RMS, the world’s leading catastrophe risk management firm, has analyzed the catastrophe risk of the world’s ports and ranked the top ten for greatest potential loss.
The analysis shows that while the riskiest two ports are in Japan (Nagoya — $2.3 billion) and China (Guangzhou — $2 billion), six of the top ten riskiest ports are in the U.S., with the remaining two in Europe. Surprisingly, it is not just the biggest container hubs that have a high risk of loss. Smaller ports in the U.S. such as Plaquemines, LA and Pascagoula, MS, as well as Bremerhaven in Germany also feature in the ranking due to their cargo type and the natural hazards they face.
The findings 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: 2015 Tianjin explosion (more than $3 billion), 2012 Superstorm Sandy (est. $3 billion marine loss of which approximately $2 billion was cargo loss), and the 2011 Tohoku earthquake and tsunami.
Estimated Marine Cargo Loss in Billions USD*
3Plaquemines, LA, U.S.1.5
5New Orleans, LA, U.S.1.0
6Pascagoula, MS, U.S.1.0
7Beaumont, TX, U.S.0.9
8Baton Rouge, LA, U.S.0.8
9Houston, TX, U.S.0.8
10Le Havre, France0.7
* Losses rounded to one decimal place
Chris Folkman, director, Product Management at RMS, said: “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 Our analysis proves what we’ve long suspected — that outdated techniques and incomplete data have obscured many high-risk locations. The industry needs to cease its guessing game when determining catastrophe risk and port accumulations.”
To conduct the analysis RMS marine risk experts used the new RMS Marine Cargo Model™, the insurance industry’s first marine cargo and specie risk tool, to calculate the 1-in-500* year loss for each port. The team employed the model’s geospatial analysis of thousands of square kilometers of satellite imagery across ports in almost 80 countries and its proprietary technique for allocating risk exposure across large, complex terminals to assess the ports’ exposure and accumulations at a granular level never achieved before in the marine sector, to highlight the risk of port aggregations.
The modeling capability, the first of its kind, takes into account:
While the use of containers in shipping has hugely benefitted the global economy, it has 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. Furthermore, many ports are built on landfill, amplifying their vulnerability to earthquake risk.
“The value of global catastrophe-exposed cargo is huge and is expected to continue growing,” continued Folkman. “After so much catastrophe loss to the cargo line since 2011, it is clear that ‘good enough’ modeling techniques are no longer fit for purpose. Better data and modeling will enable more effective portfolio management and underwriting for this dynamic line of business.”
* Losses are based on a 500-year return period, which means a catastrophic event or combination of events of at least the indicated size, which carry a 1 in 500 chance of occurring in any given year.
The Tianjin port explosion occurred on August 12, 2015.
Losses were calculated using RMS catastrophe models, which simulated several million windstorms, hurricanes, typhoons, storm surges, and earthquakes. High-resolution cargo data was the key input to the models, which calculated the principal hazards at each port, their impact on cargo, and the resulting financial loss. Factors influencing the loss outcome — including salvage values, cargo packaging, structural protection, and port elevation — were taken into account.
Newark, CA – July 30, 2020 – RMS, the world’s leading catastrophe risk solutions company, estimates that the U.S. insurance losses from Hurricane Hanna will not exceed USD $400 million. This estimate represents insured losses associated with wind and storm surge, including losses to the National Flood Insurance Program (NFIP). “Wind and storm surge-driven losses for Hanna are expected to be consistent with losses projected by RMS’ HWind forecast product suite prior to landfall. The storm made landfall in southern Texas as a Category 1 hurricane with stronger winds than expected. However, the impacted region is an area with low industry exposure,” said Jeff Waters, senior product manager, RMS North Atlantic Hurricane Models. This estimate includes property damage and business interruption from wind and storm surge-driven coastal flooding to residential, commercial, industrial, and automobile lines of business. The estimate also includes wind-driven damage to offshore platforms in the western Gulf of Mexico; however, offshore platform loss constitutes a small fraction of the overall insured loss. Storm surge losses reflect the impact of coverage leakage, an escalation in claims severity for wind-only policies in instances where wind and water hazards co-exist in residential lines of business. Losses associated with inland flooding are expected to be negligible because the storm maintained its forward motion after landfall and only caused high rainfall totals in isolated areas. RMS expects losses to the NFIP to represent approximately USD $100 million or less of the total insured loss estimate. Texas has the second highest number of NFIP policies-in-force in the U.S., many of which are located in coastal areas impacted by storm surge from Hanna. Hurricane Hanna was the eighth named storm of the 2020 North Atlantic hurricane season and the earliest eighth named storm on record. It made landfall on Saturday, July 25, 2020 on Padre Island, Texas as a Category 1 hurricane on the Saffir-Simpson Hurricane Wind Scale with maximum sustained winds of 90 mph (150 km/hr). Hanna maintained this intensity and made a second landfall shortly after in Kenedy County. For this loss estimate, wind and storm surge impacts were simulated using version 18.1 RMS North Atlantic Hurricane Models, and RMS ensemble footprints, which are hazard reconstructions of Hanna’s wind field and storm surge. END The technology and data used in providing this Information is based on the scientific data, mathematical and empirical models, and encoded experience of scientists and specialists. As with any model of physical systems, particularly those with low frequencies of occurrence and potentially high severity outcomes, the actual losses from catastrophic events may differ from the results of simulation analyses. RMS SPECIFICALLY DISCLAIMS ANY AND ALL RESPONSIBILITIES, OBLIGATIONS AND LIABILITY WITH RESPECT TO ANY DECISIONS OR ADVICE MADE OR GIVEN AS A RESULT OF THE INFORMATION OR USE THEREOF, INCLUDING ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL RMS (OR ITS PARENT, SUBSIDIARY, OR OTHER AFFILIATED COMPANIES) BE LIABLE FOR DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES WITH RESPECT TO ANY DECISIONS OR ADVICE MADE OR GIVEN AS A RESULT OF THE CONTENTS OF THIS INFORMATION OR USE THEREOF.…