← The Edge of Risk Podcast by IRMI
Loading summary
Transcript54 lines
- [00:00]
A
Foreign. Welcome to the Edge of Risk podcast. I'm your host, Joel Aptabon, the Chief content officer@ermiancaptive.com and on today's podcast, we're joined by Steven Weiss, President and Chief Underwriting Officer at Incarnation Specialty Underwriters and mga Stephen. Welcome to the podcast.
- [00:24]
B
Thank you, Joel. I'm looking forward to being here and having a conversation with you.
- [00:27]
A
Great. You know, I'm kind of stoked about this conversation.
- [00:31]
B
You really got to be on our
- [00:32]
A
toes to talk about this one. Because right now the Iran conflict isn't just a geopolitical story. It's fundamentally an insurance story playing out in real time across global shipping. So, you know, we're, we're seeing a war and risk environment centered on the Strait of Hormuz, about carrying, what, 20% of the world's oil? So the Iran situation effectively turned key shipping lanes into active war risk zones. Right. And it's changing by the minute as we're talking. So it's a live stress test, I guess, for marine insurance.
- [01:11]
B
Yeah, there's a, there's a lot of truth in those statements. It's interesting because the insurance industry would say it's not really an insurance issue, it's a geopolitical issue because insurance is available. The question is, can or will the shipping companies want to pay that much money? And secondly, the ship owners, the masters of the ship, still have a decision of whether they're going to put their crew at risk for that as well as obviously the shipping companies are concerned about that, too. So while it is an insurance, it has put insurance in the spotlight. Insurance is available. It's just very expensive or can be very expensive. Plus, the issue is more safety of crew and ships. That I think is the driving issue. But we'll talk about all those different things as we move forward.
- [01:56]
A
Yeah, no doubt that you bring a unique combination of market underwriting and real world marine risk perspective. No wonder Donna Wright of our staff here has been trying to get you to speak at our transportation conference. Right. Can you start by sharing your background and how you came into your role today? It's just, how do people get in
- [02:17]
B
these really cool jobs? That's a great question. And I will say that there's no two paths that are the same. My path started with Virginia Military institute. I spent five years active duty in the U.S. navy, and I was three years reserve. And in that period of time that I was in reserve status, my unit was designated as the convoy commanders for the Persian Gulf and the Gulf of Oman. So in the event back in the early 90s, if there had been a shooting war and there were convoys, we would have been the unit that got activated to go help the ships move through the straits. So got out of the US Navy, off active duty in 1990, went into marine surveying loss adjusting. I spent almost 15 years helping insurance companies manage risk and figure out the losses at a couple of private companies, including one that I owned 50% of. And then in 2004 I went in house with my, my largest client at the time, Liberty international underwriters. Spent 12 years there initially as a risk engineer managing risk for large and very expensive cargo. And then I took on an underwriting role. And by the time I left there in 2015, I was, I was head of underwriting for Project Cargo and for General Cargo. Moved over to Aspen for a couple of years, same role there I was head of project in General Cargo. And then in 2018 I went over to Munich re spent 5 years there as a chief underwriting officer for ocean and Inland Marine. So I brought under not only the wet side of marine, but also the dry side, the inland marine. As a uniquely US term that defines basically anything. You can't insure it somewhere else, you know, just as, as, as a quick definition of inland marine. And then in 2023 I decided I wanted to do something more for me and more for maybe more niche and start up my own managing general agency and focus on cargo, project cargo, stock throughput, and then also the transportation lines, the motor truck, cargo, auto physical damage, construction, contractors, equipment. We have an excess casualty program. So really the background is an amalgamation of risk from a perspective of in the field, hands on, then some claims experience and then really just getting my hands dirty, learning how to be an underwriter and spending time talking to clients and figuring out what they need. And really the insurance industry is needs based, you know, our product is claims. So we want to make sure we do the best work we can for our clients to help them manage their own risk.
- [04:47]
A
Awesome. First of all, let me start by saying thanks for your service. And then let's begin at the top. When people hear war risk, they often think it's automatically included somewhere, right?
