Mounting cargo risks – a growing concern

By Sean Dalton, IUMI Cargo Committee Chair and Head of Marine Underwriting NA, Munich Reinsurance America, Inc., and Pascal Dubois, IUMI Loss Prevention Committee Chair and Head of Marine France, Swiss Re Corporate Solutions

Major fires on cargo ships are becoming an increasing concern and sadly often result in loss of life, damage to the vessel and cargo, and can have significant environmental impact. Whilst this is nothing new, the consequences of a fire onboard vessels of increasing size are much greater.

In the past year, there have been  a number of reported examples of such cases including containership Maersk Honam (in March 2018 where five crew members lost their lives and more than a month was needed to fully extinguish the fire); car carrier Sincerity Ace (in December 2018, where another five crew members lost their lives and the ship was eventually abandoned); containership Yantian Express (in January 2019 where the fire was brought under control after burning for a week); and most recently containership APL Vancouver (in January 2019 while enroute from Shenzhen to Singapore and where the fire is still ongoing). If a fire is not rapidly brought under control it quickly exceeds the crew’s ability to fight it.

A number of onboard fires are caused by mis-declared cargo and improperly shipped hazardous material. Carrier alliances are adding more complexity as one shipping line will often be carrying another’s containers and relying on their performance to vet and screen cargo.

Unknown accumulation is also a challenge for marine underwriters. The largest containerships will carry cargo values in excess of USD 1 billion but often the insurer/reinsurer is not able to attribute specific exposure to their clients. The recent loss of over 280 containers overboard from the 19,224 TEU MSC Zoe is a current example of the risks underwriters face while insuring cargo aboard the largest and most modern ships. In addition, the modern cargo policy has significantly broadened the insurable risk. Provisions such as ‘Selling Price Valuation’ and ‘Control of Damaged Goods/Fear of Loss/Brand Protection’ have increased the number of cargo claims.  

Based on IUMI’s global cargo premium results, IUMI has determined that this line of business is unprofitable on a worldwide basis and premiums are not risk adequate to cover losses and expenses. While there are geographic and market-specific differences, on a global basis this is concerning. There are many underlying causes including a surplus of capacity/capital, prolonged soft market conditions and the commoditisation of certain specialty lines. It is becoming increasingly challenging to technically evaluate and develop risk adequate prices for these severe losses.  

Initiatives from organisations such as the National Cargo Bureau, to inspect a sample of inbound containers arriving at US ports from several carriers that are members of the Cargo Incident Notification System, as well as Maersk recently announcing random container inspections, are steps in the right direction.

Digitalisation will also undoubtedly change the operating landscape and aid to eliminate inadequate risk conditions. Operating without a basic knowledge of risk accumulation is not sustainable anymore and initiatives such as the Global Smart Containers Alliance in Asia “to combine the knowledge and information from component and system suppliers together with the leading shipping operators of the world to transmit data over GSM networks as well as through satellite communication” are significant.

At IUMI we believe there is a need for greater transparency over cargo carried on ships; the accumulation of values needs to be recognised and quantified; and more adequate protection should be made available to guard against and to fight onboard fires.

For more information see IUMI’s position papers at