Insured losses arising from the August 2015 Port of Tianjin explosions are now estimated at US$4 billion, according to Allianz Global Corporate & Specialty's (AGCS) Safety and Shipping Review 2016.
Mr Ron Johnson, Regional Marine Manager at AGCS Pacific in Sydney, said in the Review: ““If as expected, half of the now estimated $4 billion insured losses arising out of the Tianjin explosions end up falling to the marine insurance industry, it will severely impact the profitability of global marine insurers. Based on rough estimates of global annual marine cargo insurance premiums, this could add as much as 7% to the 2015 global loss ratio for cargo insurers, at a time when cargo insurance premium rates are at their lowest on record.”
The explosions, which killed 173 people and injured hundreds, highlight the significant new accumulation exposures in Asian logistics centres, bringing to the fore supply chain issues.
“Tianjin was not on many people’s radar as an accumulation risk prior to the explosions, yet as the report highlights, 285 of the Fortune Global 500 companies had facilities there and it clearly represented a significant supply chain risk many businesses were not prepared for,”said Mr Johnson.
Tianjin is one of the world’s top container ports by volume. All ship calls to the port were immediately suspended after the explosions on 13 August last year, a ban that continued as authorities investigated the blasts. Calls from cargo ships had largely resumed by 19 August, but the potential for supply chain disruption continued. Goods which were channelled through Tianjin before the explosions were diverted elsewhere, and access to value-add services and raw material imports was severely curtailed.
Confirmed insurance industry losses via company announcements had already totaled approximately $2 billion towards the end of 2015. However, the International Union of Marine Insurance (IUMI) has said the insured loss, including clean-up costs, damage to cars and other products stored at the site, could total $5-$6 billion.
The AGCS report also notes that pirate attacks in Southeast Asia are on the increase, with the region accounting for around 60% of all incidents (246 piracy attacks) last year. Cyber risks in the maritime and shipping industry are evolving rapidly too. Furthermore, major challenges are posed by ever-larger container ships with the cargo-carrying capacity of the largest vessels increased by 70% over 10 years to 19,000+ containers. Additionally, increased risks created by ’super storms’ and weather phenomena like the “super El Nino” in the Pacific demonstrate how safety risks and the potential for a billion-dollar shipping loss need to be factored in by the industry, as well as weather routing, which ensure the safe navigation of vessels. The report also covers aspects of the increased safety risks created by depressed market conditions for shipping, such as postponed ship maintenance, and seafarer fatigue issues.