The marine cargo market is moving in the right direction in terms of premium rates but there are increasing concerns over potential major losses, says Niklas Bengtsson.

In the Nordic marine cargo market, we have seen an improvement in premium rates over the last two years. This, albeit slow rise in premiums, which has been partly driven by a mixture of increased reinsurance costs and return on capital demands, has also been accompanied by an overall tightening of wordings and the removal of add-ons.  There have also been increasing claims costs and there are worrying signs that the cargo market overall is heading for a large stack of major losses.

The loss of large numbers of shipping containers, overboard at sea, is a recent and worrying trend.  In fact, there has been a tremendous increase in major incidents. In 2019 the market saw three major losses of this type with the loss of 395 containers; last year there were seven with the loss of 2233 containers, and we have already seen four this year with the loss of 1126 containers.

The issue of the collapse of container stacks is the result of a number of different factors, often coming together at the same time.

In terms of the containers themselves, we are seeing more and more structural failures due to the use of wrong stowage and securing standards inside the containers, along with ageing or excessive wear and tear.  Regulations around the weighing of containers to ascertain their Verified Gross Mass ahead of being loaded are also not always being adhered to, and the miss-declared container weights can result in heavy containers ending up on the top, not bottom of stacks, creating issues with stability. We are also seeing improper container lashing and securing, due to a mixture of poor workmanship and shoddy materials.

Once out at sea, the collapse of container stacks is also being driven by the impact of onboard flooding (known as green water), acceleration forces in excess of the vessels design criteria and synchronous and parametric rolling.

On top of this, we have also seen an increase in the size of the container ships, with 10 000 TEU (Twenty-foot Equivalent Unit) capacity vessels now not uncommon, and the emergence of vessels able to hold 20 000 TEU. Added to the poor stacking issues above, we are also seeing a trend towards ever higher towers, increasing the dangers that vessels will become unstable in rolling seas.

It is then, perhaps no surprise, that the market is seeing increasingly expensive claims. In December for example the Japanese flagged container ship ONE Apus, reported that it had lost 1816 containers when it arrived in the Port of Kobe, Japan following a period of severe weather.  In February, the Maersk Eindhoven lost around 300 containers following bad weather at sea, only a month after its sister ship the Maersk Essen, reported the loss of 750 containers.

And whilst there is little that can be done about the rolling seas, many of these cargo losses are avoidable if vessels are stacked properly and with good quality containers. But clearly something is going awry, and as an insurer, through the International Union of Marine Insurance (IUMI) and in partnership with our brokers, we are working hard to ensure, where possible that good practice is followed whilst applying pressure on the shipping lines and shipping industry to improve standards.

In addition to this move towards larger tankers, there are also increased risks from storm damage in port as the larger ports that can accommodate these vessels are more exposed to the sea front than traditional ports that were more protected and sat within canal ways. Fortunately, however, so far, other than some wildfire and flood claims – there has not been a major incident.

The elephant in the room

No overview of the marine insurance market can avoid mentioning the Ever Given - which infamously got firmly stuck in, and blocked, the Suez Canal in March this year. This unforeseen incident has raised many issues, but one of note is that whilst delay cover is not normally covered in cargo policies, some insurers have been burnt by the Ever Given through property clauses – common in the US market – which enabled clients to claim for loss of access to their cargo. This was a double whammy for the affected insurers as they were also denied entitlement to the goods in the containers. It is perhaps lucky that the Ever Given was freed after only six to seven days; another week or two would have been devastating for the shipping industry and any insures on the hook.

One outcome of the Ever Given will I am sure be a growing demand from clients for delay-related insurance cover – a request that I suspect, insurers will in the main, shy away from.

We remain fussy and transparent

Talking of saying no, our team of experienced and skilled underwriters are highly empowered and are unusual in the marine cargo market as they can also make decisions on the spot without having to refer upwards. And that means, if a risk is not for us, we will let our brokers know quickly, and if it is we will respond fast especially if it fits in with our core focus on multinational companies involved in heavy industry or exporters in the Nordic region.

And whilst, as a specialist, we remain fussy over the business we will write, we are also benefiting from steady growth. This is being partly driven by the emergence across the world of ever more complex, and different regional taxation and compliance regimes, which is, in turn, driving a call from clients for the issuing of local insurance policies – a trend that we are well equipped to cater for as we can issue local policies in 150 countries. 

The shadow being cast by towers of containers aside, the future is looking bright for our core marine cargo business and the brokers we work with. And long may that continue.