Pandemic Drives
Life Insurance Sales, Especially Among
Young Consumers

By Maria Sassian, Triple-I consultant

The COVID-19 pandemic contributed to a decrease in life expectancy in the United States for the first time in decades, according to the Centers for Disease Control and Prevention (CDC).  After climbing steadily for many years, life expectancy fell by 1.5 years from 2019 to 2020 – the largest one-year dip since World War II, when it declined by 2.9 years between 1942 and 1943.

Life expectancy at birth for the total population declined from 78.8 years in 2019 to 77.3 years in 2020.  The grim prospect of mortality, as well as the financial havoc wrought by the pandemic, has led many people to consider protecting their loved ones with life insurance.  

A survey by Life Happens and LIMRA published in April 2021 found that about 31 percent of consumers said they are more likely to buy life insurance because of the pandemic. And the latest data show they followed through on that intention. Total U.S. life insurance premium increased 21 percent in the second quarter 2021, the largest year-over-year increase since third quarter 1987. For the first half of 2021, total premium increased 18 percent, compared with the first six months of 2020, LIMRA reports.

Life insurance is now attracting younger customers. LIMRA’s survey shows that 45 percent of millennials said they are more likely to buy life insurance because of COVID-19.  This increased interest could be explained by the fact that younger people are more likely to have children who are minors and higher amounts of outstanding mortgage debt to cover if they died.  Younger workers also faced higher unemployment rates throughout the pandemic compared to older workers, so they may have purchased individual coverage to make up for the loss of employer-sponsored policies.

Decisions about buying a policy or increasing coverage also vary by race. Deloitte research found that underinsured Hispanic/Latino buyers were most interested in increasing life insurance coverage as a response to the pandemic, followed most closely by Black buyers. Deloitte speculates that this is due to the higher unemployment rates among Black and Hispanic/Latino people during the pandemic, which resulted in the loss of employer-sponsored life coverage. Overall, Black and Hispanic/Latino people were disproportionately affected by COVID-19.

September is Life Insurance Awareness month, and now turns out to be a good time to get the coverage. Insurers have made it easier to buy policies during the pandemic. Many companies are temporarily waving in-person medical exams and streamlining the buying process with simplified underwriting.

Companies with the strongest digital capabilities are benefitting from a 30 percent to 50 percent increase in online life insurance sales since January 2020, according to Deloitte.  Consumers like shopping online, and interest in agent-driven sales is decreasing, with just 41 percent of consumers saying they prefer to buy in-person in 2020 – down from 64 percent in 2011.

People who get life insurance don’t tend to regret it. In fact, LIMRA reports that that almost 40 percent said they wished they had purchased it at a younger age. And while many people believe life insurance is too expensive, most overestimate the cost. LIMRA found that 44 percent of Millennials thought the cost of  term life insurance was more than $1,000 a year, when it’s closer to $160 for a healthy 30-year-old to own a $250,000 level term life insurance policy.

Related links:
Triple-I’s Life Insurance Basics
Facts & Statistics: Life insurance

Flood: An Insurable Peril That’s Underinsured

By John Novaria, Managing Director, Amplify

This year’s hurricanes have served as a wakeup call about the importance of flood insurance and the fact that not enough people have it. Only 1 in 6 homes in the United States is insured against flood, yet 90 percent of natural catastrophes in the country involve flooding.

More of the population is moving into flood-prone areas. Not only does this increased residential and commercial development put more people in harm’s way, it reduces the amount of land available to absorb excess water. This means more homes and businesses inundated, more contents damaged or destroyed, and more vehicles immersed.

Nowadays, flooding tends to cause more costly damage than wind. An average storm year will generate uninsured losses of $10 billion due to flooding, compared to insured losses of $5 billion.

“One of the most frustrating things for our industry related to flood is that this is actually an insurable peril and it’s broadly uninsured,” said Keith Wolfe, president of U.S. property & casualty insurance at Swiss Re. Wolf recently spoke with Triple-I CEO Sean Kevelighan, in the latest edition of Triple-I’s Executive Exchange, about closing the flood-protection gap.

That’s changing, however, as the public and private sectors work together to improve consumer behavior and harden communities. The private market is slowly but surely closing the flood protection gap as it emerges as a viable complement to the National Flood Insurance Program.

Improvements in modeling are making this peril more insurable, and private companies are recognizing the flood-insurance opportunity and entering the market. According to Swiss Re, flood represents a $1.1 billion growth opportunity for insurers.

