Containerport Insurance

Boasting most of the attributes of a mature industry, containerisation on an industrial scale is a mere half century old. Still, that should have been time enough to finesse operational procedures like a dream. The truth is that the record remains uneven, and in terms of safety statistics many experts say it is a decade or more behind much of heavy industry.This is obliging the insurance sector to bear down heavily on the claims hypertrophy, especially at a time when premium rating is under pressure through competition, and when the reinsurers are in their turn demanding tighter underwriting discipline. If this sounds tough, it should be remembered that there are hidden costs in most accidents that insurance does not cover.

With an increasing number of heavyweight insurers hungry for business, including impressive Lloyd’s and company market operators, a huge amount of expertise is being devoted to port provision.

It would be surprising, however, if anyone has been as painstaking as Laurence Jones in grappling with the thorntree of claims. Mr Jones, director of Global Risk Assessment for the TT Club, has analysed more than 1,800 asset damage claims over the last two and a half years. One by one, he has been extracting the claims reports from the mutual’s electronic files, and taking them apart.

In probably the most rigorous analysis of its kind to date, he has homed in on the pains and problems of the 400 ports and terminals in the club portfolio. This excavation is identifying the trigger points for failings by man and machinery on the quayside, and helping extirpate the causes. “What you do not measure, you cannot manage,” he says.

Mr Jones spends considerable time talking with bodies including the Port Equipment Manufacturers’ Association, which since its establishment in 2004 has embraced a score of leading producers. The vast majority of issues, says Mr Jones, are common to all terminal operations and “my focus is on helping the industry,” he stresses.

So far, Mr Jones has concentrated on scrutinising physical damage, rather than liability claims. The data is based on all asset claims and includes equipment, infrastructure and ship damage. First things first: the physical damage often leads to the liability. This approach is unusual in insurance circles, where the focus is on who can be deemed liable for an incident. Mr Jones takes a step back to dig into the root causes. As computer systems are designed to detail liability, Mr Jones has had to dissect “manually” each asset claim in a five to 10 minute-a-time apiece sprint.

He and his colleagues plan to develop a system to carry out this unaccustomed analysis automatically, but meanwhile the catalogue of workaday woe – vehicles and cranes knocking boxes about and ships bashing quaysides – is being reread with a vengeance. “Analysing the asset damage gives you a really good insight into the incidents and accidents that are out there and helps us delve further down into the operational issues,” says Mr Jones.

Sometimes a ship unhinges a wharf crane, a costly business when new units are worth between $6m and $9m; and the shore cranes can lose control nastily. Mr Jones cites an incident where the boom of a quay crane hit a ship’s crane, racking up $2m worth of damage. The quay crane was out of action for six months, piling on a significant cost of business interruption. Such agony is almost entirely preventable, through the installation of anti-collision sensors.

“These things happen in nearly every terminal in the world with container, and with general cargo, cranes,” sighs Mr Jones. “For an outlay of around $10,000 on sensors, they can be pretty well eliminated. Many big companies are specifying sensors when they order new cranes, but manufacturers who quote the best price will not necessarily include this safety feature. This is one reason why we work closely with the manufacturers’ association to share information and encourage such backups to be made standard in design.”

Main causes of asset damage incidents have been stubbornly unchanged over the years. Heading the list are operational or human factors, accounting for 79% of this kind of claim, despite all the experience, technology and training available, says the TT Club. Out of the entire book, operational issues or human error contribute to 80% to 90% of claims.

Straddle carrier incidents were only 12% of the number of claims, but accounted for 29% of the costs. When these vehicles overturn they are often a total loss at a cost of around $1m. Cell guides are a contentious item, where the ship interest often alleges the terminal damaged the cell guides and the terminal claims the cell guides were already damaged or maintained inadequately.

In any event, there is a need for better training of crane drivers, and this makes even more sense now that simulators are less costly, says Mr Jones.

Spreaders and ropes are the most used and abused item of equipment in a container terminal and suffer the most maintenance related claims at 23%, according to the club. Fires caused by fuel or hydraulic leaks in straddle carriers and heavy lift trucks are the second highest number of equipment failure claims and the highest cost. Almost the entire bill is the result of hydraulic leaks in the engine. Installing a fire suppression system in a truck until recently cost around $8,000, but the club has advised its members to consider at a new system called Fire Foe (www.quick-fire.com) which gives fire suppression for a figure closer to $500; and maybe even cheaper as the club has negotiated a 10% discount from the manufacturer for its members.

And what of the weather, that bane of insurers everywhere? Any port has a problem in a storm, given the enormous number of cranes that are blown off track. Sometimes the operators and authorities fail to tie down the cranes despite timely weather forecasts, but these days sudden windstorms and gusts are whistling up everywhere. While in the past damage mainly stemmed from Atlantic hurricanes, and typhoons and cyclones in the western Pacific, the incidence has become random. Claims and damage costs have increased, particularly in Europe.

Although the number of weather-related claims has increased slightly in the last three years, their cost has more than tripled. Better tie-down procedures and improved braking systems on cranes are called for. The TT Club is currently revising the Windstorm booklet it produced in 2006, in collaboration with ICHCA, the International Cargo Handling and Coordination Association.

Mr Jones says that management has the biggest part to play in improving safety: “We all make mistakes and no amount of training will eliminate all errors. So we must also look at what procedures or engineering changes can be made to mitigate the risks or provide a backup for the operators and drivers.”

Simple measures can work wonders: for instance, a change from two-way to one-way traffic flow can dramatically decrease the risk of vehicle and pedestrian accidents.

Mr Jones concludes: “All terminals think they are totally different, but all have the same problems and are spending money to solve them. If I can continue to encourage them to share technologies, ideas and procedures, we can all benefit.”