54Mary Acts. And my visitor's ticket today, it said The Gherkin. So I'm glad we can call it The Gherkin, because that's what everyone else has been calling it. Part of the show is to get to know some of the people who are on the show. I've known you for quite a long time now, but I've probably never heard you tell me this story of how you got into insurance and run us a bit through your career and bring us right up to date. Right. Thank you. You know, I think many people come into insurance from all sorts of places, and maybe not as planned as many things. For myself, I had maybe quite a traditional education.

2:27I went to business school in Norway. And then after school and university, I joined a consultancy firm, which at that time was Andersen Consulting. Right, okay. Which is now Accenture. Yes. So I worked there for a few years, working for different industries, mainly actually in the retail industry. And then after a while, I just found out to be consultants working day and night and not really understanding who or what you are working for. I thought it was better to look at maybe one company to concentrate on. And there were just an ad in a Norwegian business paper looking for a business controller in skuld.

3:08So I applied for that role and came into, at that time, a very old traditional building. That was the old office of Skuld in Oslo, being served water in crystal glasses with the old paintings on the wall. And after a few rounds of interviews, I got hired. But I must admit, today's Skuld is very different from what it was then 23 years ago when I joined. In fact, how old is Skuld? We are celebrating 130 years next year. Well, I was going to say, because you don't get that sort of oak panel boardroom with these pictures of the founders and different CEOs over the years. All the chairman and the old CEOs were there.

3:50And it was founded, presumably, by a group of Norwegian ship owners. Yes. So Skuld was actually the first P &I club outside London and was founded by the Norwegian ship owning community because they wanted to have insurance closer to their home and their operations. So they didn't have to travel to the London coffee shops all the time. Absolutely. Well, of course, we're sitting in London. You've got an office in London. So we've always had that friendly connection, I think, between Norway and the UK. And coming up to the Christmas season, we were waiting for your Christmas tree to arrive in Trafalgar Square and other things.

4:24So when was that? When did you start in school? I started in 2002. So we're actually into the 24th year now. And I began as a business controller, found that to be quite interesting. It was quite difficult times in school in the early millennium shift. We had had many years with very volatile claims environments and investment portfolio didn't perform that well. So being a young without family, anything at that time, it was time to concentrate on doing work. and try to stretch a little bit what you could do. And it was a great opportunity to actually be part of the team that turned around school in those times.

5:08How long were you business control and then how did you move up the ranks? Well, I was business control maybe just for three, maybe four years. And then I got more interest for the risk management side and also gradually over to the underwriting side. So I then got the chance to go into a role of risk management or risk manager. And by that, I got quite heavily involved in sort of the underwriting tools and pricing models, etc. that we are working with. Were you managing the risk talking to ship owners about their own risk management? Or is it more risk management from your own sort of being like a chief risk officer of school itself?

5:44Exactly. This was more as a chief risk officer where you actually looked at all the exposures and risk assessments necessary for school being a regulated financial institution. I'm not a technical expert on ships. I don't have the engineer background. We have a lot of engineers in the company that actually go on board on the ships and do the actual assessments there. But this was more from a financial risk assessment perspective. I suppose it was a professionalization that was going on. And of course, let's say 100 and something years ago, it was more of a gentleman's kind of arrangement. And of course, there probably wasn't financial regulation equivalent of what we have today.

6:22And I suppose you had to professionalize in many ways, I suppose that you're starting to get financial regulation, you had to sort of make sure you've got your ticket. That's right. And I think that happened around the millennium shift where we saw that a mutual company as we still are, they didn't have much of a financial solvency requirement at that time. But this was gradually introduced during the millennium shift and later was very much escalated when the Solvency 2 regulation regime was introduced and our capital requirement escalated severely from what we had in the past. Because in the past, it was sort of accepted that we could call on additional premium from the ship owners if we needed.

7:07So if Skull had a loss, we could just call for more premium. And that's not the case anymore. You need to show that you have a robust buffer to cover these volatilities. And you've got ratings from rating agencies, which you wouldn't have had before. Yeah. So the whole industry, especially the mutual part of the insurance industry, became far more professionalized during those years. And so after risk management, you were in underwriting. So what were you underwriting? Yeah. So I was still sort of, call it a desktop underwriter. I didn't run out in the markets at that time. But then I got an opportunity because the CFO that I reported into in my risk manager role, he got another opportunity with another company.

