Global Shipping

Full Speed Ahead

A dispute delaying Panama Canal construction was resolved, but further delays could be costly to shippers and exporters.
By: | March 25, 2014 • 3 min read
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Any further delays to widen the Panama Canal could have far-reaching cost implications for all parties involved in the construction project and the shipping companies and exporters who use the Canal, a marine risk expert warned.

The Panama Canal Authority (ACP) signed a deal this month to end a four-month dispute — and a two-week work stoppage — over $1.6 billion in cost overruns claimed by the Grupo Unido por el Canal consortium (GUPC) carrying out the work. The dispute had threatened to derail the whole project, which now is expected to cost nearly $7 billion.

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Under the terms of the agreement, the Authority and the Spanish-led construction consortium will each invest an extra $100 million in the project.

Zurich North America, which holds $400 million surety bond on the project, “worked diligently with the ACP and GUPC to reach an agreement on the matter and fortunately the two sides have had a successful negotiation,” said Michael Bond, head of surety, Zurich North America. “We congratulate both of them on effectively reaching a favorable outcome. Zurich was glad to have played a role in a solution that brought the project forward.”

When the Canal expansion is completed in December 2015, the new third lock will house 12 giant lock gates designed to allow larger cargo ships through, and double the shipping lane’s capacity.

But Douglas Sakamoto, class underwriter, marine, Liberty Specialty Markets, warned that any further interruptions could result in shipping delays, increased costs and lost shipping tolls.

“The forecast for work to be completed has changed from 2014 to 2015, which is still not a massive delay when compared to the dimension of the work and the expectation in terms of international trade turnaround,” Sakamoto said.

“However, a longer delay could impact several international trade industries since there are lots of related ongoing investments, such as work on several international ports to adapt them to the new vessels, and orders placed for the new-Panamax vessels.

“If the work can’t be completed for any reason and costs still continue increasing, there are a number of serious implications such as the termination of the agreement with the current consortium, and the bond policy may be required in order to provide the extra amount needed to complete the work.”

When done, the Panama Canal Authority is expected to double the $1 billion in revenue it currently receives from shipping tolls.

With more than 13,000 ships passing through the Canal every year, Sakamoto said, construction delays could mean restrictions in the amount of goods producers can export as well as increasing the time it takes to ship the goods.

He noted that producers of commodities, such as LNG, which are exported from the U.S. Gulf Coast to target markets like Asia and the west coast of Latin America could be affected.

In addition, grain producers in the Brazilian ports of Itaqui, Suape and Pecém would also lose out on shorter shipping times, he said.

Shipping companies that have invested heavily in new-Panamax vessels orders several years ago would similarly miss out on vital revenue, Sakamoto said.

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International port authorities that have poured vast amounts of money into developing their ports for larger vessels and cargo volumes would also be adversely affected, Sakamoto said.

Pressure to meet the new deadline for completion of 2015, he said, could also impact labor force costs and suppliers.

“The Panama Canal construction project has been highly debated,” said a spokesman for Allianz Global Corporate Specialty, “but it’s actually not unusual for a large construction project to run over/get delayed. In fact, that’s why with project cargo coverage, there is a particular element called ‘delay in start up’ protection to help mitigate that risk.”

Work on the Canal project is now 70 percent complete; however the delay has come at a considerable cost to Sacyr, the Spanish building company that is leading the consortium, which saw its share price drop 6.9 percent this month following a breakdown in initial talks.

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]
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Infographic: The Risk List

6 Non-Cyber Risks for Technology Companies

Tech firms face multiple perils in addition to cyber risks.
By: | July 9, 2014 • 2 min read

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The Risk List is presented by:

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The R&I Editorial Team may be reached at [email protected]
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Sponsored: Starr Companies

To Keep Cool in a Crisis, Companies Need a Comprehensive Solution

Corporate security threats now come in many forms, and mid-size companies should be prepared to cover them all.
By: | August 4, 2016 • 6 min read
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Threats against corporate security come in many forms, from intentional acts of violence to civil unrest to cyber-attacks. The perpetrators don’t discriminate by company size or sector, and the consequences can range from several thousand dollars lost to several lives lost.

The recent shooting in an Orlando nightclub that killed 49, for example, or last year’s San Bernardino shooting that killed 14, are somber reminders that terrorism and violence can erupt anywhere and in any type of business. In addition to loss of life, violence can translate into business interruption and property damage. In Ferguson, Mo., riots lead to over $4 million in property damage.

Cyber-attacks have also become commonplace, with hackers infiltrating private networks to steal data or hold it ransom.

Is your organization prepared for these risks?

“A lot of companies have a crisis response plan on paper, but they don’t have outside resources to come to their aid if there is an incident,” said Reggie Gibbs, Underwriter and Product Manager, Starr Companies.

Mid-size companies especially tend to lack comprehensive insurance coverage and crisis management services for a variety of security events due either to limited resources or an underestimation of their exposure.

Starr Companies’ Cyber and Terror Response (CTR) solution provides three coverages as well as crisis response services tailored to meet the needs of these companies. Each of its components addresses a common security threat.

SponsoredContent_Starr_0816“We don’t just want to indemnify the security risks our clients face; we want to help them actively manage them.”
 
— Reggie Gibbs, Underwriter & Product Manager, Starr Companies

Terror and Political Violence

“Political violence can be defined as a strike, riot, protest, or any type of unrest that gets out of hand and turns violent,” said Gibbs, who specializes in terrorism and political violence, workplace violence, and crisis management.

