Digital applications in vessels worry marine insurers
Consequences of advances in the digital applications involved with naval architecture and the operation of vessels are worrying the insurance sector.
Of particular concern is crew training and their ability to manage cutting-edge technology and large amounts of data, according to the International Union of Marine Insurance (IUMI).
The organisation is seeing evidence that the frequency of collisions is increasing, possibly resulting from the introduction of modern technology.
This comes as the frequency of total losses within the global fleet has been stabilising over the past three years at 0.13 percent by number and 0.05 percent by tonnage. The stabilisation is largely attributable to an improved safety climate, improvements in naval architecture and marine engineering; and more effective regulation, according to IUMI.
Total losses involving vessels younger than 15 years were significantly less during the 2013-17 period than the years 2008-2012. At the same time, the frequency of serious casualties has increased since 2014 but appeared to be stable in 2016-17.
Concerns within the hull insurance market remain, however: "All hull markets acknowledge the severe volatility inherent in a typical international hull portfolio," said Mark Edmondson, chair of IUMI's Ocean Hull Committee. "The global premium base has been eroding year-on-year as a result of reduced asset values, reduced activity in some sectors, and reduced premium rates. Although the financial impact of major casualties was modest recently, increasing values of single risks bear the potential risk of new record losses, and attritional losses are a growing concern."
The marine cargo insurance market faces larger and more complex risks, natural catastrophes, vessel and port accumulations and larger outlier losses. In addition, the sector is facing a commoditisation of specialty lines, an increase in broker facilities with high commissions and rising expense ratios.
Cargo underwriters are being stretched to evolve and improve their products, explained Sean Dalton, chair of IUMI's Cargo Committee. "The modern cargo policy has been significantly enhanced to include storage extensions, broad policy valuations and coverage provisions such as Control of Damaged Goods that provide for 'fear of loss' and 'brand protection'. As underwriters we are being challenged to improve our approach and utilise tools such as third-party data, sensor technology and predictive analytics."
"Cyber is also a concern," said Dalton. "Most policies remain silent on cyber issues, but the recent Maersk NotPetya attack highlights potential exposures and consequences. Policies that raise the greatest potential risks include Freight Forward Liability cover such as NVOCC Legal Liability, Indirect Air Carrier Liability and Errors and Omissions," Dalton noted.
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