Deepfake: A Real Hazard

By Maria Sassian, Triple-I consultant

Videos and voice recordings manipulated with previously unheard-of sophistication – known as “deepfakes“ – have proliferated and pose a growing threat to individuals, businesses, and national security, as Triple-I warned back in 2018.

Deepfake creators use machine-learning technology to manipulate existing images or recordings to make people appear to do and say things they never did. Deepfakes have the potential to disrupt elections and threaten foreign relations. Already, a suspected deepfake may have influenced an attempted coup in Gabon and a failed effort to discredit Malaysia’s economic affairs minister, according to Brookings Institution

Most deepfakes today are used to degrade, harass, and intimidate women. A recent study determined that up to 95 percent of the thousands of deepfakes on the internet were pornographic and up to 90 percent of those involved nonconsensual use of women’s images.

Businesses also can be harmed by deepfakes. In 2019, an executive at a U.K. energy company was tricked into transferring $243,000 to a secret account by what sounded like his boss’s voice on the phone but was later suspected to be thieves armed with deepfake software.

“The software was able to imitate the voice, and not only the voice: the tonality, the punctuation, the German accent,” said a spokesperson for Euler Hermes SA, the unnamed energy company’s insurer. Security firm Symantec said it is aware of several similar cases of CEO voice spoofing, which cost the victims millions of dollars.

A plausible – but still hypothetical – scenario involves manipulating video of executives to embarrass them or misrepresent market-moving news.

Insurance coverage still a question

Cyber insurance or crime insurance might provide some coverage for damage due to deepfakes, but it depends on whether and how those policies are triggered, according to Insurance Business.  While cyber insurance policies might include coverage for financial loss from reputational harm due to a breach, most policies require network penetration or a cyberattack before it will pay a claim. Such a breach isn’t typically present in a deepfake.

The theft of funds by using deepfakes to impersonate a company executive (what happened to the U.K. energy company) would likely be covered by a crime insurance policy.

Little legal recourse

Victims of deepfakes currently have little legal recourse. Kevin Carroll, security expert and Partner in Wiggin and Dana, a Washington D.C. law firm, said in an email: “The key to quickly proving that an image or especially an audio or video clip is a deepfake is having access to supercomputer time. So, you could try to legally prohibit deepfakes, but it would be very hard for an ordinary private litigant (as opposed to the U.S. government) to promptly pursue a successful court action against the maker of a deepfake, unless they could afford to rent that kind of computer horsepower and obtain expert witness testimony.”

An exception might be wealthy celebrities, Carroll said, but they could use existing defamation and intellectual property laws to combat, for example, deepfake pornography that uses their images commercially without the subject’s authorization.

A law banning deepfakes outright would run into First Amendment issues, Carroll said, because not all of them are created for nefarious purposes. Political parodies created by using deepfakes, for example, are First Amendment-protected speech.

It will be hard for private companies to protect themselves from the most sophisticated deepfakes, Carroll said, because “the really good ones will likely be generated by adversary state actors, who are difficult (although not impossible) to sue and recover from.”

Existing defamation and intellectual property laws are probably the best remedies, Carroll said.

Potential for insurance fraud

Insurers need to become better prepared to prevent and mitigate fraud that deepfakes are capable of aiding, as the industry relies heavily on customers submitting photos and video in self-service claims. Only 39 percent of insurers said they are either taking or planning steps to mitigate the risk of deepfakes, according to a survey by Attestiv.

Business owners and risk managers are advised to read and understand their policies and meet with their insurer, agent or broker to review the terms of their coverage.

Insurer Declined to Renew your Homeowners Policy? You Have Options

By Maria Sassian, Triple-I consultant

In high-risk areas like the West Coast with its wildfires and Florida with its hurricanes and floods, insurance non-renewals are on the rise as insurers attempt to limit their exposure to future losses. Homeowners insurance protects your most valuable possession, so the prospect of getting a notice that your policy will not be renewed can be nerve-racking.  

But don’t panic if that happens – you have options.

Know the difference between cancellation and non-renewal

There is a big difference between an insurance company canceling a policy and choosing not to renew it. Insurance companies can’t cancel a policy that has been in force for more than 60 days except when:

Nonrenewal is a different matter. Either you or your insurance company can decide not to renew the policy when it expires. Depending on the state you live in, your insurance company must give you a certain number of days’ notice and explain the reason for not renewing before it drops your policy.

