Global claims trends to watch in marine insurance

 

1. Fire is the top cause of claims by value, as Li-ion batteries add a new loss dimension

Fires accounted for 18% of the value of marine claims analyzed in the period to 31 December 2021 (equivalent to around €1.65 billion) compared to 13% to 31 December 2021 , worth approximately 9.2 billion, according to AGCS analysis of over 240,000 industrial claims. In the five years to July 2018, the number of large ship fires has increased sharply in recent years, with numerous cargo-related incidents that are difficult to extinguish and can easily lead to total loss of the ship. increase. Death and environmental destruction can result. The International Union of Marine Insurance (IUMI) [1] recently identified an increase in engine room fires, often caused by incorrect or missing declarations of dangerous cargo. modern technology.

Another notable new trend is the threat of lithium-ion batteries in electric vehicles or cargo that are not properly stored, handled, or transported. Due to its high flammability, there have been many fires on car carriers and container ships in recent years. Battery fires are reported to have contributed to the March 2022 sinking of the RoRo aircraft carrier Felicity Ace with her 4,000 vehicles in the Atlantic Ocean. In June 2020, he of Florida, a fire at a Höegh Xiamen [3] car transporter was traced to the vehicle's battery being improperly disconnected and secured.

Lithium-ion batteries have also caused fires in shipping containers and shipments are often misdeclared as accessories or replacement parts for mobile phones. In January 2020, a fire on board the containership Cosco Pacific [4] was caused by the burning of an improperly declared lithium-ion battery pack. In 2022, the U.S. Coast Guard [5] issued a safety warning about the risks posed by lithium-ion batteries following two separate container fires.

Lithium-ion battery and electric vehicle fires burn more violently, are difficult to extinguish, and can spontaneously reignite hours or days after they are extinguished. Most ships do not have adequate fire prevention, suppression and detection systems to combat these fires at sea. This is made more difficult by the dramatic increase in ship size.

Due to the difficulty of extinguishing battery fires at sea, companies should primarily focus on loss prevention. Measures to be considered include ensuring personnel/crew are properly trained and have access to suitable firefighting equipment, improving early warning systems, and developing hazard management and emergency plans. included. A new risk management report from AGCS highlights a complete list of loss prevention measures to consider. [6].

“Ship losses may have been more than halved over the past decade (AGCS Safety & Shipping Review 2022 puts the total number of losses at the end of 2021 at 54 (100 GT and above)).However, there have been fires onboard.It remains some of the industry's biggest security concerns.The potential hazards associated with shipping lithium-ion batteries, if not stored or handled properly, include: We have already seen many accidents, which only add to these concerns.

2. Inflation and exposure growth drive claims severity

Rising inflation exacerbates existing trends, with many countries recording rates around 10%, increasing the severity of claims involving large vessels and environmental, social and governance (ESG) factors. . Rising steel prices, rising spare parts costs, and rising labor costs are all impacting the cost of hull repairs and engine damage claims.

Accidents such as fires, collisions and groundings are one of the leading causes of marine insurance claims, and there have been many expensive accidents in recent years. Incidents involving large container ships and car carriers are particularly costly, reflecting the cumulative cargo risk and challenges in emergency response and rescue. Minor incidents such as misdeclared cargo fires or errors in stability calculations often lead to total losses. Salvage and wreck removal costs are high, especially for large vessels that require special facilities and rely on a limited number of ports of refuge. The super-large container ship Ever Given took her nearly a week to close the Suez Canal in 2021, while her sister ship Ever Forward ran aground in the Chesapeake Bay in the United States a year later. , it took her a month to resurface. Both accidents were declared general average. This is a complex process in which cargo stakeholders and ship owners share the loss and salvage costs.

Salvage her costs have also increased in response to growing ESG and sustainability concerns. The 2019 capsize of the U.S. car carrier Golden Ray was one of the most costly maritime accidents of modern times,[7] costing more than $1 billion, and salvage and wreck removal to date. The cost exceeds her $800 million. The 2012-2014 Costa Concordia cruise shipwreck removal off Italy cost about $1.3 billion, while the 2011 Lena wreck off New Zealand cost about $1.3 billion. It cost an estimated $450 million [8]. Lena's cleanup was just declared complete in April 2016.

Inflation also exacerbates the problem of rising risk values. The value of the ship and cargo is increasing amid increasing stress from her large ships, which can carry more than 20,000 containers at a time. The value of ships has risen significantly in recent years due to the surge in demand for ships. According to Clarkson Research Services, the value of global merchant shipping will increase by 26% to $1.2 trillion in 2021[9]. The increase in containers was driven by more than 35% increase in ship prices, along with increases in dry bulk and general cargo.

The average value of container shipments has also increased along with inflation and higher shipments of high-value commodities such as electronics and pharmaceuticals.

“The average cost of goods is rising with inflation, while high-value goods are being shipped in containers,” Khanna said. “It’s not uncommon for containers of high-value cargo, such as pharmaceuticals, to cost upwards of $50 million. Additional mitigation measures are required, such as security and sensors. At the same time, those interested in cargo should pay attention to the insurance amount. Customers may need to adjust their insurance and policy limits or risk being inadequately insured. I have already seen the bill. ”

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