7:49So he left and the current CEO at that time, he asked if I wanted to run for the CFO position. That was maybe five years into my career in school and being quite unexperienced and young at that time, I think he did a large bet. but I then joined the management team in Skuld as a new CFO and this was in 2008 around the time when the finance crisis broke out. That must have been a fun time to be a CFO. A CFO at that time yeah quite painful I imagine. Quite painful and especially when you don't have any experience of being a CFO and the first day at your job the finance markets are collapsing so it was some interesting board meetings we had back in those days where I was going to explain and justify to the board that we had full control, everything is okay, and we were just looking at large red numbers.

8:48Back in those days, you probably had a little bit more freedom around the investments. Would I be right in thinking that back in those days, you had a higher weight into equities, perhaps, than a standard insurance company would have done? Yes. So that must have made it extra painful. Exactly. So that's why we were facing maybe more volatility than some other more, call it more professionalized industries at that time. And you're absolutely right. The challenge that some of the insurance mutual had was that we were quite heavily weighted to equities and then the markets collapsed. But I think what we perhaps did right at that stage was to keep calm.

9:29So we reduced our exposure, but we didn't sell completely out of equities. So when the markets rebound again in 2009 and 2010, we actually got more than what we lost in 2008 back investment returns with the steep recovery that you saw in the markets after the finance crisis. However, some of our peers, They sold completely out of equities, which made that journey much longer for them to regain their stability. And then, of course, you get clobbered by buying lots of safe government debt. Of course, when the yield was going down to zero, not much fun. Okay, it's fun to hold them for a while, you know, the ones that were yielding quite a lot, and you get a bit of capital gain on those ones.

10:16But then eventually you have to recycle into this zero interest rate world. Correct. Must have been pretty painful as well. Yeah, it was a challenge. It was a steep learning curve, to put it that way. But, you know, you learn as you live. And at least that also made me more comfortable taking on the role going forward, having had that kind of crisis behind me. Baptism fire, if it didn't kill you, then it made you stronger. Yeah, exactly. When did you take the top job? That was in 2015. So I was more or less eight years as the CFO. And then my predecessor, he retired and the board of school had their assessment and I was lucky to be offered the role.

10:59So I've been CEO since then. Well, we're fully up to date. I was just looking at your last set of results and I have to congratulate you. They're really strong. Thank you. How would you describe the current state of the pni market and then that wider fixed premium marine market that you also operate in and what's your sort of plans to navigate where you are at the moment there's so many things we can talk about i suppose let's start with where we are and then we can tell you where we're going we can probably spend the whole day talking about the geopolitical side of our industry but if we sort of narrow it down to the pni side and the performance in 2024 we quite some steep claims numbers coming into the international group of P &I clubs where we share the risks and we have a joint pooled claims.

11:48Yeah, the pooled claims. That's over 10 million, isn't it? Exactly. It's from 10 million and up. And that was the year when we had the DALI claim, the vessel colliding into the Baltimore Bridge. It's bad when you see something on 10 o 'clock news, you know it's going to be expensive then. Yeah, exactly. And I think we all knew that.

12:06But the system is working and the robustness of the pooling system that we have together with the other P &I clubs. So all the clubs stepped up, but also all the reinsurers. We are jointly purchasing one of the largest reinsurance programs in the world. And they all stepped up and that enabled us to go through quite a challenging year where most P &I clubs saw combined ratios well above 100%. And then after 24, we came into 25 with a much more benign claims environment. And I think that's what you see in the results from school from last year is that the combined ratio has now come down again beneath 100%, which means we are making a profit on the underwriting side, basically because of absence of really large claims.

12:58Was there a reaction? Did you have to put up prices or were you able to just ride through it? Is the combined ratio down partly because you increase premiums? Well, it's of course a combination. And the DALI claim is one case. Really what is hitting us harder, I would say, in our industry is when we have many cases of, call it medium-sized, costly claims. And we had that in addition to the Baltimore case. But in 2025, the claims environment calmed down. But yes, because of 2024, we were able to achieve some premium increases in the renewals into 25. So that benefited, of course, the performance.

