Losses the likes of Deepwater Horizon, Costa Concordia and Tinjin port explosion prove that there is a need to manage the ‘unthinkable’ risks, according to the President of the International Union of Marine Insurance (IUMI) Dieter Berg.
Speaking at this year’s annual conference in Cape Town, South Africa, Berg said that the ‘unthinkable’ risks are likely to become more commonplace and underwriters must adapt to manage them effectively.
The insured losses of the said incidents have surpassed billions of dollars: Deepwater Horizon USD 6bn, Costa Concordia’s insured loss was USD 1.5bn and the Tianjin port explosion’s insured loss was USD 2-3bn. Natural catastrophes were also creating large losses such as hurricane’s Katrina and Rita in 2005 (total insured offshore energy/marine loss USD 12.57 bn) and last year’s hurricanes Harvey, Irma and Maria which resulted in more than USD 1bn in yacht losses, IUMI’s data shows.
“Growing accumulation of risks at sea and ashore is of increasing concern. On large containerships where around 20% of boxes are empty, we are likely to see a combined cargo and hull value of around USD 1.5bn, and that doesn’t include any wreck removal or pollution costs. In ports and terminals, the values are even higher as was seen at Tianjin.”
“Climate change will continue to influence risk profiles. Earthquakes and wind storms are not the real issue, unless you are an offshore energy underwriter. But flooding and storm surges can create massive losses.”
“The political landscape is also changing with an increase in sanctions and disruptions to trade agreements. Certain regimes are entering trade wars that has led to increased protectionism. The impending Brexit is causing instability within the Eurozone and is also likely to impact our industry,” he said, adding that digitalization should not be forgotten either.
” Shipping is lagging other logistics modes and technology will soon impact heavily on maritime supply chains as there becomes a more urgent need to optimise trade flows and streamline port operations,” he added.
However, Berg is confident that the sector would step up to the challenge. As explained, taking an innovative approach in managing the unquantifiable risks is key in order to achieve that.