World trade continues to grow and more and more of it is containerised. In response to this, containerships and container terminals are also ‘upsizing’ to meet ever-increasing capacity demands. This trend brings many challenges for those in the insurance industry brave enough to take on box terminal risks.<\/p>\n
Also, this extremely competitive area is treated with a considerable degree of confidentiality not least because of the security and safety implications that relate to it. A number of the leading container terminal operating groups contacted by Port Strategy all declined to comment on their insurance strategies,but it is fair to say that these tend to centre on global policies with a certain amount of local coverage to meet legal requirements.<\/p>\n
What is clear, though, is that more and more of the global container terminal capacity is concentrated in fewer hands. Hutchison, PSA and DP World each operate around 50 or more terminals and they are regularly increasing both the number projects they are involved in and the geographical spread. Likewise, the number of providers for insuring container terminals is relatively few in number and, like the over-arching marine or transport insurance sector, is considered to be a niche area. This is not least because of the growth in the size of ships, terminals and traffic volumes means that insured values,liabilities and risks are increasing in magnitude and this generally requires a large insurance company to be able to cope with customer requirements. And while there is no global insurance valuation of the container terminal market, one underwriter active in this market suggests a back-of-an-envelope value of $50m, based on an average terminal premium of around $25,000 and 2,000 terminals around the world.<\/p>\n
Undeterred by the confidentiality and increasing risks, Fortis, through its Fortis Corporate Insurance arm, has been developing a growing involvement in the terminal insurance area over the last five years. From humble beginnings in the Benelux domestic market, it has now expanded into other parts of Europe such as in Poland,the Baltic States and the UK.It also works with Raets Insurance which adds expertise in other marine areas such as protection & indemnity and geographical coverage of southern Europe,South America and the Far East. As Ernst Jan Sundermeijer, underwriting manager, explains: “Within our total marine portfolio one of the niches is logistics and a part of logistics is ports and terminals.We have a premium income on the logistics side of $30m (\u00a225m) and we forecast that it will continue growing. It is one of our developing sectors.”<\/p>\n
Fortis has two entry points into this market; one through its marine activities and one through the logistics multi-liability side of Raets. Mr Sundermeijer sums up the main trends in this business area:”Insured amounts for terminal clients are increasing. Also the contractual liability wordings are getting more important so there is a need for broader wordings”. He also points to there being “a tendency for packaged policy solutions” which provide total cover, taking in terminal infrastructure, equipment as well as general, contractural and comprehensive liability.<\/p>\n
Mr Sundermeijer explains that with insured values and related legal and contractual liabilities increasing, there is more pressure on legal wording and increased demand for proper risk management. This involves more stringent inspection of the facilities themselves linked to a greater depth in the analysis of both the client and the terminal’s history and performance. As Mr Sundermeijer says: “There have been a lot of changes in the client group and increased emphasis on risk management going on as the risks, the terminals and the investments are getting bigger.”<\/p>\n
In terms of premiums and claims, Mr Sundermeijer describes the former as generally rising, while claims are falling in number but are for larger amounts because of the higher values applicable in the sector. He places a strong importance on liability insurance which is “very important for ports and terminal operators. However, it is not always price driven; the coverage it provides is often the key issue.”<\/p>\n
Mr Sundermeijer adds that the trend for growth in the size of terminals has prompted a rise in writing liability risks on a layered basis, involving a number of insurance providers all taking different parts of the risk. He points to some current large terminals having up to three or four layers with some of the biggest of terminals needing as many as five layers in the future, all depending on capacity within the relevant market.<\/p>\n
He suggests that the first and second layers will always be served by niche players because of the need for experts to assess the risk and liability levels, but higher levels might be taken by other insurers. In addition, reinsurers reinsurers provide the necessary support for the front line insurers. The mutual insurer TT Club is also a leading player in the terminals market, providing coverage for over 2,000 port and terminal operations and over 4,000 transport and logistics businesses.<\/p>\n
Marketing manager Ian Lush refers to the growth in the container sector being “as dynamic as at any time it has been in the last 20 years” and that this is driving the need for responsive insurance policies. Mr Lush sees one of the key developments in terminal insurance as the growing recognition of container terminals as an integral link in supply chains.<\/p>\n
This is reflected in the number of container ship operators that have set up their own logistics divisions and also the number of terminals which now provide logistic-type services.”Ten years ago these would have been described as freight forwarding,”he comments.<\/p>\n
To meet this, TT Club has over the past few years developed inclusive logistic policy packages which can include terminal insurance.”This is very much an area we are looking to expand in,” comments Mr Lush, “because with terminal operators engaging in these logistics services they want cover for this in addition to their standard insurance.We have responded to this by putting together more innovative packages which meet the changing needs of customers and reflect changes in the industry. This is a change in methodology,”he adds.<\/p>\n
While the TT Club’s premiums are “up to 10%”more than those of commercial companies, Mr Lush promotes the mutual approach because of its ranges of expertise in underwriting, its international office network, customer-friendly claims service and its loss prevention and risk management skills. With risks and insured values growing, TT Club remains confident that it has the capacity to keep up with the growth. Mr Lush explains that the Club has assets of around $500m and last October strengthened its capital base with an additional $30m through the issue of a floating subordinated loan note.<\/p>\n
As to claims, the TT Club has seen an increase in the number received, but Mr Lush points out “this is down to the growth in the market with larger volumes and more terminals”.On the risk side, he adds that “the risks themselves have not changed they are just bigger.The challenge is to maintain the level of expertise in order to cope with the increasing demand.”<\/p>\n
Apart from Fortis\/Raets and TT Club,other players in this market include Lockton International, Willis and Charles Taylor Consulting Services working with Wavelength Insurance at Lloyd’s as claims specialists.<\/p>\n","protected":false},"excerpt":{"rendered":"
Swelling container trade and the consequent growth in terminals poses the greatest challenge to insurers today, as Mark Stanway finds out<\/p>\n","protected":false},"author":8,"featured_media":1395,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[12],"tags":[],"sponsor":[],"class_list":["post-1394","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-concessions-investments"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts\/1394","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/comments?post=1394"}],"version-history":[{"count":1,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts\/1394\/revisions"}],"predecessor-version":[{"id":1396,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts\/1394\/revisions\/1396"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/media\/1395"}],"wp:attachment":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/media?parent=1394"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/categories?post=1394"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/tags?post=1394"},{"taxonomy":"sponsor","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/sponsor?post=1394"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}