Question the non-renewal

If you think the reason the insurance company provided for non-renewing is unfair or want a further explanation, call the company.  You may get an opportunity to keep your coverage by verifying that you’ve taken risk mitigation measures such as replacing the roof or removing flammable materials near your house.

If your policy isn’t renewed because of a failed inspection, making the proper updates could help you maintain coverage.

Shop around for another policy

If your insurer insists on non-renewing, shop around for a new policy. Here are some tips from Triple-I’s How to Save Money on Your Homeowners Insurance guide:

  • Ask friends and relatives for recommendations for insurers and then do your due diligence.
  • Contact the state insurance department to find out whether they make available consumer complaint ratios by company. If they do, check into the insurers you’re considering doing business with.
  • Check the financial health of prospective insurance companies by using ratings from independent rating agencies and consulting consumer magazines for reviews.
  • For price quotes, call companies directly or access information online. Your state insurance department may also provide comparisons of prices charged by major insurers.
  • Get quotes from at least three companies.
  • Don’t shop based on price alone. Remember, you’ll be dealing with this company in the event of an accident or other emergency. When you need to file a claim you’ll want an insurer that provides good customer service, so test that while you’re shopping, and choose a company whose representatives take the time to address your questions and concerns.

Explore your state’s shared market option

If you’ve shopped around and can’t find coverage, you may need to turn to the state-run shared market. Many states offer Fair Access to Insurance Requirements (FAIR) policies for high-risk homes, or beach and windstorm plans for coastal properties. These policies offer limited coverage and are often more expensive than a standard home policy from a private insurer.

For more comprehensive coverage, homeowners in California may purchase a “difference in conditions” policy that complements FAIR Plan coverage.

Look into surplus lines

The surplus lines market, which is comprised of highly specialized insurers, exists to provide coverage that is not available through licensed insurers in the standard market. Each state has surplus lines regulations and each surplus lines company is overseen for solvency by its home state.

Available surplus lines companies vary by state. Speak with an insurance agent or broker about surplus lines if you’ve been rejected by at least three other insurers.

Non-renewals in disaster-prone areas

 State regulators are pushing back against the non-renewal trend by placing moratoriums on non-renewals for certain zip codes, as happened in California recently, or for certain companies, as is the case in Louisiana.

Whether the decision not to renew is yours or your insurer’s, don’t put off shopping for a new policy. You don’t want coverage on your home to lapse.

Cyber Insurance’s “Perfect Storm”

Cyber is a relatively new, evolving risk. Insurers manage their exposures, in part, by setting coverage limits and excluding events they don’t want to insure.

Increasing cybercrime incidents resulting in large losses – combined with some carriers retreating from writing the coverage – is driving cyber insurance premiums sharply higher.

Once a diversifying secondary line and another endorsement on a policy, cyber has become a primary component of any corporation’s risk-management and insurance-buying decisions. As a result, insurers need to review their appetite for the peril, risk controls, modeling, stress testing and pricing.

According to A.M. Best, the prospects for the cyber insurance market are “grim” for several reasons:

  • Rapid growth in exposure without adequate risk controls,
  • Growing sophistication of cyber criminals, and
  • The cascading effects of cyber risks and a lack of geographic or commercial boundaries.

While the industry is well capitalized, A.M. Best says individual insurers who venture into cyber without thoroughly understanding the market can put themselves in a vulnerable position.

“The cyber insurance industry is experiencing a perfect storm between widespread technology risk, increased regulations, increased criminal activity, and carriers pulling back coverage,” according to Joshua Motta, co-founder and CEO of Coalition, a San Francisco-based cyber insurance and security company. “We’ve seen many carriers sublimit ransomware coverage, add coinsurance, or add exclusions.”

Worsening since the pandemic

A recent Willis Towers Watson study found primary and excess cyber renewals averaging premium increases “well into the double digits.” One factor helping to drive these increases, Willis writes, is the sudden shift toward remote work on potentially less-secure networks and hardware during the pandemic, which has made organizations more vulnerable to phishing and hacking.

The average cost of a data breach rose year over year in 2021 from $3.86 million to $4.24 million, according to a recent report by IBM and the Ponemon Institute — the highest in the 17 years that this report has been published. Costs were highest in the United States, where the average cost of a data breach was $9.05 million, up from $8.64 million in 2020, driven by a complex regulatory landscape that can vary from state to state, especially for breach notification.

The top five industries for average total cost were:

  • Health care
  • Financial
  • Pharmaceuticals
  • Technology
  • Energy

For the health care sector, the average total cost rose 29.5 percent, from $7.13 million in 2020 to $9.23 million in 2021.

