“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.”
said Richard Hayman (pictured), technical director at Sedgwick.
His comments, made to Insurance Business, follow the announcement of the London Gateway port expansion this May.
The expansion will not only offer “400 new jobs”, but also accommodate “six of the world's largest container ships,” according to the Southend Echo.
While there are undoubtedly benefits to this project, there is still a lot of risk involved.
According to Hayman, the growth of any major port will “inevitably lead to a significant increase in vessel traffic, infrastructure activity and logistics throughput, which increases the risk of incidents occurring within the port and surrounding areas.”
These concerns regarding port incidents are not unwarranted.
According to Allianz Commercial’s 2024 Safety and Shipping review, “British Isles is the top global location for the most shipping incidents over the past decade.”
According to Hayman there are several risks which brokers must consider, with the first relating to spacing: “Ports and vessels inevitably operate on tight schedules,” he said. “When something goes wrong, claims will occur, such as vessels navigating tighter spaces, which increases collision risk, berthing accidents and pollution exposure.”
Hayman also believes that more boats can weigh-down operations: “there’s also a higher chance of cargo mismanagement and storage limitations causing delays, especially during transitional phases of construction, improvements, and expansion.”
Brokers must also be mindful of cargo handling systems in major UK ports.
Hayman acknowledged that while such technologies can reduce costs and increase efficiency, they also introduce new risks:
“When any automated system is involved, cyber risk becomes an important consideration.”
With the anticipated increase in ship traffic and port activities, brokers should reassess their clients’ coverage, especially if operating in the area.
Hayman suggests that brokers should focus on “recommending or reassessing coverages such as marine hull & machinery (H&M) insurance”, and review “collision clauses”.
He also argued there would be a need for protection & indemnity (P&I) coverage due to third-party liability risks, “including collisions, pollution, and personal injury.”
Cargo insurance with delays/storage extensions, is also essential “during the expansion and construction phases”, according to Hayman. Marine legal expenses insurance should be another consideration, as “it covers legal costs related to liability disputes, salvage, or regulatory issues,” according to Hayman.
There are also specific considerations for workers.
For clients working within the port, Hayman claims brokers must “review limits for port and terminal operator liability, ensuring coverage for property damage, bodily injury, and pollution.”
For port operators managing the physical expansion, Hayman advised brokers ensure that “construction all risks (CAR) and contractors plant & equipment coverage is adequate for both temporary and permanent works.”
As the port expansion moves forward, there should be a focus on risk prevention.
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). Additionally, updated environmental impact assessments and mitigation strategies must be in place,” said Hayman.
He also stressed the importance of all round safety: “It's also important to implement robust safety protocols for contractors and third parties during expansion, making sure work permits that are issued are managed correctly. Check also that the appointed contractors have similar robust safety protocols...”
Brokers can then be the anchor of support.
According to Hayman, they can advise on “suitable construction & engineering cover for temporary and permanent works and recommend business interruption and delay in start-up (DSU) cover in case things go wrong…”
Hayman also believes brokers can be a continued support, claiming they can “help clients establish claims protocols and identify emerging risks throughout the port development lifecycle.”
The increased complexity and uncertainty surrounding the expansion will likely lead to hesitancy from underwriters.
Hayman explained that underwriters will likely require more detailed risk information, including “vessel frequency forecasts, cargo handling volumes, and construction timelines,” in order to assess the potential impact of the expansion.
Hayman also stated that this will likely impact premiums: “Due to increased exposure during the expansion phase, it’s also likely that premiums and deductibles will be increased or modified, or conditions added.”
With the tides changing, brokers are the navigators for underwriters and this venture.
According to Hayman: “Brokers should be mindful of providing up-to-date risk data, including safety audits and mitigation plans and proactively negotiate bespoke cover... It’s also beneficial to ensure policy wording clarity, particularly around exclusions tied to construction activity or operational delays. It is also worth considering multiyear policies or phased cover for businesses evolving with the port.”
