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Port congestion and extreme weather: The impact of shipping delays on the marine market

Uncertain trade policies are worsening port congestion and accumulation risk in Asia. How can port owners mitigate risks from tariffs to climate?
Port congestion

 

As the trade war between the US and China escalates, the potential for cargo accumulation and trade disruptions at some of the world’s busiest ports is once again straining the marine and cargo market. This situation poses unique challenges for Asia as traditional risk models that relied on steady shipping volumes and predictable schedules must now adapt to the unpredictability of trade responses.

While insurers are now offering greater policy flexibility, including options for transit extensions, warehousing coverage, and rerouted cargo, these may come with additional costs. As more goods sit in storage for extended periods, insurers are also implementing stricter scrutiny of storage conditions, requiring proof of secure, climate-controlled, and well-managed facilities to ensure the safety of goods during delays.

The need for Trade Disruption Insurance and Port Blockage Insurance in today’s volatile market

As the potential for port congestion grows with ongoing rerouting around the Red Sea and the Suez Canal, exacerbated by the volatile tariff policies, businesses must consider the implications of these disruptions on their operations.

Trade Disruption Insurance and Port Blockage Insurance provide essential coverage that can safeguard your company’s financial health.

In a world where nine out of ten of the busiest container ports are in Asia, understanding and investing in these insurance options is vital for maintaining a competitive edge.

What is Trade Disruption Insurance?

Marsh Asia’s Trade Disruption Insurance (TDI) is designed to mitigate the financial impact of disruptive events on a port’s finances, with a limit of up to US$50 million, and higher limits are available on a case-by-case basis. TDI can be a standalone product or complement existing port placements to provide wide-ranging coverage.

Key coverage and benefits of Trade Disruption Insurance:

  • Comprehensive coverage for business interruption: Marsh's Trade Disruption Insurance (TDI) provides coverage for business interruption losses specifically due to trade disruptions caused by geopolitical events, extreme weather incidents and marine perils.
  • Risk transfer solution: This insurance is a unique offering in the market, designed to address gaps in traditional insurance that typically only covers physical damage to ports or access barriers.
  • Coverage capacity: The facility offers standalone coverage with a limit of up to US$50 million, allowing port and terminal owners to mitigate significant financial losses from disruptions.
  • Response to global trade challenges: The insurance is tailored to respond to the evolving global trade landscape, which has faced disruptions from various crises, including geopolitical conflicts and natural disasters.
  • Collaboration with A++ rating insurer: The TDI is developed in partnership with Tokio Marine Kiln, leveraging their specialty expertise in the insurance market to provide a robust solution for port and terminal operators facing increasing risks.

In addition, Marsh’s TDI also covers political risk, physical risk, political violence and other perils.

What is Port Blockage Insurance?

Marsh Asia’s Port Blockage Insurance is a standalone port blockage insurance to cover revenue losses from third-party incidents, such as vessel sinkings, impacts causing waterway closures, and natural disasters.

Our port blockage cover comes with a ready-made capacity of US$50 million, where higher limits may be available on a case-by-case basis. The policy wording can also be customised to meet individual requirements, and the insurance can be purchased as a standalone cover or as a top-up to existing cover provided elsewhere.

Key coverage and benefits of Port Blockage Insurance:

  • Protection against port access disruptions: Port Blockage Insurance provides coverage for financial losses resulting from the blockage of ports due to various factors such as a vessel sinking in a channel, a vessel impact resulting in a waterway closure, or a natural catastrophe.
  • Coverage for loss of revenue: The policy compensates for lost revenue during periods when access to a port is blocked, helping terminal owners manage cash flow and financial stability during disruptions.
  • Faster placement and coverage certainty: Capacity is underwritten under a pre-agreed and approved Marsh arrangement to support speedy placement. Leading underwriters can bind risks on behalf of the follow panel, providing greater certainty of coverage and price at an earlier stage of the placement process.
  • Flexible policy terms: The facility uses Marsh’s proprietary port blockage wording which can be customised to fit around existing policies, or standalone to meet the specific needs of port and terminal operators.
  • Highly-rated Lloyd’s capacity: The insurance is backed by a panel of insurers, including Lloyd’s of London, which has a financial strength rating of A (excellent) from AM Best and AA (very strong) from Standard & Poor’s, providing additional assurance of reliability and support.
  • Rapid response: This insurance addresses the growing frequency of port blockages, providing timely support to protect operations and recovery in the event of port and terminal disruptions. Facility insurers will automatically follow the overall lead insurer’s claims settlements, as per the Lloyd’s Claim Scheme, ensuring a streamlined claims process.

Key differences between Trade Disruption Insurance and Port Blockage Insurance:

 

Trade Disruption Insurance

Port Blockage Insurance

Coverage

Increased costs of operation resulting from disruption to the normal business operations

Loss of revenue caused by caused by third-party accidents events that block access to:

  • A berth or quay owned or leased by the assured.
  • Any approach channel or waterway.
  • Any land access immediately adjacent to the confines of the port, terminal, or insured location.

Coverage options

Standalone facility designed to complement existing port placements.

Can be purchased as standalone cover or to top-up existing cover provided elsewhere.

Why partner with Marsh to support your port risk solutions?

With over 250 port and terminal clients and as an insurance broker for more than 40% of the world’s LNG fleet, we are committed to serving our clients with data-driven solutions backed by our extensive experience and industry knowledge. We understand the risks affecting your port and strive to be an effective partner, providing you with the most relevant and cost-effective port risk solutions.

Enhance your port and terminal coverage with our innovative risk solutions

In today’s volatile trade environment, Trade Disruption Insurance and Port Blockage Insurance are not just options; they are necessities for businesses engaged in global and regional trade. Protect your assets and ensure operational continuity by exploring these essential insurance solutions.

 

For more information on Trade Disruption Insurance and Port Blockage Insurance, contact us today to discuss how we can help safeguard your business against shipping delays and potential disruptions.

Please note that Marsh PB Co., Ltd and Marsh McLennan are not engaged by nor involved in any manner with Bonus Ranch and its promotion, and has not placed any insurance for nor insured any of its businesses or operations. Marsh as a licensed insurance broker will not request customers to make payment via non-standard methods, such as the transfer of money to any individual’s bank account.