We had a conversation with Emin Yaşacan, the founder and General Manager of Kuzey Insurance, about the importance of P&I clubs in insurance, the current situation and future of Turkish shipowners and the investments made by his company
First of all, could you tell us about Kuzey Insurance, what it does and your future plans?
We were established under the name of Kuzey Marine to cater to the maritime industry and meet its needs. Although we generally serve Turkish shipowners and local shipowners in our geography, we also provide services to shipowners abroad. We help not only shipowners but also cargo owners who buy and sell cargo, and those who charter ships. We generally make insurance placements to western European countries. We also make placements in Turkiye when needed.
Due to the nature of shipping, we have responded to the needs of our international customers throughout our working life. In the last seven years, we have also helped domestic renewable energy investors with their insurance needs. As such, we have branded ourselves as Kuzey Marine and Kuzey Energy, and Kuzey Insurance. We are currently focusing on wind turbines. Although I do not remember the number of wind turbines in Turkiye very clearly, one out of every 3 wind turbines is insured through Kuzey Insurance.
Can you explain a little bit?
We provide all kinds of parametric insurance for onshore wind turbines. We brought this to Turkiye. The reason we set out was the question of what can be done if the wind does not blow.
This insurance is like a guarantee of return on investments. We create a guarantee against the risks that will arise in cases where the wind does not blow or blows too much. Of course, we were inspired by the maritime industry. There is a type of insurance called loss of rent. We thought why not in energy investments. We provide coverage against sudden events. In addition, we said how can we combine maritime and renewable energy. We established the Offshore Wind Energy Association (DÜRED). We established this association in order to create awareness on this issue. We believe that we have created sufficient awareness on this issue. Both investors and state mechanisms. Our government also supported these projects. Investment areas were opened for DÜRED investors in 3 places in our country. In the Marmara Sea, the east and west of the Kapıdağ Peninsula and the Saroz Gulf, there is currently a search for a patriot to invest there. Foreign bankers, investors and producers are ready to support. Only one father valiant is expected. Kuzey Insurance established DÜRED by combining marine and energy. We will of course respond to insurance needs from here.
How has the post-pandemic period unfolded? How did new expectations develop?
During the pandemic, everyone questioned themselves when they were locked in their homes. What are we doing, where are we going? Of course, this led to expectations such as whether to return to a simple life. When the pandemic ended, on the contrary, consumption frenzy started. This created the need for more transportation of commodities all over the world. Prices also increased up to 5 times. Since it was thought that there would be less consumption 2 years after the pandemic and no investment was made, ship values and freights suddenly increased 2-3 times.
Our shipowners made a great fortune after the pandemic. Transportation fees, which were enough to support a household before that, started to bring enough capital to buy new ships. The biggest problem faced by insurers during this period was the unexpected and 3-5 times increased costs incurred due to the Covid-19 quarantines, which caused ships to be tied up at ports. This disturbed the P&I clubs the most. Afterwards, they were not greatly affected. Because P&I clubs have almost the best reinsurance structures in the world. They were not affected too much, insurance payments were very comfortable.
In fact, it would be more accurate to say that it is the largest reinsurance structure in terms of capacity. According to the latest calculations, this reinsurance structure provides coverage in the event of a catastrophe that damages the environment and human beings with a value close to 5 billion dollars. To put it simply, the P&I club absorbs the first 10 million dollars of the damage within itself. 12 P&I clubs cover up to 30 million dollars within their own pool. The rest is covered layer by layer by insurance companies. According to the latest calculations, an amount of 4.1 billion dollars emerges. Of course, although it has not been tested, it can technically go up to this point. Among the insurances, only P&I clubs have this amount of assurance.
Can you explain the difference between P&I clubs and others?
The P&I club is actually a hull and machinery centered system that shipowners gathered among themselves in the 1800s when the insurance was monopolized by giving insurance to 2 companies in England and said “we are not actually an insurance company, we are a club established for cooperation”. Later on, they became members of this club and paid dues.
In the following processes, P&I clubs continued to be established by hull and machinery manufacturers to cover damages to third parties and became indispensable in international trade due to this feature. Apart from this, shipowners, who did not need such large limits, did not want to be partners in the losses of other ships and container companies, and P&I companies emerged. These companies have coverage limits of 50 million dollars, 500 million dollars, 1 billion dollars, but they do not provide as wide coverage as P&I clubs.
