The marine cargo sector is still dealing with the challenges that came to the fore in the pandemic with supply chain issues, port congestion, container fires and natural catastrophes increasingly affecting marine cargo. <\/p>\n
The pandemic caused a number of challenges for the cargo sector, including the production of goods being delayed, along with route disruption or port\/country closures and restrictions. But according to Grace Jeffreys from the cargo team at Miller, demand for marine cargo insurance has remained relatively stable, despite the challenges, although she notes that globally it is estimated that more than 60% of the world\u2019s cargo is underinsured.<\/p>\n
The pandemic saw methodology changing for insureds, she says. \u201cFor example, in relation to apparel, the methodology \u2018just in time\u2019, became \u2018just in case\u2019. Due to this change, imports increased, along with warehousing levels. This is not necessarily because insureds were buying more product, but they were buying increased product levels in advance to ensure that they could service their clients while taking into account the abovementioned challenges.\u201d<\/p>\n
Market trends<\/strong> \u201cThis doesn\u2019t mean a return to the lows of the 2016 soft market but there is more certainty around pricing and more options for insureds, especially where there are large turnover changes. The market is starting to see the benefit of rising commodity prices and economic recovery stimulating growth,\u201d says Gallagher in the update.<\/p>\n Miller\u2019s Jeffreys says: \u201cOver the last six to nine months, we have seen a transition from the hard market trends that we have seen over recent years in the London cargo market. Within this period, we have seen a move towards profitability for insurers. The absence of large catastrophe losses (which the London cargo market has been hit heavily with over recent years) has ensured insurers are in a strong position to maintain an era of stability for ratings and premium levels alike.\u201d<\/p>\n She adds: \u201cInsurers across the market have addressed their ratings to ensure adequacy and have been stringent with their policy wordings \u2013 discipline is the trend and brokers have and will continue to show their value when it comes to complex risk transfer purchasing for clients. The additional capacity that has entered the market has increased competition but underwriters are still being disciplined and pushing for modest rate increases. Following the attainment of \u2018adequacy\u2019, we are seeing single-digit rate increases becoming the \u2018norm\u2019, with flat renewals becoming more readily available to those accounts within insurers\u2019 appetite, and a good loss record.\u201d<\/p>\n However, while the London cargo market is stabilising for now, Gallagher warns that as the war in Ukraine intensifies and ports and global supply chains reach breaking point, \u201cit\u2019s unlikely we\u2019ve seen the last of tough conditions\u201d.<\/p>\n In the US, it is the same story of moderating increases in 2022. According to WTW\u2019s Insurance Marketplace Realities 2022 Spring Update, insurers remain focused on bottom-line profitability, with continued scrutiny of insuring terms and conditions and capacity deployed, but insureds can anticipate a more predictable approach from cargo insurers at renewal. <\/p>\n However, WTW says certain business segments and exposures are subject to more scrutiny than others, such as temperature-sensitive products, pharma, automobiles and high-hazard cat exposures. Detailed exposure information and risk differentiation remain crucial to securing favourable terms and conditions.<\/p>\n Capacity in the London cargo market is growing, with new entrants. Miller\u2019s Jeffreys says there has been a large increase in competition in the London cargo market, following a large influx of capacity and a return to underwriting profitability.<\/p>\n \u201cWe saw the entrance of new capacity, predominately within the last 12 months, which ended up being more than was withdrawn during the hard market phase. This level of capacity into the cargo market was more than we had anticipated, and consists of both Lloyd\u2019s and MGA capacity. This level of capacity has not only served for placements where there was a complete lack of appetite, but it has also ensured that there are more options for buyers when they are looking to place their insurance here in London,\u201d she says. <\/p>\n Supply chain disruption<\/strong> \u201cPort congestion has become a challenge in marine cargo insurance, as it has led to an accumulated level of cargo at ports (and manufacturing locations while goods are in store awaiting transit), which can lead to the limit of liability that is set on an individual policy being exceeded, leaving both insurers and insureds exposed and vulnerable to claims in excess of what has been prepared for,\u201d she says.<\/p>\n She adds that port congestion can also lead to delays for insureds, which are not typically covered under a cargo policy as it does not often cause physical loss or damage to the majority of goods. But she says that as the economy and logistics industry recover, these issues are expected to be alleviated.<\/p>\n Other problems for the sector include lost containers at sea, as a shortage of available vessels has led to a substantial increase in full containers shipped on a single sailing, leading to several incidents of containers lost overboard, according to WTW.<\/p>\n Cargo fires<\/strong> \u201cFires onboard large vessels remain the top issue for the shipping industry. We continue to see major incidents involving fires on large container ships, and now the emphasis is also shifting to car carriers and roll-on roll-off (ro-ro) vessels,\u201d says Captain Rahul Khanna, global head of marine risk consulting at AGCS in the report.<\/p>\n Randy Lund, senior marine risk consultant at AGCS, adds: \u201cThe size and design of large container ships and ro-ro car carrier vessels makes fighting fires extremely challenging. Fires need to be contained quickly, yet it may take several hours to get to the base of a fire on a container ship with as many as 20,000 containers onboard, stacked ten high.”<\/p>\n The AGCS report states that it is estimated that about 10% of all containers loaded onboard ships contain declared dangerous cargo. However, about 5% of containers shipped consists of undeclared dangerous goods \u2013 either due to administrative error or being deliberately misdeclared. <\/p>\n Also in the report, R\u00e9gis Broudin, global head of marine claims at AGCS, says container stack collapse and the loss of containers at sea can have serious safety and environmental consequences, particularly if dangerous cargo is involved. \u201cThere are questions around the potential for misdeclared cargo weights and lashings, but the problem may be another consequence of large vessels. The larger the vessel, the higher the containers are stacked, and this may cause issues in bad weather, which is likely to become increasingly severe given climate change,\u201d he says.