Earlier this month, an ultra-large containership belonging to shipping giant Maersk suffered what is being described as a ‘serious fire’ in one of its cargo holds while en-route from Singapore towards Suez, Egypt. Of the 27 seafarers aboard the Maersk Honam, three have died and one is missing as of this publication date.

This recent fire reignites longstanding industry concerns over the severity of fires on these large container ships, particularly since the Maersk Honam is relatively new. It was built in 2017 at Hyundai Heavy Industries shipyard in South Korea, is valued at $122 million, and has a nominal capacity of 15,262 TEU (twenty-foot equivalent unit).

According to an article published in Seatrade Maritime News, numerous insurers have issued warnings over the challenges of containership fires over recent years. “With temperatures reaching in excess of 500 degrees centigrade inside boxes, extinguishing the blaze is both extremely difficult and dangerous, and the fire can easily spread to other containers and the ship as a whole,” cites the article.

The Maersk Honam tragedy is similar to a fire aboard the MSC Flaminia in the Atlantic in July 2012 that claimed the lives of three crewmembers – two confirmed dead, and one missing. The insurance costs for both the vessel and cargo can be huge and far out of proportion of the number of claims caused by fire, notes Seatrade Maritime News. In fact, just 0.76% of cargo claims are due to fire, yet in terms of total costs of claims fire relates to some 28%. The Maersk Honam had 7,860 containers, equaling 12,416 TEU, on board at the time of the fire.

On the Heels of the Fire

According to Lloyd’s Loading List, Maersk has declared general average (GA) for the stricken Maersk Honam containership, with the British International Freight Association (BIFA) stating the insurance industry is bracing for hundreds of millions of dollars in claims from the fire. The U.K. trade body also confirmed that cargo owners have been advised of Maersk’s decision to declare GA.

In addition, BIFA noted that based on the evidence of images from the Indian coastguard, hundreds of containers in the fore section of the containership would seem to be a total loss, but boxes stowed behind the superstructure and in the aft section appear intact.

The cause of the container fire is currently under investigation. However, some BCO representatives suspect that the use of containerized cargoes of calcium hypochlorite, a disinfecting and bleaching agent with a tendency for self-ignition, may be behind the fire. Maersk in 2010 and 2015 said it would not accept these types of containers, however, the BCO reps suspect that perhaps misdeclared containers of this compound were responsible for the blaze. Maersk said in a statement a week after the fire that it was too soon to conclude whether the fire was caused by dangerous goods, and the line is said to be investigating cargo contents and manifests. 

Roanoke Underwriting specializes in helping agents and brokers secure commercial marine insurance solutions for global trade and logistics risks. For more information about our portfolio of products, please contact us at 1.855.213.4545.

Sources: Seatrade Maritime News, Lloyd’s Loading List, Maritime Executive

The international shipping organization BIMCO, based in Copenhagen, sees 2018 as the year container shipping growth and demand growth strike a balance, according to an article in American Shipper. “BIMCO forecasts demand to grow by 4.0-4.5 percent against a fleet growth of 3.9 percent in 2018,” stated Peter Sand, chief shipping analyst for BIMCO.

Sand also believes that our ports on the East Coast will see increasingly more ships as carriers leverage the new locks at Panama Canal, which opened in June 2016. “For the whole of the U.S. East Coast in 2017, the amount of inbound loaded containers grew by 10.1 percent,” Sand said in the American Shipper article. “It took the industry a while to embrace the expanded Panama Canal locks – but they are making use of them now. 2018 is likely to be the year where many container line networks calling the U.S. East Coast will become fully up-scaled by deploying ultra large containerships.” He also commented that we have yet to see the full impact of the elevated Bayonne Bridge, which enables mega containerships to enter into the New York/New Jersey port. The Bayonne Bridge is an arch bridge spanning the Kill Van Kull connecting Bayonne, New Jersey with Staten Island, New York City. The bridge was raised to 215 feet to allow for larger, more efficient ships.

