Overall losses in the maritime industry fell during the year, but increased cargo accumulation risk onboard vessels and in port continued to challenge insurance providers, according to a report from the International Union of Marine Insurance.
The maritime shipping industry saw major vessel casualties rise for the second consecutive year in 2016, according to a report from the International Union of Marine Insurance (IUMI).
Overall losses in the maritime industry fell during the year from 2015 levels, but increased cargo accumulation risk onboard vessels and in port continued to challenge marine insurers, the report said.
The frequency of major vessel casualties had been declining on a year-over-year basis until 2015, when they recorded a “sharp upturn which was continued in 2016,” according to IUMI.
Total vessel losses, on the other hand, continued to fall as a decrease in claim frequency was offset slightly by an increase in the average cost of claims.
IUMI attributed this trend primarily to “accumulation losses” both on board ships and in ports caused by the increasing size of containerships.
Larger vessels currently being delivered and deployed by ocean carriers can carry more cargo than ever, but this also means that cargo, and therefore insurance risk, is more concentrated on those vessels as well.
The latest generation of ultra-large containerships, for example, can carry as much as 20,000 TEUs with a potential cargo value of $985 million, noted IUMI. Compared with older vessels like the MSC Flaminia, which in 2012, suffered a fire while carrying $115 million in cargo, this represents a significant increase in risk concentration for carriers and cargo insurance underwriters.
“Accumulation risk in ports, particularly Chinese ports, was thought to be even greater,” the report added. “It was estimated that the value of cargo throughput at Shanghai could reach $1.6 billion a day, Shenzhen $681 million and Tianjin $477 million. The explosion at Tianjin in 2015 also resulted in a significant loss but might have been much worse. The total cargo estimated to be onboard the 754 ships in the port on the day of the incident would have amounted to more than $53 billion.”
“Marine risks continue to grow both in size and complexity and it is vital that underwriters fully understand the potential losses that they are being asked to insure,” said Donald Harrell, chairman of IUMI’s Facts & Figures committee. “It is gratifying to see the year-on-year decrease in total losses, but we must take particular notice of the recent increase in major casualties and the reasons for this.
“The offshore sector continues to face challenges that look likely to get worse before they get better,” he said. “Energy risks per se have not reduced, but the premium base from which they are settled, or reinsured, has shrunk dramatically.
“The disaster in the port of Tianjin in 2015 serves as a reminder of the growing accumulation risk that continues to dog our sector and one that will only intensify over the coming years,” he added.
IUMI: Major vessel casualties continue to rise in 2016
