Letter: Weather Risk Factors

To The Editor:

At the recent Inland Marine Expo (IMX) conference, we discussed changing weather conditions with a number of ports at our stand.

From flooding to hurricanes, extreme weather is now a constant risk factor for many U.S. inland and coastal ports. Insured losses from natural catastrophes continue to be above the 10-year average of $81 billion, at $115 billion. Hurricane Ian, which struck Florida in September, was last year’s costliest natural catastrophe event, with an estimated insured loss of $50-$65 billion. The Port of Houston has further been identified in an Oxford University study as the most at risk in the world from extreme weather. But given that there are 29 ports in Texas alone, you start to see the size of the problem with people, infrastructure and operations all potentially affected.

Against this backdrop, ports should be aware the insurance industry is becoming more risk-averse. We are seeing policy quotes moving to more expensive risk criteria. In this context, unless your insurance broker explores a wide variety of quotes from insurance companies, the port can be hit with far higher premiums than necessary.

And even then, that coverage, despite its expense, may not fully protect the port. This is particularly the case with port blockage, which ports often think will be handled by the government in a crisis, causing them to remove it from policies to save money. This is an ill-advised move as, in our experience, government agencies are frequently overwhelmed and cannot be relied on to clear ports at speed. This leaves port operations paralyzed with the port picking up the very expensive bill.

Ed McNamara

CEO, Armada Risk Partners

Cleveland, Ohio