In related news, imports rose steadily at the nation’s seaports in January, as U.S. retailers and manufacturers restocked after the holidays and Chinese suppliers stepped up shipments for the annual two-week factory shutdown during the Lunar New Year. U.S.-bound ocean shipments increased nearly 7.7% across all of the nation’s seaports in January, according to research firm Panjiva Inc. This is on the heels of a record-setting year for import shipments to the U.S., which rose 4.1% in 2017 from the prior year as the nation’s trade deficit expanded to $566 billion, its widest in nine years.

“That’s a direct reflection of the overall level of activity in the economy and our continued engagement in international trade,” said Paul Bingham, a trade economist with Economic Development Research Group, in an article in the Wall Street Journal. “Consumers are still buying goods made overseas and so are businesses.”

Roanoke Underwriting specializes in helping agents and brokers secure commercial marine insurance solutions for global trade and logistics risks. For more information about our portfolio of products, please contact us at 1.855.213.4545.

Sources: American Shipper, Wall Street Journal

Global insurer Munich Re, parent company of Roanoke Underwriting, earlier this month released a review of 2017’s natural catastrophes. Hurricanes Harvey, Irma and Maria, along with Mexico’s severe earthquake and other disasters, are estimated to cost the insurance industry a record $135 billion. Add to this uninsured losses, and the cost for overall losses is at $330 billion, the second-highest figure ever recorded for natural disasters, cites Munich Re.

“This year’s extreme natural catastrophes show how important insurance is in absorbing financial losses in the wake of such disasters,” said Torsten Jeworrek, Munich Re Board member responsible for global reinsurance business. “Munich Re is willing to develop this business further – we have the necessary capacity and expertise. For me, a key point is that some of the catastrophic events, such as the series of three extremely damaging hurricanes, or the very severe flooding in South Asia after extraordinarily heavy monsoon rains, are giving us a foretaste of what is to come. Because even though individual events cannot be directly traced to climate change, our experts expect such extreme weather to occur more often in future.”

Inside U.S. Losses

Following are several of Munich Re’s findings from last year’s losses as they relate to the U.S.:

  • The share of losses in 2017 for the U.S. was 50% compared to the long-term average of 32%.
  • Hurricane Harvey, a Category 4 storm that hit the Houston area, is responsible for overall losses of about $85 billion, making it the costliest natural disaster of 2017.
  • In September, Hurricane Irma, a Category 5 storm, destroyed the Caribbean before hitting the Florida Keys and then making landfall on the southwest coast of Florida. While Florida experienced moderate losses, Hurricane Irma ended up being the costliest natural disaster for insurers in 2017, with insured losses of around $32 billion.
  • Hurricane Maria slammed the island of Puerto Rico, a U.S. territory, on September 20 as a Category 4 storm. Production facilities, including those used to manufacture pharmaceuticals, were affected. Infrastructure on the island was almost totally crippled. Many, in fact, have been living without power for four months and are just now coming back on the grid. As of mid-January, 40% of the island is still without power.
  • Severe thunderstorms last spring, with accompanying tornadoes and hail, also contributed to the heavy U.S. losses. No less than five tornado-hail outbreaks caused insured losses in excess of $1 billion each.
  • Northern California’s wildfires in October resulted in overall losses of $10.5 billion, with insured losses expected at about $8 billion.

Lessons Learned

The most significant takeaway in the aftermath of these events, cites Tony Kuczinski, President and CEO of Munich Re, U.S., is the importance of mitigation and improved risk management, as evidenced by the stronger building codes adopted in Florida, which “can work to reduce losses and promote safety.” Another takeaway is the continued substantial insurance gap that exists – “even in a highly developed market like the United States where, for example, the vast majority of home and small business owners do not purchase flood insurance,” notes Mr. Kuczinski. “Our industry’s risk expertise, capital strength, and claims-handling infrastructure are critical to finding meaningful solutions, and Munich Re is an active participant in the public-private partnership that seeks to offer more Flood insurance options and promote flood protection.”

About Roanoke Underwriting

Roanoke Underwriting specializes in helping agents and brokers secure commercial marine insurance solutions for global trade and logistics risks. For more information about our portfolio of products, please contact us at 1.855.213.4545.

2017 Holiday Hours

Our offices will close at 1:00pm on Friday, December 22nd and will reopen on Tuesday, December 26th at 8:30am. We will also close at 3:00pm on Friday, December 29th, remain closed on Monday, January 1st to ring in the new year, and will resume normal business hours on Tuesday, January 2nd.