- [05:02]
B
Or not.
- [05:04]
A
So what is war risk coverage and why do standard marine or aviation policies so often exclude it?
- [05:13]
B
So if there's no war going on, war risk is included in a marine or an aviation policy. Funny way to put it that way. But basically the risk changes when there's a shooting war going on. You know, a typical marine policy is built to cover or is made to cover perils of the sea or air. And those are not considered when two belligerent nations are shooting missiles and dropping bombs on each other. So when that happens, the policy typically there's a war notice of cancellation issued. The war notice of cancellation basically says, okay guys, for this area, we no longer will cover you in a standard marine policy. And this area is because there's a much heightened risk of loss for ships, cargo, airplanes, etc. And while there is coverage available, typically coverage available, the coverage comes at a much higher price. So it's less of a lack of insurance, more of a differential in price because of the differential in risk. And I think we're going to spend a little bit more time on this. But the differential in price and the war risk is very dynamic. For example, the Persian Gulf or the Black Sea, which is other area that has that where Ukraine and Russia are involved in a war. The, the cost of taking a ship in there changes daily, hourly, based on what the risk profile is that is analyzed by the various companies that would potentially trade in those areas.
- [06:40]
A
Awesome. All right, so walk us through how like your just last example was a listed area, right. And a war risk policy. How do listed areas work in the real world? Who decides what gets listed? How quickly can the list change? Sounds like hourly. And what does the designation immediately trigger for owners, brokers or underwriters?
- [07:07]
B
So the joint war committee in London, which is an amalgamation of Lloyds of London and Institute of London underwriters companies, they meet virtually all the time. And I think they actually probably talk daily. And then when something like this happens, I think this happened started on a Saturday. You know, they met over the weekend. You know, it was probably likely by phone, but they met over the weekend and they discussed, okay, what are we going to do? Because immediately the chance of a loss increased from minimal to highly likely. And so, you know, so that's the kind of how they saw it in the back of their mind, you know, what are the chances of a ship sinking in the Persian Gulf in a normal day? And it's pretty low because it's a pretty mild sea there isn't the worst thing you could do is run into something on the seabed, I. E. A coral reef or something like that. But when they started dropping bombs and shooting drones and the missiles and drones are the two things that were really critical to this one because they were unpredictable. So that the committee said, okay, this is the circle that we're considering at risk for war. And it's basically was the Gulf of Oman, the Persian Gulf and the Straits of Hormuz kind of separates those two, or it really is the channel between the two of them. And then we still had, down south of there, we still had the Houthi issue around the Red Sea. So, I mean, it really covers a relatively large area. The other listed area that's currently enforced is the one in the Black Sea, like I mentioned, for Ukraine and Russia. And then there's a lot of notices out to mariners about piracy. So it's piracy, it's a shooting war. Those are the kind of things that trigger it. And when it gets triggered, underwriters have to look at, okay, what's our probability of loss? What was it before? And what do we have to charge to make us comfortable with putting ourselves at risk for the loss of a vessel? And one of the things that had already happened, I think, on the first day or the second day, is a couple of ships got hit. So, I mean, it was very clear that there was a targeting going on of shipping that area. So very quickly, boom. The P and I clubs and the major London underwriters, including my backers, issued notices of cancellation. And it was a war notice of cancellation. It was specifically for that listed area. The policy in the rest of the world is still in force. It only triggers that area and the policy still enforced those areas. But if you go into one of those areas, you have to go into there with advanced notification, an agreed premium and an agreed plan for what you're going to do. So it doesn't, per se, stop. It changes the mechanism for whether you're covered or not.
- [09:38]
A
So brokers really have to monitor and communicate and understand the things that are going on. And literally. Right, Stephen, as we're speaking, Iran is changing the game. Right. And that, I assume, could impact pricing. Right, Right. The first ship, they say, well, all ships can go through.
