Insight: Maritime Insurance Today
As the global logistics industry navigates the challenge of greater demand, which means bigger ships, new technologies and more connected supply chains, the oft-under-reported maritime insurance sector finds itself in flux.
It would be easy to assume that the more advanced shipping becomes, the less of a role maritime insurers have to play. After all, with smart tracking solutions, vessel safety systems and improved training methods facilitated by simulators, accidents at sea are almost certain to decrease.
Perhaps this is the case, although the last year alone has witnessed such incidents as the crash at the Port of Barcelona, in which a ferry veered into a container crane that subsequently toppled and caused major damage.
Nevertheless, it is true that insurance companies working in the shipping business are now adapting to a different, more digital ecosystem.
A Challenging Environment
While there is still the possibility of ship collisions, as well as the persistent quandary of piracy in regions like the Gulf of Guinea, there are threats to vessels and maritime businesses that are no longer physical.
In recent times, there has been a major response to the growing problem of cybersecurity, with concerns exacerbated following an attack on the world’s largest shipping company Maersk in June 2017. This was not an isolated incident either, as leading Chinese carrier COSCO also suffered a “network breakdown” in July 2018.
Adam Brown from computer integration company Synopsys, commenting on the current landscape of maritime trade in a recent Port Technology technical paper, has pointed to network configuration, security configuration and application security as serious vulnerabilities the shipping sector has been forced to tackle head on.
Although progress is being made on this front, it would be naïve to suggest that shipping lines, port operators and service providers are out of the woods yet. For this reason and more, maritime insurance firms find themselves in a potentially crucial position.
Businesses are not only becoming increasingly digital, and therefore more susceptible to cyberthreats, but are also investing in technologies such as blockchain and the Internet of Things (IoT); while these innovations may promise benefits for the future, they could lead to complications in their infancy.
The Value of Insurance
Despite the changing face of container shipping, with vessels at sea and ports on shore undergoing a fundamental transformation technologically, maritime insurers continue to support the industry.
Laurence Jones of TT Club, a leading company in the sector, has recently shone a light on one area of the market which has posed particular difficulties: ship berthing incidents.
Find out more about the heightened risk of ship berthing incidents in a recent Port Technology technical paper
As container vessels approach the terminal, these components of the global supply chain that often work separately must begin operating together, a process which involves clear communication and planning. In many cases, as Jones underlines, technological discrepancies between the two can lead to accidents, damage, and even fatalities.
As well as covering for incidents that do occur, insurance firms working in this space can provide a service to its customers by offering guidance; for shipping companies and port operators, this often involves encouraging collaboration to help improve safety, save costs and ensure the smooth flow of cargo.
Other issues highlighted in a recent report that could bring insurance firms into the picture include cargo safety, container fires and concerns about harm to the environment. With the shipping industry being such a versatile area, insurers working inside of it must be equally adaptable.
Shipping may have developed significantly in the last few years, but all estimates indicate that this curve will continue to rise instead of plateauing. As such, maritime insurance must also remain on its toes, ready to mould itself to new, unpredictable situations.
One of the key trends moving forward that will affect maritime insurance especially is the increasing size of ships, which seems likely to persist despite fears of overcapacity from many corners of the market.
The benefit of bigger ships for leading ocean carriers like Maersk, MSC and CMA CGM is the sheer amount of the cargo they are able to carry, and while this may represent a platform for higher productivity, as more goods can reach their destination quickly, the risk also increases with more containers onboard.
Megaships may be a gamble that leading players in the industry have chosen to take, but there are other changes to the industry which have been taken out of their control.
On January 1, 2020, a new sulphur cap from the International Maritime Organization (IMO) will be introduced, forcing shippers to commit to compliant fuels with less than 0.5% sulphur content.
Simon Bennett overviews the IMO greenhouse gas strategy for a sustainable future in a recent Port Technology technical paper
Although discussions have been held as to what this means for maritime insurance, with many companies wondering if they can be covered for the teething issues such a monumental shift will undoubtedly cause, the situation remains uncertain.
What is sure though, as innovations accumulate, automation progresses, and maritime businesses look for new ways to optimize their operations, is that the insurance companies supporting these firms as they propel themselves into the future will have to face a growing array of new challenges.
Article written by Liam Donovan, Assistant Editor