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The current global events have challenged the shipping industry, and particularly, marine insurers. Today, they must manage increased regulations alongside transportation limitations, and they must often do so remotely, which is a significant change from the previous methods of operations. However, these events have also created many opportunities, removed barriers, and increased cooperation.
Ami Daniel asked Paul Jennings to discuss the role of leadership during times of adversity, the importance of cooperation over competition, and the impact recent regulations will have on marine insurers.
Below are our top five takeaways:
As governments are discussing restrictions in light of current events, industries with a large collective voice can use it to raise awareness, add weight to relevant conversations, and support the interest of their entire industry. In the case of the IG, representing over 90% of the world’s shipping carries a lot of responsibility that goes beyond insurance.
While it may have been easier to use the current situation as an excuse to shift from growth to sustainability, if you know where you want to go, and have the opportunity to get there, take it. Moving forward while others are stagnant is just as effective as gaining leverage.
Outsmarting competitors is helpful, but not always the most effective path. Recent events have led many organizations to realize how collaboration has the power to bring better results for all parties involved. Instead of competing for a small competitive edge, collaborating within and across industries can help achieve a lot more, only differently.
The last thing anyone wants is to stop trade, however, there is a fine line between enforcing sanctions and enabling trade. Although it is a burden on the shipping industry, these regulations encourage players to work together towards the same solution.
Many organizations have detailed and well-thought-out plans for times of crisis and adversity. However, plans are not enough. You can have the best contingency plan, but if you do not have the resources to implement it when the need arises, it is of no value to your organization.
Want more than our top takeaways? Read an edited version of the full conversation transcript below.
Ami Daniel: Good afternoon everybody, today we have Paul Jennings, the CEO of NORTH P&I Club, and the chairman of the International Group (IG) of P&I Clubs. Paul, how are you today?
Paul Jennings: I’m good. Nice to have a chance to connect with you.
Ami Daniel: Thanks for joining us today. Previously I had the opportunity to speak with people from the shipping industry and people from the bunkering industry, but maybe you have even a broader view because you lead both an insurance mutual club, and you have the perspective of the IG. Can you just kind of take me through what you see on these strange days?
Paul Jennings: Yeah, it’s as you say strange isn’t it? I haven’t gotten used to the idea or concept of us all not being at base, which I think everyone has adapted to quickly, and that’s been my experience with it within NORTH and with everyone else I’m talking to in the International Group. I think that’s fine and we’re running the business really well. In terms of adapting, I think the strange thing is that shipping just continued. You’ve probably heard that from other people you’ve spoken with. There’s some change in volumes, and clearly, the cruise industry is pretty badly affected at the moment, and some of the volumes for container lines are down, but overall ships are still moving around, but in a different environment. In a sense, it’s harder to get into some places because of port restrictions etc.
The crucial issue that I think we’ve got at the moment is how we look after the crew that is on board, and in particular, getting that crew moving around. It’s reported that 150,000 crew members are due for changeover and to come off ships, or they’ve gone beyond the period when they should have come off, and it’s just not possible because ports aren’t allowing them off and countries aren’t allowing them in and it’s going up to the cabinet-level. These are not decisions being made by somebody within a port authority, these are decisions being made by really high levels of governments, and that’s making it really hard to get people off. Even if we can get them off, flying them around with the airline industry pretty paralyzed as well, that’s a massive challenge. For us, I think as an individual club and for the International Group, we are spending a lot of time on those issues at the moment.
Ami Daniel: So can you explain to me, how do you guys connect? Obviously, you support your members, and the board of every mutual is shipowners, but what’s your responsibility or what’s your contribution, liability, and involvement?
Paul Jennings: I guess our role and our collective voice goes to raise awareness about this, to add weight if you’d like, to discussions that are going on. We really are lending our weight, and our experience and expertise. The clubs are in a unique position. We’ve got 90% of the world’s shipping entered with the 13 International Group Club. So we’ve got a big say or a big interest in supporting ship owners during these times.
Ami Daniel: What I’m hearing is that although you’re not formally responsible, so to speak, as a team, you as a person identified the challenges or issues at hand, and are rising up and taking a leadership position and helping these crews have a voice. Is that what I’m hearing?