You started in this field in the late 90s. How do you evaluate the growth and diversification of the Turkish maritime sector since then?
The Turkish maritime sector generally proceeds in the way that one shipowner goes out and makes an investment and others follow. For example, one shipowner invests in tankers and everyone else invests in tankers. Someone makes a chemical investment and everyone makes a chemical tanker investment. Someone invests in containers, everyone invests in containers. To some extent, as Turkish investors, we follow the fashion.
Is that a good thing?
Following fashion is actually a more comfortable option. Because being a shipowner means risking a lot of unknown risks. Our shipowners prefer to try what has been done instead of investing millions of dollars in places full of unknowns. A shipowner makes 200-odd critical decisions in a day and one day is not like the other. This is very tiring.
On top of that, they do not want to take the risk of ship investments with an uncertain future. In the newspapers, the giant container ship that hit the Baltimore bridge and caused it to collapse also knocked down 3 cranes in our country. The damage in Baltimore is much bigger. Unfortunately it cost 6 lives. Everyone there thought that there would be a huge damage of 2-3 billion dollars, especially because of the American waters and courts. But that was not the case.
In fact, one should not choose a profession where so much risk can be taken. The damage caused by a ship to third parties is limited to the current value of the ship. The one that hit Baltimore was worth 90 million dollars. As it was, it was reduced to almost half its value. Shipowners can limit their liability with what they call “Special Drawing Rights”. They can apply and say I am responsible for this much. If a ship of 5 thousand tons goes and hits a tanker of 200 thousand tons and sinks it, will he pay for it? No, his liability consists of a damage close to the value of his own ship. Otherwise, no one can take such a risk and become a shipowner.
İlginizi çekebilir: Kuzey Sigorta ve Reasürans Brokerliği A.Ş. Yönetim Kurulu Başkanı Emin Yaşacan: Hedefimiz, entelektüel liderlik
These contracts, agreements and regulations are correct. P&I clubs have a very special clause. The damage to human life cannot be limited. It cannot limit the oil pollution to the environment. It cannot limit its liability for oil cleanup. Because of these articles, the importance of P&I clubs increases a lot. P&I clubs are environmentalists. In this sense, they are indispensable to eliminate the damage caused by ships to the environment. No other insurance organization can do this.
Global warming measures will also have an impact on shipowners.
Yes, in fact, especially the measures introduced by European countries to reduce carbon emissions also affect our shipowners. The impact of maritime transportation on carbon emissions is around 3 percent. Despite this, necessary financial measures are taken to reduce the carbon emissions of ships. For example, when a ship travels from port A to port B in Europe, it is taxed for its carbon footprint. For this reason, ships and machinery with lower carbon footprints have started to be preferred. These ships started to be insured for better premiums. Therefore, the phenomenon that we say insurance is a panacea, a medicine, emerges here.
Forests are increasing in Turkiye, Europe and especially in the Amazon. Because of the carbon footprint, companies are forced to invest in green energy, or if they cannot, to plant trees. When they do this, the tax they pay decreases. For this reason, forests started to increase in the Amazon for the first time. Trainings on preventive measures and recommendations for the environment are given to shipowners by P&I clubs. But here, since P&I clubs are actually indemnification organizations, they are not able to be even more prominent. They provide preventive trainings, but the most important thing is that they cover the costs incurred when the damage occurs. And they cover that without much questioning.
It has been 17 years since your establishment, and you are turning 18. You also opened an office in London. Could you tell us a bit about it?
Due to the internationalization of P&I clubs and the sector, we needed to open an office in London. We opened our office 3 years ago. It became operational exactly 1 year ago. It was very important to open this office abroad in the heart of Lloyd’s. In addition, due to the energy sector in our country, we opened an office in Ankara and we are opening an office in Izmir. We will also have an office in Bursa soon.
How many of you are there now, have you reached the targets you set in your board?
There are 27 of us in total. My initial goal was to work with up to 15 people, we have almost doubled that. The reason for this is our love of service to the sector. We have endeavored to be the king who serves the kings. For this purpose, we make sure that each of our colleagues are competent people who have reached a certain point in their careers. This has made us a center of attraction. In the meantime, we have also become a school in 17 years. Many people who grew up with us have gone to other insurance companies.
