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TT Club: Extreme weather puts shipping under pressure

Extreme weather events due to climate change pose a growing threat to international supply chains, according to an analysis by the TT Club.

The French liner shipping company CMA CGM has just warned of severe storms off Europe’s coasts in the last few days of January. The Bay of Biscay, in particular, is likely to be very rough. The shipping company warns that delays and disruptions to supply chains are to be expected. Inclement weather is also increasingly appearing in insurers’ statistics as a risk factor and cause of damage.

The analysis of weather-related risks by TT Club, which specialises in freight transport and logistics insurance, highlights water damage to cargo in particular. The insurer’s analysis of claims over the past three years shows that In 32% of cases, inland waterway vessels were damaged by extreme weather conditions. Unsurprisingly, locations close to the coast are more prone to weather-related incidents (68% of cases), with 16% of claims caused by heavy rainfall leading to flooding. 74% of weather-related claims during this period involved property damage caused by strong winds and microbursts.

65% of the losses relate to maritime traffic

65% of the reported damage was caused by maritime traffic. This can be explained in part by the long time cargo spends in transit by sea and its exposure to different climate zones. Road transit was the second most important mode of transport at 14%. Wetting damage during storage accounted for 13% of reported damage, 31% of which was the result of flooding.

Recent and ongoing meteorological events, particularly in the Vancouver region, show that extreme weather events such as unprecedented rainfall, tidal surges and microstorms are becoming more frequent. While many storm events are considered geographically seasonal – such as those in the tropics – the global supply chain as a whole must take appropriate measures to prepare for isolated severe weather events. As a rule, wind forces are most severe in coastal areas. However, it is often the storm surge and flood risk that can cause major problems both on the coast and further inland.

Summer months increase weather risk for freight

Incident data compiled by the TT Club shows that cargo is more at risk during the traditionally wetter summer months in the northern hemisphere. The extreme flooding across much of continental Europe in July and August 2021 confirms this as an emerging (or occurring) risk. In addition, in recent months, various parts of the world have experienced exceptional rainfall in short periods of time, resulting in flash floods and significant damage.

Peregrine Storrs-Fox, Director of Risk Management at TT Club, explains: “The losses associated with such incidents can be far-reaching; water is relentless and has the ability to penetrate and cause significant damage. Flood water is inevitably messy, increases damage and in many cases leads to health problems. Extreme weather events are difficult to predict, but operators of warehouses, terminals and port areas need to refresh their assessment of the changing risk profile in relation to climate experience.”

More knowledge supports operational decisions

According to the TT Club’s assessment, understanding of meteorological trends is increasing, particularly with regard to global warming. The ability to monitor, record and predict weather patterns will also continue to develop. This does not mean that property, equipment and operations are physically protected. As an integral part of a thorough risk assessment, a better understanding of the weather could lead to better operational decisions in the future.

Many claims avoidable through better packing

The insurer’s analysis also revealed that 65% of cargo damage is due in part to the way goods are packed in a container or cargo transport unit (CTU). This 2020 data suggests that 25% of wet cargo damage was caused by water ingress into the CTU due to prior damage that should probably have been detected when the cargo was packed. Many claims can, therefore, be avoided by a sound pre-loading condition checking procedure and correct packing procedures.

The CTU Code and the more recent ‘CTU Code – A Quick Guide’ and the complementary Container Packing Checklist published by the Cargo Integrity Group (available in all six UN languages and Italian) provide invaluable guidance to supply chain actors on how to mitigate such risks.

Operational measures and best practices

“Climate change is a fact of life,” Storrs-Fox concludes, “so supply chain actors must inevitably factor extreme weather events into their risk assessments, however unpredictable they may be. However, sensible operational measures and the application of best practice procedures tailored to the functions of individual organisations will go a long way to avoiding catastrophic consequences when the next rainstorm hits.”

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Copyright: © TT Club

Caption: The insurer's analysis has shown that 65% of cargo damage is partly due to how the goods are packed in a container and transport unit (CTU) © TT Club