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What's in store for the industry? A risk engineer's perspective
June 05, 2018
Readers are no doubt familiar with the various changes taking place within our industry. These include, most notably: progressively larger ships, terminals and logistics centres; the increasing use of automated processes and autonomous control systems in all facets of the business; new operating models and procedures enabled by blockchain, big data and cloud computing; and new/expanded routes, e.g., trans-Arctic, Panama Canal and China’s Belt & Road initiative.
As these developments unfold, it’s clear that marine risk engineers will have to become even more versatile and technologically astute. And as seafaring experience becomes less relevant, expertise in diverse fields like automation/robotics, cybersecurity, asset tracking, advanced materials, and building/ship design and construction will become more important.
Marine risk engineers have a unique set of skills for surveying the landscape and assessing the implications of various new technologies in the logistics industry. That’s because we have the opportunity to roam widely across all parts of the business; we can be found crawling around engine rooms, reviewing operating processes with terminal managers, inspecting protection systems in modern mega-warehouses, and on and on.
What are some of the potential outcomes/repercussions of the “disruptions” taking place within our industry, especially as they relate to marine insurance and the role risk engineering plays within our industry? Here’s my take.
Self-steering ships: Coming soon?
There is no question that more and more partially if not fully autonomous ships will be launched in the coming years as the enabling technologies – hardware and software – become considerably less expensive and more powerful. There is, however, an ongoing debate within the industry about how quickly this transition will occur.
Some observers predict that, compared to the automotive industry, shipping companies are likely to move more cautiously in adopting autonomous control systems. One reason for that is the fact that safely operating a massive vessel carrying highly valuable cargos in an ever-changing and dynamic marine environment is a vastly more complicated and risky undertaking compared to, say, a self-driving taxi maneuvering within a defined territory.
The international regulatory framework also could be a factor. The various global conventions like SOLAS or UNCLOS that govern our industry will need to be updated, and that won’t happen overnight. In fact, current maritime law doesn’t consider the possibility of an unmanned ship; salvors today might reasonably claim that a vessel without a captain onboard is a wreck.
Nonetheless, once the industry starts to embrace autonomous control systems – a question of when not if – self-steering ships should quickly become more common. That’s likely to have significant implications for the shipping industry and marine risk engineers. My colleagues and I, for example, could be expected to assess the safety and reliability of interconnected and sophisticated control systems as well as the capabilities and fitness of shore-based “crew” responsible for monitoring a vessel in real-time.
A more automated and transactional operating model
In the very near future, on the other hand, blockchain will make marine insurance more automated and transactional, and improve asset tracking. Marine insurance is a fast-paced, high volume undertaking involving multiple stakeholders. These characteristics make marine insurance a prime candidate for implementing blockchain platforms to streamline the underwriting process while also providing greater security and transparency. In this case, our industry has been a leader as opposed to a follower; we’re one of the first sectors to demonstrate the viability of blockchain.
And XL Catlin has been one of the first insurers to authenticate the potential benefits of blockchain in the marine sector following a successful 20-week proof-of-concept involving A.P. Møller-Maersk A/S, consulting firm EY, blockchain vendor Guardtime, XL Catlin and others.
Based on the success of this pilot, a global blockchain platform is set to launch later this year that will connect clients, brokers, insurers and third parties to distributed common ledgers that capture data about identities, risks and exposures, and then integrates this information with insurance contracts. The platform’s capabilities will include the ability to: create and maintain asset data from multiple parties; link data to policy contracts; receive and act upon information that results in pricing or business process changes; connect client assets, transactions and payments; and capture and validate up-to-date first notification of loss data.
Marine risk engineers will play a more critical and expansive role
In the wake of these and other technological innovations, the contributions of marine risk engineers will become even more critical. The data collected and analysed by risk engineers will play an important role in imparting a level of trust/confidence that the counterparties in a more transactional business model require.
At the same time, seafaring experience is becoming less relevant – and sufficient. Marine risk engineers are increasingly expected to operate across classes and support underwriting decisions in different lines-of-business including Hull, Cargo, Property, Construction, Liability and Cyber. That, along with the industry’s ever-growing scale, sophistication and interdependencies, means the skills and capabilities we relied on in the past will need to be extended and upgraded.
We will also have to contend with an evolving risk landscape. As automated systems and autonomous controls eventually become more common, new threats will be introduced, and the current liability regime will be transformed. Cyber, in particular, represents a multi-dimensional and demanding new risk; combating cyber-attacks promises to be an ongoing and escalating challenge.
Some open questions
These developments also raise an important question: With ever larger and more technologically advanced ships, ports and logistics facilities, how will we recruit and train a new generation of risk engineers who can support underwriting decisions in different lines-of-business, while also working with clients to create safer and more efficient operating environments?
I suspect this will be one of the most vexing challenges facing the industry in the coming years. And while a clear solution is not readily apparent, I believe that marine risk engineers’ contributions will remain so critical that coordinated efforts involving insurers, shipping/logistics companies, and the academic community will be launched to remedy this gap.
The shipping industry has repeatedly experienced disruptive change over the years, and marine risk engineers have always managed to adapt and adjust; while this voyage may not be as smooth as we’d like, I expect we again will weather the storm.
About the author:Jarek Klimczak is a former seafarer and Master Mariner. Nowadays he is a Marine Risk Engineer based in Singapore supporting a broad range of transportation clients, over the sea and inland. He can be reached at firstname.lastname@example.org.
This article was first published in Asia Insurance Review.