Archives for the ‘Other Commercial Lines’ Category

Trucking Turns To Technology To Blunt Insurance Hikes

Trucking companies considering deploying on-board cameras now have another reason to adopt them: lower insurance costs.

Truckers using the new Greenlight smartphone-based dashcam can get discounts on insurance products of up to 5 percent from Paul Hanson Partners, which is working with Greenlight.

That’s no shabby incentive at a time when trucking insurance is increasingly expensive and harder to get, with insurance companies such as Zurich and AIG leaving the trucking market or curtailing coverage as jury awards in accident lawsuits against trucking companies climb higher and higher.

“We’re not too far away from insurance companies forcing commercial fleets into using some type of telematics as a precursor to obtaining insurance,” said Jason Green, CEO of Greenlight. Insurers may wind up playing as big a role in the adoption of safety technology as regulators. Actuaries are going to have hard numbers on the difference in incidents for those who are using dash cams and those who aren’t. We’re getting a lot of presales and a lot of interest in Greenlight, because we tie it to an insurance discount through PHP.”

On-board cameras are just one tool that trucking companies may turn to as they try to blunt insurance costs that jumped significantly in 2016. Rising liability insurance costs are a concern to trucking operators and their shipper customers. Higher insurance costs not only put pressure on transportation rates, they threaten to force smaller trucking operators with fewer insurance options out of the business.

Green claims his company is unique in tying its forward-looking mobile dashcam and driver management system to lower insurance premiums, but he’s not the only one who sees a potential for cameras and other on-board safety systems to drive down insurance costs, or hold increases at bay.

“We’ve certainly seen an increase in auto liability severity,” Todd Reiser, vice president of transportation at Lockton Companies, said during a conference call with reporters last month hosted by Stifel Capital Markets. “In the past, worker’s compensation was more a hot button. That’s changed in recent years as claims become more severe. A million-dollar claim 10 years ago, unfortunately, now we’re finding is a three-, four-, five-million dollar claim.”

As a major trucking insurance broker, Lockton has broad visibility into the market.

“We’ve seen some major settlements and verdicts in 2015-16,” Reiser said. “One example is a $35 million jury award in a fatal truck crash in Texas. Those types of awards should concern shippers, too. Plaintiff attorneys can slap shippers with negligent hiring liability lawsuits following truck accidents.”

Reiser cited “a massive increase” in the use of on-board cameras as trucking companies and drivers gain experience with them.

“We’re finding more and more carriers are piloting cameras or have gone ahead and done the full implementation and are seeing significant impacts and frankly exonerations in cases where they may have been targeted for liability initially,” Reiser said. “As for trucking insurers making telematics a prerequisite for coverage, I see it moving more and more toward that direction. If you have all these various technologies we are sort of going to put you in a different category than those that don’t. The underwriting community has certainly embraced certain aspects of truck safety technology and for the first time … we’ve had underwriters say we will provide some sort of discount or credit as far as when and how truckers implement the technology.”

Reiser referred to lane-change warnings systems and collision mitigation systems as well as on-board cameras, but on-board cameras, in terms of cost, are an easier choice for many carriers. Greenlight wants to make the choice easier by replacing cameras with smartphones.

Replacing stand-alone cameras wasn’t what Green initially had in mind. His career has largely been focused on developing the point-of-view camera, first with a company called Twenty20 that he co-founded and later with Contour, a GoPro competitor now part of iON Cameras.  Greenlight started out as an onboard video recorder.

“I was looking at dashcam recorders. People were putting a camera on the windshield, and I thought, man, we could do this better using the phone. The big challenge was making it robust,” Green told JOC.com.  “Once we had that, we realized we had a telematics device that could capture data and video together from one source with very minimal hardware.”

A dash-mounted cradle works with iPhone and Android phones, and a mobile app converts the phone into a dashcam. In addition to video, drivers, as well as fleet managers and insurers, can see data from the system, including information on their performance during recent trips and safety scores.

“Some of our partners use the system for training,” Green said. “We will use the data to flag drivers when we see signs of a risk, hard braking, for example. We can send them training videos automatically. When they complete training it gets noted in the insurance account.”

Green initially had the consumer market in mind, and a consumer version of the product is available for $49.

“We got pulled into fleets because the opportunity is so good,” Green said. “You look at the cost of fleet operations and insurance and you can see why the need is so high.”

