I think there's a tendency to think of them as sort of limiting factors in the world... but I also think of them as enablers of certain behaviors. People do a lot of things that they wouldn't otherwise do, were they not able to get insurance on it. What are clubs? Clubs, in our context of the P&I club, which means protection and indemnity, is a collective. It's a non-profit, accessible mutual association. It's not a commercial insurer. And it basically, historically is a club that brought together ship owners in the industry that were trying to fill a gap. So they came from a need for society. The clubs never pay own damages. We will not pay damage that occurred to the vessel in an accident or if they have economic loss... what P&I clubs do is they step in and they protect the owner and defend the claims, but they ultimately pay whatever is the fair compensation for passengers that perhaps get hurt, claims from crew, liabilities related to collision... oil pollution and environmental damage. It's the safety net. And it is the only way that a ship can trade. For example, let's look at what you do with your car. You're not allowed on the road if you don't have liability insurance. You don't have to have own damages insurance, but you do need to have liability because we need to know that all the cars on the road have financial security behind them.

The American club actually was born much later... In 1916, the Americans were not in World War One yet. Right? The UK was. So the UK at that time passed what was called the UK Trading with the Enemy Act... which prohibited a lot of American operators from continuing to have their insurance with the UK clubs. johnson and higgins at that time came together with ship owners and legislators and realized that they were going to have to create something in the United States. On February 14th, 1917, the American club was born. Collectively now there's 12 international group clubs known as the International Group of P&I Clubs. Collectively, we insure 90% of oceangoing tonnage. Selfishly, I'll say the most important is the reinsurance purchasing power that the group clubs have. Collectively, the 12 clubs come together every year and they purchase policies. I think it's the largest reinsurance policy in the world. We provide cover about for about 8 billion per incident, but we buy reinsurance collectively with the other clubs up to 3 billion. Together we realize the best thing for an individual ship owner is to have this group purchasing power and allows us to buy high levels of reinsurance at pretty inexpensive cost.

It's not that there's like a fixed point. Tonnage is just a measuring tool. If you have a small barge that doesn't have any crew versus a large cruise ship... you would price differently. For example, our experience has shown us that container ships have certain types of risks. If there's a casualty on a container ship and it's a total loss... those individual containers will start to pop up and float to all different places. Part of the liability includes cleaning those all up and those types of containers are considered hazardous waste. There's a special disposal process that can be quite expensive. It can also cause danger to navigation. A lot of it too, is human error. You can't account for crew member not sleeping or being or falling asleep at the wheel basically and causing an accident. Many 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... We have safety stuff. We have posters. There's one that says: "Personal cell phones - keep them shut off."

Most other types of insurance is actuarially stable... You can't really do that for war. During the year in peacetime, it's very cheap. These are the headlines we saw: saying that war risk insurance has been pulled right at the start of a war, which was very confusing... Complete misconception. It's really a cancellation of the rate, not of the cover. Every war policy has a notice of cancellation clause saying if a war were to break out... we didn't price for that. We cancel your policy, meaning we cancel the rate you paid, give you three day notice. You're still covered if something happens. But now after the three days lapses, you have to buy your cover back at a higher rate based on if you're trading there. The ships that were trapped on the inside were given different rates than ships that were looking to go in and out. The ships that were trapped, the rates were significantly lower (0.5%) than it was for those ships looking to actually transit regular trades (3 to 10% of the hull value). And the operators and our members made it very clear that the safety of their crew was much more important than everything else. Ultimately the decision to do that type of course is for the master of the vessel to decide. 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.