IUMI: Tianjin Disaster a Wake-Up Call to Cargo Insurers
The recent catastrophe at the port of Tianjin in China should be a “substantial wake-up call to all cargo insurers,” as large cargo losses are having a significant impact on the marine insurance sector, Nick Derrick, Chairman of the Cargo Committee at The International Union of Marine Insurance (IUMI), said during the union’s annual conference held in Berlin.
The Tianjin incident, coupled with other large losses in 2015 – including the grounding of car carrier Höegh Osaka resulting in a vehicle loss exposure of GBP 35 million (USD 54m) – is expected to have an impact on the profitability of the marine cargo sector in 2014 and 2015.
“Tianjin port covers an area of around 125 sq km, but only a small part of the port was affected by the explosion,” Derrick said.
”Even so, we are expecting to see cargo losses of at least USD 1.5 billion with some reports stating that the final figure could be as high as USD 6 billion. Cargo insurers need to understand what the dollar loss might have been if the entire port had been affected, perhaps by a natural catastrophe such as an earthquake or tsunami. Added to the direct impact of the Tianjin explosion, we also understand that goods outside of the blast area have been contaminated by dangerous chemicals. This will add to the final loss figure.”
Accumulation risks – when a single event causes an exceptionally large group of related losses – such as the Tianjin disaster, are continuing to grow. In the marine sector, the continuous growth of this type of large-scale risk is being driven by the trend for bigger container ships and the construction of extensive freight handling and storage facilities, according to IUMI.
Derrick believes that the management of unexpected accumulation risks will become an increasing problem for cargo insurers in the future and called for new technology to assist insurers handle that risk.