<\/p>\n The problem of container losses on ships was highlighted earlier this year by GDV, the German insurance association. It said better lashing and securing of containers on deck, the use of anti-roll tanks on vessels and an effective system of checking the weight and quality of containers should be used to tackle the growing problem.<\/p>\n \u201cWe have to put a stop to this development \u2013 cargo losses pose a threat to both the crew and the ship, they are expensive and they contribute to marine pollution,\u201d said Anja K\u00e4fer-Rohrbach, deputy CEO of the GDV. \u201cThe main problem is that the common practices for lashing and securing containers are no longer compatible with the sailing characteristics of large containerships.\u201d<\/p>\n Role of technology<\/strong> And technology has been developed that allows both the insured and insurers to mitigate risk, she explains: \u201cFor example, there are systems in place that monitor the temperature of goods throughout the supply chain. Therefore, if a loss was to occur, it becomes easier to discover at which stage of the supply chain the loss originated and determine the cause.\u201d<\/p>\n She adds: \u201cHaving access to this useful data is invaluable as it allows insurers to make more informed underwriting decisions, and also allows insureds to ensure they have the appropriate protections in place throughout the supply chain to protect their goods. Overall, this drives a culture of risk awareness and good practice.\u201d\u2002<\/p>\n","protected":false},"excerpt":{"rendered":" The marine cargo sector is still dealing with the challenges that came to the fore in the pandemic with supply chain issues, port congestion, container fires and natural catastrophes increasingly affecting marine cargo. The pandemic caused a number of challenges for the cargo sector, including the production of goods being …<\/p>\n","protected":false},"author":10,"featured_media":91995,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_uag_custom_page_level_css":"","footnotes":""},"categories":[507],"tags":[],"acf":[],"uagb_featured_image_src":{"full":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400.jpg",700,400,false],"thumbnail":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-150x150.jpg",150,150,true],"medium":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-300x171.jpg",300,171,true],"medium_large":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400.jpg",700,400,false],"large":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400.jpg",700,400,false],"1536x1536":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400.jpg",700,400,false],"2048x2048":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400.jpg",700,400,false],"image-publication":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-390x223.jpg",390,223,true],"image-publication-large":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-476x272.jpg",476,272,true],"jannah-image-small":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-220x150.jpg",220,150,true],"jannah-image-large":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-390x220.jpg",390,220,true],"jannah-image-post":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400.jpg",700,400,false],"featured-2":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-530x340.jpg",530,340,true],"editors-pick":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-219x115.jpg",219,115,true],"archive-thumbnail":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-375x375.jpg",375,375,true],"mobile-thumbnail":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-375x300.jpg",375,300,true],"single-feature":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-700x400.jpg",700,400,true],"square-thumbnail-s":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2022\/07\/Felixstowe_shutterstock_1543726661_700x400-100x100.jpg",100,100,true]},"uagb_author_info":{"display_name":"Tony Dowding","author_link":"https:\/\/www.commercialriskonline.com\/author\/tony-dowding-2\/"},"uagb_comment_info":0,"uagb_excerpt":"The marine cargo sector is still dealing with the challenges that came to the fore in the pandemic with supply chain issues, port congestion, container fires and natural catastrophes increasingly affecting marine cargo. The pandemic caused a number of challenges for the cargo sector, including the production of goods being …","_links":{"self":[{"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/posts\/92019"}],"collection":[{"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/comments?post=92019"}],"version-history":[{"count":2,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/posts\/92019\/revisions"}],"predecessor-version":[{"id":92021,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/posts\/92019\/revisions\/92021"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/media\/91995"}],"wp:attachment":[{"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/media?parent=92019"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/categories?post=92019"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/tags?post=92019"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nBrokers agree that while rates are still increasing in most cases, the hard market has moderated in 2022. Gallagher says in its latest cargo update that in 2021, the average rate rise in the London cargo market decreased from about 23% at the beginning of the first quarter to about 3% at the end of the last quarter, largely due to new entrants to the market. <\/p>\n
\nThe pandemic highlighted supply chain susceptibility to disruption and, according to Jeffreys, it has been viewed as the \u2018black swan\u2019 event that will ensure many companies transform and develop their supply chain model, in order to mitigate the risks of disruption in the future. <\/p>\n
\nAllianz Global Corporate & Specialty SE\u2019s (AGCS) notes in its latest Safety & Shipping Review 2022 that cargo fires are a growing concern, with misdeclared and dangerous goods a recurrent issue for container shipping, while lithium batteries are an emerging risk for both container ships and car carriers.<\/p>\n
\nTechnology is playing an increasingly important role in the sector, both in terms of claims information and mitigating risk. Miller\u2019s Jeffreys says technology has become an essential requirement in relation to marine cargo underwriting, by ensuring stronger decision-making and a better understanding of claims. <\/p>\n