Ports and logistics specialist insurer TT Club may need to pay out on more than 1,000 containers after the massive explosion in the Chinese port of Tianjin earlier this month, but is certain to find the claim manageable, according to its veteran risk management director.
Early commentaries on the incident have sometimes singled out the London-based marine mutual as among those potentially facing a serious hit, given that it insures four out of five units in the world container fleet.
But crucially, in this case, TT Club does not have any property exposure in Tianjin, and while a four-figure number of containers are likely to be written off, the value per unit involved is limited, Peregrine Storrs-Fox pointed out.
The Thomas Miller-managed outfit is in surplus, and has extensive reserves. While it is not a P&I Club and therefore not part of the International Group of P&I Clubs pooling arrangement, it does buy reinsurance and part of the pay-out will be met by others, he added.
Mr Storrs-Fox told Lloyd’s List that insuring such claims is the bread and butter of what the club has been in business to do in its five decades of existence.
“I’ve been here for 30 years and certainly we’ve had our fair share of very significant claims,” he said.
“This certainly won’t be an insignificant claim, but at this stage I would not say it is likely to be one of the most significant, either.”
While liability remains uncertain at this point, the TT Club is not expecting huge exposure, because of the nature of the incident and the way that Chinese law operates.
In particular, the explosion occurred in a logistics and storage area, not the port itself, which is where most of the containers were situated. Most of the containers wharfside fortunately escaped damage.
“The incident has been notified by a number of members, but as yet, we have not got any clear picture as to how many containers may have been involved, because members do not know themselves.
“We’ll all have seen images that show containers tossed around like cardboard boxes in a supermarket yard, but at this stage we don’t have any clarity as to the number of containers.
“I suspect we are talking well into three figures and probably into four figures, but its conjecture at this stage.”
The value of a used dry container ranges from $1,000 or less to around $3,000, with specials such as reefers or tank containers inevitably pricier, but even then, relative inexpensive.
TT Club members can insure either at current value or at replacement cost. Where boxes are leased, there is a contractual value that must be paid back to the lessor. Where boxes are owned, they tend to be insured for their actual value.
“It’s definitely manageable. This type of event is going to be a larger incident. As we speak now, I can’t really give you an indication of how significant it will be,” Mr Storrs-Fox insisted. “But this is what we do, this is what insurance is about.”
In broad brush terms, the explosion is likely to mean an insured loss of broadly the same size of the Costa Concordia cruiseship casualty of 2012, although only an as-yet-unquantifiable proportion will fall on the marine market, according to sector specialists.
There will also be extensive cargo and marine property claims and claims on non-marine lines such as property casualty, death and personal injury, and business interruption.
Moreover, major supply chain disruption has also taken place, and the knock on effects and costs in terms of business interruption are likely to be substantial, according to major brokers.
Cargo insurers are understood to be in contact with their insureds and will be looking to see from whom they can make a recovery from in respect of the damage.
P&I Clubs are likely to have had inquiries from members seeking clarification as to whether they are likely to be held liable for cargo losses under the contracts or carriage.
Investigations are still ongoing in the aftermath of the incident, in which at least 114 people are known to have died