13:35We have also continued growing. So we have a larger premium volume to cater for the volatility that we have in the industry. So the growth side of the business have also helped. And on top of that, I think surprisingly, we have seen the investment returns continue at a rather high level compared to what we have seen in the past. Well, of course, now we're getting bond yields, some of the longer data bond yields are hitting records that we haven't had 25-year, 30-year. We haven't seen these sort of yields since 2001, 2002 or something like that. So then that's probably going to bode quite well.

14:09It is. So the 25-year, we sort of benefited both on a more positive underwriting result and we had a strong investment return. So overall, actually, we landed the second best result in history in 25. And of course, we need to put that in context. Of course, you're not here to make spectacular underwriting profit. You're here to be solvent and there for when your members need you. And probably, I don't know, when you're targeting a combined ratio, you're trying to target 100 % or you're trying to target 96 and a half and you hope to give yourself a little bit of margin. But ultimately, you're not here to specifically make an underwriting profit.

14:45You're here to be solvent and ready to pay claims. Yeah, I can sort of put that into some context with Skuld. And if you look at our peers and the international group of P &I clubs, You can sort of divide the clubs into what we call more diversified clubs and clubs that are focusing mainly on the P &I mutual cover. We are one of the diversified clubs, meaning for the mutual P &I cover, we tend to aim for balanced result, meaning the combined ratios should be around 100%. But then we have more or less 50 % of our business is now a commercial book of business, not mutual, but other like Holland Machinery, war risk covers, charter offshore energy covers.

15:29And there we set a target lower than 100%. So it's more down on the lower 90. So the intention of that is to subsidize the mutual, but also provide genuine diversification as well. Yeah. So you get diversification where you then lower the volatility on your performance, But also the commercial side should produce a profit because the commercial business is also owned by the mutual members of the club. So that should contribute to the overall performance of the club. And do you diversify because partly the fixed premium, let's say, you know, the commercial insurance side, the marine insurance side, is that being sold to the same members or is it being sold to people who are not members?

16:09Quite often is sold to the members. And that basically it's from a call it service perspective. Because these are your customers. They're very happy to buy from you. They know that you have a great reputation with them, don't you? Exactly. You know, the P &I business, I said, school is 130 years old next year. And some of the ship owners that are insured with us have been insured with us for generations. And you have established a long-term relationship. So why not utilize that to offer more services? And also, they are asking many of these ship owners to have, call it, fewer points of contact when they are buying their insurance covers.

16:44So by diversifying, we can offer a broader range of services and products to the same membership. But having that said, we are also offering these commercial covers to what we call clients outside the mutual membership of the club. Yes, but ultimately it's for benefit of the mutual members, ultimately, because it will make it more efficient, make it better priced. Yeah. All the services that they're getting from you, ultimately. Yeah. And I mean, ultimately, what we want to avoid is what I started with, that we want to avoid calling extra premium calls to the mutual membership. Yeah. They don't want surprises.

17:20No, they don't want surprises. And they do their budgeting at the same time as us. And if we go then out with what we call an unbudgeted supplementary call later in the year, it's very annoying for the CFO that he has set his budget and suddenly he gets an extra bill of X percent of the insurance premium. Yeah, absolutely. And it's the only disadvantage over fixed premium, isn't it? But of course, with the fixed premium, you know that next year, even if you've got away with it this year and you have the loss very quickly after you've renewed, you know that next year you're going to have to pay more anyway, but at least you have more time to budget.

17:54Yeah, that's right. So what kind of market is it at the moment? Is it hard or soft? If you look at the marine insurance industry in totality, it's both hard and soft. When it comes to the P &I side, as I said, because of the Baltimore claim, increased reinsurance costs that we have had a few years with fairly large claims into the pooling system, that market has sort of stabilized in maybe more the harder section of the cycle. It's not flattening out, but it's more stable probably this year because we have seen less large claims in 2025 and 6. It's a brokered market, isn't it? So brokers usually help generate competition.

