Assessing Exposure


Assessing the accumulation of risk for cargo in port areas or aboard vessels is a great challenge for underwriters, who rely on methodologies that are helpful, though the true test of their accuracy comes only after a loss.


“As a reinsurer we not only have to know each individual client’s exposure, but also the clash of all clients and accumulation at one site.”


Robert Huffert, Munich Re America


Marine underwriters rely on a variety of methodologies for evaluating their exposures, but the information they get is rough at best because there is no way to know exactly how much cargo is on a vessel or in a port at one time. Many companies consider an average value per container and try to estimate the number of containers in a port at one time. Then, by applying its own market share, an insurer can get a crude estimate of its exposure. This methodology works best when adapted for seasonality to take into account, for example, greater cargo values prior to the holiday season. Munich Re America now also uses satellite imagery to get an estimated count of containers. This method still relies on assumptions about average value and must take into account the type of goods that come in through that port. Only after a loss can an underwriter determine the accuracy of the estimate. In fact, post-loss analysis is critical to future determinations of potential disaster scenarios.


Copyright © 2011 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18