- [09:58]
B
Well, the first ship. Well, I mean, you make a really good point, because when the ceasefire was signed in Lebanon yesterday, Iran said, okay, the straits are open to all shipping as long as that ceasefire is in force. However, you can only go through this particular route. And that route is between Iran and the island of Hormuz, which is on the. The northern. So you're going to be close to the coast of Iran and then up between the island of Hormuz and Iranian territory. But currently the US Navy has said no. The Iranian ports are still blockaded now only for ships trading with Iran or coming to or from Iran. So every ship that's going into the straits or out of the Straits that's not going to Iran. As far as the US Navy is concerned, it's free to pass. Iran is saying everything's free to pass, but only if you go this way. So ships are right now or you know, companies, insurers are looking at this and saying, okay, is it safe for me to go do this now?
- [10:58]
A
Yeah.
- [10:58]
B
And if so, do I follow the Iranian plan or the US plan? And what's the good and the bad of each of them? You know, as soon as their risk management hits spin around all this and the joint work committee comes out with a updated rates, then I think you'll see transits slowly starting to rekindle. Now ships are going to first go through and those first ships that go through will I'm sure be highly monitored, slash, maybe even escorted by one of the naval vessels that's there just to make sure that they get through. Because the last thing that certainly the US wants is another merchant ship to be hit. You know, and the Iranians are saying that everybody's clear as long as the ceasefire holds, but they're not really saying the challenge here is to basically is to freedom of the seas. And the Straits of Hormuz is considered an open sea and free passage through there is guaranteed by the UN agreement on freedom of the seas. And with Iran for a while charging tolls and saying you have to go this certain direction that's no longer in US mined or most countries mind freedom of the seas. So there's, there's a dichotomy here about what's being said and what's actually in place. And like you said, it's going to be sorted out I would say over the next few days as people start having further conversations.
- [12:22]
A
Let's break it down a little further for our listeners. And you know, this is such an interesting coverage piece. I like there is coverage, but one of the most. I heard you say that earlier on one of the most counterintuitive features is a breach of warranty mechanism where the annual policy is effectively suspended for transit into a listed area and this additional premium kicks in. So I'd love it if you could just break it down a little more, explain how the negotiation works and what drives the additional premium rates from fractions of a percent to, to 1% or more in just a matter of days.
- [13:04]
B
That's a really good question and it is a complex thing to get your head around. So a listed area is considered a warranty within a policy and in an insurance policy a warranty says you either do something or you don't do something. In this case, it says you don't transit in this area unless you've notified us, gotten pre agreed terms and pay the additional premium. Because all of the policies that would be affected by this area, the war notice of cancellation has been issued. So unless you're willing to sail in their bear of insurance, then you need to do this negotiation. And it is because it's saying you once had it, now you don't, but you can get it back if you pay more money. Everybody thinks that's what insurance companies do anyway. But this really is the pricing for a change in risk. And as you can tell that as anybody that you know has followed this at all, the risk has dramatically changed. For an example, I had some cargo that was wanting to fly out of Dubai International Airport on an airplane to go to, to Italy. And the cargo coverage for it without the war in place was whatever $7,000, the war coverage which would come in place when, when the unit rolled up on the, onto the back of the aircraft. And then when it, when it came off the aircraft, it was done. So the war coverage is only going to be in effect for whatever 15 hour flight from Dubai to Italy or whatever that probably not even that long, but that was going to be 10 times. So the cargo premium was 0.1%, the war premium surcharge was 1%. So the cargo worth $7 million. So the total premium then that had to be paid was $77,000. Not $70,000, but $77,000. Because in order to have your regular policy in place, you had to pay the initial premium in order to have the war coverage in place, then you had to pay the additional premium.
- [14:59]
A
Sure. So I think I understand that. And you know, maybe just to keep it really simple, you know, and say when, if gasoline or fuel or oil starts moving through these straits, right. Or, or has moved to these straits, the price we pay at the pump probably also includes some of this war risk premium. Right. You know, at the end of the day, because you have to, do you have to pay.