18:36How competitive is the market amongst the 12 members? And how often do portfolios of shipping fleets, do they move around? And obviously you've got ones that never move around, a core that never moves. And then what percentage of your portfolio gets moved around? An increasing percentage, I would say, because sort of the traditional family-owned companies is now not disappearing, but they are fewer than before. And we see, call it more professionalized or commercialized, larger shipowning entities. Big public companies. Big public companies being listed on the stock exchanges. Also, we see more private equity funds coming into the owner side of shipping, where maybe the loyalty to their insurers are not the same as it was before.

19:23And if they can save themselves 15 % going somewhere else, they'll do it, I suppose. Exactly. And they have shareholders to justify their performance and profitability too. So they are looking to save costs in all aspects of their business. And I think the brokers there play a very vital role for the ship owners. And obviously that creates more competition than maybe what we saw in the past. But we like a challenge. And I also see that we have been quite happily on the winning side now on some of these larger consolidations that we have seen in the industry on the ship owning side, which have been important for us.

20:00So we see larger buyers than before. Because mostly these are 100%. On PMI, it's 100%. Yeah, you're right. Do you think we might end up with a syndicated market, particularly if some of these insurers get so big? It sounds like might one chip owner eventually be too big for any one club to handle? I think you're right. And we see that already, that when you come up to the likes of Maersk and CMA, CGM, they have more than one club. They are, in a way, diversifying their risk exposure by having more insurers. Yeah, well, we've had consolidation. We were 13 and now we're down to 12. One, is that desirable?

20:36Would it be optimal to have a lower number? I know it can be quite hard, but you're talking about 130-year-old businesses. Often some of these relationships are really set in their ways. And there was a reason why Skulled existed. And often that reason is still valid. I'm sure Norwegian ship owners still want to have local Norwegian service. Yeah, although we see sort of a globalization of the whole industry, including the local ship owners. One, do you think it's desirable to happen? and two, do you think it is going to happen? I think over time it will happen. I think we will see more consolidation in the future.

21:10As of now, I think most clubs are in a healthy state and that maybe lowered the pressure from boards and management to look for consolidation. But we have seen the examples of North Standard coming together. We have recently now seen a UK club buying Thomas Miller, taking that in-house and they merge with the TT Club, creating a new larger entity. And I think all of these examples show the need for size in our business. And because the capital requirements have just escalated severely over the years from the regulating side, and also that we see that the claims patterns are becoming more volatile, you need premium volume to cater for this volatility.

21:57And therefore, when you look at sort of the group of clubs being a member of the international group today, they vary quite a lot in size. We have different strategies. I believe over time that some of these clubs perhaps will come together to create larger, say, more comparable units to what we see with the North Standard, the new merged UK TT club. and also you have another Norwegian peer in Norway with large sort of standing out with their size. And we are on our own growth journey. We haven't seen the need so far to go for an active merger search. We have grown significantly on our diversification and organic growth that we have been able to do over the years.

22:43But I think over time that probably will stagnate and then it's a need to look for it. And how much organic growth are you getting out of shipping in itself? Because obviously, you're dependent on the shipping industry. So if the shipping industry is in a terrible recession, presumably, then there's less shipping happening, less ships being built, and therefore the tonnage is going down. Presumably, it's not like that. I presume there's an organic growth in shipping. There's an organic growth. Yeah. And we see it's between 4 % or 5 % every year. The global book of, call it, tonnage that we ensure is continuing to grow.

23:16I think there's an everlasting need for goods to be transported around the globe. It might be changing from what it was in the past, that it's less in the future, less traditional oil and gas and other new types of fuels or whatever that they will have to transport. But you see the need for the large bulkers and you see the need for the big container lines that will just continue escalating. Where else in the market is good? When you're looking at your growth strategy, you're thinking, all right, I'm excited here that we're going to get good diversification growth out of this segment. What are the segments that you're most happy with?

23:54Well, coming back to your initial question about is it a hard or soft market? I've been talking about the P &I side, but it's completely opposite at the moment on the hull and machinery side, where we see a very soft cycle. The hull and machinery, where it's not 100 % cover, we offer, we are all taking shares of a policy that the broker put together as 100 % cover for the shipowner. We see that there's too much capacity in the markets, which have lowered the prices. But we've been there before lots of times. Yeah. And also the hull of machinery is far more volatile in their cycle, to put it that way.