Since the start of the year, cyber insurance rates have increased 7 percent for small businesses, according to AdvisorSmith Solutions. For midsize and large businesses, AdvisorSmith said,  those increases were closer to 20 percent.

Insurers’ reactions

AIG last month said it is tightening terms of its cyber insurance, noting that its own premium prices are up nearly 40 percent globally, with the largest increase in North America.

“We continue to carefully reduce cyber limits and are obtaining tighter terms and conditions to address increasing cyber loss trends, the rising threat associated with ransomware and the systemic nature of cyber risk generally,” CEO Peter Zaffino said on a conference call with analysts.

In May, AXA said it would stop writing cyber policies in France that reimburse customers for extortion payments made to ransomware criminals. In a ransomware attack, hackers use software to block access to the victim’s own data and demand payment to regain access.

The FBI warns against paying ransoms, but studies have shown that business leaders today pay a lot in the hope of getting their data back.  An IBM survey of 600 U.S. business leaders found that 70 percent had paid a ransom to regain access to their business files. Of the companies responding, nearly half have paid more than $10,000, and 20 percent paid more than $40,000. 

Two advisories last year from U.S. Treasury agencies –  the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) – indicated that companies paying ransom or facilitating such payments could be subject to federal penalties. These notices underscore businesses’ need to consult with knowledgeable, reputable professionals long before an attack occurs and before making any payments. 

More like terror than flood

Cyber risk is unlike flood and fire, for which insurers have decades of data to help them accurately measure and price policies. Cyber threats are comparatively new and constantly evolving. The presence of malicious intent results in their having more in common with terrorism than with natural catastrophes.

Insurers and policyholders need to be partners in mitigating these risks through continuously improving data hygiene, sharing of intelligence, and clarity as to coverage and its limits.

Relocated & Property Damaged by Ida? You May Be Eligible for Additional Living Expenses

Standard homeowners and renters insurance policies include additional living expenses (ALE) coverage. ALE pays the costs of living away from home—above and beyond your customary expenses— if you cannot live at home due to damage caused by an insured event that makes the home temporarily uninhabitable.

What expenses are typically covered by ALE?

ALE covers living expenses incurred by you so your household can maintain its normal standard of living.  These expenses could include:

  • Temporary housing
  • Moving costs
  • Grocery or restaurant bills 
  • Storage costs
  • Laundry expenses
  • Transportation (e.g., if your temporary home requires a longer commute)
  • Parking fees
  • Pet boarding

Your homeowners policy’s ALE coverage is usually equal to 20 percent of your home’s insured value—a home insured for $200,000, for instance, may have ALE coverage of up to $40,000—or limited to a certain timeframe (e.g., no more than 12 months).

What about Damage from Hurricane Ida?

Standard ALE coverage should be triggered if damage from a covered peril (e.g., wind and rain) caused the home to be uninhabitable. In addition, some companies provide ALE coverage when policyholders leave their home or apartment due to mandatory evacuation orders. Policyholders should speak with their insurance professional to confirm whether their policy provides ALE coverage for their situation.

As a reminder, standard homeowners insurance policies typically do not provide coverage for flood damage. The National Flood Insurance Program (NFIP) covers physical damage from flood but does not include ALE. Some privately sold flood policies offer ALE following flood losses. 

What Other Help Is Available?

Federal assistance has been made available through the Federal Emergency Management Agency (FEMA). On September 2, FEMA announced they will cover hotel expenses for survivors of Hurricane Ida with damaged homes or dwellings in 25 parishes in southeast Louisiana.

The program, known as Transitional Sheltering Assistance, will provide survivors with short-term housing free-of-charge as they recover from the Category 4 storm. Survivors must first register with FEMA at disasterassistance.gov or by calling the FEMA helpline at 800-621-3362. Those wishing to take advantage of the program must find and book their own hotel rooms. Participating hotels are listed at www.femaevachotels.com.

“Silent” Echoes of 9/11
in Today’s Management
of Cyber-Related Risks

“The cyber landscape to me looks a lot like the counterterrorism landscape did before 9/11.”
Garrett Graff , historian and journalist

Before Sept. 11, 2001, terrorism coverage was included in most commercial property policies as a “silent” peril – not specifically excluded, therefore covered. Afterward, insurers began excluding terrorist acts from policies, and the U.S. government established the Terrorism Risk Insurance Act (TRIA) to stabilize the market.