- [15:24]
B
Well, you know, that's an interesting question because all the gas or all the, all the fuel that most people are using right now was already outside of the Straits of Hormuz before this happened.
- [15:36]
A
Right.
- [15:36]
B
So technically is a fuel burden in our car right now, is it a war risk premium or is it a potential shortage because of war risk premium?
- [15:46]
A
Okay.
- [15:47]
B
And I would say that that's really what it is. You know, the U.S. you know, Irma is international, but the U.S. is relatively fuel independent, except for like the west coast because of their particular needs and what they want out there, Europe, China, German, Japan are not. They rely on the Middle east for a much larger portion of their fuel than the US Does. So the impacts there have been much more dramatic than they've been in the U.S. you know, in the U.S. i would say, I mean, when I filled my tank up in late February, before this happened, I was paying, you know, 256A gallon. When I filled it up day before yesterday, it was 385A gallon. So, yes, that's a dollar and 20 cents more than it was a month and a half ago. But in Europe, it went from $4 a liter to $10 a liter. We haven't seen that sticker shock that occurred in Europe. And but again, as I said, you know, it's really a potential shortage of the product that is driving the prices up. And if you looked at the markets today, the price was down 13 or 14%. It was back in the low 80s, which would be good for, you know, in a couple of weeks you'll probably see price gasoline pull price at the pump start coming down. There's always a lag when the price goes up, it goes up quickly. But when it goes back down, even if it should, it lags a little bit. Takes a little bit longer for it to go back down.
- [17:07]
A
So, Stephen, I appreciate that explanation. So I think the cancellation feature in this policy is very wild compared to most commercial insurance cancellations in the United States. Right. There's usually 30, 60, 90 days require we have a cancellation guided Ermia. I Rarely ever see 7 days notice in some wordings or 48 hours in others. So from a buyer's perspective, what does that actually mean operationally? And from a market perspective, why is that clause essential to keeping the war risk market solvent?
- [17:47]
B
So I think there's two reasons that those cancellations are so much shorter. The first one is because the risk escalates so dramatically in a regular insurance policy, whether it be marine or commercial, whatever. We plan for hurricanes, we plan for bad weather, we plan for severe convective storms, we prepare for ship sinking and fires on ships, et cetera. But what we don't prepare for is a war. And wars typically don't start slowly. You don't have two weeks notice that. Okay, I'm going to drop this bomb on you. Let's reconfigure all the global policies. It's like, boom, Saturday afternoon when most people are in the summertime, they'd be at the pool I guess it was February. Maybe not everybody's at the pool yet. It was a very quick start. So there has to be a way to protect that marketplace. And the protection is this short notice of cancellation. And the notice in the US for war risk written on a US AIMU policy, the American Institute of Marine Underwriters is 48 hours. And so some of our coverage were on 48 hours. Some of them were on the seven days requirements that Lloyd's Gifts and the notice of cancellation is typically issued within 48 hours of the incident occurring. That triggers this review. Really, as soon as the Joint War Committee comes out with their listed area, then notice of cancellations go out very soon thereafter. As soon as they have some wording, they can send with them. So we waited until, I think we issued all of ours on Wednesday or Thursday of the first week of March. And personally, by MGA as a whole, we only had two policies that actually had a Persians offer golf for full money exposure, but we had to issue that notice of cancellation everything. And then the ones that had an exposure over there, then we'd renegotiate if they still needed cover. And neither one of them, I mean, we negotiated that one for the aircraft, but they actually never shipped that cargo, not because of the expense of the. Of the insurance, but because the airline canceled the flight because of the war exposure, because just before that flight was ready to start loading cargo, a suicide drone hit the airport. Yeah, that's kind of a scary thing when you're that close and you know there's the chance of an issue there. And that's a very confined space, really, if you think about it, the Persian Gulf area is a very confined space. And Iran has the entire northern coastline of the Gulf of Oman and part of the coastline of the Arabian Gulf. So, I mean, it's very much a place where they have relatively instant access to most of that area.