24:31It's changing more often than what you see on the P &I side. So it's a much more dynamic market. So we have grown quite significantly on hollow machinery in recent years, because we see that as a nice addition to what we have on the P &I side, that we can offer hollow machinery to the same shift owners. However, it's not the market we are making money in, at the moment at least. I think we need to see some capacity going out. And we see more short-term thinkers or short-term players in that market than what we do on P &I. And I'm sure some of these players will now realize that they don't get the return on their equity as they should have.

25:11Maybe we'll start pulling out. At least it's reasonably short tail, so they should find out quite quickly how well they're doing. But I mean, for the ship owners, it's the buyer's market at the moment. So for them, they are buying rather low cost insurance on the hull machinery side. But then we have more, call it specialized covers. We are one of the largest players in the offshore energy fields. Where we still see there are pockets of profitable business when you have the, call it the expert skill of underwriting those more complicated, very technical assets. There's FPSOs and things like that.

25:45I mean, they're sort of floating cities, aren't they? They're unbelievably complicated. But when you look at it, you think that's not a ship. But it is technically, I think. And that's an experience you need to have in order to be part of that market. And we have built up quite significant experience over the years on the offshore energy field. So that's still a good diversification for us. And obviously, given the geopolitical side of things today, know that there are very high premiums at the moment on the war covers. We are not specialized in war covers, but we do write shares in that market as well.

26:22Are you happy with at least the way that the market has responded to what is obviously, you know, we've got the threats and the Straits of Four Moves, but we've also got threats around Yemen into the Red Sea, again, more constrictions and pressure points. And then there are probably other places, and of course, we know the Blackest Strait and other things, these could all kick off at different times. They do. But at least are you pleased in the way that the market has responded and the way it probably should have done? I'm pleased to confirm that the market has responded in the way it should, because the insurance covers are available.

26:50I mean, there were some confusion and misunderstandings in the beginning when some of us had to go out with what we call notices of cancellation. That doesn't mean that the cover is not available anymore, but it's just that a geographical area has been defined as a war zone. So it's a different risk and it's a different premium you need to pay to sail through those war zones. And I think in that way, the market has responded being able to provide the necessary insurance covers for the ship owners in sort of very difficult situations, having ships locked in in some of the areas. But it's not without risk.

27:27So even though the premium levels have come up, we have also seen that the claims have come up in recent months, given the severe situation with missile attacks on several vessels. Yeah, and broadly, obviously, you're an organisation that's got that really close long-term relationship with those clients. And what are their biggest worries at the moment in terms of how is it for them and what are they asking you to do the most to help them? A prudent shipowner will always have the biggest worry for its crew on board the ship. And that's where we, in the beginning of the war and sort of the escalation in the Hormuz Strait, We were facing a lot of requests from ship owners that wanted to safeguard their crew on board.

28:09And what could we do to assist also to repatriate crew out of the geographical area? Is that included in the standard P &I cover? Yes, but when the geographical area is defined as a war zone, it is the war insurance that kicks in and P &I sort of takes a step back. But what we have done, if not financially, we have contributed quite a lot with basically assistance to give advice, to help with the people they can contact to actually make sure that the crew are taken off the ships. And also there have been necessary to maintain ships down there to actually have crew changes. Even if you're an anchor and you've got the minimum crew, but you still need someone who's volunteering to be there.

28:52Obviously, yes. Also, we have an interest that both the crew and the vessels are taken care of, because at some point, it's the P &I that we'll have to cover again. And they'll say, oh, hull and machinery, if the engine won't start, because you haven't been maintaining it properly over the last year, then yeah, that's a problem. So basically, what we were facing and still are facing is a lot of advisory requests. So that is taking its toll on the organization. We have built up quite a lot of experience now over the last month. But financially, we haven't seen the same negative effects so far. Although where we are exposed on the war risk covers, we see an escalation now in the claims patterns due to all the activity there.

29:34Obviously, that big claim, you mentioned the DALI claim, the Baltimore Bridge claim. Some of the recent news on that, obviously, that was a large increase in that reserve, which is now getting quite close to the limit. And that limit hasn't been touched much. And obviously, given your risk management background, your finance background, there's 3 billion over 100, really, isn't it? That generally, and the first 2 billion is each and every loss, and then that 1 over 2 is in the aggregate, isn't it? And you call it the overspill or collective overspill. Is it time to have a collective overspill over the overspill?

