As European governments approved a controversial plan to share 120,000 refugees between most of the European Union countries, there’s an important insurance story playing out amid the ongoing flow of thousands of refugees into Europe.

The risk management challenges and costs for freight transporters, haulers and shipowners arising from the refugee crisis are outlined in a recent Business Insurance article.

It reports that with thousands of refugees attempting to board trains and trucks heading for the United Kingdom at the French port of Calais this has caused problems for companies transporting goods.

Some of the risks they face include potential loss of earnings due to delays at ports, risk of damage to goods, fines for illegally transporting refugees if they board trucks undetected as well as driver safety.

Shipowners must also have emergency procedures in place to help their crews deal with situations given their legal and moral obligation to help ships in distress, Business Insurance notes.

A Reuters report suggests that more and more commercial ships are being drawn in to rescue refugees from unsafe and overloaded vessels in the Mediterranean:

Since January 2014, more than 1,000 merchant ships have helped rescue more than 65,000 people, according to estimates from the International Chamber of Shipping. That’s more than one in 10 of the estimated 585,000 migrants and refugees who crossed the Mediterranean over the period.”

Some of the merchant ships’ risks are covered by insurance, Reuters says.

Mutual marine insurers, also known as P&I clubs, provide cover for a wide range of liabilities including crew injury, pollution and cargo loss and damage.

So, if a refugee attacks and injures a crew member or breaks into a container and damages cargo, insurance would cover the shipowner.

But because rescue operations can take ships off course into uncharted waters, Reuters reports that other risks including fines for late arrival or the cost of chartering another vessel at short notice may not be covered.

Uncertainties also surround liability in the case of death or injury of a refugee while being rescued by a ship’s crew.

In June the Maritime Safety Committee (part of the International Maritime Organization) agreed that there was an urgent need for the international community to make greater efforts to address the problem through safer and more regular migration pathways, and to take action against criminal smugglers.

Check out I.I.I. facts and statistics on marine accidents here.

A protracted labor dispute that continues to disrupt operations at U.S. West coast ports underscores the supply chain risk facing global businesses.

Disruptions have steadily worsened since October, culminating in a partial shutdown of all 29 West coast ports over the holiday weekend.

The Wall Street Journal reports that operations to load and unload cargo vessels resumed Tuesday as Labor Secretary Tom Perez met with both sides in the labor dispute in an attempt to broker a settlement amid growing concerns over the impact on the economy.

More than 40 percent of all cargo shipped into the U.S. comes through these ports, so the dispute has potential knock on effects for many businesses.

A number of companies have already taken steps to mitigate the supply chain threat, according to reports. For example, Japanese car manufacturer Honda Motor Co, among others, has been using air freighters to transport some key parts from Asia to their U.S. factories – at significant extra expense.

On Sunday Honda also said it would have to slow production for a week at U.S.-based plants in Ohio, Indiana, and Ontario, Canada, as parts it ships from Asia have been held up by the dispute.

Toyota Motor Corp. has also reduced overtime at some U.S. manufacturing plants as a result of the dispute.

A brief published by Marsh last year noted that a West Coast port strike or shutdown could have broad consequences for global trade, business and economic conditions.

Organizations with effective risk management and insurance strategies in place will be best prepared to manage and respond to situations that hamper their flow of goods and finances, Marsh noted.

In 2002, a similar labor dispute ultimately led to the shutdown of ports along the West coast costing the U.S. economy around $1 billion each day, and creating a backlog that took six months to clear.

Many businesses purchase marine cargo insurance to protect against physical loss or damage to cargo during transit. This type of insurance generally will not respond in the event that a strike or other disruption at a port delays the arrival of insured cargo, unless there is actual physical damage to the cargo, according to Marsh.

However, some policyholders may have obtained endorsements to their insurance policies, or purchased additional coverage to protect themselves from the effects of port disruption.

Trade disruption insurance (TDI), supply chain insurance, and specialty business interruption insurance may also provide coverage for the financial consequences of a port disruption, Marsh wrote.

A study by FM Global of more than 600 financial executives found that supply chain risk, more than any other, was regarded as having the greatest potential to disrupt their top revenue driver. FM Global’s Resilience Index can help executives evaluate and manage supply chain risk.

We’re visiting the United Kingdom this week, so it’s appropriate we bring you a British themed news item.

