A NEW WAVE OF RISK

The marine and cargo sectors have had their fair share of challenges over recent years – and consequently, risks are emerging at pace.

By MARTIN WANLESS

The global pandemic brought with it a seismic challenge to the marine and cargo industry, and today it’s still charting its path to recovery after port closures and enduring supply chain difficulties.

Of course, we now know that we can never be complacent as to what the world might throw at us, and the inflationary environment and subsequent cost of living crisis have added new challenges to what was an already challenging environment.

“Inflation has been a key influence on the sector over recent months, with higher prices of goods and supply and rising labour costs contributing to an increase in overall business costs, and thereby insurance premiums,” says Dan Morrison, Head of Marine Portfolio at NTI.

James Butchart, Head of Marine at Zurich, agrees, pointing out the impact inflation is also having on claims.

“Inflation continues to have an impact on marine insurance both in terms of claims inflation and an increase to the value of goods. By working closely with their intermediaries, customers can make sure they have sufficient limits in the policy to cater for these value increases.”And inflation’s creating other challenges, too. With the cost of goods on the rise and less disposable income, theft is becoming more prevalent – which subsequently impacts premiums.

Gunna Sinniah, Senior Claims Administrator – Marine, NTI, says, “A significant contributor to the issue of increasing theft at ports is inflation and the consequent rising costs of living.

“For insurers, the resulting claims and claims handling costs are increased with the requirement to appoint investigators to help establish the facts, while brokers face increased needs to manage the insured’s expectations while investigations are being conducted, and clients must deal with the heightened costs of doing business associated with product loss and consequent delays.

“The severity of the theft issue is demonstrated by the shifting nature of goods that are stolen.”

Valuable cargo has, naturally, always carried a higher possibility of theft –however, Damien Mulvenna, Director and Broker at Cornerstone Risk Group, says the level of sophistication of criminals is increasing.

“There’s a greater target on high value, easy-to-handle and easily-sold-on-the-black market products,” he says.

“The obvious implication to insurers, brokers and clients is the increase of premiums and excesses, and reductions in insurers’ willingness to insure certain valuable cargo.

“For clients, it may also be a case of improved shipping techniques and security protocols to deter the criminals – unfortunately, this usually comes at a cost for the client.”

Emerging Risks Spark Concern

There’s been much talk of the risks that come with transporting Li-ion batteries, and the risks that are subsequently attached. “The increased volume of products powered by Li-ion batteries being shipped around the world has highlighted the risks that these batteries pose to the vessels carrying them,” says Mulvenna.

“Many vessels may not be appropriately prepared due to the specialised equipment and knowledge required to safely contain and extinguish such fires. Also at risk are the cargo owners of goods with Li-ion batteries, who may be held liable for injuries or loss to other parties caused by a Li-ion battery fire.”

For brokers, this is one to be particularly aware of.

Mulvenna continues: “Brokers need to ensure that the description of cargo given to carriers specifically mentions electric vehicles or goods containing Li-ion batteries. They should also find out whether cargo owners’ liability insurance can fill the gaps between traditional general liability insurance and a standard cargo insurance policy.

“Clients must declare goods containing Li-ion batteries and ensure they are packaged in compliance with the International Maritime Dangerous Goods (IMDG) Code. These actions help promote safer carriage of dangerous goods aboard the vessel, and help protect clients against accusations of ‘misdeclaration should a fire be caused or exacerbated by the Li-ion batteries within their shipped goods.”

Kurt Herron, Logistics Risk Engineer – Marine, NTI, says the transportation of Li-ion batteries as well as electric vehicles, is beginning to lead change.

“Multiple industry bodies are now publishing guidelines for the safer transit of Li-ion batteries and to lower the incidence of cargo fire-related claims. These guidelines push for industry standards and elevation in the manufacturing process of Li-ion batteries, as well as implementing updated monitoring technologies and training in the detection and fighting of Li-ion battery fires.”

Herron also calls into question the suitability of vessels to handle Li-ion fires.

“As it currently stands, generally vessels are not yet fully equipped to handle EV or Li-ion fires completely, which makes correct declarations and adequate monitoring vital in increasing the safety of life and property at sea.

“New build Ro/Ro ships are combatting this with newer temperature and