Risk management a failure in ferry disaster, with Aussie impacts minimal

Risk management a failure in ferry disaster, with Aussie impacts minimal | Insurance Business

Risk management a failure in ferry disaster, with Aussie impacts minimal
The tragic South Korean Sewol ferry disaster has served as yet another pertinent reminder of the importance of risk management, Australian marine insurance experts have told Insurance Business.

The ferry sank off the coast of Jindo Island on 16 April, it had 476 passengers, many of whom were high school students. More than 200 bodies have been found. Around 174 were rescued, and the others are so far unaccounted for.

Reports suggest the captain Lee Joon-Seok and other crew members abandoned the ferry while hundreds of passengers were left on board. Reports also state that Joon-Seok delayed ordering passengers to abandon the ship, and was not at the helm of the ship when it hit trouble. Concerns have also been raised as to whether the ferry was carrying three times more cargo than the approved quantity.

Joon-Seok and 14 other crew members in the navigation of the ferry are now in custody, facing criminal negligence charges.

Matthew O’Sullivan, head of marine, property and engineering – corporate at Zurich said the impact of this tragic event on the Australian insurance industry is likely to be minimal although an indirect impact may be felt through the reinsurance market, and could lead to an increased awareness of the potential for disaster at sea.

Industry impact
Rick Wolozny, managing director of marine specialist Trident Insurance, told Insurance Business the ferry is insured in the local Korean market and heavily reinsured in the London market. There is cover for $400,000 for families through protection and indemnity (P&I) cover. The vessel is insured for $11m.

“This will be massive loss both to hull and P&I underwriters,” he explained. “It’s too early to say what impact but it is a massive loss that has to be absorbed. The likelihood is that reinsurers and the market will do what they can to recover these types of losses. It could mean an increase in rates but it is too early to tell.”

The disaster serves as yet another reminder of the importance of risk management among vessel owners, not just of the vessel but also the crew.

There have been five major disasters in the past two years. One that bears similarities to the Sewol disaster is Costa Concordia ferry calamity in which 32 people died when the vessel struck a reef in January 2012. Captain Francesco Schettino also abandoned the vessel before all the passengers had been rescued. He is subject to an ongoing trial against him for multiple counts of manslaughter and abandoning passengers.

Risk management critical
O’Sullivan said risk management - for passenger vessels in particular - extends beyond the physical attributes of the vessel, and must be addressed.
“One of the key elements to analyse is the management of the vessels, including areas such as maintenance, crew selection, crew qualifications, experience and training, schedules and disaster planning for example. As an industry we focus more on the physical element, and too often the cause of such disasters is crew error. In addition, ferry disasters often result from overcrowded vessels and from a lack of a disaster plan.

“While overcrowding doesn't appear to be the case in the South Korean event, some media outlets are reporting a breakdown in communication between the crew and disaster teams during the sinking. In the extensive investigation to follow, these issues will be investigated.”

Wolozny said the tragic event highlight can go wrong with risk management: “There are risk management lessons that can be learnt from this. Captains have their maritime duty to follow. The crew did not do that. Had they done the right thing and ordered the evacuation at the right time, fewer lives would have been lost it would seem.  The risk management clearly was quite poor.”

Wolozny said there are strict international rules that must be followed when operation a vessel to mitigate damage to the vessel and passengers and that crew did not appear to do this.

Speaking to Insurance Business Canada, Captain Stuart J. McLea, a SAMS – Accredited Marine Surveyor of Surveys-Claims-Appraisals-Loss Prevention-Salvage with MRM Solutions, said the captain should be on the bridge and the engine room staff should be in the engine room to make every effort possible to mitigate damage.

Photo source: Boatdesign