30:02I think it's a question more what actually will be available in the market as well. Because as I said, we are collectively buying one of the biggest reinsurance programs in the world. And I think there's a red line somewhere how much capacity actually will be available. Good time to be buying reinsurance, of course, as well. There is abundant capacity and there's all sorts of alternative capacity, which I'm sure if you're telling them you could write a 1 billion over 3, they'll have a good look at it. They'll think, oh, this will be good. What I can say is that will be sort of a constant consideration for the international group to look at how much capacity is available in market and what makes sense to buy.

30:40I think what is important for the international group collectively is to maintain these long-term relationships with the reinsurers. And we need to provide stability for them so they can cover when we have a DALI claim or these spikes that comes, hopefully not very often, but when they are there, they are stepping up and they are actually there to protect us jointly together with the P &I clubs. And in order to create that stability, you need to have a very long-term perspective. So you wouldn't go in and out of what limits you are buying in such a program. You will have a very long-term horizon.

31:16So on that note, I don't expect to see much changes with sort of the level of what we are purchasing in the market. You're not worried that if it was your ship, it would spill over the top of the overspill and then come back to you? Yeah, the last layer is actually going back again to all ship owners. If we have exhausted all reinsurance, then it is actually the ship owners that will have to pay the last leg of the cover. What about the trends in terms of, obviously that's a severity loss. What about the general frequency of things that are sort of getting in to become poolable losses? What's that trend doing?

31:50For us, I can only speak there on the frequency side for school or on school's behalf. And we see quite stable development there. Obviously, because we are growing, we see that also the frequency claims are coming up in numbers, but it's comparable to what we have grown in size of business. Yeah, it's not some new trend or it's something that fits in with the fact that there are just more ships. going around. Exactly. What I can say is that we probably see over the years, it's been more regulation coming in, especially on the tankers. And that has also had a positive effect on the claim side. I read about the dark fleets and stuff, as we know, with following Russia, Ukraine, ships going around turning the AIS signals off so that no one can track them.

32:34And obviously, that means no one can see them. They can't see things they might be crashing into. Do you think shipping is becoming more hazardous from an underwriting perspective? Do you think ultimately it's on a probability basis more hazardous than it was? I mean, I think we all share a general concern about the escalating shadow fleet because we don't know really what type of insurance they are buying or what cover is actually in place if something happened with these vessels. And concern about the crew. You're not really going to be able to subrogate against them, are you, if you can't find them?

33:03It is challenging. And you are also concerned there about, for instance, a collision between a ship insured by a P &I club in the IG. colliding with the Shadow Fleet vessel. And certainly you don't have a counterpart on the other ship to discuss this with and share the cost. Or maybe it's actually the Shadow Fleet that should pick up the bill. So where is the insurance? So there's an escalating concern about the growth of the Shadow Fleet and what effect that will have actually, not only for our business, but more for the society as such, if there's no P &I insurance in place on these ships. So ultimately, it does sound like it is a bare point for an under-roiser to be pointing to.

33:45So ultimately, this is going to feed through. It's bound to happen at some point, isn't it? And we have had some examples already. And we see that, I believe it was in the news, that there were a ship outside Oman without covers. And what happens when you have a noise spill, for instance, then it's basically the states that will have to step in and cover far more than what they usually should have if the normal insurance were picking up the costs. We're sitting in London, very close to the Lloyds building. You had a foray into the Lloyds market, and then there's not a lot of water under the bridge since that happened, but you subsequently withdrew from the market.

34:21Obviously, Lloyds has changed a lot since that time. So have you, I'm sure. What lessons do you think you learned from that experience? And you might be circumsensitive where you might be able to go back again. One of the challenges that we saw being in Lloyd's was that we were in Lloyd's context to monoline in our products. And that caused challenges in scaling up the syndicate in a way where we got the full benefits of being in Lloyd's. So the positive side of entering into the Lloyd's market was that we got immediately licensing to do trades all over the world through the Lloyd's licensing.

