Managing Risks and Exposures – it is time to think outside the box
For the first time in the 140 year history of the International Union for Maritime Insurance (IUMI), its annual conference was held on the African continent. The conference, held at the Cape Town International Convention Centre, was attended by 450 delegates from 38 countries.
Four African countries are members of the IUMI - South Africa, Nigeria, Morocco, and Egypt.
At the four-day conference under the banner of “Managing Risks and exposures – Think the Unthinkable”, a range of topics were discussed: advancing technologies in deep-water construction and artificial intelligence; cyber risks to ship hulls and cargos; US sanction laws and the global trade war; safety aspects for pleasure crafts and fishing vessels; and the risks of fires aboard Ultra Large Container Vessels (ULCV’s)
Future challenges
The outgoing President of the IUMI, Dieter Berg, said the marine insurance industry were faced by several major challenges including climate change, the introduction of smart technologies such as sensor technology and the Internet of Things, cyber attacks on shipping lines and cargo vessels, and the digitalization of trade platforms.
Global cargo insurance market
Sean Dalton, chairperson of the IUMI’s Cargo Committee, said in his annual overview cargo remained the largest commercial ocean marine line of business globally in terms of Gross Written Premium (GWP).
“The modern cargo insurance policy provided some of the broadest first party insurance coverage that is available in the non-life insurance market. Cargo insurance, combined with service offerings including claims and risk engineering, remains one of the most comprehensive polices available in the market.”
Dalton said whilst there were geographical differences, the global cargo insurance market remained highly competitive with an abundance of capacity. “Following the 2017 natural catastrophes there has been a ‘firming’ of market conditions for cargo accounts impacted by these events and on loss affected business.”
Fire and cyber risks
He pointed out that fires and cyber security remained a huge challenge for the industry. “Container-ship fires and the issue of mis-declared cargoes is of great concern to cargo insurers. The 6th March 2018 fire aboard the 15,000 TEU Maersk Honam which tragically killed five crew members is the most recent casualty to highlight this challenge. This loss is likely to generate the largest General Average (GA) claim in history. With the trend towards even larger vessels this problem must be addressed by all stakeholders including cargo insurers.”
“Cyber is a concern for cargo underwriters as many policies are silent on the subject. On 25 July 2018, COSCO Shipping Lines suffered a ransomware cyber-attack. This follows the 2017 Maersk NotPetya cyber-attack which cost the company $ 300 million and lasted for more than two weeks causing vessel delays that pushed on-time reliability down 74% to 55%.
Dalton said COSCO was able to contain and respond to the attack possibly because of learning what happened to Maersk. (Source: JOC.COM, 30 July 2018)
“These are both examples of the potential exposure and consequences. Some cargo policies that raise the greatest potential exposure include Freight Forwarder Liability covers (NVOCC Legal Liability, Indirect Air Carrier Liability, Errors and Omissions).”
He said cargo underwriters were challenged to evolve and improve their approaches including utilising third party data, sensor technology, and seeking opportunities to apply predictive analytics.
“This is essential as submission quality continues to deteriorate, because more information is available than ever before, but much less of it reaches the underwriter via intermediaries. InsurTech developments (the use of technological innovations designed to squeeze out savings and efficiency from the current insurance industry model) and innovative initiatives such as utilisation of Blockchain technology, has the potential to transform the global supply chain and change how business is transacted. These developments will impact cargo underwriters and the services they provide.”
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