Larger ships, more valuable cargo worries marine insurers

As new ships increase in size, and cargo gets more expensive, insurers’ exposures are higher than ever, says industry leader

Larger ships, more valuable cargo worries marine insurers

Insurance News

By Gabriel Olano

As ultra-large container vessels (ULCVs) enter the shipping industry, re/insurers have begun to express concern that their exposures might be too concentrated.

Michael Hauer, head of marine reinsurance of Munich Re Singapore, made a LinkedIn post discussing the need for the insurance industry to understand the magnitude of exposure that would result from an ULCV getting into trouble.

French shipping firm CMA CGM has reportedly signed a letter of intent for nine ULCVs, each capable of carrying 22,000 teu (twenty-foot equivalent unit). Hyundai Heavy Industries has said that it and a Chinese shipbuilder are competing to be selected to fulfill the giant order.

Such behemoth vessels can carry huge amount of cargo, but when they encounter trouble, it also means a huge amount of cargo can be lost. In one such example, the 8,110 teu MOL Comfort was lost off the coast of Yemen in 2008, taking with it 4,380 containers. The insured cargo loss estimated at US$300 million.

According to marine insurers, the average exposure per container is US$50,000 to US$100,000.

Hauer said that the size of container ships has more than doubled in the past decade, and that means historical large loss values “must be called into question”.

He added: “We are aware that these expectations are, for a number of (largely perishable) commodities, becoming increasingly unrealistic. We are aware of a number of instances … where the value of a single pallet can be US$1 million or more.”

The challenge to the insurance industry, Hauer said, is to challenge previous assumptions made using old data. He called for more study into the nature of ULCV shipping to better understand the risks it may encounter.

“Too much has, and is, changing,” he warned. “If we as underwriters do not recognise and manage these trends, it is certain that our capital providers will.”

Related stories:
Lloyd’s managing agent launches cargo consortium
Singapore Shipping Association to increase focus on marine insurance
Allianz gives verdict on shipping insurance sector

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