What percentage of the market do you address?
Apart from energy, we are the oldest large company in Turkiye that provides marine insurance and marine brokerage services. We are selective in determining our customer portfolio. For 17 years, there is not a single file that has not been paid to the satisfaction of the shipowner-customer. For example, a customer who has paid 5 million dollars gets 5 million dollars. We cannot work with any customer with whom we cannot be friends.
How much tonnage do you manage in terms of dwt?
We manage the insurance business of approximately 3 billion dollars worth of fleet.
Do you also work with non-Turkish shipowners?
We serve the needs of every shipowner in this geography.
Is there a difference between working with Turkish-flagged and foreign-flagged vessels?
There is an escape from the Turkish flag among our shipowners, but the most important thing in terms of insurance is to have a white flag. If it is not white-flagged, different payments can be made according to the variable quality segments of P&I clubs. There are also shipowners who prefer P&I clubs other than those in the UK to avoid the UK embargo. P&I clubs as far as New Zealand can be preferred. The British have a strict attitude especially towards Russia. For this reason, P&I clubs in the UK are demanded to report every ship going to Russia. P&I clubs that do not submit these reports may have their insurance licenses suspended. In fact, it is not forbidden to go to Russian ports. It is allowed under certain rules and cargoes. For example, fuel will be under 60 dollars per barrel. Steel products are under embargo. Some institutions, companies and ports are on the embargo list. When damage occurs while transporting products purchased from these ports, it is not covered by P&I clubs. For this reason, shipowners prefer P&I clubs outside the UK to stay away from reports.
How will this situation and the current conjuncture affect the relationship between P&I clubs and Turkish shipowners?
Turkish shipowners do not exceed 5 percent in the portfolio of P&I clubs. Even 3 percent. Therefore, even if all Turkish shipowners leave, it will not be very effective. It is a very challenging issue for our shipowners. Don’t go to Russia, don’t go to Israel. Ukraine does not exist anyway. What will happen? They will move their goods elsewhere. There is no possibility of going to the Far East.
There are thousands of ships there, big and small, and it is impossible for them to compete. When they go to Europe, they have to pay a fine if they cannot make a proper declaration due to their carbon footprint. In the Mediterranean, Libya is east of Libya and you cannot go to the west. Until recently, when there was a Turkish shipowner in Egypt, all kinds of difficulties were created. Syria is naturally excluded from P&I agreements. When you look, where will they carry cargo? God help them, all these countries used to be open. Now all of our neighbors are in trouble.
Could you also tell us about your investments in the field of training?
I continue to give insurance lectures at ITU. We used to give training in the form of seminars and conferences, but we have changed that now. We realized that employees in most companies do not have the afternoon off, so we go to shipowners one by one and get involved in their internal training. We try to explain the tricks of insurance. For example, how to keep a report, how to prepare the first letter. For example, we do not let them use the expression “I went on board and hit the ship”, we make them write “collision occurred”. Saying “I hit the ship” means taking full responsibility. The most important thing is the first half hour, 3 hours, 6 hours and 12 hours in case of an accident. Here, if we put the train on the right tracks, we will not have any problems in terms of insurance. But if you say you hit the ship, you take away the insurer’s right to defend you.
Are there any insurance-related applications in developing artificial intelligence technology?
There used to be 26 personnel on a ship. Now it is down to 11-12 people. There are unmanned engine rooms. Nevertheless, I see unmanned marine vehicles as close to impossible because we need a man to blame. It is said that 80 percent of accidents are human-caused. I think it is commercial pressure but we like to say human error. Artificial intelligence and the internet age actually make tracking easier. You can learn why the accident happened and how to take precautions with artificial intelligence, but what about commercial pressure? I don’t think artificial intelligence will be very effective in insurance, because insurance is a service sector.
What are your expectations for the sector for 2024?
In 2024, I anticipate a shift towards reconstruction efforts as wars end locally. This will likely increase demand for special multipurpose ships, presenting growth opportunities for shipowners willing to invest in this area.
Bu haberin/makalenin tamamı ya da bir kısmı kaynak gösterilmeden yayımlanamaz. Kaynak gösterilse dahi aktif link verilerek kullanılabilir. Kaynak göstermeden ve aktif link vermeden yayımlayanlar hakkında yasal işlem başlatılır.
