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MARINE | Risk accumulation In association with IUMI
A recent dramatic rise in loss of containers overboard and the catastrophic explosion at Beirut port have re-focused attention on the accumulation of risks. Lars Lange, (right) Secretary General of IUMI, argues that proper measurement of new and growing risk, particularly in situations where accumulations occur is needed. This will significantly enhance underwriting performance and the level of service delivered to the assureds
Measuring emerging marine market risks Accurately assessing risk is the bedrock of good underwriting and insurers are increasingly widening the net of available data and turning to more sophisticated tools to help them do that. But risk profiles change continuously as do the levels of risk inherent within a particular vessel, cargo, port or other entity. A growing concern for marine underwriters is risk accumulation and this takes a number of forms. Economies of scale have encouraged shipping companies to build ever larger vessels to move cargoes more efficiently and cheaply. Yesterday’s post-Panamax containerships of 10,000 TEU seem tiny in comparison with today’s Ultra Large Container Vessels of 24,000 TEU or greater. At a newbuild cost of around US$150m, these vessels represent a sizeable risk on their own. Add in 24,000 boxes filled with finished goods with a rough value of $50,000 per container and the total value of hull and cargo could easily approach $1bn. The Marine Insurer Nordic & Asia Special Edition | April 2021
INCREASED VALUES But the issue of risk accumulation extends much further. Modern container ports operate multiple terminals and each is capable of berthing multiple vessels – all carrying many thousands of boxes. Add this to the containers waiting in the stack or stored in adjacent warehouse facilities and the insured values skyrocket. A single incident occurring in such a port facility has the potential to become an unprecedented insurance loss. Of course, a financial loss is nothing when compared with loss of life and injury. By their very nature, ever larger port facilities require more people-power and a more concentrated workforce will inevitably - and tragically – result in a higher death toll should the worst happen. A recent stark reminder was the explosion at the port of Beirut in August 2020 which sadly left 178 people dead and a further 6,500 injured. It is too early to assess the financial impact of the blast and its effect on the insurance sector but