TRIA requires insurers to make terrorism coverage available to commercial policyholders but doesn’t require policyholders to buy it. Originally created as three-year program allowing the federal government to share losses due to terrorist attacks with insurers, it has been renewed four times: in 200520072015, and 2019.  

An evolving risk

Terrorism risk has evolved in complexity and scope, and some in the national security world have compared U.S. cybersecurity preparedness today to its readiness for terrorist acts two decades ago.

“The cyber landscape to me looks a lot like the counterterrorism landscape did before 9/11,” historian and journalist Garrett Graff said during a recent Homeland Security Committee event at which scholars and former 9/11 Commission members urged lawmakers to increase funding for the Cybersecurity and Infrastructure Security Agency (CISA) and other federal agencies focused on preventing attacks.

Cyber is more complicated, said Amy Zegart, co-director of Stanford University’s Center for International Security and Cooperation, due to the private sector’s role “as both a victim and a threat vector. There are more people in the U.S. protecting our national parks than there are in CISA protecting our critical infrastructure.”  Cyberattacks like the one on the Colonial Pipeline underscore this reality.

When TRIA was reauthorized in 2019, a crucial component was the mandate for the Government Accountability Office (GAO) to make recommendations to Congress on amending the act to address cyberthreats. The trillion-dollar infrastructure bill now being considered in Congress proposes $1.9 billion for cybersecurity, with more than half set aside for state, local, and tribal governments. It would establish a Cyber Response and Recovery Fund for use by CISA.

“Silent cyber”

Like terrorism before 9/11, much cyber risk remains silent. Silent cyber – also called “non-affirmative cyber” – refers to potential losses stemming from policies not designed to cover cyber-related hazards. If silent cyber isn’t addressed, insurer solvency could be affected, ultimately hurting policyholders. 

The United Kingdom’s Prudential Regulation Authority in 2019 sent a letter to all U.K. insurers saying they must have “action plans to reduce the unintended exposure” to non-affirmative cyber. Later that year, Lloyd’s issued a bulletin mandating clarity on all policies as to whether cyber risk is covered. This led many insurers to exclude cyber or include it and price the risk accordingly. 

“Other regulators and the rating agencies have been less vocal about the issue” writes Willis Towers Watson,  “and, until recently, efforts to address silent cyber have been limited.” Some insurers – most notably in the specialty mutual sector – updated their policies in the mid-2010s to provide clarity on cyber. But, until recently, movement elsewhere has been sporadic, Willis writes.

Event-driven action

The recent proliferation of ransomware attacks leading to business interruption has led to cyber insurance – which began as a diversifying, secondary line – becoming a primary insurance-purchasing consideration. Unfortunately, while policies are available, many policyholders still incorrectly expect to be covered under their property and liability policies. Confusion around cyber coverage can lead to unexpected gaps.

“In a best-case scenario, a cyber incident may trigger coverage under multiple policies and increase the available total limit to respond to a covered event,” said Adam Lantrip, CAC Specialty’s cyber practice leader. “In a more common scenario, multiple policies may be triggered but not coordinate with one another, and the policyholder spends more on legal fees than the cost of having purchased standalone cyber insurance in the first place.”

Cyber risk will only grow in significance, complexity, and cost as the world becomes more wired and interdependent. The costs of cyberattacks are potentially massive and need to be mitigated in advance.

From the Triple-I blog

Emerging Cyber Terrorism Threats and the Federal Terrorism Risk Insurance Act

A World Without TRIA:  Formation of a Federal Terrorism Insurance Backstop

Brokers, Policyholders Need Greater Clarity on Cyber Coverage

Cyber Risk Gets Real, Demands New Approaches

Businesses Large and Small Need to Be Cyber Resilient in a COVID-19 World

Victimized Twice? Firms Paying Cyber Ransom Could Face U.S. Penalties

From Risk & Insurance (an affiliate of The Institutes and sister organization to Triple-I)

Silent Cyber Will Sabotage Your Insurance Policy if You Don’t Watch Out. Here’s What Risk Managers Should Keep Top of Mind

After Ida: Stay Safe and Report Damage Quickly

“Stay informed, stay safe, and contact your insurance professional as soon as possible.”

The Insurance Information Institute is working with insurers in the aftermath of Hurricane Ida to monitor property damages and assist consumers as they recover. In this video, Triple-I CEO Sean Kevelighan provides guidance for homeowners to help them ensure a smooth claims experience and avoid being taken advantage of by unethical contractors and other scammers who tend to emerge after disasters.