The initial market for the system is not over-the-road long-haul trucking, but final-mile logistics providers and local delivery companies.

“We started by looking at companies operating straight trucks and cargo vans, but we’re getting a lot of attention from the Class 8s,” Green said.

He recommends trucking companies pay their drivers an incentive to use their personal phones as cameras.

“You’ll reap the rewards in insurance costs,” Green said. “Also, a smartphone used as a dashcam is a smartphone that’s not being used for texting or phone calls while driving. Everybody knows the smartphone is a distraction. We’re putting it to work, so it’s less likely to be a distraction.”

 

Source: JOC

With Absent U.S. Export Subsidies, U.S. Exporters Turn To The Private Sector

Federal subsidies for U.S. exports have been slowed for more than a year thanks to Republican congressional resistance, and reports from the field show something unsurprising: When government subsidies fade away, the private sector often steps in.

The Export-Import Bank of the United States is a federal agency that extends loans and loan guarantees to foreign buyers of U.S. goods. Since late 2015, Ex-Im‘s board has lacked a quorum, because Republicans haven’t held a vote on Obama‘s nominee. Without a functioning board, Ex-Im can’t approve deals of greater than $10 million. Before that, for five months in 2015, Ex-Im‘s charter had expired and the agency couldn’t approve any new financing deals.

How are exporters reacting?

“People that relied on EXIM-backed financing,” Hernan Mayol, chair of the Florida International Bankers Association’s Trade Finance Committee, told Miami Today, “they felt a little pain. They had to go through the private insurance market to find an alternative until it was reauthorized.”

That is, when Uncle Sam wasn’t there to provide taxpayer-backed trade insurance, private insurers stepped up.

“It’s been mostly business as usual for Miami exporters, just as it was before and during the lapse, according to an industry expert,” the Miami publication reports.

There is a robust private market in the sorts of financing and insurance Ex-Im provides.

“Ex-Im Bank is a competitor.” Michael Kraemer, a banker at AIG told me. “There is a vibrant private export credit market,” another financier told me. “Ex-Im provides financing that the private sector also provides.”

A Goldman Sachs research note sounded the same theme in 2014.

“If the US Export-Import charter is not renewed, we believe the overall impact in the near-to-medium term would be fairly limited given the robust financing environment at present…”

Government subsidies generally do one of two things: they subsidize things that don’t have market value, or they displace private sector activity. Much of Ex-Im‘s work seems to be knocking the private sector out of the way.

 

Source: Washington Examiner

Terror Coverage Back In Limelight As Christmas Market Carnage Appears To Be Deliberate

In an apparent terror attack in Berlin, a truck has repeatedly plowed through a Christmas market.

At least twelve people have been confirmed dead and at least 50 more have been injured, according to news reports.

The truck had Polish plates, according to reports. CNN is reporting that one of the vehicle’s passengers was killed at the scene. The driver was arrested near the Berlin Zoo, according to reports.

The attack took place in Berlin’s fashionable Breitscheidplatz in the city’s central Charlottenburg district.

“It wasn’t an accident,” one witness told Sky News. “It was going 40 miles per hour, it was in the middle of the market. This was the middle of the market – no way was it deviating off a road, and there was no sign of it slowing down.”

Germany dodged a terrorist attack earlier this month when a 12-year-old German-Iraqi boy tried to plant an explosive device at a Christmas market. the device failed to detonate, according to a Sky News report.

The incident is similar to an attack carried out in France in July. In that attack, Tunisian-born Mohamed Lahouaiej Bouhlel plowed along the beachfront in a 19-ton truck. The beach was packed with people who had gathered to watch Bastille Day fireworks, and Bouhlel killed 86 people. Police shot Bouhlel dead at the scene.

 

Source: Insurance Business

What Shippers Need To Know About New US Port Bill

US shippers using the ports of Charleston and Everglades in the coming years should be able to ship their goods via larger ships and avoid navigational hurdles after Congress passed a major port bill late last week.

More broadly, US ports seeking to deepen their channels to handle larger ships could also get additional help from the government through the recently passed water infrastructure bill President Barack Obama is expected to sign. After diving into the 728-page bill, covering water infrastructure from irrigation to drinking water projects, here’s what shippers, marine terminals, port authorities, and container lines need to know about the Water Infrastructure Improvements for the Nation, or WIIN, bill.

How does the bill help Charleton and Everglades?

