Marine insurance market faces massive accumulation losses, IUMI conference is warned in Berlin

Strong warnings about the unforeseen accumulation of multi-million dollar insured losses from maritime-related casualties were issued as the International Union of Marine Insurance conference 2015 got underway in Berlin.

One of the worst single impacts is likely to result from the devastating explosion on August 12 2015 at the Chinese port of Tianjin, where unconfirmed reports have estimated the potential total insured losses at up to $6bn. So far, more considered estimates have put the losses at more than $1.5bn.A series of unexplained explosions at a container storage depot led, according to official sources, to 159 deaths, with  14 people reported missing, and 797 injured.

IUMI president Dieter Berg  said that the loss accumulation factor had been highlighted at the time of the association’s winter meeting in London in January 2015, as this was just a few days after the car carrier Hoegh Osaka had grounded.

That incident underlined the risk exposure in relation to car carriers and to storage.
As a result, IUMI leaders decided that the theme for the Berlin conference would be “Technical, financial and human factors — is there a new normal?”

Since then,  the Tianjin incident was rumoured to have involved the destruction of more than 80, 00 cars. A previous major problem had been the loss of 16, 00 cars and 2, 000 trucks following Superstorm Sandy which hit the east coast of the United States in 2012.

“There seem to be some new drivers in our business which are difficult to control from an underwriting perspective, ” said the IUMI president, who is a senior executive at Munich Re.

 In terms of risk, “everything seems to be getting bigger and more complex.” Ships of as much as 21, 000 teu were being ordered, and car carriers were in demand for 39, 000 vehicles.

Ships were afloat with insured values in total of up to $900m, of which $200m was for the cargo alone. Massive salvage costs had been illustrated by the $1bn wreck removal of the Costa Concordia.

Mr Berg, whose ‘president’s workshop’ at the conference will be devoted to cyber-risks, called on the insurance market to increase its understanding of technological developments “which will basically change the whole logistics in the future.” He said: “The insurance market is very close to the issue, but we have to have a real understanding of what are our exposures.”

Nick Derrick, chairman of the IUMI cargo committee, said that the Tianjin explosion “should be a very substantial wake-up call for all cargo insurers.” Recent reports suggested that the explosion impacted only a small portion of the overall port area of 125 sq km, but the event was expected to generate a cargo loss in excess of $1.5bn.

Mr Derrick said there was contamination damage being discovered as clients opened up ‘undamaged’ containers.  “That could lead to big losses, including extra exposures.”

Chinese property insurers and broker facilities locally would bear much of the cost, but the indirect expenses of the tragedy could push total costs to a level that could impinge on the world reinsurance markets.

He said there were further concerns that dust from the blasts might have contaminated ships, and this would have an effect on the whole market.