'Responding to marine pollution events requires effective planning'
Companies need proven systems and processes to support prompt and accurate claims management and assessment to ensure the amounts involved accurately reflect damages incurred, including costs of remediation, property damage, business losses and other damages
As marine exposures increase and nation states continue to regulate the treatment of maritime pollution incidents, pre-incident planning has never been more critical
Recent history in the maritime sectors has been defined by major losses, many of which have a pollution element, turning what may have been a straightforward recovery into a far more complex and potentially expensive situation for all concerned, including insureds, insurers, salvors and others.
The very nature of the maritime sector and its global reach means no one can be certain they will not experience a major loss or a significant event that can lead to such a loss. When it comes to pollution, past losses have highlighted the variability of containment and clean-up costs and the unpredictability of third-party claims. In the US, this is compounded by an often onerous litigation environment.
Post-Exxon Valdez the US has implemented the Incident Command System (ICS) structure for marine pollution incidents. It was initially introduced in the western US to address wildfires but has now also become the standard for management of marine pollution incidents. The system has a tiered response dependent on an incident’s severity and required mitigation resources. It highlights that a prudent marine operator should consider pre-incident planning.
Any plan must fully engage with experts and vendors, such as those deploying spill containment booms and other remediation equipment and personnel, addressing wildlife and other environmental issues. It should also set out structures for managing related financial issues, including cost auditing to facilitate resolution of third-party claims.
Fast response
Speed of response is a critical success factor: the early attendance of appropriately qualified response experts facilitates identifying and, if appropriate, resolving claims. Proven systems and processes are needed to support prompt and accurate claims management and assessment. This ensures the amounts involved accurately reflect damages incurred, including costs of remediation, property damage, business losses and other damages provided for by the applicable legal standard.
In the past, the maritime industry focused planning efforts primarily on incidents that might occur in the US, northern Europe and other industrialised economies. More recently, as the world continues to evolve, the focus has become increasingly global. Vendors and support systems must be in place to ensure the prompt deployment of expert assets if a major loss occurs, wherever it might be. These assets need to be familiar with local regulations and how to address such incidents. The first 72 hours are critical.
The very nature of the maritime sector and its global reach means no one can be certain they will not experience a major loss or a significant event that can lead to such a loss
This often entails correspondent relationships to ensure global experts are able to supplement local resources with the requisite financial/audit, third-party claims, environmental and other experts required to initiate a comprehensive and effective response.
Some recent examples illustrate how issues can arise: first, an incident on the US East Coast in which a cargo container fell overboard. In doing so, it struck and punctured the vessel’s bunker tank, creating a leak that went unnoticed for several days. Second, a roll-on/roll-off vessel capsized with up to several thousand vehicles aboard containing fuel and lubricants. The vessel’s bunkerage also needed to be secured.
As larger vessels are lost or in distress, the industry is discussing how the world can create salvage capabilities to meet the challenges that will occur when one of the new mega-vessels is lost. The grounding of Ever Given in the Suez Canal affords an ample illustration of the increasing costs incurred during a large salvage operation, and the related costs of maintaining such equipment in ready mode awaiting such losses.
Stress testing
Although the maritime sector continues to recover from the effects of the pandemic, there is a recognition creating a pre-planned pollution ICS-type structure comes with a cost towards which responsible and prudent operators will significantly contribute. And simply having an ICS and putting it in a draw is not enough; operators should stress test their ICS by conducting regular crisis response exercises to ensure the strategy is fit for purpose. The cost of failing to react swiftly to contain the pollution, its environmental impact and the associated third-party claims and possible penalties can run into billions.
While the International Union of Marine Insurance and international protection and indemnity clubs have been working hard with coastal states to manage expectations and educate the regulators on the limitations in the potential response, nation states are increasingly demanding in terms of the response to pollution incidents.
Operators and insurers must be better prepared for future losses wherever they may occur. History tells us the costs of delay and indecision can be significant in a world that is becoming ever more connected and litigious. Global Risk Solutions remains passionate about delivering people, processes and technologies to plan for, manage and respond to marine pollution risks.
Steve Gosser is chief executive of environmental risk management solutions at Global Risk Solutions