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Marine

Rough Seas Ahead for Marine Industry

The sector’s profitability is precarious, but investments in technology and recruitment could assuage some of its challenges.
By: | October 3, 2017 • 4 min read

The marine sector faced an uncertain and at times unstable year in 2016. Regulatory uncertainty, fluctuating shipment volume, tightening margins and changing technology challenged the industry and will continue to do so into 2017.

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But the convergence of trends in technology, labor, and market demands offer new opportunities as well as new risks for marine operators.

Marsh, which has a global marine practice spanning more than 100 countries, analyzed these trends in its recent report, “The Changing Tide of Risk: Expert Perspectives on the Marine Industry.”

Emerging Technology

New technologies are poised to help modernize the marine industry.

Logistics is one area ripe for a tech makeover. According to Marsh, container logistics is a $4 trillion per year industry “rooted in the byzantine world of legacy IT systems, massive amounts of data-entry type paperwork, and milestone management processes.”

A Maersk study concluded that about 30 individuals or organizations touch the shipment of a product using a shipping container – a process that involves as many as 200 transactions.

Blockchain offers a way to centralize data, documents and transactions, reducing risk of error, streamlining administrative processes, and cutting costs.

Uncertainty over environmental regulations makes it difficult for ship designers, owners and financiers to plan the best ship design, and it is unclear what incentives might be introduced by new regulations that affect operational decisions.

Some ports are experimenting with blockchain technology, but applications remain in the proof-of-concept phase.

Autonomous shipping holds promise as well. Marsh expects to see fully autonomous ships at sea by the end of 2020. Onboard technology can monitor cargo conditions, alert relevant parties to any issues, and provide records of incidents.

3D printing has also been tested by the Rotterdam Additive Manufacturing Lab to make metal castings. 3D printing can reduce the time it takes to make a casting from months to just weeks.

All of these technologies, however, increase exposure to hacking, with unknown impacts on business operations or worker safety. Hackers could break into connected systems to steal corporate data, intentionally damage cargo or ships, or interrupt business with a DDOS attack.

Human Capital

The world fleet grew by 3 percent in 2016, while shipments increased by 2 percent. But an aging workforce, lack of skilled laborers, and a lack of interest in the marine industry from young people mean shippers may not be able to handle the growth. According to the Marsh report, a study by BIMCO and ICS found that the marine industry could be short by as many as 147,500 officers by 2025.

In its efforts to recruit more workers, marine companies may benefit by improving gender diversity. Currently only 2 percent of seafarers are women, and 98 percent of those women work on cruise ships or in some type of service capacity. The Marsh report suggests that the industry must revamp its image to appeal to a broader pool of prospects.

Market Demands

International shippers will also face pressure to reduce greenhouse gas emissions. Global shipping is responsible for 2.3 percent of the world’s total emissions – down slightly from 2.8 percent in 2007.

The International Maritime Organization adopted standards to improve efficiency and cut emissions in 2011, and cargo shippers have since been able to reduce their carbon emissions even while shipment volume has increased.

But shippers are feeling the squeeze to further cut their sulfur emissions in addition to carbon. Significant emissions reduction won’t be possible without a viable alternative to fossil fuel, the report stated. Even with the ability to store energy in batteries, ships will still need a backup form of liquid fuel.

Uncertainty over environmental regulations makes it difficult for ship designers, owners and financiers to plan the best ship design, and it is unclear what incentives might be introduced by new regulations that affect operational decisions.

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Other challenging trends include cargo theft, which costs the U.S. about $50 billion each year, and falling export prices. The World Trade Monitor index shows global export prices at 20.5 percent below peak, Marsh said. Falling prices are largely due to excess capacity in heavily traded sectors and stagnant export volume.

Though shipment volume increased in 2016, industry researchers see the trend as short-lived and uneven across the globe. Prices and profit margins should improve, however, as global economic health continues to recover.

The Insurance Sector

Overcapacity is also challenging the market. More marine operators are shifting risks to non-traditional new entrants into the marketplace over historical markets like London or Paris, sometimes retaining more risk themselves. Prolonged complacency by underwriters “has done little to focus attention on the quality of tonnage being insured or the terms being offered,” the report said.

Overall, the report warns that the marine industry, including shippers, ports and every member of the supply chain, will face a difficult year ahead if it does not rein in excess capacity. A single Black Swan event could reveal inadequate insurance coverage and cause lasting damage to an industry already fighting for profit margin.

