Hurricane Damage Predicted to Get Worse

By Wendy Laursen 2015-08-18 22:26:48

Hurricane Katrina struck the U.S. Gulf Coast on August 29, 2005. Katrina was the 11th named storm and fifth hurricane of the 2005 season – the longest and most severe hurricane season in history. Three of the storms (Katrina, Rita and Wilma) rank in the top 10 costliest global windstorm events of all-time.

The severity of windstorms, and their consequences, could get worse than this, says insurer Allianz Global Corporate & Specialty.

To mark the 10-year anniversary of Hurricane Katrina, Allianz Global Corporate & Specialty (AGCS) has released a report Hurricane Katrina 10: Catastrophe Management And Global Windstorm Peril Review. The report analyzes windstorm risks and losses and examines the business lessons learned from Katrina for future global windstorm loss mitigation, given increasing weather volatility.

Risks are increasing

The report states that while there has been no conclusive answer to the question of how climate change impacts storms, most scientists agree that the severity rather than the frequency of windstorms will increase in future. Based on Allianz experience the severity of losses from weather events including windstorms is already increasing.

A principal reason for this is the continuing economic development in hazard-prone areas. In the hurricane-affected state of Florida for example, the population in 2014 was just under 20 million, compared with just three million in 1950. It is a trend that is being repeated at apace across Asia.

In future, further population growth and expansion of industries, particularly in the developing world, will exacerbate the issue. For example, catastrophe modeller RMS describes Ulsan in South Korea as “an industrial exposure hot spot that is highly vulnerable to typhoons.”

The Northwest Pacific Ocean is the most active basin on the planet generating an average of 26 tropical storms per year compared with 11 in the Atlantic. 2013 saw the most active Pacific typhoon season in almost 20 years with 13 typhoons developing and tropical storm, Haiyan being the deadliest on record to hit the Philippines.

Even though the 2014 season was not as active and costly as the one that preceded it, it still contained Typhoon Rammasun, which made landfall in Southeast China as the strongest typhoon to hit the region since 1973 – a Category 4 storm on the Saffir-Simpson scale.

Larger Losses Expected

Increasing assets and a booming population clustered around tropical storm hotspots in the face of intensifying storm activity means the potential for larger windstorm losses across Asia continues to increase.

Ten years ago, the top 10 cities in terms of assets exposed were Miami, Greater New York, New Orleans, Osaka-Kobe, Tokyo, Amsterdam, Rotterdam, Nagoya, Tampa-St Petersburg and Virginia Beach, according to a global screening study by the OECD which made a first estimate of the exposure of the world’s large port cities (136 in total) to coastal flooding due to storm surge and damage due to high winds. These cities contain 60 percent of the total exposure, but are from only three countries: U.S., Japan and the Netherlands.

Based on the study’s projection for 2070, the exposure landscape looks very different with asset exposure forecast to grow dramatically, reaching $35,000 billion by the 2070s; more than 10 times the level in 2005 and rising to roughly nine percent of projected global GDP in this period.

Ports Should Be Prepared

Accumulation of risks is rising exponentially with the greater interconnectedness of the global economy, resulting in increasing business interruption, contingent business interruption and supply chain exposures, says Allianz. If natural catastrophe risk management procedures are not in place or have not been regularly reviewed, the magnitude of such losses can increase significantly.

Captain Andrew Kinsey, Senior Marine Risk Consultant, AGCS, says that one of the lessons of Hurricane Katrina for ports was that most of the wind damage occurred to the building envelope (roof covering, walls and windows). Poor workmanship and lack of knowledge were primary culprits.

Adequate preparedness before a storm arrives can mitigate potential losses, says Kinsey. The four primary areas of windstorm loss mitigation are:

* Pre-windstorm planning includes the development of a comprehensive, well-tested emergency plan, site and equipment inspections and prep for possible flooding.

* During a windstorm, response personnel should monitor for leaks, fire and damage.

* After a windstorm, the site should be secured to prevent unauthorized entry. An immediate damage assessment should be conducted if safe to do so.

Business continuity management is crucial as just-in-time production, lean inventories and global supply chains can multiply negative effects. Property damage and business interruption are usually covered by insurance policies, but often there is loss of market share, suppliers, clients and staff that need to be addressed.