In the case of the Ferguson protests, any first party property damage or third party liability incurred by the disruption would be covered under the terrorism and political violence segment of the CTR solution.

In the case of a terror attack, organizations cannot necessarily rely on TRIA to pick up property losses. In the case of the Orlando shooting, for example, the likelihood of TRIA being invoked is low because property damage will not meet the threshold for coverage to kick in.

TRIA, reauthorized in 2015, provides a federal insurance backstop in the event of a terror attack. The U.S. Secretary of the Treasury, U.S. Attorney General, and U.S. Secretary of Homeland Security must declare an attack to be an act of terrorism, and property damage must exceed $5 million to trigger TRIA.

“We would still view the Orlando shooting as an act of terror, however, because of who the shooter claimed he was working for regardless if the ties to terror groups are clear or not. Therefore, our coverage would apply,” Gibbs said. Even if TRIA was enacted, however, companies would still have a lot of pieces to pick up following an attack. They may have injured or deceased employees, or face legal action from third parties.

Workplace Violence

For these situations, and any other incident of violence not driven by terrorism, the workplace violence component of Starr’s CTR solution would act as an umbrella to cover other liabilities such as legal liability, loss of life benefits, psychiatric care, and other crisis response services.

One such incident struck a Boston-area Bertucci’s in early May. An attacker wielding a knife drove his car into a Boston shopping mall before making his way into the nearby restaurant. He killed five, including restaurant workers and patrons.

“There was no ideological or political motivation behind it. He was just deranged.” Gibbs said. “Our workplace violence coverage can handle the loss of life benefits for both the employees and patrons killed in situations like this one.”

In the best cases, though, violence can be prevented altogether.

“If an employee reports a stalking threat, the policy would cover the expense of security guards,” Gibbs said. “In this case, it’s more of a pre-workplace violence coverage. It would de-escalate the situation.”

Cyber Liability

SponsoredContent_Starr_0816Attacks can also be non-physical.

Cyber extortion in particular is on the rise. Phishing scams lead employees to click on malicious links, unknowingly downloading ransomware onto their internal networks. The cyber criminals then hold companies’ networks ransom, asking for a sum of money in return for the release of data or to prevent a business interruption. The ransoms can be low — amounts that organizations can afford to pay.

“The hackers don’t want to attract the attention of law enforcement or regulatory agencies,” said Annamaria Landaverde, National Cyber Practice Leader & Professional Liability Underwriting Manager, Starr Companies. Landaverde specializes in the cyber component of the CTR coverage. “The FBI may not get involved if someone asks for $5,000. They are more likely to get involved if someone asks for $5 million.”

Since companies are not required by law to report cyber extortion —like they are for data breaches — many choose simply to pay the ransom and move on without generating any negative news headlines.

Starr_SponsoredContent“The hackers don’t want to attract the attention of any law enforcement or regulatory agencies. The F.B.I. won’t get involved if someone asks for $5,000. They will get involved if someone asks for $5 million.”

— Annamaria Landaverde, National Cyber Practice Leader & Underwriting Manager, Professional Liability Division, Starr Companies

“A California medical center recently had an incident like this where the hackers asked for $17,000 in ransom,” Landaverde said,” but the amounts can vary.”

While the ransom itself may seem manageable, many companies fail to recognize other costs associated with the identification and removal of the malware from their system. There may also be costs associated with forensics investigations, legal experts, public relations firms, third party lawsuits, and notification and credit monitoring.

“The cyber arm of the CTR coverage extends to liability that an organization would suffer as a result of a breach, or failure of security of the insured’s network,” Landaverde said. That includes not just cyber extortion, but outright data theft or denial-of-service attacks.

Crisis Management Services

SponsoredContent_Starr_0816“We don’t just want to indemnify the security risks our clients face; we want to help them actively manage them,” Gibbs said.

The fourth component of Starr’s CTR solution – crisis response — provides two outside consultants to insureds, with one specializing in “hard” security services like guards or instances of cyber extortion, and another focusing on crisis communications.

Without these outside services, there is only so much insurance can do in the aftermath of a crisis. Experienced consultants provide a range of security preparedness and response services to complement coverage and help insureds recover from an episode of violence or cyber event.

“From a communications perspective, our consultants can manage the public relations front to create clear and consistent messaging, but they can also stay in touch with families after a terror or other violent attack to make sure everyone stays informed,” Gibbs said.

They also serve as a first point of contact for insureds immediately after an event. If they need guidance quickly, consultants await at the ready.

“When a client purchases the product, they get a 24-hour hotline set up with one of our consultancies,” he said. “They can report an incident at any time, and our consultant will help either resolve a situation or deal with the aftermath in whatever way they can.”

While the Cyber and Terror Response package provides a comprehensive solution tailored for mid-size companies, Starr also offers standalone cyber liability and crisis management coverage on a primary and excess basis.

“For companies with greater exposure to a particular type of risk, or who simply want higher limits or greater customization, we have those standalone polices.” Landaverde said.

For more information on Starr Companies’ Cyber and Terror Response solution, visit https://www.starrcompanies.com/Insurance/CyberAndTerrorResponse.

Starr Companies is the worldwide marketing name for the operating insurance and travel assistance companies and subsidiaries of Starr International Company, Inc. and for the investment business of C. V. Starr & Co., Inc. and its subsidiaries.
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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Starr Companies. The editorial staff of Risk & Insurance had no role in its preparation.




Starr Companies is a global commercial insurance and financial services organization that provides innovative risk management solutions.
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