WIIN authorizes funding for new US Army Corps of Engineers navigation projects, including projects to deepen harbors at the Port of Charleston in South Carolina and Port Everglades on Florida’s Atlantic coast: roughly $231.2 million for Charleston and $229.8 million for Everglades.

The inclusion of Charleston and Everglades in the bill will open the door for both projects to receive federal funds and begin construction, but — in a unique instance — the Charleston project was actually already cleared months ago by the Senate to begin construction with or without the WIIN bill.

Charleston is set to deepen its existing entrance channel from 47 feet to 54 feet and deepen the inner harbor from 45 feet to 52 feet, effectively making it the deepest harbor on the US East Coast. The state of South Carolina has already secured roughly $300 million for the $502.7 million project, and has been waiting on Congress to authorize and appropriate the remaining dollars and cents through a new WIIN bill before starting construction.

Farther south, however, Port Everglades will have to continue waiting for Congress to pass the WIIN bill before it can begin dredging. The $337 million Port Everglades project included in the WIIN bill is set to deepen the main navigational channel there from 42 feet to 48 feet, as well as deepen and widen the port’s entrance channel and parts of the Intracoastal Waterway so that cargo ships can pass safely by docked cruise ships.

Despite their differences, both harbor projects aim to prepare their respective ports for the arrival of mega-ships traversing a recently expanded Panama Canal, whose new locks can now handle ships with capacities of up to 14,000 twenty-foot-equivalent units, nearly triple the size of the ships that historically have transited the canal’s century-old waterway.

How will WIIN help future channel-deepening projects?

WIIN includes language from the Senate version of the Water Resources Development Act, or WRDA, which takes steps to modernize the cost-sharing formula for future channel-deepening projects — something that hasn’t been updated in 30 years.

WIIN increases the minimum depth required for a 50-50 federal-state funding split from 45 feet to 50 feet. The 45-foot depth was established in 1986, when vessels were smaller. Congress updated the cost-sharing formula for maintenance projects in 2014 to reflect the need for deeper 50-foot waterways. WIIN extends the same criteria to the initial dredging.

Will WIIN prevent money meant for harbor maintenance being used for other purposes?

No such luck. The latest waterway bill will not address the longstanding efforts to stop the siphoning of funding meant for ports in the Harbor Maintenance Trust Fund to other projects. WIIN, however, will protect ports from unexpected drops in annual dredging funds generated by the tax — a 0.125 percent levy on the value of imported cargo — that contributes to the fund. WIIN does this by ensuring that the harbor maintenance funding target will increase 3 percent every year, even if HMT revenue estimates decrease.

US port interests called the language guaranteeing the annual 3-percent hikes a “backstop” to continue progress toward eventual use of all HMT funds for their intended purpose.

“This fits with the intent of Congress in the 2014 bill,” Kurt Nagle, president and CEO of the Association of American Port Authorities, said at a Gulf Ports Association conference in Lake Charles, Louisiana earlier this year. “When the 2014 bill was passed, nobody was thinking about the possibility that the appropriation might go down.”

That guarantee received a warm welcome from ports, which were surprised to learn earlier in 2016 that during the next fiscal year dredging appropriations from the HMT are expected to decline by $82 million, even though the percentage of HMT collections allocated for dredging will rise from 69 percent to 71 percent.

The forecast decline is due to an expected drop in fiscal 2017 collections from the HMT, which is levied at the rate of 0.125 percent of the value of waterborne imports and domestic cargoes. That decline has been blamed mainly on the recent drop in the price of oil and other commodities.

How could future bills prevent that money from going elsewhere?

Although the latest waterway bill will not stop the siphoning of port funding from the Harbor Maintenance Trust Fund, a House version of WRDA this year did include language that would have taken the trust off budget. That law would have changed HMT spending from discretionary to mandatory in 11 years. That would mean the trust would not be subject to the appropriations process and would ensure every year that HMT revenues would be directed toward projects at the nation’s ports. The industry loses about $20 billion from raids on the Harbor Maintenance Trust Fund.

“Finally taking the Harbor Maintenance Trust Fund off budget guarantees that every year billions of dollars will go to keeping our nation’s ports efficient and globally competitive,” former Congresswoman Janice Hahn, D-Calif., said in a statement.