- [20:19]
A
Yeah, no doubt. I would love it if you could help our listeners and audience separate the buckets. Right. So I'm a cpcu, but I gotta be honest, I don't really always understand all the differences. There's war risk haul, there's war risk liability, or P and I production and indemnity insurance. And then there's cargo. What are they? Where do you see the biggest gaps in how buyers structure these coverages and what claim scenarios most often surprise people?
- [20:54]
B
How do we do this? Okay, so when they ever given ran aground in the Suez Canal about, I don't know, four or five years ago, I took that and made a picture of it. Right. I took a picture of it. And then on that picture I, I put all the different exposures that happened because of that ship ram ground. And it's relatively similar to the war risk. So you have your hull exposure, which is the actual ship, the structure of the ship and the ship's machinery. So that's the hull, the war hull risk. And a typical, let's use LNG tanker is worth about $150 million, maybe $200 million. So if you think about your annual trading premium for that, you're probably talking 0.1, 0.2% of the ship's value over the course of a year as a premium. But if you go to a war risk, war risks on hulls were being quoted anywhere from 1% to 7%. So 1% would be $1.5 million, 7% would be, what's that, almost $20 million. If the ship wanted to make that transit, it becomes a matter of financial calculations. You know, can I recover that money for my charter, for the whole risk? So, you know, that's the first factor they play in there. Separate from that is the liability insurance on the ship, which is typically covered by a protection and indemnity club, a P and I club. There's I think 12 of them in the International association of P and I Clubs. They have a, you know, a limit of $3 billion per ship. But that cover also is, is immediately canceled because they cover pollution. For example, the ship gets sunk and there's a pollution incident, the P and I club would have to respond to that sinking or to the, to the spill. And you know, in a war zone, it's going to be hard to do that. So you really don't want the ship to go in there. But if the ship wants to go in there, they're going to have to pay the premium to make it in there. And then the last part of that was the cargo. War and cargo is the stuff that ships carry. You know, whether it be containers, whether it be lng, whether it be oil. And each of those owners of the cargo, if they want first party coverage on their cargo, they're going to have to purchase that war cover for their particular, you know, not rely on the P and I war cover because P and I also would reimburse cargo in the event the ship owner does something negligent. So is selling into a war zone the ship that's covered by hollow and P and I, is that an, you know, probably the cargo owners could say that. But the challenge that the cargo owners face that the hollow machinery and the P and I folks don't face is that in a standard cargo policy, which is still in effect outside the region, that cargo could be discharged somewhere else because the ship has to move on to its next thing or. Or potentially it's produce, so it's refrigerated. It's got a perishable timeline. So this cargo could be dropped off somewhere else and then has to be reshipped when the war risk goes away. So the cargo owners could be on the hook for that particular exposure, which I think most cargo owners right now are more concerned about that than they are the actual cargo loss because of the war, because of a missile hitting the ship or something like that. As far as I know, there's no cargo claims because of war. There are vessel claims because of war. I think 22 vessels have been hit by missiles or drones, and I think 20 seafarers have been killed. But as far as I know, there's no cargo losses because of the drone and missile warfare over there.
- [24:14]
A
Okay, so big gaps. Do you feel like we've covered that or claim scenario? Most would surprise people.
- [24:21]
B
I think, on the cargo side, the surprising thing would be that even if there's no loss in the cargo, the cargo market may be on the hook to get all this cargo to its proper market after the war's been cleared up.
- [24:33]
A
Okay.
- [24:33]
B
I think where there's going to be a heightened concern for a period of time is the mines that have been put in the water by the Iranians. So ships sailing in and out of there might need to buy war risk for an extended period of time until they can confirm all the mines have been cleared from the straits. And that could affect both the hull and the P and I cover for whatever period of time until the US Navy or whatever navies go in there to try and clean the mines out safe. It's now clear. Yeah.
- [25:00]
A
So there's something in there, too, about capture and seizure. How does that differ from physical damage? I don't know if you have to drop off the cargo for a period of time while it's cleaned out and it can be shipped. But is that capture and seizure or
- [25:14]
B
Capture and seizure would be more if one of the belligerent nations took your vessel and did not give it back to you.
