Advice from Expert: Marine Insurance – Not Only For Your Cargo

>> Last year 2017 about 170,000,000 containers were shipped around the world
>> An average of 1,582 containers are lost at sea each year. In 2013 total 5,578 containers lost, including 4,293 containers lost in MOL Comfort’s sinking
>> Every two or three days, there is a ship run aground somewhere

If your cargo value is low, and just an average 1,582 containers lost in transit per year, is it worth to spend money to buy insurance?

Your real lost could be much more than just the cost of your cargo.

Not many shippers know that, in maritime law, when you ship your cargo on a vessel, you are actually binded into a kind of “joint venture” with the shipping line and other shippers who have cargo on that voyage.

And if the vessel gets into trouble; is lost at sea, needs salvaging, or has to dump containers overboard to save the ship; then you and other shippers with cargo on board proportionally share these costs.

Per maritime law, ship owners are able to pass the bulk of their risk on to the shippers who use their service by a precedent called the “general average principle”.

Simply put the “general average principle” is where all parties in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency.

Even if the loss of your cargo might not be worth that much, your share of the cost for a voyage mishap could be huge.

The term “loss” in the “general average principle” applies to any loss on the voyage.  So even if your container or cargo is safe and sound on the vessel, you may still being asked to contribute towards the loss of other shipper’s container. This is based on the principle that the other shipper’s cargo was sacrificed to save not only the vessel, but your cargo as well.

Potential “general average” scenarios include:

Where the vessel runs agrounded in bad weather causing delays; you may be liable for a proportion of the ship damage, salvage costs and damage to other shippers goods

Where other shipper’s cargo is dumped overboard to save the voyage but yours is salvaged; if a “general average” is declared by the Ship’s Master, you would have to put up a cash bond or your Insurance puts up a guarantee before your goods would be released.

By not taking out marine insurance you are taking the risk that the loss of your cargo worth thousands could end up costing you hundreds of thousands.

>>> Advice from Florence Lam and insurance partner, contact at: florence-vn@vantage-logistics.com.vn