The maritime industry is manoeuvring towards the destination of decarbonisation, but the unpredictable route, and ever-increasing complexity of the journey, creates major challenges for all ocean stakeholders.
Skuld’s executive underwriter Matias Bøe Olsen assesses how underwriters can help create certainty and trust in tomorrow in uncertain times.
How do you assess risks for shipowners looking at 25-30-years vessel lifecycles when no one seems to know what’s going to happen tomorrow? How will the industry hit regulatory targets without a ‘silver bullet’ fuel solution? Why are you smiling Matias?
Matias Bøe Olsen has remarkable poise and maturity for someone comparatively new to the shipping industry. The big questions don’t appear to derail him; simply putting him on track to deliver answers rooted in understanding, research and, with his education in marine engineering, a solid appreciation of technical considerations.
“We need to take things one step at a time,” he says calmly. “Sustainability is a challenge, of course, but specialist underwriters can help. In fact, I’d go as far to say that the function of underwriting is actually sustainability in practice.”
What Matias, an Executive Underwriter with Skuld’s sustainability group, means by this is manifold. Firstly, there’s the ‘bread and butter’ aspects of assessing risk and setting P&I premiums that are commensurate with any potential third-party liabilities – for example cleaning up an oil spill, or safely removing a wreck. So, there’s clear environmental responsibility.
The premiums also have to be sustainable to in terms of Skuld’s operations, and its members’ businesses, while providing an adequate safety net to meet all future claims.
And this is where, from a sustainable perspective, things get a little complicated.
Despite the fact that Skuld has over 125 years’ experience in assessing maritime’s ever-evolving risk picture, the situation the industry, and indeed the world, currently faces is unprecedented. A new generation of expertise is required.
“The climate is changing, and so is risk,” notes Matias. “We now have to consider two categories of risk – physical risk and transitional risk.”
In the past, assessing physical risk was comparatively “straightforward” in an environment of relative stability, he says, but the rapid warming of the planet disrupts established risk models. Now, he explains, it’s necessary to consider a wide range of climate scenarios before coming to any conclusions. “The risk picture changes in accordance to future global warming projections,” Matias comments. “The higher the increase above the 1850-1900 baseline, as set by the Intergovernmental Panel on Climate Change (IPCC), the greater the frequency and intensity of ‘extreme’ events. So, for example, if the world warms up by 2 degrees as opposed to 1.5 degrees, the probability and consequence (hence the risk) of an event that could impact upon our members’ operations, will increase.
“That’s something we have to constantly track and understand to be able to provide optimal levels of cover.”
The other side of the coin, transitional risk, is no less important.
With the lack of any aforementioned silver bullet solution to enable a truly green maritime industry, owners are confronted with a myriad of (often unproven) alternative fuel choices. This is challenging for them, but also for the insurance industry, which has to assess and cover risks. Skuld, Matias says, is working to stay at the vanguard of the transition.
The organisation has just participated in a Green Shipping Programme with Grieg Star to assess the potential of retrofitting an open hatch bulk carrier with green ammonia. This kind of cross industry partnership, he stresses, is crucial to unlocking understanding.
“Ammonia has huge potential for deep sea shipping, but there’s also challenges, not least in its toxicity,” Matias explains. “So, how do those challenges and risks compare to those of conventional fuels, and how can ammonia be handled, how can the technology develop, to mitigate those risks? Maybe it – or hydrogen, or any of the other competing alternatives – could incur less risks than conventional heavy fuels?
“These are questions that we don’t have all the answers to as yet, but through involvement in such projects we can build industry leading expertise. This enables to advise our members, helping them navigate the uncertain waters ahead.”
Easy does it
As if that task of navigation wasn’t already complex enough, Skuld’s members also have an array of regulations and reporting requirements to contend with, as Matias acknowledges.
“The regulatory landscape is changing fast,” he notes. “Owners now have CII to consider, and all the implications inherent in that, while we also need to look ahead at the development and adoption of new Emission Trading Schemes. For our members, who obviously need to focus on their core businesses, staying informed, ahead, and compliant can be an increasing challenge.”
Thankfully, Matias and the team are on hand to help. He says that their collective knowledge works to “simplify complexity”, streamlining regulatory developments into advisory services that help both Skuld’s claims handlers, and members, understand how trends impact upon their operation and insurance needs. As such, Skuld can act as a “partner and enabler” when it comes to negotiating a landscape where ESG demands are, understandably, looming ever larger.
“The whole industry is evolving, but so is Skuld, and so is the task of underwriting,” Matias states, adding that the organisation’s recent commitment to the Poseidon Principles for Marine Insurance demonstrates the accountability, and responsibility, defining shipping today, and tomorrow.
“This is a collective effort,” he says. “No one can suddenly become ‘sustainable’ in isolation, so we need to work together, and Skuld has a strong part to play. Looking at the big picture, I see sustainability as optimisation – a process of continual improvement – and there’s multiple factors to consider, including underwriting insurance.”
Matias sits back to gather some final thoughts, revisiting the start of the conversation at its conclusion.
“Look, the future is uncertain,” he says, “and there are some big questions ahead for this industry. If you want to find the right answers, you need the right partners. And that’s Skuld.
“We’ve been a robust partner for our members for over 125 years, and I look forward to playing my small part in building that role for a successful, sustainable future.”