“The ports that can assure their clients that these issues are being actively monitored and addressed are helping themselves attract and retain business,” says Kinsey.

The report is available here.

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U.S. Plans Methane Emissions Cuts

By MarEx 2015-08-18 19:47:21

The U.S. Environmental Protection Agency has announced standards that would reduce emissions of greenhouse gases and volatile organic compounds (VOC) from the oil and natural gas industry.

The proposal is a part of the Obama Administration’s strategy to cut methane emissions from the oil and gas sector by 40 to 45 percent from 2012 levels by 2025.

Methane, the key constituent of natural gas, is a potent GHG with a global warming potential more than 25 times greater than that of carbon dioxide. Methane is the second most prevalent greenhouse gas emitted in the United States from human activities, and nearly 30 percent of those emissions come from oil production and the production, transmission and distribution of natural gas.

The proposed standards for new and modified sources are expected to reduce 340,000 to 400,000 tons of methane by 2025, the equivalent of reducing 7.7 to 9 million metric tons of carbon dioxide. EPA estimates the rule will yield net climate benefits of $120 to $150 million in 2025.

The standards are also expected to reduce 170,000 to 180,000 tons of ozone-forming VOCs in 2025, along with 1,900 to 2,500 tons of air toxics, such as benzene, toluene, ethylbenzene and xylene.

The proposed standards require:

• Finding and repairing leaks;

• Capturing natural gas from the completion of hydraulically fractured oil wells;

• Limiting emissions from new and modified pneumatic pumps; and

• Limiting emissions from several types of equipment used at natural gas transmission compressor stations, including compressors and pneumatic controllers.

Industry body, API has issued a statement saying the EPA’s proposals are duplicative, costly and undermine America’s competitiveness. The industry has already led the significant reduction in methane through innovation and existing regulations, says API President and CEO Jack Gerard.

“The oil and gas industry is leading the charge in reducing methane,” he said. “The last thing we need is more duplicative and costly regulation that could increase the cost of energy for Americans. Even as oil and natural gas production has surged, methane emissions from hydraulically fractured natural gas wells have fallen nearly 79 percent since 2005, and CO2 emissions are down to 27-year lows. This is due to industry leadership and significant investments in new technologies.”

EPA’s own analysis shows that methane emissions from hydraulically fractured natural gas wells have fallen dramatically, says Gerard. Total methane emissions from natural gas systems are down 11 percent since 2005 – a direct result of industry innovation at the same time production has increased significantly.

“API supports a common sense regulatory approach that builds on cost-effective controls already required by EPA for new equipment,” Gerard said. “Combined with smart, voluntary efforts for existing sources, this approach will continue to lower methane emissions. To avoid undermining American competitiveness, we urge the EPA to coordinate its efforts and not add duplicative rules.”

The EPA will take comments on the proposals for 60 days.

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U.S. Tops Windstorm Damage Claims

By Wendy Laursen 2015-08-18 17:24:23

The U.S. is the top location in the world for windstorm related insurance claims, says insurer Alliance Global Corporate & Specialty, and there are lessons to be learnt for shipowners from the largest one, Hurricane Katrina, 10 years on.

To mark the 10-year anniversary of Hurricane Katrina, Allianz Global Corporate & Specialty (AGCS) has released a report Hurricane Katrina 10: Catastrophe Management And Global Windstorm Peril Review. The report analyzes windstorm risks and losses and examines the business lessons learned from Katrina for future global windstorm loss mitigation, given increasing weather volatility.

Hurricane Katrina, which struck the Gulf Coast on August 29, 2005, remains the largest-ever windstorm loss. Four thousand lives were lost during the 2005 hurricane season, 80 percent of the city of New Orleans flooded, $125 billion in overall damages and 1.7 million insurance claims filed.

“Katrina will always be remembered as an extraordinary natural disaster that affected millions of individuals and businesses and left an indelible impact on the global insurance industry,” says Hugh Burgess, head of corporate lines of AGCS. “Even without considering the influence of climate change, the prospect of increasing losses due to storms is more of a result of continued economic development in hazard-prone developed coastal areas. Preparedness limits windstorm exposure and Katrina has taught us many lessons on this front.”

