Concentration of Risk


The ability of shippers to send so much more high-value cargo on a single vessel creates a concentration of risk that worries underwriters.


“The mere size creates a problem for underwriters in really assessing the risk for any given shipper, where they may be tripling the amount of value that they may be shipping on one vessel.”


Tom Denniston, Lockton


Concentration of cargo owners’ interest is the biggest concern on the larger cargo container ships and liquid tanker vessels that are being built. The larger vessels enable a shipper that may be putting 200 containers on a ship today to triple the amount of cargo being moved on one vessel. The exposure is even greater when we consider the types of high value cargo that have become so prevalent: TVs, appliances, and semiconductor chips. Consider the concentration of risk facing underwriters when a vessel contains cargo worth billions of dollars. To calculate the maximum probable loss, an underwriter would consider the potential cost if two giant vessels collided and sank.


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.


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