“Right now, the most important thing those impacted by Ida can do is remain safe and stay out of the way out of recovery workers,” Kevelighan says. “The storm may have passed, but remember that new dangers may be lurking.”

In particular, he points to threats from downed electrical wires and washed-out roads and bridges. Kevelighan also emphasizes the importance of quickly reporting property damage to your insurer.  

Other resources:

Hurricanes: Insurance and recovery resources

After a hurricane, beware of the dangers that remain

When disaster strikes: Preparation, response and recovery

Health safety following a flood

Recovering from a flood

Catastrophe-related fraud

Mitigating Shipping Risk Benefits Everybody

(Photo by Mahmoud Khaled/Getty Images)

By Captain Andrew Kinsey, Senior Marine Risk Consultant at Allianz Global & Corporate Specialty

When an Amazon package arrives at our door, we scarcely give any thought to what it took to get here. It’s likely that your school supplies or article of clothing has traveled a great distance across the ocean by vessel.

International shipping accounts for 90 percent of world trade, and the old saying “there’s many a slip ‘twixt the cup and the lip” is appropriate. Much can go wrong between the point of origin and destination — and lately Marine insurers are keeping a close eye on developments in our climate, the economy, and public health that could influence the odds of a successful delivery.

The annual Safety and Shipping Review produced by Allianz details trends and developments in shipping losses and safety and is a valuable resource for Marine insurers. Here are some of the major highlights.

Losses at sea

First, let’s look at losses of vessels at sea, where the trend is stable. There were 49 total losses of 100 gross tons or more in 2020, compared to 48 a year earlier. Credit better safety measures, regulation, improved ship design and technology, and advances in risk management. Behind the numbers, however, are a host of volatile factors, such as extreme weather, machinery breakdown, fires, and even piracy. Ship operators can improve fire detection and firefighting on large vessels and ensure that machinery has been inspected and is in good working order. Also, weather impacts can be mitigated by improving forecasting and vessel routing.

Another big concern of insurers is shipping containers lost at sea. Last year, more than 1,000 fell overboard in the first few months due to rough weather and heavier loads. A surge in demand for consumer goods is another factor; in response, containers are being stacked aboard at unprecedented heights, leading to concerns that they aren’t being properly secured. In all, more than 3,000 containers were lost at sea in 2020, compared with a longer-term average of 1,382 per year.

Pandemic impact

Next is the global pandemic, which has had little effect on Marine insurance claims to date. It’s quite possible that claims could increase as more vessels are put back in service and we see the effects of delayed maintenance. Another big concern is crews confined to their ships in ports due to public health mandates, which delays crew changes and medical treatment. Crew fatigue leads to human error – a major cause of many losses.

These are factors that warrant immediate action by all stakeholders in the supply chain, including cargo owners. One solution is to designate merchant seaman as vital workers so they can receive vaccines and move about freely.

Bigger ships, bigger problems

Size does matter in global shipping. Remember the ship stuck in the Suez Canal for over three months? The Ever Given incident was a vivid illustration how hard it is to free large vessels. When it takes more equipment and more manpower, someone must pay. Not to mention the societal and economic cost of supply-chain disruption. There’s a real possibility we will see bare shelves and lots of “items unavailable” this holiday shopping season.

So if bigger vessels cause bigger problems, why are there so many of them? It’s all about economies of scale and fuel efficiency, and shipping companies really can’t be blamed for trying to comply with increased environmental regulations and attempting to reduce their operating costs. However, large vessels pose problems for the supply chain, often overwhelming ports when so many containers are dropped off at once.

Vessel size also has a direct correlation to the potential size of loss, and this is an issue that keeps Marine insurers up at night. Too often, cargo is misdeclared or improperly declared, which can result in fires. For example, if self-igniting charcoal, chemicals or batteries are not properly stowed, the risk of ignition escalates dramatically. And if the item is improperly declared in the first place the crew doesn’t know what it’s dealing with in an emergency.

Compounding the problem is inadequate fire detection and firefighting capabilities on large vessels; for this reason, the International Union of Marine Insurers (IUMI) is rallying stakeholders to establish more stringent standards.

At first glance, it appears the risks associated with global shipping are a moving target. But more careful scrutiny reveals patterns and trends that, when carefully analyzed, can lead to improved loss mitigation, thus reducing the “slips” that can occur in transit.

Captain Andrew Kinsey is Senior Marine Risk Consultant at Allianz Global & Corporate Specialty and chairs the technical services committee of the American Institute of Marine Underwriters, which is a Triple-I Associate Member.

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