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About the Author Rich DeSimone is president of Travelers Ocean Marine. He can be reached at rich.desimone@travelers.com
21st Century Ports
Boldly Going Where No Port Has Gone Before
The worldwide shipment of cargo containers more than tripled between 1995 to 2006, growing from 137 million to 417 million TEUs. In 2006, one out of every nine of those containers was either bound for or exiting from the United States. Put those two facts together and it explains the pressure that our nation's ports have been under to grow and modernize. Much has already been accomplished, starting from the days 50 years ago when stevedores would line the docks to unload cargo by hand. But all signs point to the need to continue to create the ever-more sophisticated infrastructure required to move high volumes of cargo efficiently. The changing face of port logistics has ripple effects that spread beyond the shipping industry, impacting land use planning, truck and rail transportation development, environmental considerations and much more. In addition, for the ports themselves, the dynamic evolution they are undergoing has implications that go beyond the day-to-day business of transferring cargo from ship to shore. These implications include new and increased liabilities that make it critical for ports to work closely with their insurance experts to identify exposures, limit risks and update coverage.
Yesterday, Today, Tomorrow
Think about a horse-and-buggy moving at a leisurely pace through Amish country; then picture a Corvette speeding cross-country through the curves of a multi-lane freeway. Now fast-forward to the bridge of the Star Trek's Enterprise, with unlimited information and capabilities available at the touch of an automated button. Those are apt metaphors for the change that ports have been undergoing. The containerization of cargo that began
in the 1950s meant that the ports that would thrive were those that could figure out the best way to move containers quickly, replacing brute force with mechanical automation. Today, long before a ship enters port, cargo controllers identify where each container is on a ship, where it must be moved to for overland transport, and in what order containers waiting for shipment should be loaded in their place. This orchestration of movement is planned, right down to the individual box, with a precision made possible by computers and automated equipment. Ocean transportation firms don't make money when a ship is sitting in port; the freight charges that they collect are for moving cargo from point A to point B. So the port that can send both ship and cargo to their next destinations faster, safer and more accurately has an edge. For example, what used to take days now takes hours: one recently renovated terminal in Virginia can now unload the largest container ship in less than nine hours. In addition to updating facilities, ports are also thinking ahead about the evolving flow of shipments. Today, a container from Asia bound for Philadelphia may be dropped at a West Coast port, travel by rail to the New York metropolitan area, and then be delivered by truck to its final destination, all on a single bill of lading. With the widening of the Panama Canal and the doubling of its capacity to handle container ships due to be completed by 2014, the U.S. intermodal system will face new competition as cargo is routed directly to the East Coast. What does all of the change mean? As U.S. ports compete with each other, we can expect to see consolidation, with fewer ports handling more cargo. Those with available
land for expansion and the foresight to invest in new infrastructure are likely to be the winners. Ports that are limited in their ability to grow will not disappear, but may transition to serving regional needs � much as air transportation has developed its system of international and local airports.
Emerging Liabilities
The evolution of shipping impacts the insurance carriers who partner with the industry to address risks. Underwriters who have long been involved with shipping have seen their calculations change as they assess exposures that ports face. What used to be an industry plagued by frequent but often low-cost claims (for example, dock-side pilferage) is now one that has the potential for severe disruptions that are hugely expensive. Exposures include: � Ship damage. With ships larger than ever � many of them 10 times the size and carrying capacity of ships built just 20 years ago � and loaded with their own sophisticated, expensive systems, the potential cost of any damage that occurs while the ship is in port has grown. � Failure of port equipment. Container cranes that cost millions of dollars are crucial to the continued operation of a port. If one breaks down from inadequate maintenance or is damaged through operator error, the disruption to business can be costly. � Terminal incidents. With the accumulation of larger amounts of cargo in a port's facilities, any incident that threatens the infrastructure, including fire at a warehouse or loss of power to equipment, can lead to damage claims that are much higher than in the past. These changing conditions mean that
underwriters often look beyond the simple inspection of a port's terminal facilities that they may have performed in the past. They want to know that adequate hiring practices and training programs are in place to limit the port's exposure to operator error. They will examine backup systems and emergency plans to make sure the port is ready to handle any crisis before it gets out of hand. And they want to understand the full value of the port as expansion changes its footprint and physical structures. Obtaining proper insurance may not be at the top of the list for a port operator, who has daily priorities such as dockside ships and future competitive positioning to worry about. But by working closely with an agent who understands shipping and its many exposures, ports can connect with an insurer who can deliver, not just coverage, but also services. Port operators should seek out insurers who provide extensive coverage for their multiple exposures. They should also look for risk control advice from insurance experts who are in a position to understand industry best practices and to help ports implement them. Finally, they will want to stick with insurers who have financial stability and a long track record of serving the shipping industry � both signs that the insurer will be there when coverage is needed. As ports step up to meet the challenges of a continually evolving shipping industry, they will find that insurers are right beside them, identifying risks and providing coverage to protect port operators. We've all moved beyond the horse-and-buggy days. Next up: boldly going where no port has gone before.
Source: Containers to/from US
http://www.bts.gov/publications/americas_container_port s/html/highlights.html
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Maritime Reporter & Engineering News