- [25:21]
A
Okay.
- [25:22]
B
And then I think there's also. There's blocking and trapping, which is, you know, blocking would be where the straits, like in this case Straits of Hormuz, are technically open but physically closed because of the blockade by the U.S. navy. And also the chance to get hit by a missile, a drone or a mine. So that piece of water is blocked, and then you have all of the ships that are up in the Persian Gulf, which is, you know, past the Straits of Hormuz, they've been stuck up there. They've been blocked from going onto their voyage. And that blockage or that blocking could become a part of a claim in the future, because after six months or a year, under a war risk policy, blocking and trapping could be considered loss of use of the vessel, and not loss of use, but functional loss of ownership of the vessel. And it could be reimbursed by the hull and the machinery interests. And, you know, that's a potential for future claims. I don't think this is going to go on long enough for that, but that's a potential for future claims.
- [26:26]
A
So blocking and trapping, it is a kind of a unique feature. Paying the full value of a vessel stuck for a continuous.
- [26:34]
B
Yeah. Which has no fist, has no physical damage to it. It's. It's just stuck in it. During the height of the Somali piracy crisis, where they were taking vessels, they were taking, you know, some oil tankers and some container ships, we had several clients that came to us and said, hey, we want to put together a trigger in our policy that in the event our vessel and its cargo isn't available after six months or a year, then we'll get fully reimbursed for that cargo. And then if we recover it, then it's yours, you can sell and do whatever you want with it. So for. For a good client, we would do something like that for an additional premium that's not quite war risk, but it's compensation for a risk that is unusual, I. E. In that particular case of piracy.
- [27:14]
A
Right. So I guess there are special considerations for blockades or choke points.
- [27:22]
B
Yeah, choke points. You know, any canal or any port really could end up with a blockade and trapping issue. Like if you could close the Houston ship channel, you could potentially block and trap ships within the Houston ship channel. Baltimore was another example where the bridge fell into the Baltimore channel. That's potentially blocking and trapping. However, there was no war risk associated with that, so it was more considered a demurrage or a loss of higher client. Potentially awesome.
- [27:45]
A
All right, so let's talk about the big picture. When the market experiences a de facto closure, when a route is technically open but effectively uninsurable, or there's a really, really high premium on it, what are the downstream effects you see? First, for insureds and brokers and how do issues like GPS spoofing, jamming and loss of hire disputes change the underwriting claims conversations?
- [28:12]
B
Yeah, that's a. I'll say it's a really broad question. So I'm going to start with the last question there. The loss of hire disputes. So vessels sail under charter parties. It's a contract between the person that rents the vessel, the charter and the owner of the vessel. And this contract says that we will do these things if you do these things, or as the owner of the vessel, we'll carry your cargo from this port to this port for this specific period of time. And if it goes outside that period of time, then you pay us extra money. So that's not technically a loss of hire, that's a demurrage claim. But basically what the ship owner is saying is I can't do anything else with my ship because it's got took out your cargo on it. So I need you to pay me for that ship for a longer period of time. Or let's say there was a ship that had just, that's now sitting in the Gulf of Oman empty, wanting to go into Kuwait and pick up a cargo. Now it's sitting there empty. So it's technically not on hire because it can't get to where it needs to go. So the ship is sitting there. Nobody's paying for that ship or nobody's paying the owner for that ship. You know, the ship itself is, you know, is owned by somebody. But, you know, the disputes I think are going to be, you'd have to, again, it's going to be all very much contract specific. So if the contract says in a war zone, the merge no longer applies, then that's an easy one. Or if it says that, you know, if we can't sail because of this, there might be a penalty clause in there or there might be a clause that says as the ship owner, we can choose to take your cargo somewhere else, drop it off and you figure out what to do with it after that. Those are some of the potential solutions for this. And one of the things, there's two pipelines that go across the Saudi Arabia, United Arab Emirates, Omani, to the Gulf of Oman on the Arabian Gulf on the south side of Oman. So some cargo was getting out that direction, about 20% of total, something like that. Not negligible, but not really enough to fulfill the needs of the world. And when Iran targeted that particular pipeline, that was the last oil spike you saw about two weeks ago. So there are many things that are going to need to be unpacked here. And I don't think we're going to be out of the woods as far as unpacking all this for several or many years. There's going to be a lot of legal expenses paid in and around this particular dispute.