Improving freight conditions and freight rates in 2017 is expected to lead to a rebound in carrier profitability in 2018 as well as a jump in new big rig orders by trucking companies, according to ACT Research, publisher of commercial vehicle (CV) industry data, market analysis and forecasting services for the North American market.  Trucking firms, cites ACT, ordered 32,900 Class 8 trucks, those used on long-haul routes, in November, up about 70% from a year earlier. They ordered 35,700 Class 8 trucks in October, a 62% increase from September and a 167% increase compared with the same month a year earlier, according to FTR Transportation Intelligence.

Fleets are adding capacity as strong economic growth fuels surging volumes of freight through the nation’s transportation networks. Trucks are in high demand to carry record imports from ports to distribution centers, move machine parts and heavy goods for manufacturers and merchandise during the holiday shopping season, according to a recent article in the Wall Street Journal (WSJ). Shippers are paying higher rates as capacity tightens, driving incentives to put more trucks on the road.

“We’re seeing a lot of volume…and rates are following suit,” said Eric Fuller, chief executive of trucking company U.S. Xpress Enterprises Inc., in the WSJ article. “I think with increased rates people are feeling a bit more comfortable buying additional trucks.”

Additionally, as trucking firms tend to reserve new trucks from manufacturers in the final months of the year, the surge in orders portends that the industry expects the market to continue booming well into into 2018.

A majority of the big-rig orders is also coming from replacing older trucks, according to Stifel Financial Corp. analyst Michael Baudendistel. He projects the industry will build about 280,000 trucks next year, a 12% increase over the pace of this year. ACT analyst Kenny Vieth estimates 2018 orders at 322,000, saying that some manufacturers are offering deals on new rigs to gain more business as the market improves.

With new big-rigs set to take to the road, the real challenge for the transportation industry is finding enough drivers. The transportation sector has been struggling to find enough qualified drivers over the last few years due to a number of reasons, including demographics (aging population), regulations and lifestyle – the fact that truckers are away from home for long periods of time.

Roanoke Underwriting specializes in helping agents and brokers secure commercial marine insurance solutions for global trade and logistics risks. For more information about our portfolio of products, please contact us at 1.855.213.4545.

Sources: WSJ, Truck.com, ACT Research

Four industry organizations representing different sectors of the supply chain industry in a recent session at the Intermodal Europe Conference in Amsterdam put the spotlight on the need for container owners and operators to provide appropriate equipment for properly packing and shipping cargo, as set by the Cargo Transport Units (CTU) Code. The Global Shippers Forum (GSF), ICHCA International, TT Club, and the World Shipping Council (WSC), according an article in the Maritime Executive, have been working together for some months to improve safety through a focus on cargo integrity. The group’s goal is to bring greater awareness on the use of the IMO-endorsed CTU Code by all those involved in the shipping process.

The CTU Code calls for effective interaction between the shipper, which is responsible for providing requirements on the type of equipment appropriate to carry intended cargo, and the container operator in providing units that satisfy such requirements, meet applicable safety and manufacturing standards, and are clean. Faulty and badly maintained units may have as serious ramifications as incorrect and deficient packing of cargo inside the units.

“Engagement with governments and industry groups representing the diverse mix of supply chain stakeholders is one of our primary goals,” said TT Club’s Peregrine Storrs-Fox. “Through communication and understanding of the safety issues comes a wider implementation of the CTU Code and other best practices aimed at cargo and environmental safety.  To this end we urge regulatory and advisory bodies as well as associations to unite with us in spreading the good word.”

The industry group has been working with the IMO on the CTU Code and other regulatory recommendations, but concerns remain that governments may not effectively be communicating agreed IMO requirements and advisory information within their jurisdictions. “Although the IMO agreed to amend SOLAS to require a verified gross mass of packed containers as a condition for vessel loading, government enforcement of the regulation may be uneven,” explained Lars Kjaer of the WSC, in the Maritime Executive article. “We want to make sure that governments as well as industry are promoting the CTU Code and its best practices to all parties in the CTU supply chain around the globe.”

