Blockchain Project for Hull and Cargo Coverage

After months of pilot studies, underwriters will soon go live with Maersk on a commercial distributed-ledger system for marine insurance.
By: | December 14, 2017 • 5 min read

Marine insurance is one of the oldest forms of risk management in the world and among the least changed in its roughly half millennium existence. Yet, that may all change significantly — and soon.


Two marine underwriters, XL Catlin and MS Amlin, and brokerage WillisTowersWatson (WTW) are part of a wide-ranging consortium that will begin commercial operation of a blockchain system for hull and container insurance early in 2018.

Other parties in the consortium include Maersk, the largest container shipping line in the world, software giant Microsoft, major consultancy Ernst & Young (EY), and Internet security firm Guardtime. They started proof-of-concept tests in April 2017 and have built about a dozen use cases. Maersk operates 611 ships that move 12 million containers a year.

Blockchain systems, also known as distributed-ledger systems, arose out of complex financial transactions but are quite simple in concept. Each new electronic document in what used to be known as the paper trail is a discrete block on the chain of documents.

Transparency comes from the fact that all documents in the chain are visible to all parties. Security comes from the fact that no party can change or delete any documents, only add new ones.

EY estimates the marine insurance business at $30 billion worldwide in annual premiums across all markets, including vessels, containers and contents.

“The marine insurance business is 400 to 500 years old,” said Shaun Crawford, global insurance leader, EY, “but it has not changed a great deal over that time. It has grown much more complex, but the fundamental issue is taking risk, pricing risk and putting that on the balance sheet.”

Shaun Crawford, global insurance leader, Ernst & Young

The problem in the size and complexity of the sector today, Crawford explained, is that “the gap between risk and capital has widened. There are many different counterparties, often unknown. So underwriters are actually making quite a big bet.

There are regulatory and capital requirements that help, but the question for operators, brokers and carriers remains how to understand the risk.”

The goal of the blockchain consortium project is to make the entire risk management and underwriting process more transparent, more reliable, more repeatable — in effect, more transactional.

The idea is that reducing expenses and better pricing risk will reduce overall costs, reducing premiums, speeding claims processing and payment, and ultimately freeing risk capital on balance sheets.

“Blockchain technology was born out of the virtual-currency markets,” explained Chip Reed, account manager for marine, WTW.

“It was developed as a way to have trust in a counterparty that is otherwise unknown. In the blockchain, everyone has the exact same information at the same time. That is especially important when dealing with international counterparties you have never worked with before.”

To date, the challenge in implementing blockchain transactions has been the time and treasure needed to develop a system, coupled with the complexity of ensuring it is compatible with the systems of counterparties. Hence the consortium for marine insurance.

“Outside cryptocurrency, technology is still in its very early days,” said Reed. “Technology vendors can provide stand-alone programs. In some instances, a major user would purchase the system and make it available to counterparties, including ship lines and brokers.”

“In the blockchain, everyone has the exact same information at the same time. That is especially important when dealing with international counterparties you have never worked with before.” — Chip Reed, account manager for marine, WillisTowersWatson

While the initial focus has been on transparency, efficiency, security and cost, Reed stressed another potential benefit: claims.

“Damage or loss in container freight is very complex. It would be a huge benefit to everyone if smaller claims could be paid automatically through smart contracts on a distributed ledger. We are not quite there yet, however. To get there, it is first necessary to map the claims process and, at the same time, streamline the transactional parts of the business.”

Crawford, at EY, noted another large potential benefit. While the first project is strictly for container freight, there is potential for growth into project freight. Or, at least, the containerized and breakbulk part of project freight.

The insurance for such moves almost always includes coverage for delay in start-up (DSU), because the loss or damage to a key component that is not easily replaceable can set back the building of a power plant, bridge or refinery by months.


Project cargo might seem to be the antithesis of container shipping, a highly customized movement of one or a few large, heavy, expensive components. But project cargo is often more than that. Those high-profile, one-off moves are often part of a larger development project that also involves delivery of thousands of smaller components by container or breakbulk.

“Blockchain can be useful in project management by allowing the project manager to adjust the time schedule,” said Crawford.

“It may be possible to reduce the impact of a DSU by working around” problems with delivery or damage to certain components. “More information and more data lower the overall risk for a project.”

While the Maersk group includes some of the biggest names in each respective field, it is not the only one pursuing blockchain technology in marine cargo. Containership line NYK said it is participating in a consortium to develop a trade-data sharing platform using blockchain technology formed by NTT Data Corp. of Japan.

