‘Saving on insurance an expensive option’

More than 190 maritime incidents were reported in the six months from January to June this year. This represents significant financial losses to cargo owners without the requisite marine insurance to protect their financial interests in their cargo, and in particular for general average losses, according to Jeffry Butt, marine manager at Aon South Africa. “Many importers and exporters run the gauntlet of not insuring their cargo in a bid to save on costs. But cargo insurance is an essential means to guard against serious financial loss, and in particular as the application of general average losses grows and becomes more commonplace,” he told FTW. A General Average occurs when a voluntary sacrifice is made to safeguard the vessel, cargo and crew from a common peril – for example, jettison of cargo to lighten a vessel in order to get to the closest port to prevent a ship from sinking and even piracy. “If the sacrifice is successful, all parties contribute to the loss based on a percentage share that their cargo value bears to the full value of loss suffered, with the maximum contribution not exceeding the full value of their cargo,” said Butt. “If the cargo is not insured, it will not be released until the cargo owner posts a guarantee in the form of a cash deposit, bank guarantee or bond. If the cargo is insured, however, the insurance company will post the General Average Bond and Guarantee to meet the cargo owner’s contribution and facilitate release of the cargo.” The impact of consequential losses and trade disruptions is also a huge risk factor, he points out. “Salvage operations can take weeks and even months, leaving companies without their cargo and no sales activity. In the case of piracy, ships and cargo can be held for months on end before any ransom negotiations even begin. This leaves business massively exposed to profit loss risks if they are not insured properly,” he added. INSERT & CAPTION The impact of consequential losses and trade disruptions is also a huge risk factor. – Jeffry Butt