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  August 11th, 2016 | Written by

Ten World Ports at Highest Risk of Catastrophic Loss

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  • First anniversary of China’s Tianjin Port disaster is August 12.
  • Six of ten ports most at risk are in the U.S.
  • Asia-Pacific and European ports a major insurance concern.

RMS, a catastrophe risk management firm, has analyzed the catastrophe risk of the world’s ports and ranked the top ten for greatest potential loss.

While the riskiest two ports are in Japan (Nagoya) and China (Guangzhou), six of the top ten riskiest ports are in the U.S. The remaining two are in Europe.

It’s not just the biggest container hubs that have a high risk of loss. Smaller ports in the U.S. such as Plaquemines, Louisiana, and Pascagoula, Mississippi, as well as Bremerhaven in Germany also feature in the ranking due to their cargo type and the natural hazards they face.

The last four years of marine catastrophes have generated billions of dollars in marine insurance losses. The 2015 Tianjin explosion cost insurers more than $3 billion. Superstorm Sandy in 2012 generated $3 billion in marine losses, including $2 billion in cargo losses.

The top ten as ranked by RMS are as follows: Nagoya, Japan; Guangzhou, China; Plaquemines, Louisiana; Bremerhaven, Germany; New Orleans, Louisiana; Pascagoula, Mississippi; Beaumont, Texas; Baton Rouge, Louisiana; Houston, Texas; and Le Havre, France.

“Surprisingly, a port’s size and its catastrophe loss potential are not strongly correlated,” said Chris Folkman, director of product management at RMS. “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 Our analysis proves what we’ve long suspected—that outdated techniques and incomplete data have obscured many high-risk locations.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 one-in-500 year loss for each port. (This refers to events which carry a one-in-500 chance of occurring in any given year.)

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 takes into account cargo type, storage locations, storage type, and dwell time, which can vary due to port automation, labor relations and import/export ratios.

The use of containers in shipping, while is has hugely benefited the global economy, has also increased catastrophic risk exposures for marine insurers, according to RMS, due to the increasing size of ships and 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 surges. 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,” said Folkman. “Better data and modeling will enable more effective portfolio management and underwriting for this dynamic line of business.”