Specialist insurance broker, Ascend Broking, is warning that those relying on exports or imports of cargo to drive their business, could find themselves caught between the devil and deep blue sea, due to major changes in the world of marine cargo insurance. On the one hand, they could be more exposed to risk than ever. On the other, the options through which to insure those risks are becoming ever fewer.
Ascend, which is headquartered in Chelmsford, handles the marine cargo insurance requirements of major businesses relying on overseas trade, with marine cargo insurance not just applying to sea freight but also air freight and road and rail cargo. It warns that those seeking to insure their international goods in transit are potentially in for a major shock at renewal, with insurers either having left the market altogether or hiking premiums and imposing new policy terms that could impact on the insured’s finances and operations.
The issue stems, in part, from Lloyds of London having reviewed historic losses on various classes of business and decided to pull away from those on which major and recurring losses were being made. One of these was marine cargo, where over-capacity in the market had led to low rates over a considerable period of time. The Lloyds review has led to a reduction in underwriting capacity of 35%, with fewer insurers now having an appetite to get involved in this type of risk. This led to a premium increase in 2019 of 15% and is anticipated to lead to an increase of 10% in 2020. Meanwhile, restrictions on the levels of stock that can be held have also been imposed.
However, trends in the marine cargo world, relating to theft in particular, have also been responsible for driving up rates and hardening insurer attitudes. “The need for robust cover has probably never been greater,” says Ascend Broking’s managing director, Matthew Collins “and yet importers and exporters have fewer options at their disposal than ever, when it comes to insurance.”
The circumstances of 2020, with the supply chain disruption caused by Covid-19, have amplified the risks to cargo on a worldwide scale. Cancelled and postponed shipments, switched routes and ships calling into unfamiliar ports, all present major opportunities for thieves and it is not just about the theft of marine cargo. Covid-19 has seen changes in plan for many shipments, with cargo that was originally destined for delivery by vessel having to switch to rail at the last minute, in an attempt to get goods moving. This is creating new vulnerabilities for the cargo involved.
International organisations such as The Transported Asset Protection Association (TAPA) and the International Union of Marine Insurance (IUMI), are both warning that cargo theft, across all modes of transportation, is a massive threat and one having hugely negative impacts on supply chains. They also point out that much theft is arranged by organised crime syndicates, who steal to order and often infiltrate online platforms to access the accounts of legitimate users and divert cargo deliveries as they require.
Warehouses are also increasingly at risk from planned thefts, making depot-to-depot cover imperative for anyone transporting goods across the world, either on an inbound or outbound basis. Insuring cargo from point of departure to final delivery is crucial, particularly if businesses are seeking to find new markets outside of the EU post-Brexit and encountering new route risks for the first time.
Ascend Broking’s advice is to speak to an expert immediately, whether you are currently insured under a marine cargo policy or looking to buy one. Knowing what the shock may be at renewal time is key to absorbing it, with planning ahead being crucial, given the loss of insurance options.
Ascend’s marine team is already working with client to carry out in-depth surveys that can be presented to insurers, along with a full analysis of risk. It is also helping clients calculate just how much stock needs to be protected, to combat the reduction in stock-held limits that now applies to most of the policies currently available. Working together with clients, to resolve the issues, is becoming the day-to-day norm.
Matthew Collins concludes, “The new normal for marine cargo insurance will be a big shock to anyone who has enjoyed the soft rates that were experienced in this market prior to 2019. The insurers want their money back, or simply do not want to be involved. This is a challenging time and anyone needing to insure goods travelling by sea, air or rail freight – or even by road-freight overseas – or who is providing warehousing facilities for such goods in international transit, needs to get specialist advice right now, before they leave it too late to find affordable cover.”
For assistance with this issue, contact the team at Ascend Broking on 01245 449060. More information is at www.ascendbroking.co.uk