Paul Jennings: I wouldn’t want us to take the position, or the credit of, the ICS – the International Chamber of Shipping – who are, quite rightly, leading this. But we are very much behind them, providing them with whatever support they need, whatever we can do to help them. And I think it goes beyond this, doesn’t it? I mean, personally, I feel it’s a societal responsibility to make sure we can safely move crews and seafarers off ships at the end, when it’s their time to leave ships. So it’s a societal obligation. If you want a business objective for it, then the safety at sea, safety of lives, and safety of the environment is mainly preserved by having a good crew on board. You need good equipment; you need well-maintained ships and all that, but that all comes from having the right people, and having a well-maintained crew working onboard. Now, if we’re putting [them] in a situation where they’re feeling stressed, they can’t get off, they are beyond their period onboard, and they’re tired, that’s not good is it? So there is a kind of business position there as well. That just doesn’t make sense from a business point of view. But then you’re back to the societal position again, if we don’t solve this, then we risk there being a loss of life, and we risk all the important things about safety at sea and protection of the environment, and all the things that we hold dear.
Ami Daniel: So you mentioned safety. I recently read a couple of articles about the fact that both SIRE inspections and Port State Control inspections are much less available than they used to. So, if I speak to an underwriter, and I think you’re one of the first clubs to have a proactive loss prevention function, they would look at either SIRE or port state inspections. What’s your view of this from a risk perspective? Because COVID-19 is changing our perspective of risk or the data availability of risk.
Paul Jennings: Yeah, that’s a good point. There has to be a risk there. First, just rewind. You’ve got not just Port State Control, but there’s also the membership of Class [Societies], and as the International Group we have been liaising with Class in relation to surveys that are due to take place, and making it possible for extensions of those, or for those to be conducted remotely wherever possible. That’s one aspect of safety, and the Port State system as well, that, over the years, has contributed massively to the improvement of safety and maintenance of safety within shipping. I don’t think safety standards are going to drop through the floor overnight within a matter of weeks or months for that matter just because of what we’re facing now, and some of the restrictions, I don’t think that’s going to happen, but we can’t be complacent about it. You’re right to say there’s enhanced risk there definitely. Speaking for my club, I’m very confident in the quality of the shipowners that are in NORTH that I wouldn’t see that happening. They will already, I’m sure, be putting in place systems that will allow them to monitor the effectiveness on board, and that’s an idea that can increasingly be done remotely in terms of the performance of vital equipment onboard.
Ami Daniel: It’s interesting because I saw your announcement about opening a hull book, so it’s quite an interesting timing to take a step forward with business and open another asset class or a line. Can you tell me a bit more about that? Winston Churchill, I think, said, “Never miss a good crisis.” What do you think about doing that, in terms of the timing, and what can we learn about that from your perspective about business leadership?
Paul Jennings: The business case is quite straightforward, I will deal with that quickly. It’s simply part of our development and diversification strategy. We wanted to go to do something in the Hull and Machinery space. The timing, from a business point of view of doing it, we think is good in terms of capacity coming down in the Hull market. That’s kind of the business perspective behind it. Actually putting it together has been, I would say, it’s almost going to become a kind of textbook example on how to do this remotely, and how to do it very quickly. We put this together in terms of the team that is joining us, in a very short period of time. In terms of going through all the checks and the governance, that we’ve got to do internally to get this through, and it’s been done remotely. Talking to one of my colleagues earlier today, he still asked how difficult it is to recruit and stuff, and I said hang on, look at what we’ve just done; we just recruited and started a new facility, and we’ve done it remotely. It proves that the old-fashioned thing of having to sit in a room with somebody, with half a dozen people around the interview table, is not necessary if you are agile enough in dealing with these things. So yeah, it’s about timing. It was an opportunity. We could easily have sat back and said, “oh we can’t do this now because we’re all under lockdown, it’s not possible,” but it was an opportunity to achieve some of our aims and ambitions pretty quickly, and we found a way to do it.
Ami Daniel: And where are the rest of the opportunities you see in the three to five-year horizon? How do you combine technology and your expertise as a club, and your huge asset, which is the relationship with the members, to take it to the next level?
