Cash-strapped exporters cut insurance corners at their peril

Citrus black spot (CBS)
remains one of the major
challenges facing the
country’s perishable
sector – and there’s no marine cover
available as it is a pre-existing or
inherent condition.
Bimesh Ugarchund, director
of independent marine insurance
brokerage Eikos Risk Applications,
however advises
shippers not to
underestimate
the importance of
insurance in this
regard and to insure
against unexpected
delays in the supply
chain.
“The risk of
rejection with citrus
black spot is very
high. While shippers
can get cover for
rejection, the black
spot has been such a
huge issue that insurers will tend not
to want to provide cover for this risk,”
he explained.
South African citrus producers
have invested millions of rands in
managing the risk of black spot from
a production level and high-level
delegations continue to engage with
the European Union.
The South Africans
are adamant it is just
a blemish, while the
EU has said it is far
more dangerous and
will infect their local
crops. Earlier this
year South Africa
suspended all of its
citrus exports to
Spain in light of the
ongoing debate.
“While shippers
may not be able
to insure against
the rejection of the fruit, there are
other options available to them.
Should the producer be “blacklisted”
while there are shipments en route,
some countries will allow shippers
to re-export or move the
fruit on to another market
willing to accept the goods
notwithstanding the black
spot. Getting cover for
these additional forwarding
costs is then advisable and
possibly for the difference in
pricing between the original
market and the alternative
market it is going to.”
He said even in cases
where rejection cover for
black spot was available, it
would in all probability not
be economically viable for
some exporters to insure for
this risk. However, they are
still exposed to the perils
of shipping for which they
should definitely be insuring.
“The increased costs
to ensure crops are free
of citrus black spot have
already impacted on margins
– and then there is also the
cost of wider multi-peril
crop insurance. Producers
and exporters do not want
to add further costs and
tend to compromise on the
insurance cover and cost.”
Even without black spot
shippers are already facing
increased costs. “Interest
rates are up, the fuel price
has increased, production
costs have risen – all of
this has a direct impact on
the cost of logistics in an
industry that is already far
from its market. It all etches
further and further into
producers’ and exporters’
margins and they are
tasked with finding
ways of managing it
all,” he said. “Then
there are the host of
regulations that have
to be complied with
both locally and
internationally.”
He said it
was therefore
understandable
that cutting
cost was a
priority but
doing so at
the expense of insurance was
extremely risky. “This can be
detrimental and it is often
more costly in the long run.”
INSERT & CAPTION
The increased costs
to ensure crops are
free of citrus black
spot have already
impacted on margins.
– Bimesh Ugarchund