Forty percent of natural hazard claims windstorm-related

Whether it is hurricanes in the U.S., typhoons in Asia or winter storms in Europe, windstorm ranks fifth in the top 10 causes of loss for business according to value of claims, according to an AGCS analysis of more than 11,000 AGCS major business insurance claims worldwide from 2009 to 2013. Windstorm losses account for approximately 40 percent of all natural hazard losses by number of claims and 26 percent by value.

The U.S. is the top loss location, accounting for half (49 percent) of the global claims analyzed, followed by Europe (19 percent), Asia (nine percent) and Central America (three percent). Growth of exposure is far outpacing take-up of insurance coverage resulting in a growing gap in natural catastrophe preparedness.

Marine sector accounts for majority of windstorm claims

Claims analysis reveals the maritime industry accounts for 60 percent of windstorms claims analyzed by number compared with 30 percent for property. Destruction of high-value pleasure craft, commercial vessels and cargo can significantly increase the loss tab.

“Claims can also be incurred due to water ingress into ships damaging the cargo,” says Captain Andrew Kinsey, Senior Marine Risk Consultant, AGCS. “Storms can also damage or destroy ports or coastal infrastructure, including warehouses and stored cargo, cranes, quaysides, terminals, buoys and sheds.”

Shipowners at Risk

Kinsey says shipowners need to understand the fact that ships are safest at sea; that is the environment that they are designed for. Diligent weather tracking and optimal route planning are critical during storm seasons. The effects of a major storm can have long lasting impacts on the infrastructure of a port.

Are the channels navigable, or has shoaling occurred? Are the terminals, pilots, tugs and other support services back up and operating to receive cargo?

“An often overlooked aspect of the infrastructure puzzle is if the follow on pieces of the supply chain are ready to handle and deliver the cargo to its final destination. Major storms do not just affect the waterborne aspect of transportation; road and rail systems are also impacted,” says Kinsey.

“At AGCS we advise shipowners of the importance of having a “Plan B” for handling their cargo and keeping their vessels on schedule. Contingency planning is critical, and it should not just be a binder that is kept on the shelf. It should be a plan that is regularly reviewed and the parties included actively involved in.”

Lessons learned from Katrina

Storm Surge – Katrina and other storms such as Sandy have helped to greatly improve catastrophe risk research and modeling. Katrina showed the impact of storm surge can often be more damaging than high wind speeds and that the physical size of the hurricane can affect the surge itself. Storm surge has been a contributing factor in half of the top 10 costliest storm losses in U.S. history, with these five storms having collectively caused almost $125 billion in insured losses.

U.S. Levees – The flooding caused by Katrina also showed the state of the levee systems in the U.S. to be substandard and in need of repairs estimated to be $100 billion, according to the National Committee on Levee Safety. There are many levee systems throughout the U.S. that would reveal similar deficiencies if subjected to the same level of scrutiny as those in New Orleans.

Wind Damage – Most of the wind damage caused by Katrina occurred to the building envelope, comprising roof covering, walls and windows. After Katrina, Allianz developed enhanced roof surveys, placing greater scrutiny on condition and age of roofs.

Demand Surge – The aftermath of Katrina was marked by a surge in demand for building materials, resulting in rising prices and supply shortages. This can also have peripheral loss consequences, as were seen post-Katrina with the use of substandard, hazardous resources.

“Today, the Gulf Coast is better prepared to withstand the effects of a hurricane due to better education, improved construction guidelines and increased third party inspection,” says Thomas Varney, Regional Manager, North America, Allianz Risk Consulting.

Extreme weather risk mitigation

Based on Allianz’s analysis, the severity of losses from weather events, including windstorms, is increasing. The average amount paid for extreme weather events by insurers between 1980 and 1989 totaled $15 billion a year. Between 2010 and 2013, this rose to an average of $70 billion a year.

The report is available here.

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Obama Heads To Arctic

By MarEx 2015-08-18 16:49:33

President Obama will be the first standing president to visit the Alaskan Arctic. He will travel to the Arcitc August 31 through September 3 for a series of climate change conferences and events. His trip comes two weeks after Shell was granted final approval to drill in the in the Arctic, which was on August 17th.

Obama plans to speak about the impacts of climate change has had on the region and well as globally. He will also attend a climate issues conference with government leaders and scientists in Anchorage.