That consortium comprises 14 companies from various sectors involved in trade-related business including banking, insurance, integrated logistics, import and export and others.

According to a statement from NYK, “trade procedures are time-consuming, as exchange of paper-based documents is required. This consortium aims to streamline processes for trade data sharing between verticals and businesses using blockchain technology. It is the very first consortium ever launched in Japan that transcends across diverse industries in trade-related business.” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]

More from Risk & Insurance

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Emerging Risks

Stadium Safety

Soft targets, such as sports stadiums, must increase measures to protect lives and their business.
By: | January 10, 2018 • 8 min read

Acts of violence and terror can break out in even the unlikeliest of places.

Look at the 2013 Boston Marathon, where two bombs went off, killing three and injuring dozens of others in a terrorist attack. Or consider the Orlando Pulse nightclub, where 49 people were killed and 58 wounded. Most recently in Las Vegas, a gunman killed 58 and injured hundreds of others.


The world is not inherently evil, but these evil acts still find a way into places like churches, schools, concerts and stadiums.

“We didn’t see these kinds of attacks 20 years ago,” said Glenn Chavious, managing director, global sports & recreation practice leader, Industria Risk & Insurance Services.

As a society, we have advanced through technology, he said. Technology’s platform has enabled the message of terror to spread further faster.

“But it’s not just with technology. Our cultures, our personal grievances, have brought people out of their comfort zones.”

Chavious said that people still had these grievances 20 years ago but were less likely to act out. Tech has linked people around the globe to other like-minded individuals, allowing for others to join in on messages of terror.

“The progression of terrorist acts over the last 10 years has very much been central to the emergence of ‘lone wolf’ actors. As was the case in both Manchester and Las Vegas, the ‘lone wolf’ dynamic presents an altogether unique set of challenges for law enforcement and event service professionals,” said John

Glenn Chavious, managing director, global sports & recreation practice leader, Industria Risk & Insurance Services

Tomlinson, senior vice president, head of entertainment, Lockton.

As more violent outbreaks take place in public spaces, risk managers learn from and better understand what attackers want. Each new event enables risk managers to see what works and what can be improved upon to better protect people and places.

But the fact remains that the nature and pattern of attacks are changing.

“Many of these actions are devised in complete obscurity and on impulse, and are carried out by individuals with little to no prior visibility, in terms of behavioral patterns or threat recognition, thus making it virtually impossible to maintain any elements of anticipation by security officials,” said Tomlinson.

With vehicles driving into crowds, active shooters and the random nature of attacks, it’s hard to gauge what might come next, said Warren Harper, global sports & events practice leader, Marsh.

Public spaces like sporting arenas are particularly vulnerable because they are considered ‘soft targets.’ They are areas where people gather in large numbers for recreation. They are welcoming to their patrons and visitors, much like a hospital, and the crowds that attend come in droves.

NFL football stadiums, for example, can hold anywhere from 25,000 to 93,000 people at maximum capacity — and that number doesn’t include workers, players or other behind-the-scenes personnel.

“Attacks are a big risk management issue,” said Chavious. “Insurance is the last resort we want to rely upon. We’d rather be preventing it to avoid such events.”

Preparing for Danger

The second half of 2017 proved a trying few months for the insurance industry, facing hurricanes, earthquakes, wildfires and — unfortunately — multiple mass shootings.

The industry was estimated to take a more than $1 billion hit from the Las Vegas massacre in October 2017. A few years back, the Boston Marathon bombings cost businesses around $333 million each day the city was shut down following the attack. Officials were on a manhunt for the suspects in question, and Boston was on lockdown.

“Many of these actions are devised in complete obscurity and on impulse, and are carried out by individuals with little to no prior visibility.” — John Tomlinson, senior vice president, head of entertainment, Lockton

“Fortunately, we have not had a complete stadium go down,” said Harper. But a mass casualty event at a stadium can lead to the death or injury of athletes, spectators and guests; psychological trauma; potential workers’ comp claims from injured employees; lawsuits; significant reputational damage; property damage and prolonged business interruption losses.

The physical damage, said Harper, might be something risk managers can gauge beforehand, but loss of life is immeasurable.


The best practice then, said Chavious, is awareness and education.

“A lot of preparedness comes from education. [Stadiums] need a risk management plan.”

First and foremost, Chavious said, stadiums need to perform a security risk assessment. Find out where vulnerable spots are, decide where education can be improved upon and develop other safety measures over time.

Areas outside the stadium are soft targets, said Harper. The parking lot, the ticketing and access areas and even the metro transit areas where guests mingle before and after a game are targeted more often than inside.

