‘Guessing game must cease’ – RMS unveils world’s riskiest ports

The Japanese port of Nagoya and the Chinese port of Guangzhou top a ranking of ports at the greatest risk of potential losses from catastrophe risk, according to an analysis from risk management firm, RMS.

But a number of large ports in the US also have the potential for big losses. In a top ten list of ports with the highest potential losses, six of the ten riskiest ports were within the US, with the remaining two in Europe.

The port of Nagoya has an estimated marine cargo loss of $2.3 billion, followed by Guangzhou at $2.3 billion and Plaquemine in LA at $1.5 billion.

The analysis found that it was not just the biggest container hubs that have a high risk of loss. Smaller ports in the US such as Plaquemines, LA and Pascagoula, MS, as well as Bremerhaven in Germany feature in the list due to the type of cargo they carry and the natural hazards they face.

RMS believes the findings will cause concern among marine re/insurers following four years of marine catastrophes, such as the 2015 Tianjin explosion with losses of over $3 billion, the 2012 Superstorm Sandy with an estimated $3 billion marine loss, of which $2 billion was cargo loss, and finally the 2011 Tohoku earthquake and tsunami.

Chris Folkman, director, product management at RMS, said: “Surprisingly, a port’s size and its catastrophe loss potential are not strongly correlated. For example, while China may be king for volume of container traffic, our study found that many smaller US ports rank more highly for risk — largely due to hurricanes.

“Our analysis proves what we’ve long suspected — that outdated techniques and incomplete data have obscured many high-risk locations. The industry needs to cease its guessing game when determining catastrophe risk and port accumulations.”

The analysis was conduct by RMS marine risk specialists using the RMS Marine Cargo Model, the first marine cargo and specie risk tool, to calculate ‘1-in-500’ year loss for each port.

The modelling tool takes into account cargo type, precise storage location, storage type and dwell time.

The team at RMS employed the model’s geospatial analysis of thousands of square kilometres of satellite imagery across ports in almost 80 countries and its proprietary technique for allocating risk exposure across large, complex terminals to assess the ports’ exposure and accumulations to highlight the risk of port aggregations.

According to RMS, the use of containers, while hugely benefitting the global economy, has increased cat risk exposure for marine insurers due to the increasing size of ships and the increasing capacities of ports and storage facilities.

Folkman added: “The value of global catastrophe-exposed cargo is huge and is expected to continue growing. After so much catastrophe loss to the cargo line since 2011, it is clear that ‘good enough’ modelling techniques are no longer fit for purpose. Better data and modelling will enable more effective portfolio management and underwriting for this dynamic line of business.”