The IUMI Cargo Committee has embarked on a new initiative and formed a working group with Risk Management Solutions (RMS), an IUMI Professional Partner, to work jointly on static CAT cargo modelling. Ports are getting bigger which means larger amounts of cargo are being stored resulting in vast accumulations of risk. An exposure management tool is vital in assessing the risks to marine insurers.
This new working group comes together, via video conferencing, once a quarter and includes underwriters from New Zealand, Japan, Germany, France, USA and the UK. IUMI cargo committee secretary, Mikaela Tamm provides legal guidance to the group, keeping us on the “straight and narrow”.
The key variables under discussion include:
- Vulnerability – up until recently the industry norm “best practice” was to model cargo & specie as “warehouse contents” in property models. The vulnerability variable however varies widely depending on the commodity (i.e. foodstuff, pharmaceutical, soft/hard commodities, clothing, etc.); and on its storage method/build quality (container, warehouse, open lot, etc.).
- Exposure management – cargo exposures change over time, the exposure can move and the locations are frequently unknown prior to being bound, values change over time and static exposures face a wide range of CAT perils as cargo is moved around the world. “Best practice” for marine CAT risk management dictates a better understanding of cargo CAT risk and its correlation with property CAT risk.
- Port specific industry exposure databases (IEDS) – looking at and incorporating important information on “dwell time”, or how long cargo spends at a location. This variable, which is critical in determining port accumulations, can be highly influenced by variables such as weather, port automation, import/export ratios, and labour relations.
Marine underwriters are now beginning to embrace modelling and the IUMI cargo committee is working closely with RMS to accelerate and improve the use of catastrophe models in the marine industry in an effort to better manage the risk to cargo from natural catastrophes. We look forward to bringing you more information in due course.