Marine cargo insurance essential as shipping grows

If you’re an importer or an exporter, it’s vital to cover your precious cargo in transit against a

seemingly endless array of risks.

Marine cargo insurance protects the goods carried by a ship – whether they are bulk

commodities or containers – but not the ship itself.

Last year, cargo ships accounted for more than a third of the 94 lost vessels on Lloyd’s List

Intelligence Casualty Statistics. The number of vessels being lost is falling, reflecting

improved safety standards, according to Allianz’s Safety and Shipping Review 2014, which

said there were more than 170 losses a year a decade earlier.

Sinking is the most common cause of ship loss, but others include collisions with other

vessels or harbour equipment, piracy or running aground.

The largest loss in 2013 was the five-year-old container ship “MOL Comfort”, which

suffered a crack amidships and broke in half, off the coast of Yemen, with more than 4000

containers aboard. The insured losses were estimated at $523 million, of which $440 million

was for cargo and $83 million for the hull.

One safety problem faced bycontainer ship operators is when the cargo inside containers

weighs more than was declared on the paperwork, often a ruse to save on freight charges.

Some bulk cargoes pose particular risks – for example, some solid bulk cargo such as nickel

ore or iron ore can behave like a liquid if high moisture levels are present en route.

This phenomenon, known as “liquefication”, could be behind the sinking of the

HaritaBauxsite in February 2013 in which 15 of 24 crew members were killed, Allianz

speculated in its review.

Interestingly, contemporary environmental expectations, means the cost of salvaging a ship

can sometimes be higher than replacing the vessel itself. For example, the Costa Concordia

which capsized off an Italian island in 2012 had an estimated total claim of $2 billion, much

of it associated with salvage operations not the hull loss.

Wild weather can also cause problems for cargo. For example, hailstorms can cause

significant damage to vehicles being shipped. In February 2014, the container ship Svendbord

Maersk lost more than 500 containers overboard at sea in high winds – the largest single

incident of its type recorded. Hurricanes are also a concern.

Floating containers – which can sometimes be salvaged – pose a crash risk to other boats and

ships. If they contain hazardous materials, there can also be environmental damage. Even

seemingly innocuous cargo is considered pollution – such as almost 30,000 plastic ducks and

frogs which escaped a broken container in 1992 and are still washing up around the world.

Estimates vary of the number of containers lost overboard each year, but they are an

extremely small proportion of the five or six million containers at sea on any given day.

Ninety per cent of global trade is still transported by sea – emphasising the importance of

Marine Cargo Insurance.

To find out more about Marine Cargo Insurance contact us

The above advice is general advice and has not taken into account your personal

circumstances, be sure to read the appropriate Product Disclosure Statement to ensure the

policy meets your individual circumstances