The Growing Challenge of Accommodating Larger Vessels
“It’s the old adage – bigger vessels equate to bigger risks, and the expansion of ports to accommodate these bigger vessels consequently also equates to bigger risks,” remarked Richard Hayman, the technical director at Sedgwick. His observations come in the wake of the London Gateway port expansion announcement made this May. As reported by the Southend Echo, the expansion will not just create 400 new jobs, but also have the capacity to host “six of the world’s largest container ships.” However, alongside these benefits, the project brings substantial risks.
Increased Traffic and Infrastructure Risks
Hayman points out that the enlargement of a major port will “inevitably lead to a significant increase in vessel traffic, infrastructure activity, and logistics throughput, which heightens the likelihood of incidents within the port and its environs.” Such concerns are bolstered by Allianz Commercial’s 2024 Safety and Shipping review, which highlights the British Isles as the leading global location for shipping incidents over the past decade.
Considerations for Brokers
There are multiple potential risks brokers must consider, starting with spatial constraints. “Ports and vessels operate on tight schedules,” Hayman noted. “When mishaps occur, claims follow, such as those from vessels navigating tighter spaces, which raises collision risks, berthing accidents, and pollution exposure.” Additionally, an increase in boats can strain operations, “elevating the chances of cargo mismanagement and storage limitations causing delays, especially during transitional construction phases.”
The Role of Technology and Cyber Risks
With the introduction of automated cargo handling systems, new risks emerge. Although these technologies can cut costs and boost efficiency, they bring cyber security concerns. “When any automated system is active, cyber risk becomes a crucial consideration,” Hayman emphasized.
Insurance and Coverage Recommendations
As ship traffic and port activities are expected to rise, brokers should reassess their clients’ insurance needs, especially those operating in the vicinity. Hayman advises brokers to prioritize reviewing or recommending coverages like marine hull & machinery (H&M) insurance, and re-evaluating collision clauses. He also emphasized the necessity for protection & indemnity (P&I) coverage due to third-party liability risks, “including collisions, pollution, and personal injury.” Cargo insurance with delay/storage extensions is essential, particularly during expansion phases. Marine legal expenses insurance is another critical consideration, as it covers legal costs related to liability disputes, salvage, or regulatory issues.
Protection for Workers and Construction Considerations
For clients working within the port, Hayman advises brokers to “review limits for port and terminal operator liability, ensuring coverage for property damage, bodily injury, and pollution.” For port operators managing the physical expansion, he recommends ensuring that “construction all risks (CAR) and contractors plant & equipment coverage is adequate for both temporary and permanent works.”
Proactive Risk Prevention Measures
As the port expansion progresses, a focus on risk prevention is vital. Port managers should “conduct comprehensive risk assessments, including hazard identification studies (HAZIDs), and audit safety systems like fire suppression and pollution control and vessel traffic management systems (VTMS). Updated environmental impact assessments and mitigation strategies must be in place,” Hayman suggested. He also stressed the importance of comprehensive safety protocols: “It’s important to implement robust safety measures for contractors and third parties during expansion, ensuring work permits are correctly managed, and confirming contractors have similar safety protocols.”
Support Role of Brokers in Port Expansion
Brokers can serve as a crucial support system. According to Hayman, they can advise on “appropriate construction & engineering cover for temporary and permanent works and recommend business interruption and delay in start-up (DSU) cover in case of unforeseen issues.” Furthermore, brokers can continue to offer support by “helping clients establish claims protocols and identify emerging risks throughout the port development lifecycle.”
Underwriters’ Hesitation and Impact on Premiums
The increased complexity and uncertainty surrounding the expansion will likely make underwriters cautious. Hayman explained that underwriters will seek more detailed risk information, including “vessel frequency forecasts, cargo handling volumes, and construction timelines,” to evaluate the impact of the expansion. This scrutiny will likely influence premiums: “Due to increased exposure during the expansion phase, premiums and deductibles may be adjusted, or conditions added.”
Guidance for Brokers in Navigating Expansion
As the port evolves, brokers must act as navigators for underwriters and businesses. Hayman advises, “Brokers should provide up-to-date risk data, including safety audits and mitigation plans, and proactively negotiate bespoke cover… Ensuring policy wording clarity, especially around exclusions linked to construction activity or operational delays, is essential. Consider multiyear policies or phased cover for businesses growing with the port.”
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