The visit highlights the administration’s climate polices and in a video released by the White House on August 13, Obama called the situation one of the greatest challenges the country faces.

Watch the full video here:

But, environmental groups are not pleased with the administration polices and believe there is a disconnect between climate change rhetoric and Shell’s approval to drill in the Arctic. Greenpeace and Oil Change International released a report earlier this month criticizing Arctic drilling.

The report said that the administration and the oil industry have defended Arctic production as necessary for future U.S. energy requirements. Unfortunately, the report continued, the perception for the demand of fossil fuels will continue to create a climate disaster.

Click here to read the full report.

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Joint Sino-Russian Naval Exercises Off Japan

By MarEx 2015-08-18 15:26:11

China and Russia will conduct the largest joint naval exercise ever undertaken by these countries in the Sea of Japan during late August. More than 27 warships including air power will conduct training exercises in simulated anti-submarine combat and air defense.

China’s warships are expected to call at Russia’s Vladivostok port on August 20 and the military exercises will begin on August 28 in Peter the Great Bay, which is near North Korea. The Chinese will send seven naval vessels, six helicopters, five warplanes and 21 amphibious vehicles along with more than 200 marines. The Russians will deploy 20 battleships and support vessels, two submarines, ten warplanes, nine amphibious vehicles as well as a detachment of marines

This is the second time this year that the Chinese and Russians have participated in bilateral drills as part of their Joint Sea Program. Chinese officials say the drills are not targeted at any specific nation. But, the Russian Minister of Defense Sergey Shoygu has made it clear that the U.S. is a primary motivator for these military exercises.

The U.S., Japan and the Philippines recently did a joint military exercise in Subic Bay.

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2014 Towing Industry Safety Statistics

By MarEx 2015-08-18 13:14:23

Two weeks ago, the Coast Guard met with the American Waterways Operators for a National Quality Steering Committee meeting. During the meeting, the Coast Guard provided the safety report, ‘Towing Industry Safety Statistics: 1994 – 2014.’ These measures are presented annually and considered to be useful indicators of industry trends.

Maritime Commons attended the AWO meeting and is providing a summary of the key takeaways and charts from the report for your informational purposes…

Towing industry safety statistics report

For 15 years, the National Quality Steering Committee has used metrics to track overall trends in safety and environmental protection. These provide useful indicators of towing industry trends. Measures discussed during the AWO meeting covered here:

  • Crew fatality rate
  • Oil spill volumes
  • Oil spill rate
  • Vessel incidents
  • Crewmember injuries

Crew fatality rate

In 2014, there were four crew fatalities, which is the lowest number on record. There were a total of eight deaths reported to the Coast Guard but only four were directly related to towing vessel operations. Three were the result of crewmembers falling into the water and the fourth was a result of a crane barge striking a bridge, which caused the crane to collapse on the pilothouse of the vessel.

This chart shows the annual fatality count, the linear trend line, and the five-year moving average for calendar years 1994 through 2014.

Here is a chart of crew fatalities by accident type. The largest number of crew fatalities is attributed to falls overboard (72 of 144 or 50 percent). The next largest group of fatalities is attributed to asphyxiation.

The chart below shows the number of fatalities resulting from falls overboard for 2010 to 2014. While the number of annual fatalities for all accident types has gone down over the last five years, the number due to falls overboard has remained nearly constant.

Oil spill volumes

According to Coast Guard records, an estimated 200,363 gallons of oil was spilled as a result of 85 tank barge pollution incidents in 2014.

The largest oil spill of 168,000 gallons was 84 percent of the volume spilled in 2014. The second largest spill of 2014 was 15 percent of the total volume spilled.

*These two spills accounted for 99 percent of the total volume of oil spilled from tank barges for 2014.

Here is a table that depicts the gallons of oil spilled from tank barges in 2014:

Oil spill rate

Based on Army Corps of Engineer data, the oil spill rate for 2014 was projected to be approximately one gallon of oil spilled per 373,000 gallons transported, or 2.68 gallons of oil spilled per million gallons transported.

For 2013, the ACOE reported 273.1 million short tons, or approximately 74.9 billion gallons of oil transported by barge on U.S. waterways *. That amount represents 83 percent of all oil carried on domestic waterways. The amount of oil transported by barge in 2013 increased by 20.7 million short tons or 5.7 billion gallons. This represents a 7.6 percent increase over 2012.

