Marine insurance is a technical area impacted by banking and finance arrangements, international carriage conventions, and specialist insurance law and regulations. Tom Goodwin spoke to Zurich Insurance’s Iain Sharples to find out more
Marine Insurance is a field that sometimes manages to sail under cover of dark, rarely spotted from the shore by its landlocked brethren. But in spite of its niche nature, marine insurance is a remarkably complex field, requiring deep, specialist knowledge from its practitioners. It also covers a far broader range than many may initially realise, spanning everything from goods being transported through to port operator’s liability insurance.
“Traditionally, there has been a lack of understanding from the public around the role that shipping plays in moving goods around the globe,” says Iain Sharples, national manager of marine and transport liability at Zurich Insurance. “But fortunately, recent years have seen much more public recognition that transport is a key part of any country’s infrastructure planning.”
The temptation – and trend – across the insurance industry as a whole has been to make insurance transactions as quick and straightforward as possible. It’s an understandable approach from both the consumer and insurer perspective; using existing platforms and other IT solutions to streamline processes can make for a smoother transaction for all parties.
“Recent years have seen much more public recognition that transport is a key part of any country’s infrastructure planning” Iain Sharples, Zurich Insurance
Yet it’s less cut-and-dried when it comes to marine insurance. Sharples staunchly believes that human judgement in marine insurance can’t be underestimated. The people underwriting the risk have to possess an intimate knowledge of their chosen subject matter.
“There is a real danger that if we lose marine knowledge and expertise, the ability of companies to purchase and arrange movement of cargo could become affected,” Sharples says. “The transport chain and all the parties involved rely on marine insurance to function.”
For example, when a major terminal operator or logistics company needs to finance the takeover or commissioning of a new facility, finance companies won’t provide backing without the right insurance in place. As many brokers know, insurance can be one of the last things a client thinks of when these deals are being done, so insurers have to be able to move quickly.
“Knowing what you are doing as an underwriter means you can ask the crucial questions and make decisions to enable the client to complete the deal,” Sharples says.
Bearing the brunt of exposure
Marine insurance involves numerous exposures across the different types of operation involved in the transport chain – freight forwarders, logistics operators, warehouse and distribution, stevedores, cargo handling facilities, and port authorities, to name a few. Additionally, many of the companies involved in the freight process are at the cutting edge of modern freight handling, so insurers need to be aware of how cover must evolve to adapt to this change.
The right underwriter will be able to identify early whether cargo, carriers or liability coverage is best suited, and will assist in putting in place the right clauses and extensions. On the other end, the right claims handler will be able to analyse the claim correctly and promptly.
“You have to be confident that the insurer – or, more to the point, the people working for that insurer – has enough experience and training to identify what is required by the broker and customer,” Sharples says.
Longevity in the field is also an important factor to consider, as it speaks to the insurer’s experience within the field. Zurich has been involved in the insurance of freight forwarders liability for more than 30 years, working in conjunction with partner Midas Insurance Brokers. Freight forwarders present a number of challenges for insurers; they produce legally tricky and technical claims, which necessitate the support of an insurer that has a detailed understanding of the potential exposures.
“We work in a litigious environment, and both longevity and commitment to the partnership are crucial to providing the best possible advice and guidance,” says George Midas, managing director of Midas Insurance. “You need a combination of experience in underwriting, claims and a legal team that tailors specifically – possibly uniquely – to the needs of the client.”
But as with any insurance, people usually only recognise the need for it when something goes wrong. The July 2018 loss of containers from the ship YM Efficiency o‑ the coast of Newcastle highlighted this clearly. Sharples stresses the importance of choosing a marine insurer that will make good on its policies as soon as possible.
“Zurich was the first insurer to pay a cargo claim arising from that loss, because if the container and cargo are gone, there’s no point messing around delaying payment,” he says. “Whatever the investigations bring out down the track in terms of why the containers were lost, the insured party just needs its cargo loss paid so a replacement shipment can be arranged.”
As with any industry, marine insurance continues to undergo evolution. Marine liability in particular keeps growing as brokers realise that companies involved in the transport chain have specific needs that don’t always fit standard insurance policies. A common example is a trucking company that has moved into warehousing and has developed into being a third-party or fourth-party logistics operator.
“In a situation like this, the exposures cut across marine carriers, general liability, ISR, PI and statutory liability,” Sharples says. “A single policy designed to cover these exposures can be attractive, so you need experts in place to help ensure that all avenues are appropriately covered.”
“You need a combination of experience in underwriting, claims and a legal team who tailors specifi cally – possibly uniquely – to the needs of the client” George Midas, Midas Insurance
New challenges are also emerging; already, the impact of larger ships on accumulation of risk is becoming apparent. One notable example was the March 2018 fi re on the Maersk Honam, in which a single fi re killed five crew members and damaged or destroyed millions of dollars’ worth of cargo.
Additionally, the industry has been affected in a similar fashion to the general liability market in terms of workers’ compensation recovery claims. The transport industry makes heavy use of labour hire, so the increased frequency and average value of bodily injury worker-to-worker claims remains a concern.
Last but not least, marine insurance is being challenged by the development of IT solutions for transport, which are pushing the boundaries of consumer expectations about delivery times. Amazon and eBay are some of the most obvious examples; marine insurers will need to keep meeting the transport insurance needs of these companies while negotiating the exposure that comes about as a result of increased speed.
Nonetheless, Sharples remains optimistic. As the freight market continues to grow in Australia and worldwide, the need for marine insurance will also keep pace.
“I know many consider marine a niche area of insurance, but the ability to offer expertise and knowledge in such a specific area is an opportunity to assist brokers,” he says. “And the days of marine insurance being the realm of ‘the hairy old sea dogs’ at the back of the office are in the past. We’re a much more diverse industry now.”