34:59But the negative side was that we saw the cost level of operating a syndicate at that time was too high compared to the volume we could provide into the syndicate. So that was the main reason why we saw a need to pull out. And also, we saw that by gaining the experience we had through Lloyd's, we were able actually to establish a similar service in-house on our own corporate paper, and that we were more in control on our own destiny. Yes. I think if we were to go back again into Lloyds, it would be if we were to further diversify out of the marine insurance that we are more or less 100 % focusing on now.

35:40Should we expand into something else in the future? I think Lloyds, again, could be considered as a vehicle for an even further diversification than what we have today. Or I suppose, again, if we go back to some of that international group P &I club consolidation, if that were to happen, presumably then you would be big enough to start to justify that ticket entry cost of Lloyds. Yeah, I mean, there's many benefits with Lloyd's. And as you say, Lloyd's also have developed a lot since we were there. So I think that's something we will always have on the, call it strategic agendas when we have the strategy meetings with the board.

36:15And I'm not going to rule it out, but it's not in the short, medium term something to consider. No, absolutely. We couldn't be sitting in 2026 and not talk a little bit about AI. You know, if it was 2022, we would have been talking about ESG. But now this is the part of the podcast where we talk about the things of today. So AI, everyone's got to have a view on AI. And well, the first question would be, I suppose now most people have moved from just experimentation with AI to actually implementation of AI in some things. Where have you found it most useful to help run your business? I mean, we have seen sort of immediate results and value creation through AI has been on the claims servicing side, where we now use AI on a regular basis to create, call it more standardized responses on these frequency claims that we have a lot of.

37:03We have a database in Skull where we can use previous correspondence with similar cases to create new correspondence on new cases. And that has made the whole servicing of these frequency claims far more efficient than what it was in the past. A little bump in this port. You know who fixed it last time. You might as well get them on. Exactly. Because if you have the parameters of what type of claim you are facing today, the AI engine that we are using can very quickly go back in history and see, do we have a similar claim in the past where we can utilize the same law advisory and correspondence at that time?

37:42So it's good. And presumably it improves the response time, which is good. And I presume the quicker you are, the quicker you can start to minimize that loss as well. Exactly. So for now, it's not going to make anyone redundant in school because we are growing. We are still a very personalized industry, I think. But it's making each and every claim handler more efficient. And then over time, I think we will see the benefits coming also more on the underwriting side. We have some projects going on at the moment where we also want to utilize sort of our historical underwriting and all the data that we have built up over the years and see if that can strengthen our pricing models and our risk assessment tools in a more efficient way and also more quality risk assessments than what we have had in the past with the previous risk models and previous pricing models.

38:35So, yes, you can look at all the risk factors and start saying, actually, you know, this is what happened. Yeah. What should be the price on this ship? Because you have this history of similar ships having these and these claims. And we see that AI in that connection can improve the quality of the tools we are using quite a lot. What are the ship owners using it for? Is any of that worrying to an underwriter? AI in shipping. Yeah. In terms of apparel, is this making the risk better or worse? I'm sure sometimes it's making risk better and sometimes it's going to make the risk worse? I think that's the answer.

39:09I'm not sure if we have sort of the conclusion yet, but we see that AI is being used now more in operations on the shipowning side as well. Presumably on the logistical side, it must be really useful. Exactly, yeah. I mean, you know, particularly if you're sort of scheduling the cargo and loading the cargo in the right order, and that must be fantastic. What I do hope is that AI can improve a quality of insight of what actually the ships are carrying of goods, and especially in the containers, where we have seen many examples. You never really know what's in there, do you? Exactly. And those claims have also caused quite a lot of challenges for the insurers where you really didn't know what these containers had inside.

39:49And we have had some severe fires, for instance. And of course, if there's sort of 20 layers down, it can be really hard to get in there, can't it, to put it out? And even then, if you do put it out, then you've got a load of dirty water. You can't just dump that into the ocean, can you? Yeah, so I guess the dream scenario is that those intelligence systems that we know that ship owners, especially the container liners, are using, if that could be connected more closely to our risk assessments and to the insurance, maybe we all could benefit from it in a stronger way. I think the flip coin of using more digital tools is obviously the cyber risk that we see will come in as a negative factor if companies are being hacked.

