Six of the top ten ports at risk for highest losses are in the US, an analysis by catastrophe risk modelling company RMS has revealed.
The top ten ranking, which is based on a 500-year estimated catastrophe loss for earthquake, wind, and storm surge perils, showed that the riskiest two ports are Japan’s Nagoya, with an estimated marine cargo loss of US$2.3bn, and China’s Guangzhou (US$2bn).
The ranking also included two European ports – Germany’s Bremerhaven, at the fourth place with an US$1bn estimated cargo loss, and the French Le Havre, ranking last with US$0.7bn.
The six US ports featured included New Orleans, at the fifth place with an US$1bn estimated cargo loss, and Houston, ranking ninth with US$0.8bn.
The RMS Marine Cargo Model, which the company claimed was the first of its kind, took into account factors including the type of cargo handled, precise storage location, storage type (e.g. container stacked or at ground level) and dwell time.
According to the company, it is not only the biggest container facilities that have a high risk of loss, with smaller US ports and the Port of Bremerhaven ranking high due to their cargo type and the natural hazards they face.
RMS claimed that the findings, which were published to coincide with the first anniversary of the Tianjin Port disaster, “will cause concern among marine insurers and reinsurers coming after four years of marine catastrophes which have generated billions of dollars in marine insurance losses.
These include last year’s Tianjin explosion, which caused losses for more than US$3bn, the 2012 Superstorm Sandy and the 2011 Tohoku earthquake and tsunami.
To conduct the analysis, the company’s marine risk experts used what they claimed is the insurance industry’s first marine cargo and specie risk tool to calculate the 1-in-500 year loss for each port.
Chris Folkman, director of Product Management at RMS, said in a statement: “Surprisingly, a port’s size and its catastrophe loss potential are not strongly correlated. For example, while China may be king for volume of container traffic, our study found that many smaller U.S. ports rank more highly for risk — largely due to hurricanes.”
“Our analysis proves what we’ve long suspected — that outdated techniques and incomplete data have obscured many high-risk locations,” he added, “the industry needs to cease its guessing game when determining catastrophe risk and port accumulations.”
According to RMS, while the introduction of containers in shipping “hugely benefitted” the global economy, their use also resulted in increased catastrophic risk exposures for marine insurers “due to the increasing size of ships and the increasing capacities of ports and storage facilities”.
“Larger vessels have rendered many river ports inaccessible forcing shippers to rely on seaside ports, which are more vulnerable to hurricanes, typhoons, and storm surge,” the statement read. “Furthermore, many ports are built on landfill, amplifying their vulnerability to earthquake risk.”
In conducting the analysis, RMS used the model’s geospatial analysis of thousands of sq km of satellite imagery across ports in nearly 80 countries and its proprietary technique “to allocate risk exposure across terminals to assess the ports’ exposure and accumulations at a granular level”.
According to Folkman, the value of global catastrophe-exposed cargo is “huge” and is expected to continue to grow.
He added: “After so much catastrophe loss to the cargo line since 2011, it is clear that ‘good enough’ modelling techniques are no longer fit for purpose.
“Better data and modelling will enable more effective portfolio management and underwriting for this dynamic line of business.”