The increasing size of ships means that a total loss, when recovery costs were taken into account, could approach $3bn, warned IUMI president Dieter Berg when speaking at a press meeting ahead of the official opening of IUMI 2019, taking place from September 16th to 19th in Cape Town, South Africa.
Growing accumulations were a serious matter for marine insurers, Berg said, noting the recent launches of container ships of 20,000+ teu capacity. He said that there were huge cargo accumulation values on those vessels. Even if one allowed for the fact that 20% of containers might be empty, there could be a cargo accumulation up to $1bn. Add a vessel value of $300m and a recovery cost of up to $1.5bn, and the sum could approach $3bn. And it was not only accumulation on board ships, observed Berg. As Tianjin showed, it could also be accumulation in ports. “We have seen massive losses which made us learn the hard way about huge accumulations”. Storm Sandy, for example, saw cargo losses in the Port of New Jersey, pleasure craft losses and Fine Art losses from the floods in Manhattan.
Berg said that the major issues that would be taken up during the conference included the market environment, accumulation and digitalization.
He felt that the economic environment was rather positive, with the global economy developing nicely in 2017/18, with indications for trade in 2018 and 2019 good as well. Nevertheless there were threats, with an increasing level of political uncertainty. There was a basic shifting of economic power from the West to the East, plus political uncertainties in local economies could be a threat to trade, and finally the new protectionism. “In many countries we see more and more strengthening of right-wing parties blaming globalization for domestic problems”, said Berg, adding: “I think we have to speak up and explain how positive development of global trade is vital for global wealth”. He felt that with emerging countries we had to come up with fair trade agreements.
Overall, said Berg, the big question going forward was climate change and what it would mean for insurers in general and for marine insurers in particular. “The issue for marine insurers is not earthquake or windstorm, although the latter might have some relevance for offshore energy, but flooding.”
“Looking at 2017 it’s been one of the worst years we have seen for catastrophes, with hurricanes Harvey, Irma and Maria causing significant losses for marine insurers. But the question is, ‘is this the new normal?’, said Berg, adding that we probably had to accept that it was.
The third issue in marine insurers’ heads for the IUMI conference was digitalization. What would the new technology mean for clients? Berg said he was convinced that all shipping and logistic environments would change massively. After a conference in Hong Kong last year Berg spent a couple of days in Silicon Valley “and my perspective completely changed. It’s massive what is going on there. Start-up companies are really focusing on logistics and supply chain problems.” He noted that ‘smart ports’ were doing much to avoid congestion of ships and increase throughput capacity. “We as insurers have to understand these technologies and what is going on in our clients’ businesses, because that is going to change radically”, said Berg.
He also noted that the risks would change as well. Some risks would just disappear thanks to artificial intelligence, sensor technology etc. But other new ones would appear. “It is up to us to come up with intelligent creative products to serve our clients”, concluded Berg.