The group is committed to communicating the need for standard cargo safety standards to all stakeholders involved via governmental and industry events and linking with other organizations that can assist in promoting its widespread adoption.

Roanoke Underwriting specializes in helping agents and brokers secure commercial marine insurance solutions for global trade and logistics risks. For more information about our portfolio of products, please contact us at 1.855.213.4545.

Sources:  Maritime Executive, Dive

Thanksgiving Hours 2017

Roanoke will take time to celebrate family and friends this Thanksgiving by closing our offices at 3:00pm on Wednesday, November 22 and reopening at 8:30am on Monday, November 27.

Wishing everyone a wonderful holiday!

Two years ago this past October 1, in the face of Hurricane Joaquin’s 150-mph winds, 40-year-old cargo ship El Faro went down, sinking 15,000 feet of water to the sea floor near the Bahamas and killing 33 people on board. The worst maritime disaster for a U.S.-flagged vessel since 1983, the El Faro was one of two ships owned by TOTE Maritime Inc. that navigated in constant rotation between Jacksonville, Florida, and San Juan, Puerto Rico.

The Coast Guard recently released a 199-page report based on a Marine Board of Investigation and its recommendations that could eventually lead to changes in the shipping industry. The primary cause of the disaster, according to the report, was the captain underestimating the strength of the hurricane and overestimating the ship’s strength. Captain Michael Davidson, says the report, should have changed El Faro’s route to avoid the hurricane’s winds. Furthermore, when the 790-foot vessel got stuck, the captain, the report cites, should have taken more aggressive measures to save it.

The report, according to the Associated Press (AP), also said TOTE Maritime Inc., had not replaced a safety officer, instead spread out those duties among other managers, and had violated regulations regarding crew rest periods and working hours.

There were also problems with shipping safety inspections. Ships like the El Faro are inspected by surveyors who work for organizations called “classification societies” to ensure the vessels meet the Coast Guard’s safety standards under its Alternate Compliance Program (ACP), and certify whether they are seaworthy. The investigation report said the societies’ “surveyors are not held accountable for performing substandard ACP inspections that miss glaring safety deficiencies” and the Coast Guard doesn’t have a system for tracking which societies produced which below-par inspections. Moreover, the Coast Guard doesn’t produce yearly reports on ACP compliance or the work done by classification societies. The report says that this “the lack of transparency has enabled vessel compliance and surveyor performance issues to continue unabated.”

The investigation board in the report recommends a series of steps to make classification societies and surveyors more accountable and prepared for their role, but others feel only experienced Coast Guard inspectors should perform these shipping inspections.  For example, when senior Coast Guard inspectors in 2016 checked the El Faro’s sister ship, the El Yunque, and opened up a ventilation trunk on one of the cargo holds they “found enough rust and wastage of the metal trunk that an inspector hitting a hammer against the metal to check for decay accidentally punched a hole,” the report said. The same vents on El Faro were probably a way water spread from one hold to another as the ship gradually flooded before it sank 15,000 feet deep in the ocean, the report said.

Other findings in the report, according to the AP, include:

  • A few weeks before the accident, TOTE stopped employing in-port helpers who assisted its ships’ crews to safely load cargo. The Coast Guard said the El Faro’s crew had a hard time keeping up with the pace needed to get the ship out on schedule. A manager at the port took a photo of the El Faro the day before its final launch because unbalanced loading had caused it to lean heavily to one side, more than he had ever seen. He alerted stevedores, who added containers to the other side to rebalance the ship.
  • When the El Faro departed Jacksonville the oil level in its main engine was below the manufacturer’s recommendation although still within the range for operation. That became crucial when the El Faro began leaning in the storm, as the oil level no longer reached the pump. That starved the engine, shutting it down. The loss of propulsion left the El Faro helpless against Joaquin and its waves.
  • Four of the five Polish workers who had been temporarily assigned to the El Faro spoke little English and none of them had been briefed on safety procedures. The wife of one of the men told investigators “he had never seen or worked on a hulk like this” and that as he worked, rust would fall into his eyes.
  • A weather prediction system that would have sent emailed updates about Joaquin to Davidson had not been activated.
  • Less than six hours before the El Faro sank Second Mate Danielle Randolph, who was in charge of safety, was recorded telling another crewmember that drills were not taken seriously. She added that crewmembers rarely try on their survival suits to make sure they fit. As the ship was going down and Davidson ordered the ship abandoned, Randolph was heard leaving the bridge to find life vests either because none were stored there as required or she didn’t know where they were.