An unpublished and original insurance claim for the loss of the Titanic will come under the hammer this Saturday at Aldridge’s auction house in Devizes, Wiltshire. The document is expected to fetch more than £12,000 ($20,185).

It’s more than 100 years since the RMS Titanic, a luxury British passenger liner, sank in the North Atlantic ocean on April 15, 1912 after colliding with an iceberg during her maiden voyage from Southampton, UK to New York City.

She carried 2,224 passengers and crew, but had lifeboats for only 1,178 people. More than 1,500 people died in the disaster.

The 4-page insurance document up for sale was prepared for insurance purposes and written by second officer Charles Lightoller, the most senior officer to survive the Titanic disaster. It was certified and signed by the Titanic’s second, third, fourth and fifth officers on April 19, 1912.

In what appears to be an attempt to avoid the insurers accusing the ship’s crew of negligence, the certified claim includes an interesting and sometimes curious account of the disaster:

The ship sank in very deep water and proved a total loss, with cargo, luggage, personal effects and mails.”

As to the actions on the bridge, the document states:

…the first officer immediately starboarded the helm reversed the engines full and closed all watertight doors. The ship swung to port, but struck a “growler” or small low-lying iceberg…”

In the words of the auctioneers, it’s fascinating that the officers would seem to attempt to minimize their encounter with the rather large and ominous iceberg by describing it as a “small low-lying iceberg.” This could possibly have been an attempt to downplay the size of the iceberg due to the question of liability and who was to blame for the sinking.

As the Western Daily Press reports, the strategy worked. Insurers paid out £3 million ($5.1 million) within 30 days – crucially before a major inquiry revealed the catalogue of mishaps that led to the sinking.

The lot is one of 200 Titanic collectables included in the auction, which is to commemorate the 102nd anniversary of the loss of the ship.

Atlantic Mutual, then the largest marine and general insurance firm in North America, was one of the major insurers of Titanic, providing the Oceanic Steam Navigation Co, Ltd (Titanic’s parent company) with what is believed to be more coverage for the ship than any of the many other single carriers which were part of Titanic’s insurance consortium.

Numerous Lloyd’s syndicates put their names on the insurance slip to cover the Titanic which was considered a prestigious risk to insure. More on how the disaster remains strongly linked to the history of the Lloyd’s market here.

The insurance policy was sold in an October 2013 auction.

Check out I.I.I. facts and statistics on marine accidents.

The insurance marketplace as a whole could benefit greatly if marine insurers would incorporate more catastrophe modeling in their pricing and profiling of risk accumulations, according to American Institute of Marine Underwriters (AIMU) chairman Roger F. Ablett.

Speaking at the 115th AIMU annual meeting held in New York City late last week, Ablett noted that in the aftermath of Superstorm Sandy there had been a call for marine underwriters to make greater use of cat modeling in their risk analysis.

Despite the shortcomings in modeling hull and cargo risks which are transient, as opposed to property risks which are static, Ablett told the gathering:

It is well known that the marketplace as a whole could benefit greatly if marine insurers would incorporate more modeling schemes in their pricing and the profiling of accumulations.”

Some 15 percent of Superstorm Sandy’s total estimated insured loss of $19 billion was marine-related.

The marine loss of $3 billion exceeded the total amount of U.S. marine insurance premiums collected last year, Ablett said.

The two marine lines most affected by Sandy were cargo and yachts.

Cargo recorded a combined ratio of 131 percent in 2012, up from 88 percent in 2011.

The combined ratio for yachts was 135 percent in 2012, some 40 points higher than the prior year.

AIMU’s annual survey of its members also reported direct written premiums of $2.2 billion in 2012, with a combined ratio of 115 percent.

That represents a slight drop in premiums from 2011, while the combined ratio deteriorated from just over 90 percent.

As we look ahead to the start of the 2013 Atlantic hurricane season marine insurers are among those that will be closely monitoring forecast storm activity.

Annual spring statistics recently released by the International Union of Marine Insurance (IUMI) noted that the cost of Superstorm Sandy to the global marine market has been put at between $2.5 billion to $3 billion – effectively wiping out the entire U.S. marine premiums for 2012.

The statistics which cover the cargo, ocean hull and offshore energy sectors remain a litmus test for the marine insurance market and the impact of Sandy will define 2012 in the eyes of underwriters, IUMI said.

While Superstorm Sandy’s main areas of impact were the states of New York and New Jersey, it was one of the largest storms ever and its impact stretched over 1,000 miles from the Great Lakes to Boston.