- [30:32]
A
Yeah. Focused on. One piece of advice for risk managers is read your contract.
- [30:38]
B
Yeah, well, read your contract with the mindset that a war could happen. It may not be super likely, but it could happen. And then the brokers and the insureds, they need to make sure that they understand that when there's a conflict like this, the first thing underwriters are going to do is they're going to issue you notice of cancellation. You need to have a thought through solution at that point in time. Do you take your cargo somewhere else? Do you just not go to that area for the next 12 months? What are going to be your, your mitigation attempts, you know, in order to prevent you from having a significant loss because of this particular, you know, going to be a lot of people that are out a lot of money because of this. Not only the shippers of cargo out of the Persian Gulf, but also the traders that move all this stuff to ship owners. Iran's going to be, obviously Iran also has a lot of devastated areas that have been bombed. And I think that the linkage of the conflict in Lebanon and Iran is interesting because from a political standpoint, that's an admission by the Iranians that they're responsible for what Hezbollah is doing up in, in Lebanon. So I, I think that the geopolitical issues that are going to come out of this are going to be far further reachy than the financial issues that come out of this.
- [31:51]
A
Very insightful. Bringing it back to insurance though. Yeah, no, I agree.
- [31:56]
B
I didn't want to go too far off of that tangent. Yeah, I agree with that.
- [32:00]
A
How much capacity is in the market and how competitive is the market now?
- [32:06]
B
So I would say outside of the Persian Gulf, the market, hull market and cargo market are both relatively soft and there's an overcapacity in those marketplaces. What that number is globally is, it's hard to say, somewhere between, on the cargo side, somewhere between 2 and $3 billion worth of capacity exists to write business now that gets deployed multiple times because there's about 22 or 23 billion dollars worth of insurance premium that flows into the cargo market every year. The whole market is about $10 billion worth of premium. And again, they probably have one to $2 billion worth of capacity now. You would have heard about I think most listeners would have heard that the US government has agreed to put a $40 billion backstop behind the war risk. That's not a capacity number, that's more of a premium number. So they'll, you know, they'll insure up to $40 billion worth of premium business that goes in there. It could be a lot more exposure than that. But what they're gambling on is not every single ship that goes in there is going to get sunk by the Iranians. So in that war risk cover, the capacity didn't change. The application of the capacity to risk changed. So, I mean, the hull market still has between 1 and 2 billion dollars worth of capacity can use to insure any one single ship. But it got so tight and so expensive. So the whole war market is extremely hard right now. The whole market outside of the war regions is relatively soft. So what the numbers are, nobody really knows exactly, but there is plenty of capacity in the world to do this. It's just whether you want to pay for it and whether the owners are comfortable taking their very expensive pieces of equipment into that area.
- [33:53]
A
Yeah, I guess. And if the insurance is provided, eventually that has to build its way into the economy. Right, so.
- [34:01]
B
Oh, absolutely, absolutely. We will get away as consumers without having to pay for. Pay for this particular. For the increase in process.
- [34:09]
A
You know, Stephen Weiss, this has been incredibly helpful. You know, you are translating a very complex insurance thing and fast moving by the minute, really, you know, area into a practical takeaways. I think for our listeners to help understand this for risk managers is really, really insightful. And to our listeners, I think if you found this episode valuable, interesting, please share it with a colleague who maybe touches marine or cargo or energy or transportation or international trade risk. And until next time, I'm Joel Applebaum and thanks for listening.
- [34:47]
B
Thanks, Joel.