Last year, for example, a stadium in Manchester was the target of a bomb, which detonated outside the venue as concert-goers left. In 2015, the Stade de France in Paris was the target of suicide bombers and active shooters, who struck the outside of the stadium while a soccer match was held inside.

Security, therefore, needs to be ready to react both inside and outside the vicinity. Reviewing past events and seeing what works has helped risk mangers improve safety strategies.

“A lot of places are getting into table-top exercises” to make sure their people are really trained, added Harper.

In these exercises, employees from various departments come together to brainstorm and work through a hypothetical terrorist situation.

A facilitator will propose the scenario — an active shooter has been spotted right before the game begins, someone has called in a bomb threat, a driver has fled on foot after driving into a crowd — and the stadium’s staff is asked how they should respond.

“People tend to act on assumptions, which may be wrong, but this is a great setting for them to brainstorm and learn,” said Harper.

Technology and Safety

In addition to education, stadiums are ahead of the game, implementing high-tech security cameras and closed-circuit TV monitoring, requiring game-day audiences to use clear/see-through bags when entering the arena, upping employee training on safety protocols and utilizing vapor wake dogs.

Drones are also adding a protective layer.

John Tomlinson, senior vice president, head of entertainment, Lockton

“Drones are helpful in surveying an area and can alert security to any potential threat,” said Chavious.

“Many stadiums have an area between a city’s metro and the stadium itself. If there’s a disturbance there, and you don’t have a camera in that area, you could use the drone instead of moving physical assets.”

Chavious added that “the overhead view will pick up potential crowd concentration, see if there are too many people in one crowd, or drones can fly overhead and be used to assess situations like a vehicle that’s in a place it shouldn’t be.”

But like with all new technology, drones too have their downsides. There’s the expense of owning, maintaining and operating the drone. Weather conditions can affect how and when a drone is used, so it isn’t a reliable source. And what if that drone gets hacked?

“The evolution of venue security protocols most certainly includes the increased usage of unmanned aerial systems (UAS), including drones, as the scope and territorial vastness provided by UAS, from a monitoring perspective, is much more expansive than ground-based apparatus,” said Tomlinson.

“That said,” he continued, “there have been many documented instances in which the intrusion of unauthorized drones at live events have posed major security concerns and have actually heightened the risk of injury to participants and attendees.”

Still, many experts, including Tomlinson, see drones playing a significant role in safety at stadiums moving forward.

“I believe the utilization of drones will continue to be on the forefront of risk mitigation innovation in the live event space, albeit with some very tight operating controls,” he said.


In response to the terrorist attacks on Sept. 11, 2001, U.S. Homeland Security enacted the Support Anti-Terrorism by Fostering Effective

Warren Harper, global sports & events practice leader, Marsh

Technologies Act (SAFETY Act).

The primary purpose of the SAFETY Act was to encourage potential manufacturers or sellers of anti-terrorism technologies to continue to develop and commercialize these technologies (like video monitoring or drones).

There was a worry that the threat of liability in such an event would deter and prevent sellers from pursing these technologies, which are aimed at saving lives. Instead, the SAFETY Act provides incentive by adding a system of risk and litigation management.

“[The SAFETY Act] is geared toward claims arising out of acts of terrorism,” said Harper.

Bottom line: It’s added financial protection. Businesses both large and small can apply for the SAFETY designation — in fact, many NFL teams push for the designation. So far, four have reached SAFETY certification: Lambeau Field, MetLife Stadium, University of Phoenix Stadium and Gillette Stadium.


To become certified, reviewers with the SAFETY Act assess stadiums for their compliance with the most up-to-date terrorism products. They look at their built-in emergency response plans, cyber security measures, hiring and training of employees, among other criteria.

The process can take over a year, but once certified, stadiums benefit because liability for an event is lessened. One thing to remember, however, is that the added SAFETY Act protection only holds weight when a catastrophic event is classified as an act of terrorism.

“Generally speaking, I think the SAFETY Act has been instrumental in paving the way for an accelerated development of anti-terrorism products and services,” said Tomlinson.

“The benefit of gaining elements of impunity from third-party liability related matters has served as a catalyst for developers to continue to push the envelope, so to speak, in terms of ideas and innovation.”

So while attackers are changing their methods and trying to stay ahead of safety protocols at stadiums, the SAFETY Act, as well as risk managers and stadium owners, keep stadiums investing in newer, more secure safety measures. &

Autumn Heisler is a staff writer at Risk & Insurance. She can be reached at [email protected]