While there has been an increase of +7.6 percent in the amount of oil transported by barge from 2012 to 2013, the projected oil spill rate of 2.68 for 2014 is still very low given the number of volume transported. Further, as noted previously, two marine casualties are responsible for 99 percent of the total volume spilled for 2014.

Vessel incidents

Towing vessel incidents include all reportable marine casualties that involved any towing vessel or barge. Each incident is only counted once, regardless of the number of vessels involved. In 2014, 89 percent of towing vessel casualties were of the low severity type. Medium and high represented 7 percent and 4 percent of all incidents respectively. There was a slight decrease in all incidents, to include medium and high severity incidents between 2013 and 2014.

*Something to note about the chart below is that 32 percent of medium and high severity incidents began with an allision and material failure was the first event in 20 percent of marine casualties.

Crewmember injuries

In 2005, the Coast Guard began documenting injury severity with each personnel casualty investigations. In 2014 there were 133 injuries to crewmembers where the “vessel class” or “vessel service” was either “towing vessel” or “barge.” The breakdown of injuries by severity is shown in in the table below where 67 percent of injuries were classified as minor or moderate. In 2013, 68 percent of the injuries were classified as minor or moderate. In comparing serious, severe and critical injuries, there was an increase in these injuries between 2013 and 2014.

The next chart summarizes crewmember injuries by severity, for calendar years 2006 – 2014. The data continues to show that almost three-quarters of injuries (72 percent) were minor or moderate in severity.

Injury data may also be grouped by type of accident. Four accident types appear to account for most of the higher severity injuries: Fall onto surface, Line handling/caught in lines, Struck by moving object Crushed between objects.

Conclusion

“The original mission of this [AWO and Coast Guard] partnership has matured to a point where we now able to focus not only on safety and the environment but also on how we, together, meet the needs of our nation in terms of maritime transportation,” said Rear Adm. Paul Thomas, assistant commandant for prevention policy. “There is a lot of great work that is ongoing and I look at this is an opportunity to forecast what’s coming and help us anticipate and prioritize that work. We need to look at this and ask where are those places that we might find ourselves in a stern chase if we don’t get out ahead today. The regulatory process can be tough. We need non-regulatory solutions.”

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US towing safety improves in 2014

Crew fatalities and accidents in the US towing vessel sector improved slightly in 2014, according to the most recent government data.
In a report covering towing industry safety from 1994-2014, the US Coast Guard (USCG) revealed that there were four crew fatalities in 2014, the lowest number on
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The Cool Pool

By MarEx 2015-08-18 12:01:28

Three LNG tanker operators have agreed to pool LNG tankers to reduce operating costs. “The Cool Pool” consists of U.S. traded Golar LNG (NASDAQ-GLNG), Gaslog (NYSE-GLOG) and Monaco based Dynagas, will jointly market 14 Tri Fuel Diesel Electric propulsion vessels on a charter basis of twelve months or less.

Dynagas made history in 2012, when the company’s LNG carrier OB RIVER became the world’s first LNG Carrier to transit and carry a cargo through the Northern Sea Route. The company performed all logistics, approval process and risk analysis for this effort.

Golar will supply eight vessels and both Gaslog and Dynagas will pool three vessels. But the operators will continue to handle crews and technical management.

The flood of LNG newbuilds from Asian shipyards has driven down charter rates to $30,000 per day from $130,000 per day just two years ago. A spokesperson of The Cool Pool said the consortium will allow the owners to optimize marketing of the vessels, improved scheduling ability and increase cost efficiencies.

Spot and short-term LNG trading has grown rapidly in recent years. In 2014, there were 78 LNG spot fixtures in the market compared to 97 this year. Spot and short-term LNG trades are defined by the International Group of LNG Importers (http://www.giignl.org/) as agreements lasting no longer than four years. Spot market fixtures accounted for 16 percent 2006 charters and rose to 29 percent in 2014.

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LNG carriers form spot pool

US-listed Dynagas Partners, GasLog and Golar LNG have created an innovative pooling arrangement amid a depressed spot-rate environment.
The arrangement, called The Cool Pool, will debut next month with 14 vessels: three each from Dynagas and GasLog plus eight from Golar. The pool will be run by
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