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Risk & Insurance, Oct 1, 2004 by Bruce Shutan

CRACKING DOWN ON MARINE CARGO

In "Speed 2," a Hollywood thriller starring Sandra Bullock and Willem Dafoe, Dafoe holds a luxury cruise liner and its passengers hostage. Though the movie quickly sank to the bottom rungs of the video store racks, the idea of holding ships or their human or commercial cargo hostage, isn't lost on those responsible for insuring the safety of the nation's ports.

Vessels of all types from oil tankers and natural gas carriers to ferries and luxury liners, have the potential to be used as weapons by terrorists.

"Biological or chemical weapons could contaminate an entire port through containers, resulting in hugely expensive decontamination and business interruption costs," says Worters.

A recent Munich Re study found that a chemical or biological contamination in Hamburg harbor could reach estimated losses of more than $4 billion, she says. As more attention is being paid to the likelihood of a loss as a result of an act of terrorism or war, more information is being provided to underwriters. Underwriters take into account a ship's destination, the commodity being shipped, risk management efforts by shippers and carriers, and technologies being used to improve security to bridges, tunnels and roadways.

"Marine policyholders must scrutinize their policies to ensure that any gaps or potential exposures are eliminated," Worters says.

Federally mandated port-security measures that took effect in July have fallen short, says Bonnie Levine, vice president of Boston, Mass.-based International Special Risks, Inc., a marine insurance broker. "I think the regulations are unclear and port authorities haven't found a way to make the clients using their facilities understand and accommodate them," she says.

The government says it has improved security. Ships calling in U.S. ports now must submit their security plans to the U.S. Coast Guard or face fines and not be allowed to dock. In addition, ports will conduct drills to test their ability to respond to a terrorist attack. Despite technological advances in cargo scanning equipment, Levine believes it's important to pay close attention to who's checking the passenger and crew since most explosives arrive via handbags or luggage.

In Boston Harbor, Levine notes that all passenger and container vessels as well as gaming boats and dinner cruise lines are expected to comply with the new rules as they relate to screening passengers and unauthorized personnel, checking deliveries and tying up vessels.

"And it's not just during the Democratic Convention," she says, referring to the gathering of the Democratic Party last summer. "It has to be all the time. I don't know how, with limited resources, this can happen."

The standard cargo-shipment perils of breakage, shortage and theft are still prevalent and while protection strategies haven't changed, Levine points out that packaging has become more advanced. Containers are better built and cargo-inspection technology has improved. The challenge is using these daily practices "to prevent a terrorist from blowing up your boat or getting into a container and blowing up your port," she says.