LONDON, 23 May 2006 – Following losses from the 2005 hurricane season, property premiums have increased on average by at least 40% for global ports and terminals, particularly those operating in catastrophe prone areas, according to a new report from Aon Marine the specialist unit of Aon Limited, a leading insurance broker and risk management consultant.

Whilst the general property insurance market has seen international rates fall, underwriters are taking a less aggressive approach to win ports and terminals business and are less inclined to drop rates due to geographical, weather and earthquake risks plus loss experience on handling equipment.

Within a year, ports which were experiencing property premium reductions of 20-30% in early 2005 had their fortunes changed following the impact of hurricanes Katrina, Wilma and Rita. Premium increases have hit around the 25-30% mark and rates for catastrophe exposed ports have on average risen by up to 40% but have even reached 70% in some cases.

Piers Comonte, Associate Director of Aon Marine, said: “Inevitably, ports in the loss affected areas of the Gulf of Mexico and the Caribbean, plus some parts of Asia which are exposed to earthquakes, need to prepare for premiums rises as well as considering retentions and improved risk management programmes.”

However, despite underwriters’ concerns over catastrophe risks, the ports exposed to the hurricanes suffered fewer losses than feared and, for example, larger cities such as Houston did not suffer a direct hit. Therefore, market capacity still exists for even the most difficult of risks.

Other areas of insurance for ports and terminals include:

• Terrorism – cover is available but still expensive, especially in the London markets;
• Liability – the casualty market’s flat rates offer some solace for the ports and terminals industry. Again, restructuring of retentions can lead to a reduced cost for liability exposures;
• Business Interruption – depending on the location of the risk, this can be expensive but is available in the market.

Piers Comonte continued: “The biggest lesson learned from last year’s torrid hurricane season is the importance of a good working relationship with your insurer.  To successfully place property placements in catastrophe prone areas, ports need to start the renewal process extra early and demonstrate an effective business contingency plan. When a catastrophic loss is suffered, a port does not need an insurer providing obstacles to claim settlements.”

Mr Comonte added: “Any well managed port will have a decent plan which, in conjunction with business interruption insurance, will enable them to return to operation quickly and thus minimise the threat to their bottom line.”

Aon Marine's report

For a copy of Aon Marine's Insurance Market Overview for Ports & Terminals, please contact Piers Comonte.

About Aon
Aon Corporation  is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 46,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.
 

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