Paul Jennings: What has been good out of this situation is more cooperation. The cooperation between the clubs, which was coming anyway. In terms of data, in terms of us putting aside those areas where we can get a small competitive advantage, and say “hey we don’t need those individually because we get greater collective strength by combining all these things rather than just looking at individual, small competitive wins.” I think maybe this is one of the profound things that come out of this whole situation; that we actually recognized not just us within our industry but other industries as well, that by collaborating a bit more you can achieve a whole lot more rather than just trying all the time for that competitive edge, and actually collaboration can help you achieve that differently. So I think we’ll see more of that going forward. I think the other role of the club I don’t see diminishing at all. The pressure on shipowners going forward is huge. Not just around what’s happening now with COVID-19, but in terms of all of the regulatory changes, the legislation we see, and the clubs, and the clubs’ role is becoming more and more important in that.
Ami Daniel: So you speak about regulation, and there’s a lot of talk about the crackdown on shipping in terms of regulators. There’s OFAC, and there’s IMO 2020, and it seems like everybody wants something from the maritime space, although it doesn’t necessarily have the deepest pockets. So, for instance, if you look at the compliance fines, then usually the regulators go after deeper pockets, which historically have been banks. But for some reason, that’s kind of been crawling bit by bit into the maritime industry, and you spoke about regulation and cooperation. So do you know why this is happening, and what is your perspective on the best way to look at it?
Paul Jennings: I think it’s a couple of things. Regulation in terms of what we went through at the start of the year with sulfur emissions, etc., that’s regulation that I would say “that’s right.” That’s where, globally, we need to go in terms of sustainability and what that means for the planet as a whole. I think that’s anticipated and we can deal with it, and that’s something that we can all understand. And they’re just on that bit as well. It always kind of irks me as well that the headlines shipping gets around is that shipping contributes 3% of global emissions, forgetting that shipping transports 90% of everything that you and I and everybody else uses on a day-to-day basis. So it’s the bad bits that we hear about.
Regarding OFAC, and the sanctions you mentioned, now that’s a different direction. That, I will say, is a dangerous direction for shipping and for governments to go. I understand why they’re doing it, because if you want to enforce sanctions, curtailing trade is one of the easiest ways to do it. You can stop the banking system quite easily. If you want to stop the movement of actual goods, then you stop shipping. And sadly, from our point of view, governments realized a while ago that the way of doing that is to stop the insurance. So you have pressure on shipowners not to trade to certain places and they, as you know, put pressure on us and other insurers not to insure people who are trading in breach of sanctions. It’s pretty effective. Is it good? No, not good for shipping. But in terms of governments achieving their political objectives, then yeah, I can see why they’re doing it.
Ami Daniel: One last question. If there is one take away people who listen to this podcast can take from you about leadership, to reflect and see how they as leaders, managers, executives need to look at, what’s that take away from you?
Paul Jennings: I think it’s leadership in adversity, isn’t it? Crisis is often used as a word to describe it, but whether we’re in crisis or not, it is leadership in adversity. And that really is a test of leadership. When everything’s going fantastically well, and if you’re in shipping, and freight rates are through the roof, if you’re in insurance and premiums are very high, and loss ratios are good that’s easy, anybody can lead it. Leadership in adversity is the real challenge. It reinforced, for me, that what we’ve done particularly well at NORTH, is that we’ve assembled a world-class team of people. That’s what it’s about. You can have the best business plans in the world, contingency plans to move out of the office and all that type of stuff. That’s all fantastically well. But if you haven’t got a fantastic resource to then implement that and keep things moving during adversity, then it really doesn’t matter. You’re not going to be as effective. It starts with leadership; it’s about making sure you’ve got the right people, that you trust them, you empower them, and you develop them, so they can run. So I guess it reinforced it for me rather than give me any other great lesson out of it.
Ami Daniel: That’s quite the opposite of the image of the hero in the movies, or if you’re watching Netflix, there’s the ‘Last Dance’ with Michael Jordan, in which Michael Jordan comes across as a senior leader and then he talks about his team, but it’s all about him. I hear you talk about the fact that your world-class team is important, I absolutely agree with that, however, it’s not easy to do, and it’s much more challenging as a leader to bring in strong people around you rather than ‘me’ as the smartest guy in the room.
Paul Jennings: I’ve always been happy with the concept that your goal as a leader should be to continue to employ people who are better than you and challenge you, and I’m comfortable with that.
Ami Daniel: Paul, thank you very much. I appreciate the insights.