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.