2022 has been a perfect storm for the shipping and marine insurance industries. The sector was plagued by uncertainty, with a number of geopolitical and economic challenges unfolding as the year went by.
Looking ahead, there’s still concern about certain critical issues that are likely to take their toll on marine cargo loss and recoveries. So, let’s look at some of the trends that will define this year.
Accidents will happen.
Cargo shipments are exposed to all sorts of risks as they move through different ports and modes in transit. Implementing a risk management process is key to keeping cargo safe and sound, but unpredictable incidents may still happen.
The Felicity Ace disaster.
In February 2022, this roll-on/roll-off cargo ship started its journey carrying almost 4.000 luxury cars (Porsche, Bentley, Lamborghini and the like). Some of them were electric, with lithium-ion batteries.
Shortly after the vessel’s departure, a fire broke out in the cargo hold and then spread. The blaze lasted more than a week, which led to a loss that was estimated at $330 million and covered by cargo insurance.
The ONE Apus and Maersk Essen epic losses.
1,816 and 689 containers respectively. This is how many containers were lost overboard in these events.
Both container vessels encountered gale-force winds and large swells, which the cargo securing equipment couldn’t withstand.
Such expensive maritime casualties aren’t isolated events. And they push up the costs of marine insurance, unless you pursue your recoveries effectively.
However, as you know all too well…
Recouping losses isn’t always a clean-cut process.
Recovery is all about pursuing financial mitigation. And it may come in different shapes and forms.
- Retrieving lost or stolen goods
- Finding a suitable salvage vendor for damaged products
- Taking legal action against a third party at fault
One thing is true, regardless of the type of recovery pursued: it takes time and detective skills to follow a cargo loss to secure evidence.
Different obstacles may stand in the way of your recovery actions for cargo during transit. And 2023 has come with its own challenges.
Here are 5 trends likely to affect recoveries throughout this year
1. Cargo accumulation
A concentration of cargo equals a concentration of risk. Think about it:
- Bigger vessels, the largest of which can carry 20,000 containers at one time
- Storage facilities with greater capacity
- More containers being moved and kept in fewer places
We are witnessing how cargo accumulation has become a trend in the shipping industry. And a dangerous one at that. Because, when a loss event occurs, you stand to lose millions in one shot.
Not only that, but insurance coverage is adjusting to this new reality by leaps and bounds. Which means that catastrophic losses may not be fully covered.
2. Increasing value of cargo
The average value of container shipments has been rising.
Shippers are stuffing more and more high-value goods, such as consumer electronics or pharmaceutical products, inside each container for two reasons:
- High freight rates
- Lack of containers
As a result, their exposure per shipment has increased significantly.
And insurance policies should be adjusted in order to reflect accurate insured values and avoid underinsurance for costly container cargoes.
3. Geopolitical risks
To this day, cargo ships are still stuck in blocked Ukrainian harbours. And the marine market is facing a large number of total loss claims, which have been estimated to be as much as $1 billion.
Current conflicts may have dire consequences for cargo interests this year. Restrictions around ports, in airspace and roads will lead to:
- Supply bottlenecks
- Lack of availability of warehousing space
- Cargoes being rerouted and deliveries taking longer
- Increased risk of theft
- Decrease in cargo traceability, of which malicious actors may take advantage
4. Covid-19 impact
The pandemic won’t give us a break just yet. The surge in Covid-19 cases in China threatens to have dire consequences for the shipping and cargo insurance industries:
- Production is slowing down
- Freight booking cancellations are increasing
- Labour shortages are causing port congestion
5. Climate change
Global warming is leading to:
- Heightened fire risk, which is the top cause of cargo loss. Further to a recent report issued by Allianz Global Corporate and & Specialty Insurance Company (AGCS), fire accounts for 18% of the value of marine claims analysed.
- Temperature fluctuations, which may ruin temperature-sensitive products (e.g., perishables or pharmaceuticals). And let’s not forget shipping container condensation and the resulting corrosion, mould and moisture damage.
- Extreme weather is the fifth biggest cause of marine insurance claims, according to AGCS’s analysis. The increased frequency of these events has led to high-profile incidents of loss of containers overboard.
These 5 trends come to prove that cargo risks are becoming larger and more complex. Which may have a negative impact on your loss ratios, unless you attach the right importance to cargo recoveries.
More than ever, it’s now crucial to gather specific evidence relevant to the particular type of loss, so you can pursue the party at fault.
And, given the complexity of cargo claims and the different stakeholders involved, we strongly advise you to rely on professionals who:
- Are qualified to obtain relevant evidence at an early stage, and
- Have the legal knowledge needed to pursue your recovery wherever the loss happened.
Well, you’ve come to the right place! At Claimar, we meet all your cargo claim needs with our TPA services.