Port operators face significant liability risk unless they are properly advised by specialist insurers and are in possession of a bespoke port and terminals policy, a senior TT Club official has said.

Recalling September 11, Dan Negron, vice president at Through Transport Mutual Services (Americas), said reports from market analysts contained the sobering conclusion that reinsurance capacity would diminish significantly in the foreseeable future. Consequently, many weaker insurers would either restrict their coverages, or consolidate with others in order to maintain their capacity. Those insurers remaining in the market were likely to impose significant increases in their premiums.

"In simple terms, for the foreseeable future, the average purchaser of insurance is likely to pay higher insurance premiums for similar, or even lesser, coverage. A purchaser with unique insurance needs, for instance a port operator, or one who has suffered an adverse number of claims, may well be unable to obtain coverage - at any price," said Negron in a recent speech at the Panama Maritime VI World Conference.

"Because of this, the concepts of risk management and loss prevention are taking on an increasing significance in the establishment of an effective insurance management programme. For the owner or operator of a port installation, this means having greater control over the efficiency of his operation and having to maintain a greater awareness of the impact that his relationships with others will have on his insurance coverage."

Negron said a typical port authority could be one of three types: firstly a pure landlord, or a provider of equipment or premises, who does not perform any services. Its facilities might include marine terminals, passenger terminals, offices, piers and wharves, gantry cranes, container handlers and other heavy equipment. Secondly, an intermediate landlord, who provides both equipment or premises and some essential services - such as security, the publication of information about water depths etc, provision of pilotage and so on. The third type is an operational port, which provides some or all of the necessary port services: warehousing; marine terminal operations; container repairs; stevedoring and so on.

The greater the number of services offered by a port, the greater the operator's exposure to risk, said Negron. Operators may be liable for a multitude of claims, including: loss of or damage to cargo; delay in delivery of cargo or delivery to an inappropriate destination or improper person; injuries to third parties or loss of or damage to the property of third parties; liabilities arising out of pollution; and costs for clean up operations as a result of accidents, among others. In the event of any insurance claim being made, the complexity of multiple relationships with suppliers and clients could well serve to "muddy the water".

Explaining what policy issues could entail, he said a liability insurance policy contained two fundamental obligations. The primary obligation of the insurer was to indemnify the operator for liabilities he incurred arising out of a covered loss. Simply, if an operator caused a loss for which the policy provided protection, the policy would indemnify the loss.

The second obligation of the policy was to defend the insured against claims arising out of a covered loss for which he was not responsible. This was typically found in the costs provision of the policy, which included the costs of investigating, defending and mitigating, or reducing the potential exposure on a claim. In these cases, the policy was designed to defend the operator against the claim, and to seek recourse against the responsible party.

In no event, would a liability policy indemnify an operator for claims resulting from the improper actions of unrelated third parties, unless that cover was specifically endorsed onto the policy.

"The contractual undertakings that ports and terminal operators effect with their premises providers, equipment providers and subcontractors would have a direct impact on the quantum of insurance they would be required to maintain. An operator must be mindful of the impact that such arrangements would have on his insurance cover, or he might risk not having any insurance at all," said Negron.

'A well-structured liability policy, if written with the specific exposures facing ports and terminal operators in mind, would protect against the direct losses arising from the ownership or use of the port facilities as well as the contractual undertakings of the operators themselves. The policy itself must be supported by knowledgeable underwriters, capable of providing a local service - wherever in