It is time to start managing 'unthinkable risks'. That was the message to the marine insurance industry from Mr Dieter Berg in his last speech as president of the International Union of Marine Insurers' (IUMI).
Opening this year’s IUMI annual conference which took place in Cape Town, South Africa, last week, Mr Berg highlighted a series of major marine losses that, until recently, would have been assessed as ‘unthinkable’.
Some examples cited include Deepwater Horizon (insured loss $6bn), Costa Concordia ($1.5bn) and the Tianjin port explosion ($2-3bn). Nat CAT also created large losses such as hurricanes Katrina and Rita in 2005 (total insured offshore energy/marine loss $12.57bn) and last year’s hurricanes Harvey, Irma and Maria which resulted in more than $1bn in yacht losses.
“Growing accumulation of risks at sea and ashore is of increasing concern. On large containerships where around 20% of boxes are empty, we are likely to see a combined cargo and hull value of around US$1.5bn, and that doesn’t include any wreck removal or pollution costs. In ports and terminals, the values are even higher as was seen at Tianjin.”
He said that such risks would become more commonplace and underwriters must adapt to manage them effectively. And climate change will continue to influence risk profiles, he said.
“Earthquakes and wind storms are not the real issue, unless you are an offshore energy underwriter. But flooding and storm surges can create massive losses.”
He noted that the political landscape is also changing, with an increase in sanctions and disruptions to trade agreements. “Certain regimes are entering trade wars that has led to increased protectionism. The impending Brexit is causing instability within the Eurozone and is also likely to impact our industry,” he said.
Finally, he highlighted digitalisation, where shipping is still “lagging” other logistics modes. He said that technology will soon impact heavily on maritime supply chains as there becomes a more urgent need to optimise trade flows and streamline port operations.
While emerging and unquantifiable risks were of increasing concern to marine underwriters, Mr Berg was confident that the sector would step up to the challenge:
“By identifying, monitoring, reacting and being innovative we can manage the unthinkable,” he said.
On 19 September at the Cape Town conference, Mr Berg stepped down after completing his four-year term at the helm of IUMI, with the IUMI Council formally electing Mr Richard Turner, European Director of Global Risk Solutions at RSA Insurance Group as President for the next four years.