In its analysis of the cargo market, IUMI noted:

The total insured loss from Sandy is currently estimated to be between $25 billion-$30 billion of which approximately 10 percent or $2.5 billion-$3 billion is for the marine business.

It’s still unclear how much of that was for ocean cargo, but we do know that major industry groups such as automotive, coffee/cocoa trade and fine arts were particularly hard hit. There is also a substantial inland marine loss.

To put the claim in perspective this one loss has eroded an entire years worth of premium for the whole U.S. marine market.”

Insurance Journal has more on this story here.

Lessons learned from Superstorm Sandy are among the topics to be addressed at the 20th Biennial Marine Insurance Issues Seminar sponsored by the American Institute of Marine Underwriters (AIMU) on May 8 in New York City. The conference will be held at the New York Marriott Downtown, 85 West St.

To register for the seminar or for further information click here.

Piracy on the world’s seas has reached a five-year low, with 297 ships attacked in 2012, compared with 439 in 2011, the International Chamber of Commerce (ICC) International Maritime Bureau (IMB) global piracy report revealed today.

Worldwide numbers fell thanks to a huge reduction in Somali piracy, though East and West Africa remain the worst hit areas, with 150 attacks in 2012, according to the IMB report.

Globally, 174 ships were boarded by pirates last year, while 28 were hijacked and 28 were fired upon. IMB’s Piracy Reporting Centre also recorded 67 attempted attacks.

The number of people taken hostage onboard fell to 585 from 802 in 2011, while a further 26 were kidnapped for ransom in Nigeria. Six crewmembers were killed and 32 were injured or assaulted.

A press release cites Captain Pottengal Mukundan, Director of IMB:

IMB’s piracy figures show a welcome reduction in hijackings and attacks to ships. But crews must remain vigilant, particularly in the highly dangerous waters off East and West Africa.”

In Somalia and the Gulf of Aden, just 75 ships reported attacks in 2012 compared with 237 in 2011, accounting for 25% of incidents worldwide. The number of Somali hijackings was halved from 28 in 2011 to 14 last year.

IMB says navies are deterring piracy off Africa’s east coast, with pre-emptive strikes and robust action against mother ships. So too are private armed security teams and crews’ application of “Best Management Practices”.

But the threat and capability of heavily armed Somali pirates remains strong.

Follow the IMB record of piracy and armed robbery incidents on Twitter and view latest attacks on the IMB Live Piracy Map.

The Washington Post has more on this story.

The marine insurance industry is facing a bleak present as it seems to be unable to adapt to a changing business environment amid ongoing economic uncertainty, an international gathering of marine insurers was told.

In a keynote address to the annual conference of the International Union of Marine Insurers (IUMI) in San Diego, IUMI president Ole Wikborg noted that some marine underwriting entities – both old and new – were facing downgrades, and even closures, as a result of prevailing economic uncertainty.

What continues to surprise me is that with one gone, new capacity quickly fills the vacant spot with a business model not very much different from the one that had to quit. In our practical day-to-day dealings, it may be argued that our business models are not very innovative.”

This lack of innovation may be a result of marine insurers’ inability to renew a business model that is out of touch with the needs and requirements of the client base, Wikborg said.

He went on to suggest that the marine insurance industry may be unable to build and maintain a sustainable business activity through continuous profitmaking and service delivery because underwriters are disobeying the undeniable truths of their past performance.

I know it’s a hackneyed phrase, but its bottom line growth and not top line premium production inflation we need.”

Wikborg also pointed to the short-term view of some investors in the marine insurance industry:

Maybe our industry is dominated by shareholders who have no basic knowledge of the marine insurance business and its volatility, – with a short term investment philosophy and no ability nor interest in staying put when times are tough.”

New and stricter regulation was another concern for the industry:

Maybe our regulators are to be blamed for not understanding the marine insurance business model, its global reach and special requirements.”

Despite a trebling of the global commercial shipping fleet in the 100 years since the sinking of the Titanic, overall shipping loss rates declined from one ship per 100 per year in 1912 to one ship per 670 per year in 2009.

This telling statistic comes in a new report from specialist marine insurer Allianz Global Corporate & Specialty (AGCS).

The report reveals that while marine safety has vastly improved in the century since the Titanic, the maritime industry now faces new risks driven by the continued growth in world shipping.

