Future proofing against climate change: The impact, challenges and opportunities for ports and terminals

By Colin Fordham, senior underwriter, marine
Markel, Singapore

Climate change is having an increasingly significant impact on all of our lives, directly and indirectly.

In the same way that the extent of climate impact can vary depending on an individual’s lifestyle and circumstance, so it is with industry and global economies. Ports and terminal operations is certainly a higher risk industry, given the codependent nature of its relationship with the elements, oceans and seas.

At Markel, as leading global providers of insurance to this vital industry, we are acutely aware of these changes and challenges, especially given the need to factor the shifting risk landscape into future underwriting and coverage considerations.

Cumulatively, climate change issues – such as rising sea levels and coastal erosion – combined with CAT events such as wind and lightning storms and flooding, are causing severe disruption and damage. CAT incident maps are increasingly speckled with red dots and shipping lanes and routes, supply chains, regulatory oversight and investment in the industry are changing as a result.

Challenge and opportunity

This means challenge, but also opportunity. The first challenging decision ports and terminals must make is whether to stick to their current location or relocate to less exposed, more protected areas. Ongoing operations that are less likely to be impacted by climate change could also be futureproofed, but this is likely a less pressing consideration for most.

Opportunities include the chance to redesign exiting port design and layout, to optimise land use, and to upgrade and enhance operational procedures and equipment. These improvements could lead to increased productivity, greener operations, reduced carbon footprint, a safer working environment, cost saving and greater competitiveness.

However, greener and more efficient, cost effective sites and operations come at a cost. Ports and terminals by their very nature are big and require large areas of land, years of planning and massive investment. Planning poses extraordinary complexity in terms of both time and cost, including: environmental impact assessment; strategic positioning; local and national infrastructure changes; impact on affiliated industries and customers; future proofing operational capabilities, and; built-in climate change resilience.

Once the planning phase, which of itself is costly and time-consuming, is complete, there follows a need to acquire the land, build the facility, develop local and national infrastructure and to raise the capital to pay for it. An example of this is the Port of Tuas in Singapore¹, which is being built to replace several older terminals spread along the south coast of Singapore and thus release that land for redevelopment. First conceived in 2014, the Port of Tuas opened the first of four phases in 2021 with all phases expected to be completed in the 2040’s.

There are currently more than one hundred ports and thousands of terminals under construction around the world. These new ports and others in the pipeline will be looking to their suppliers, including insurers, to develop newer, more flexible and innovative solutions to meet their future needs.

One example would be a port operator’s exposure to property losses and how an insurer’s willingness and ability to innovate the parameters of traditional property insurance cover might be impactful. If a port is planning future investment in new technology, such as automatic cargo handling equipment, would they welcome replacement of their manually operated quay crane now or would they prefer to defer replacement for an automated crane meeting future plans? If this kind of future proofing is factored in during underwriting, is it not possible to facilitate greater flexibility and more fit for purpose insurance solutions?

¹ Tuas Next-Generation Port - Singapore Maritime Foundation (smf.com.sg)

About Markel International:

Markel International is a division of Markel Group Inc, a US-based holding company trading on the New York Stock Exchange (NYSE: MKL). Markel International writes insurance and reinsurance business through six divisions and through offices across the UK, Europe, Canada, Latin America and Asia Pacific. Markel International’s insuring entities include Syndicate 3000, Markel International Insurance Company Limited, Markel Insurance SE., and Markel Resseguradora do Brasil S.A. Its UK national markets business also provides legal and professional fees insurance cover as well as legal and tax consultancy services.