About the author:
Ed McNamara is the CEO of Armada Risk Partners, a Cleveland U.S.-based global port insurance broker that was a winner of the 2022 Fast Brokerage Award.
Ed has worked in the insurance industry for more than 15 years. Previously he ran his own technology company and has a lifelong interest in digital communication and is well versed in cyberattack planning.
A Cleveland native who grew up in Rocky River as the son of a Cleveland Police Captain, Edward’s charitable work includes working as a founding board member of the Prayers from Maria Foundation, and a board member at the Lorain County Board of Health (currently President), County Mayo Society, and Irish American Charitable Foundation.
Armada Risk Partners urges ports not to cut blockage insurance in wake of Baltimore Bridge collapse
The Baltimore bridge disaster has sent shockwaves through the maritime industry, laying bare the vulnerabilities inherent in everyday operations, and underscoring the value of proactive risk management measures.
It took two months for the Port of Baltimore to reopen as specialist crews and authorities focused on operations to remove the Singaporean-flagged container ship Dali that slammed into the Francis Scott Key Bridge killing six workers. The men – all construction workers fixing potholes on the bridge – died when they were plunged into the water after the Dali hit the bridge, causing its collapse on 26 March.
Total damages and costs continue to rise and are likely to run to several billions of dollars. While it is reported that Chubb is preparing to pay out $350 million in the near future as insurers of the bridge, it will cover only a fraction of the total costs associated with the bridge collapse.
The ensuing disruption has not only impacted maritime commerce but unleashed a cascade of consequences, which disrupt trade routes, strand vessels, and put at risk global supply chains creating significant economic losses.
Ports find themselves at the forefront of risk. Whether it is a ship incident, as in the case of Baltimore, or an extreme weather event, a port can quickly become blocked rapidly exposing operations, assets and people to severe disruption, damage, and third-party claims.
As a port insurance specialist broker we believe that port blockage insurance offers a critical and pragmatic solution to this pressing issue. By providing coverage for losses resulting from port closures or blockages, insurers can help ports mitigate financial risks and expedite recovery efforts.
Yet we continue to see a number of port operators who are considering cutting their coverage as a short-sighted route to saving money in the face of rising rates and premiums.
While some operators are of the opinion that federal authorities will unblock their port in times of crisis given the urgency of moving essential supplies, Baltimore has clearly shown this to be a high-risk strategy. Not only might it not even be physically possible to unblock a port immediately, but the authorities can also be already occupied with other emergencies or, indeed, be struggling with the challenges of bureaucracy.
In situations like this which paralyze or seriously curtail port operations, the net result is the likelihood of extensive delays, stranded vessels, disrupted global supply chains, and a massive economic hit.
Port blockage insurance should not be seen as a luxury; it is more of a strategic imperative. Just as we all insure our homes against natural disasters, ports should take the necessary steps to safeguard their operations from the significant risks of maritime transportation.
This specialized insurance provides financial protection in the event of port closures or blockages, ensuring that ports can mitigate losses, expedite recovery efforts, and swiftly resume operations. It also incentivizes investments in infrastructure resilience and emergency preparedness. Insurers can collaborate with port authorities and businesses to identify vulnerabilities, implement mitigation measures, and enhance response capabilities.
By fostering a culture of risk awareness and proactive risk management, we can reduce the likelihood and severity of future disruptions. This investment in resilience and preparedness, will allow us to fortify global supply chains, promote economic stability, and ensure the uninterrupted flow of goods and commerce.
SEVEN TOP PORT INSURANCE TIPS
Against this backdrop how can port operators ensure they get the best insurance available and are fully covered?
- Business Interruption/blockage insurance:
Port operations need to secure business interruption insurance that covers income losses resulting from disruptions caused by strikes, protests, or other events like blockage caused by an accident like the Baltimore bridge collapse. This can include coverage for lost revenue, extra expenses, and ongoing operating costs during the interruption period.
- Property Insurance:
It is vital to ensure that the port’s physical assets, including terminals, warehouses, and equipment, are adequately covered by property insurance. This should include coverage for damages caused by ship collisions, natural disasters, or other physical perils.
- Marine Insurance:
Marine insurance policies should cover damages to vessels, including collisions in the port area. This can include hull and machinery insurance, protection and indemnity (P&I) insurance, and cargo insurance for goods in transit.
- Liability Insurance:
Liability insurance is needed protect the port against legal claims arising from accidents, collisions, or injuries that occur on the premises. This can include third-party liability coverage for damage to other vessels, infrastructure, or injuries to individuals.
- Political Risk Insurance:
Consider political risk insurance to protect against losses occurring as a result of strikes, protests, or other political events that may disrupt business operations. Think of Russia’s war with Ukraine, or tensions between the US and China or conflict in the Middle East. These kind of dynamics can have a big impact on ports that for example have investors from countries that could be affected by sanctions.
- Contingent Business Interruption Insurance:
Contingent business interruption insurance is used to cover losses resulting from disruptions to key suppliers or customers. This can be crucial if a port relies on specific suppliers for its operations.
- Cyber Insurance:
Cyber insurance is essential to protect against cyber threats and attacks that could disrupt port operations, leading to business interruption. Hosting large numbers of vessels operated by companies employing a range of IT systems provides a perfect environment for cyber-attacks.