Human error risks and the growing trend to super size ships are among the next challenges facing the industry, AGCS says.

Human error is described as the weakest link in the system.

Over 75 percent of marine losses can be attributed to a wide range of human error factors, including fatigue, inadequate risk management and competitive pressures, as well as potential deficiencies in training and crewing levels.

AGCS says:

As technological improvements reduce risk, so does the weakest link in the system – the human factor – become more important. This is where the industry should focus most closely, so that best practice risk management and a culture of safety becomes second nature across the world fleet.”

Other significant safety risks include: increasing bureaucracy on board ships; the continued threat of piracy off Somalia and elsewhere; and the emergence of ice shipping and its associated navigational and environmental complications.

Still, shipping disasters tend to spur marine safety improvements and Costa Concordia is certain to be no different, the report says.

Another key takeaway from AGCS’s research on safety and shipping from 1912-2012:

Marine transport is one of the safest means of passenger transport overall with far lower fatal accident rates than car, motorcycle, bicycle or walking in Europe.

Business Insurance has more on this story.

Check out I.I.I. facts and statistics on marine accidents.

March 11, 2012 will mark the one-year anniversary of the Japan earthquake and tsunami. Together the quake and tsunami caused $210 billion in economic damage, an estimated $35 to $40 billion in insured losses, and 15,840 fatalities, according to Munich Re.

While the disaster hit Japan, its aftermath was felt well beyond that country’s borders. Concerns were raised worldwide over supply chain disruption, nuclear risks and tsunami damage.

Another ongoing issue of concern beyond Japan’s shores is marine debris.

According to NOAA, it’s possible that debris washed into the sea by the tsunami could arrive on shores in Alaska, Hawaii, the West Coast, and Canada over the next few years.

Over at the Marine Debris blog, a post by Nancy Wallace, Director of the NOAA Marine Debris Program, notes:

It is likely that beachgoers on the West Coast and Alaska will start noticing a gradual increase in marine debris items near-shore or on the beaches in 2013. Those on the main Hawaiian Islands might start noticing an increase closer to 2014.”

Despite the alarming news headlines, NOAA’s Wallace assures us there is no scientific estimate of how much debris the tsunami washed into the sea or how much is still floating. It is also highly unlikely any debris is radioactive, while the chance of human remains arriving with it is almost zero.

You can find out more about the Japan tsunami marine debris on the NOAA Marine Debris Program site. Resources include the informative tsunami debris FAQs and fact sheet.

There’s also a marine debris tracker app that allows you to check in when you find trash on U.S. coastlines and waterways. Significant marine debris sightings can also be reported to NOAA via email at

A HuffPost piece offers further analysis on the tsunami marine debris story.

Reports suggest that insured losses arising from the grounding and capsize of the Costa Concordia cruise ship off the west coast of Italy Friday night could make it the largest marine insurance loss in history.

So far, six are confirmed dead and 29 reported missing after the Costa Concordia, carrying over 4,000 passengers and crew, apparently deviated from its course and hit rocks near the island of Giglio. The ship is owned by Carnival Corp.

Concerns were growing yesterday that the ship could break up and cause an environmental disaster if some of its roughly 2,300 tonnes of fuel leak.

A Reuters report cites one industry analyst estimating the insured loss from the Costa Concordia at between $500 million and $1 billion. Meanwhile, Bloomberg News cites another analyst saying the insured loss could total as much as $800 million. 

Whatever the loss ultimately totals, global insurers and reinsurers will play a key role in covering claims related to the incident. A special report by Guy Carpenter has more on this.

In the world of marine insurance, damage to a vessel is typically covered by a hull and machinery policy, while marine liability insurance would cover property damage and injury to third parties at sea.

The Protection & Indemnity (P&I) market typically covers liability claims arising from large marine insurance claims.

The International Group of P&I Clubs comprises 13 mutual insurance associations (P&I clubs) that between them provide liability cover for approximately 90 percent of the world’s ocean-going tonnage.

Clubs cover a wide range of liabilities including personal injury to crew, passengers and others on board, cargo loss and damage, oil pollution, wreck removal and dock damage.

Under the Group’s pooling agreement by which the clubs reinsure each other, losses in excess of $8 million are shared between the clubs.

This claim-sharing agreement is underpinned by a very extensive market reinsurance program which the Group clubs arrange.

For more on this, check out the latest P&I market review from Willis.


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