London (still) matters: an updated perspective
Following the success of London International Shipping Week (LISW), and its focus on the future of the marine insurance market, this article looks at the ways in which we expect London will set itself apart from other global markets, as discussed in our June report on the LMG’s London Matters 2017 and at LISW.
Indications are that there were at least 160 officially organised events, plus 30-40 unofficial events, arranged around LISW, of which Kennedys is a proud sponsor. The estimated number of attendees was between 15,000 and 22,000, making it one of the largest shipping events globally. The next event will be in 2019 and there is a suggestion there may be coordination with other events at or around the same time in London.
Shipping clients have sophisticated insurance needs. The London Market excels both in terms of technical underwriting expertise and in product innovation. Several advancements are providing the opportunity for London to showcase its talents.
Autonomous vessels are undoubtedly the future of shipping as highlighted in our article earlier this year. Technological advancements are moving at such speed that it is predicted that the world’s first fully-autonomous ocean-going vessel will be in operation by 2035. Whilst crewless vessels will inevitably eliminate some of the traditional areas of risk, there will be new technological, legal and regulatory obstacles with which the insurance market will need to grapple.
The operation of autonomous ships will need to be at least as safe as existing vessels if they are to secure regulatory approval, and the support of ship owners, and – importantly - underwriters.
Central to the safe and successful operation of autonomous vessels is cyber security. In view of the fact that 90% of all products made and sold globally are transported by ship, recent cyber-attacks such as the ‘Petya’ attack on Maersk in June 2017 have brought into sharp focus the threat posed to the marine industry. For example, a cyber-attack causing a collision or disruption to a vessel’s navigation system at a main port (particularly an intelligent port) could have a significant ripple effect on the worldwide supply chain.
Digital security systems will need to keep pace with the technology for autonomous vessels to prevent/reduce the impact of cyber attacks. Questions could be raised in the future about a vessel’s seaworthiness if it is susceptible to cyber attacks.
Moreover, it is imperative that underwriters consider policy wordings carefully. Although cyber-gap policies are being developed, to remain competitive underwriters will need to quickly familiarise themselves with the developing risk profile and adapt their marine policies to meet client’s changing demands and, where appropriate, limit their own exposure.
Whilst China and South Korea continue to dominate the volume shipbuilding market, Europe is leading the way in developing bespoke ships. The controversially named Sir David Attenborough, a polar research vessel built by Cammell Laird is a prime example. London’s geographical location, as well as its specialist underwriters, means it is well-placed to pick up the risks of those involved in the design, construction and operation of these vessels.
- ‘Big Data’ - vast amounts of consumer data (Big Data) are being collected and analysed by companies on a continual basis, allowing them to intelligently anticipate customer behaviour and, in turn, patterns of supply and demand. Sharing data ranging from the ship’s speed, to the temperature of cargo, assists in optimising not only the ship’s own eco-system, but also with route optimisation, maintenance costs and asset tracking.
- Intelligent Ports – the recent emergence of these ports is aimed at achieving a more efficient, safe and low-cost business environment in which traffic flow, logistics and information are intelligently managed and shared.
- Blockchain technology for marine insurance - this platform is designed to connect brokers, insurers and shippers to a distributed ledger. The platform enables details such as key stakeholders, as well as the risk and exposure data relating to a specific shipment, to be recorded and then be automatically integrated into an insurance contract. This new technology hopes to deliver cost savings and operational efficiencies.
London Market Target Operating Model (LMTOM)
Within the London insurance market itself, technological changes are being made to improve accessibility, reduce operational costs and improve efficiencies. LMTOM has launched a number of different initiatives including the introduction of Placing Platform Limited (PPL), which allows risks to be quoted and bound both face-to-face and electronically, creating a digital information flow and audit trail. Marine policies began being placed via PPL from March 2017 and further developments to PPL are underway to maximise the utility and impact of the platform.
London is in a strong position. Its technical underwriting know-how remains a major selling point for clients with sophisticated and evolving insurance needs, whatever their location. The London market is at the forefront of developing new products and driving efficiencies in operating models. Our maritime counterparts are at the forefront in technological innovation. Our location, as well as our long-standing expertise, should mean the future is bright.