‘Tread carefully when purchasing cover from local insurers’

Insuring cargo in Zambia could be a risky business, warns Vincent Witt, managing director of Aon Zambia, a subsidiary of Aon Corporation, the only global risk consultant and insurance broker operating in the country. Liberalised in 1992, a market that up to that time consisted of a single state-owned insurer now has nine Zambian insurance companies offering cargo insurance. The relatively small size of the market and low statutory paid up share capital requirements means that “many insurers are under-capitalised and this has therefore inhibited the market’s ability to retain meaningful levels of risk,” he says. And the risks are real. “We have seen significant insurance claims involving the theft of copper concentrate and copper cathodes, cobalt, anode slimes, and foodstuffs,” he told FTW. Due to the poor state of many roads in the country, there are also regular claims for machinery damaged in transit. “Purchasers of covers from local Zambian insurers must be very careful. Investigate the credit rating of the insurer, and find out how willing they are to pay claims,” he advises. Great care must also be taken to read the fine print. “Local policy wordings often include a plethora of warranties – many of which are impractical or virtually impossible to comply with, as well as a large number of exclusions which limit the efficacy of the cover,” he says. “Furthermore, liability covers such as professional indemnity for freight forwarders, bailee’s/warehouseman’s liability and the like are difficult to obtain and tend to be limited in scope and very expensive.” Witt advises operators to seek specialist liability covers in other markets, provided that Zambian insurance legislation is strictly complied with in the process. Owners of freight cannot assume that the haulier or the warehouse operator have sufficient insurance in place. “When dealing with service providers and third parties, such as hauliers, ensure that they have adequate liability limits as Zambia is becoming a more litigious country. Frequently local service providers have inadequate liability cover,” he warns. When there is a loss, expect to wait. “There is a shortage of locally registered loss adjusters in Zambia, which means that delays in loss assessments and therefore claims settlements can be expected,” he says. One of the ways to manage both risk and cost is to structure the import and export agreements so as to allow access to external insurance markets, but at all times local insurance legislation must be complied with. “A considerable number of imports and exports are on a Cost, Insurance and Freight (CIF), or Free on Truck (FOT) / mine gate basis respectively, thereby accessing external insurance markets. This is driven by lower external market insurance rates, quicker claims settlements and enhanced security,” he added.