A comprehensive list of safety recommendations based on the findings of the report is covered here.

Roanoke Underwriting specializes in helping agents and brokers secure commercial marine insurance solutions for global trade and logistics risks. For more information about our portfolio of products, please contact us at 1.855.213.4545.

Sources: The Florida Times Union, ABC, The Maritime Executive

Roanoke Insurance Group is pleased to announce that Karen Groff, Executive Vice President of Operations, will assume the role of President as of October 1. Current President, Bill Sterrett will remain as Chairman. Karen will be responsible for the ongoing leadership, management and directional planning of the organization; Bill will assume various strategic assignments and remain on Roanoke’s Board of Directors as Chairman.

Sterrett commented, “Karen is a strong leader, results-oriented and constantly seeks ways to improve our products, services and ways of working. I am both confident and excited about the future of the organization with Karen as my successor. I have worked closely with Karen for most of her career and she cares deeply about our employees, customers and partners. She is whole-heartedly dedicated to our industry.”

Karen has more than 24 years of experience with Roanoke working in the specialty insurance areas of marine cargo, liability, transportation-related bonds and ATA Carnets. Karen has held various management positions in Roanoke’s regional sales and corporate offices, and is a champion of automation and creative client solutions throughout.

Without question, Bill Sterrett will be a tough act to follow after 32 years as President,” Groff stated, “but I am looking forward to the opportunity knowing I have his full support.” Groff also remarked, “I am energized by knowing the talent in our organization runs deep, and grateful that our clients are the beneficiaries. By empowering employees we unleash the best solutions for our clients. The key is to focus in and really listen to our clients in order to help them achieve their objectives, then execute!”

We appreciate your business, and look forward to supporting you and your industry now and for many years to come!

Freight costs have spiked in the wake of Hurricane Harvey, which decimated Houston and the surrounding region. As businesses reopen and look to stock their shelves, many shippers are experiencing significantly higher rates. For example, according to online load board DAT Solutions LLC, the cost to hire a tractor-trailer to move freight from Dallas to Houston was an average 66% more in the week ending September 2 compared with the previous week.

The higher trucking rates are due to several factors: deliveries into Houston is slow going as the city makes it way back from the storm, trucks are struggling to find return loads from the city as so many businesses that export to other parts of the country remain shut, and fuel costs have risen. In a recent article in the Wall Street Journal (WSJ), estimates from Triple A show the national average rate for dry vans, the most common trucks, rose to $1.90 per mile including fuel surcharges for the week ending September 2, up 6.7% compared with the previous week. Average diesel prices hit $2.68, up from $2.55 a week ago, according to AAA.

Harvey has also affected transportation markets outside of Texas. For instance, hurricane relief efforts have diverted trucking capacity from other regions, and cargo has been rerouted to other distribution hubs, such as Denver.

The Port of Houston was also impacted by Harvey, shutting down for a week after the storm made landfall on August 25th. This was in the middle of the peak shipping season as manufacturers and retailers restock inventories and get ready for the holidays. The hurricane was also “a big disruption” for trucking operations that move cargo from the port to nearby rail lines, cites the WSJ article.

Harvey, Now Irma

On the heels of Harvey, Hurricane Irma has roared through the Caribbean and is now making its way to South Florida. The Federal Railroad Administration has already declared a rail emergency in Florida, and trucking capacity is also tightening up, with some truckers hesitate to accept loads that could leave them stranded in the region. According to Riskpulse, a supply chain risk analysis firm, all shipping and trucking interests along the East Coast, particularly Florida, should be closely monitoring the storm for potential impacts by this weekend.

Roanoke Underwriting specializes in helping agents and brokers secure commercial marine insurance solutions for global trade and logistics risks. For more information about our portfolio of products, please contact us at 1.855.213.4545.