Port risk solutions: Mitigating port blockage and trade disruptions

Ports worldwide are vulnerable to operational disruptions from blocked waterways, natural disasters, epidemics, riots, and other factors. The situation in the Red Sea has prompted cargo shippers to choose longer but safer routes away from the Suez Canal leading to delays and bottlenecks at ports. In Singapore, port congestions are expected to last till the end of 2024 and have even caused spillover into neighbouring ports.¹

Port risk insurance typically covers liabilities for loss and damages to cargo, and equipment due to strikes, riots, terrorist risks etc. It also covers liabilities arising from delays and unauthorised deliveries, fines for regulatory breaches, and quarantine costs, depending on the policy terms. However, this insurance generally does not cover blockage to ports or trade disruptions for port owners and cargo shippers.

The need for effective risk management has never been greater as port owners and cargo shippers continue to experience evolving disruptions from escalating extreme climate events and geopolitical tensions leading to port congestions.

Reassessing current risk transfer solutions and exploring specialised insurance coverage is crucial to mitigating emerging risks to ports and terminals.

Specialised port risk coverage for challenging times

The Francis Scott Key Bridge collapse significantly impacted the Port of Baltimore, an important economic asset for the state of Maryland and the United States.² In response, Marsh launched the first Port Blockage Insurance to cover revenue losses from third-party incidents, such as vessel sinkings, impacts causing waterway closures, and natural disasters.

Additionally, Marsh partnered with Tokio Marine Kiln to offer the first of its kind in the port insurance market – Trade Disruption Insurance (TDI). TDI is an exclusive risk transfer solution for ports and terminals to cover business interruption losses due to trade disruption caused by geopolitical events and extreme weather incidents.

The infographics below show the differences in coverage between Port Blockage and Trade Disruption Insurance:

What can cargo shippers do to mitigate port-related risks?

To mitigate further impacts from the ongoing Red Sea crisis on ports, cargo shippers can consider the following approaches:

Besides managing port-related risks, cargo shippers, like port owners, are vulnerable to supply chain risks.

Sentrisk: Navigating port and cargo risks with technology

By leveraging advanced technologies such as supply chain mapping AI and geospatial satellite imaging, Sentrisk, a joint development effort between Marsh and Oliver Wyman, enables port owners and cargo shippers to identify and map supply chain risks such as critical upstream suppliers and potential vulnerabilities to develop robust contingency plans:

With the ability to analyse deeply into the supply chain map, Sentrisk overlays proprietary analytics to pinpoint low, medium, and high-risk vulnerabilities down to a site, supplier, or component-specific level.

Sentrisk also addresses the increasing strain on global supply chains caused by transportation delays, geopolitical conflicts, trade wars, and climate change. These factors can lead to congestion at ports and critical passageways, resulting in shipping delays and financial losses.

Importantly, Sentrisk helps companies gain visibility into their upstream supply chains, identifying suppliers and assessing risks such as natural hazards and geopolitical events. This enables businesses to evaluate transport routes and infrastructure vulnerabilities, allowing them to diversify suppliers, reroute components, or utilise insurance products to mitigate potential losses.

In addition, Sentrisk’s capabilities extend to evaluating a variety of risks that may impact businesses including regulatory challenges, labour issues, equipment failures, cybersecurity risks, and more.

Case study: Assisting a commodity player through Sentrisk

By analysing a commodity player’s upstream supply chain, Marsh Asia was able to help the client identify key transport routes together with critical terminals and ports along the way, and evaluated the exposure of these transport infrastructure to both climate risks and geopolitical events.

Drive positive risk outcomes with Marsh’s innovative solutions

Innovative risk transfer solutions are crucial for addressing contemporary challenges that can severely disrupt port and cargo operations and impact profitability. Consider integrating our proprietary AI technology, Sentrisk, into your supply chain risk mitigation strategies alongside Marsh’s Trade Disruption and Port Blockage insurance solutions to enhance your business resilience.

Marsh’s extensive global expertise in the marine and cargo industry, combined with our strong relationships with insurers, enables us to advocate for tailored insurance limits and policies that meet the unique needs of our clients worldwide.

Empower your risk mitigation strategies with our innovative solutions for your port and cargo operations

Schedule a non-obligatory call with our team of port and cargo risk specialists