It is tough for any port to build resilience – to remain an open channel helping build growth for others, exposed to many risks, and yet still be optimal and grow. We all understand businesses exist to grow, but an enterprise’s understanding of risk often determines the limits of its growth. For port enterprises to thrive in this environment a sound enterprise-wide risk-management framework is essential to secure growth. This means considering risk transfer as a core part of the whole enterprise.
The top five risk management factors underwriters will be assessing are:
For the past few years, insurers have been reducing the capacity deployed on exposure to locations where catastrophes – such as floods, storms, tornadoes – are becoming more prevalent, specifically in and around the Gulf of Mexico. Capacity can also be heavily influenced by an insurer’s aggregated exposure in a specific CAT-exposed region, where they may insure other risks possibly equally affected by the same CAT event.
In some instances, insurers came off CAT exposures completely after suffering large losses. Insurers were increasingly seeing historical ratings as inaccurate for today’s risk conditions.
Usually, significant losses from natural catastrophes would prompt larger increases in insurance rates.
The ports and terminals (P&T) insurance markets were not found to have incurred significant losses from natural catastrophes in 2024, according to WTW’s Marine Market Liability Update (published in September 2024).
Most increases were attributed to inflationary pressures on claims (for example, for raw materials, transport, etc.) during the year.
In general, 2024 was a stable period for CAT-related claims, one in which premium increases on ports and terminal policies were lower than those in previous years.
With insurers’ portfolios now largely corrected, rate increases for 2025 are currently expected to reflect those from the past 12 months (i.e., from 2.5% to 7.5%) if the buyer’s exposure has remained consistent and no claims were filed in later years.
With the conditions that created increases now on the wane, insurers are moving back to assessing and rating renewals on an individual basis. In addition to this, the last few months have seen some new capacity enter the P&T arena.
This is both from the aspect of established insurers participating in P&T business, which they had not done previously, and from completely new insurer set-ups (MGA’s) specifically aiming to write P&T business. The result is likely to push rate increases to the lower end of the scale.
Although their presence in high CATexposed regions can still affect the level of rate increases, ports and terminals who can show insurers their risks are being well managed stand a greater chance of premiums being proportionately rated.
Guided by their insurance broker, a port’s risk executives will be able to systematically consider risk exposure, risk appetite, total cost of risk, cost efficiencies and coverage.
Often a panel of insurers, risk engineers, claims executives and loss adjusters are consulted throughout the risk management process. During this period, policy terms – including deductible structures, detailing the assured’s retained risk – will be reviewed. Sometimes this results in prospective policy buyers providing more in-depth underwriting information.
This structured approach helps create a well-informed business enterprise. For the best outcome, this approach needs C-suite executives talking to all risk stakeholders – treasury or finance officers and insurance risk managers, and the risk managers of specific business divisions – say, the CISO, for a port’s cyber risk transfer, as well as health, safety, security and environmental managers.
This connected approach also helps to prevent losses. Loss prevention assessments and actions help to give insurers confidence an organisation not only understands its risks, but it is also managing the risks within its control.
At the same time, clear evidence of a port’s investment programme (such as new equipment or property upkeep) also provides confidence to insurers as to how a port may view its own risk exposure.
Resilient port enterprises not only manage risk, but continuously review to optimise the transfer residual risk off their balance sheet. Enterprise-wide risks need to be considered on a continuum; they change in scale and priority. The framework will need to flex to changes in risk levels, and new risks as they emerge.
If they do this with an insurance broker, then by measuring the total cost of risk and their risk appetite, they can define a clear and optimal risk transfer programme.
Insurance can help to transfer common classes of P&T risks, when aligned with a port’s goals and risk tolerance. These include property, business interruption, port blockage, collision or allision, labour strikes, civil unrest, cyber or geopolitical events.
Simply put, when port enterprises display an ability to describe risk through a structured risk management process, so insurance premiums might be better rated. It sounds simple but, in practice, too many businesses do not have a best practice risk management framework in place or fully capture the rich risk insights held within their own organisations.
Risk pervades any organisation and although the nature of perils faced by ports may endure, exposures most certainly evolve, so I advocate any port enterprise remaining in very close touch with their broker’s teams of experts.
*This article originally appeared in ‘Ports & Harbors’ March/April 2025 edition.
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