Bigger ships, bigger headaches
A heavy soup of responsibilities and liabilities mixes into today's vast port projects, insurance experts have warned.
There are, says lawyer Tim Howse, infinite variables when you consider the risks associated with the supply chain, involving ports and terminals.
Mr Howse, of shipping law firm Campbell Johnston Clark, lists a dozen or so key parties who interact typically via the port interface, and even though clear contracts might be in place governing the relationships, it is not as simple as that. “Market forces have been driving a coach and horses through the legal provisions. That is particularly so in today’s market, where ships are of incredibly low value,” he says.
This state of affairs was the challenging setting for a London Shipping Law Centre event devoted wholly to the management of risks associated with ports – a meeting appropriately hosted by the major insurer in the field, the TT Club.
The timing of the event was fortuitous. Only a short time before, there had been a stunning example of how ports can be drawn into shipping casualties, even when those occur away from their home turf.
The Emma Maersk, carrying 13,536 teu (nearly half of which were full), had on February 1 been left without power southbound at the entrance to the Suez Canal after an apparent breach in the stern thruster tunnel caused flooding in the engine room. The ship became an unscheduled visitor at the nearby Suez Canal Container Terminal, to where it was towed, remaining there for two weeks while the port rose to the task of discharging the entire cargo. This was an extensive ‘dwell time’ of the type that can cause considerable rescheduling. Eventually Maersk Line's largest container ship left under tow for repairs by Fincantieri at Palermo.
Peregrine Storrs-Fox, risk management director of the TT Club, said: “No port in the world can suddenly produce crane and storage capacity to handle 13,000 unexpected containers without huge disruption to its overall operations.”
He cited the giant ship’s mishap as he described the trends: “bigger ships, bigger cranes needing bigger areas for cranes, bigger terminals.” All contributed to increasing insurance requirements.
As container cranes get older, said Mr Storrs-Fox, they are ‘stretched’ to deal with larger ships, and the risks become more substantial from an engineering perspective. It can take between two to five hours to deal with some relatively minor incidents – and that period might be the bulk of the time a ship had planned to spend in port.
The Emma Maersk emergency was just one of several recent container sector incidents. After a serious fire on the MSC Flaminia, the port of Wilhelmshaven in July 2012 accepted that it would make room for the distressed ship after some trying negotiations to find a place of refuge.
Meanwhile, Andrew Webster, a partner with the energy and marine division of broker JLT Specialty, pointed to heavy risk exposures in new terminal projects. While a project was under way, these could range from the construction process and cost overruns to protest actions and archaeological finds. Post-completion, they included risks from operations, maintenance, techonology performance and environmental considerations.
In the light of such construction plans, Mr Webster recommended that insurance programmes be controlled by owners rather than contractors. “Do you really want your contractor in charge of all your insurance programme? I don’t think so. You want to know how things are going.” Comprehensive insurance needs to take account of cost control, premium savings, cargo, sabotage, terrorism, environmental protection and professional indemnity. “The goal is always seamless protection, to leave as few gaps as possible,” said Mr Webster.
Port authorities and terminal operators might have to provide cover in relation to bridges, waterways, buoys, lights, mooring gangs, wharfs and cranes, and perhaps the ‘walk-on, walk-off cargo’ of cruiseships. “All these things together are a rather heavy soup of responsibilities and liability,” said Mr Webster.
With cranes costing up to US$6m apiece, and one was taken out of action “how are you going to carry on doing your business?” he asked. “If you cannot perform the operations for which you have borrowed to buy cranes, the people who have paid lots of money are going to come after you.”
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