It is imperative for the marine sector to invest in attracting new talent, and in adopting technologies that can boost efficiency and help to control costs.&

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

The risk manager for Boyd Gaming Corp. says curiosity keeps him engaged, and continual education will be the key to managing emerging risks.
By: | May 1, 2018 • 4 min read

R&I: What was your first job?

I was trained as an accountant, worked in public accounting and became a CPA. Being comfortable with numbers is helpful in my current role, and obviously, the language of business is financial statements, so it helps.

R&I: How did you come to work in risk management?

Working in finance in the corporate environment included the review of budgets and the analysis of business expenses. I quickly found the area of benefits and insurance — and how “accepting risk” impacted those expenses — to be fascinating. I asked a lot of questions. Be careful what you ask for — I soon found myself responsible for those insurance areas and haven’t looked back!

R&I: What is the risk management community doing right?

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I have found the risk management community to be a close-knit group, whether that’s industry professionals, risk managers with other companies or support organizations like RIMS and other regional groups. The expertise of the carriers and specialty vendors to develop new products and programs, along with the appropriate education, will continue to be of key importance to companies going forward.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

As I’m sure many in the insurance field would agree, Hurricanes Katrina and Rita in 2005 changed our world and our industry. It was a particularly intense time and certainly a baptism by fire for people like me who were relatively new to the industry. This event clearly accelerated the switch to the acceptance of more risk, which impacted mitigation strategies and programs.

Bob Berglund, vice president, benefits and insurance, Boyd Gaming Corp.

R&I: What emerging commercial risk most concerns you?

The fast-paced threat that cyber security represents today. Our company, like so many companies, is reliant upon computers, software and IT expertise in our everyday existence. This new risk has forged an even stronger relationship between risk management and our IT department as we work together to address this growing threat.

Additionally, the shooting event in Las Vegas in 2017 will have an enduring impact on firms that host large gatherings and arena-style events all over the world, and our company is no exception.

R&I: What insurance carrier do you have the highest opinion of?

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With the various types of insurance programs we employ, I have been fortunate to work with most of the large national and international carriers — all of whom employ talented people with a vast array of resources.

R&I:  How much business do you do direct versus going through a broker?

We use brokers for many of our professional coverages, such as property, casualty, D&O and cyber. We are self-insured under our health plans, with close to 25,000 members. We tend to manage those programs internally and utilize direct relationships with carriers and specialty vendors to tailor a plan that works best for team members.

R&I: Who is your mentor and why?

I have been fortunate to have worked alongside some smart and insightful people during my career. A key piece of advice, said in many different ways, has served me well. Simply stated: “Seek to understand before being understood.”

What this has meant to me is try everything you can to learn about something, new or old. After you have gained this knowledge, you can begin to access and maybe suggest changes or adjustments. Being curious has always been a personal enjoyment for me in business, and I have found people are more than willing to lend a hand, offer information and advice — you just need to ask. Building those alliances and foundations of knowledge on a subject matter makes tackling the future more exciting and fruitful.

R&I: What have you accomplished that you are proudest of?

Our benefit health plan is much more than handing out an insurance card at the beginning of the year. We encourage our team members and their families to learn about their personal health, get engaged in a variety of health and wellness programs and try to live life in the healthiest possible way. The result of that is literally hundreds of testimonials from our members every year on how they have lost weight, changed their lifestyle and gotten off medications. It is extremely rewarding and is a testament to [our] close-knit corporate culture.

R&I: What’s the best restaurant you’ve ever eaten at?

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Some will remember the volcano eruption in Iceland in spring of 2010. I was just finishing a week of meetings in London with Lloyd’s syndicates related to our property insurance placement when the airspace in England and most of northern Europe was shut down — no airplanes in or out! Flights were ultimately canceled for the following five days. Therefore, with a few other stranded visitors like myself, we experimented and tried out new restaurants every day until we could leave. It was a very interesting time!

R&I: What is the riskiest activity you ever engaged in?

I am originally from Canada, and I played ice hockey from the time I was four years old up until quite recently. Too many surgeries sadly forced my recent retirement.

R&I: What do your friends and family think you do?

That’s a funny one … I am a CPA working in the casino industry, doing insurance and risk management, so neighbors and acquaintances think I either do tax returns or they think I’m a blackjack dealer at the casino!




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]