40:30And we see that there are negative forces out there that want to benefit of taking over control of these assets that we insure. Yes, again, cyber seems to be the big one. And obviously, AI is enabling cyber because, of course, whereas before, cyber was dependent on manual labor of hackers. human hackers. There was only a finite number of them. Of course, now if they can program agentic versions of themselves, they can be much more busy. They can multiply their vector by a thousand or whatever it is. Again, is that something you're spending a lot of time with your members on really working? No, I think a general concern is what you're saying, that we see that speed of things have escalated a lot and that more attacks can happen and more sophisticated attacks and what risks this will be for the ship owners and also then in the end for insurers.

41:21So it's important for us to at least make sure that we have also covers available for the cyber risks. And I think that will be a market that will just escalate going forward. And I don't think we really have enough examples of claims or sort of looking at the history so far, there's a lot of assumptions that we have to use to create these insurance covers today, because it's developing. And I don't think we have seen the end of what can be caused of damages through this. Will there be a cyber exclusion? And obviously, that's not in your DNA, is it? No, it's not. It's more, what can we do to cover you more than what can we do to exclude anything?

42:00So that's always been the focus, I think, especially in general on the P &I clubs, It's more how can we help? How can we expand the cover we have rather than exclude what we do? Yes, but there's more data and of course more ships using more telematics. So again, there's more things that could be hacked perhaps. And there's automatic positioning systems and other things. And I think the question mark for now is what trend patterns will we see of claims coming out of the cyber risks? And what will that cause of changes in pricing basically? Because the cover should be there. The cover will be in place.

42:33And what about AI itself as a risk? It's been more of a non-marine thing. It's a big debate at the moment. You don't have to be the world expert on this. No, I'm not an IT expert. But you're a casualty underwriter like anybody else. So what's your gut view on, say, the main argument would be, from one side, would be you can't exclude AI out of people's activities because it's so embedded in their activities. At what point would you, because it's just a tool that they're using. So at what point would you say, you know, you couldn't exclude their use of the telephone and their use of electricity?

43:04so ultimately if somebody has made a mistake and it's their fault even if they were using ai and that helped them make the mistake you can't necessarily blame the ai and it's not practical to be able to separate the point at which they were using ai the part at which it was the human's fault so that's the main argument to say you couldn't exclude it what do you think about that again i think we should try to embrace all risks best way possible but maybe this will develop into some specialized covers for AI risks as well. And I think it's very new territory, especially in the marine world so far.

43:36Going back to your DNA, you're gutting to say how can we make sure that the cover is there? How can we help? How can we cover this for you? Excellent. And whether it's a standalone thing or not, you're agnostic. Yeah. I think the first thing we need to check is this something that can be covered by the existing covers we are offering and then check that against what we have of reinsurance covers and do we have any exclusions on the reinsurance side. And if we do, then I think it quickly will develop into some bespoke covers, some specialized covers on this. Stoller, I've come to the end of my questions.

44:09Is there anything you want to add? It's something I've forgotten to ask you or that's occurred to you while we've been talking that you'd like to say that I haven't asked you about. I think I would just conclude to say that, you know, it's a world that is quite insecure these days with all the geopolitical tensions that we see. And that's why I see that insurance, and especially for marine insurance, that the P &I clubs play a very important role to create stability for the ship owners in an ever-changing global environment. Stola, thank you very much for your time. I've really enjoyed talking to you.

44:43Thank you very much. Well, I hope you enjoyed today's episode. If you did, don't forget to subscribe or leave a like or a review or recommendation on whatever podcast platform you used to access this program. These really help get the word out. Before we go, just a quick reminder that advertising slots are available here and in other places in the Voice of Insurance podcasts. Podcasting is the fastest growing medium and attracts a high quality audience of key decision makers. It's also an intimate medium where you, the listener, are right in the room with me and the interview subjects. Needless to say, that means it's a great way of getting your message out directly to an audience because you know you've got their full attention.

45:23It's also very cost-effective. So get in touch with Mark at thevoiceofinsurance.com to find out how you could be speaking directly to the industry. The Voice of Insurance is produced in association with Advantage Go. Release your underwriters to underwrite with Advantage Go's underwriting platform.

45:46The Voice of Insurance is produced by me, Mark Gagan. Music was written by Anna Gagan and produced by Carlos Gagan.