Hahn, who represented the constituency that is home to the Los Angeles-Long Beach port complex but now serves as a Los Angeles County supervisor, is an outspoken advocate for US ports. While Hahn was still in Washington, she refused to support the House WRDA bill, which she called “botched.” Hahn has expressed hope that language similar to the House version will reappear in future waterway bills.

When can another water infrastructure bill be expected?

WIIN’s passage returns Congress to the routine of passing a water infrastructure bill every two years. It’s something that lawmakers only briefly managed to accomplish in the late ‘80s and early ’90s.

The Water Resources Reform and Development Act passed in 2014 was the first water infrastructure bill passed in nearly seven years.

“WIIN now enables the much-needed return to biennial legislation in order to authorize twenty-first century navigation channel improvements in a timely manner,” AAPA’s Nagle said in a statement.

It’s not a sure thing, though. WIIN is a testament to renewed support for trade and transportation infrastructure among Washington elites — who are floating such grandiose ideas as a $1 trillion revenue neutral infrastructure investment plan. Nevertheless, it has faced considerable challenges in the current Congress and more than once was threatened by short deadlines and gridlock over debates unrelated to water infrastructure.

 

Source: JOC

Insurers Forced To Grapple With Cyber-Attacks That Spill Over Into Physical Damage

As hackers wreak havoc with depressing regularity, the insurance industry finds itself forced to contemplate a whole new set of risks.

They range from the theft of millions of credit-card numbers from American retailers to the disabling of the power grid, as happened in Ukraine last December. The dedicated “cyber-insurance” policies that companies offer against data breaches have become relatively routine. But the risks they insure under other policies are also affected by cyber-risks—and they are still struggling to understand this so-called “silent” cyber-exposure.

Insurance that protects firms who suffer data breaches has been on offer for around 15 years. It is much harder to put a precise value on, for example, stolen health records than on a property or car. Insurers sidestep the problem by covering only the direct costs that a company incurs from a hack. Typically, these include hiring a specialized forensics firm to work out exactly what was stolen, notifying affected customers (which 47 American states currently require), short-term business interruption and fines.

The industry will be shaken up by new EU data-protection rules, which come into force in 2018 and will impose stricter notification requirements and stiffer fines for data breaches than firms have so far faced in America. Partly because of this, the market for cyber-insurance, which represented only $2.5bn in global premium revenue in 2014 (90% of which came from American companies), is expected to treble by 2020, according to PwC, a consultancy. That would still leave it tiny in comparison with, say, the $670bn global motor-insurance market.

Data breaches are, however, for the most part a manageable nuisance rather than a disaster. Despite the hundreds that take place annually, only 90 since 2010 have been reported by American companies to regulators as having had a “material” impact on their business.

The bigger concern is the “silent” exposure: cyber-attacks that cause physical damage or bodily injury and can end up triggering other policies, such as life, home or commercial-property insurance. Often, such policies, though not designed with cyber-risks in mind, do not specifically exclude them either. In some cases the difference may be minor; a burglar who enters a house by hacking a “smart” lock will not necessarily steal more than one who breaks a window. But cases such as the massive damage caused to a steelworks in Germany in 2014 by hackers who messed with a blast furnace, or the hacking of the Ukrainian power grid (blamed by many on Russia), give insurers pause. They have added urgency to efforts to understand, measure and calibrate their exposures to these new threats.

With real-world precedents still too rare to form the basis of any reliable estimates, the industry has turned to using hypothetical scenarios. At the end of last year, for the first time, Lloyd’s of London, an insurance market that specialises in niche and emerging risks, asked its syndicates (groups of insurers and brokers) to come up with “plausible but extreme” cyber-attack scenarios, and report back their estimated total exposure, in what is to be an annual requirement. The exercise follows a cyber-scenario report in May 2015 from the management of Lloyd’s itself on a hypothetical hacker-caused blackout of the entire power grid of the American north-east. It estimated this would cause direct losses to business revenues of $222bn, and a total dent in GDP of over $1trn over five years.

Many insurers are turning to outside expertise. Matt Webb of Hiscox, a specialist insurer, describes an “arms race” between analytics firms such as RMS and Symantec, offering their long-standing modelling prowess (RMS is already well-trusted on hurricane modelling, for example) to help insurers understand their cyber-liabilities.

But even if exposures are better understood, limiting them may prove tricky. Kevin Kalinich of Aon, an insurance-broker, points to the near-impossibility of drawing a line, for example, between cyber-war or cyberterrorism and “normal” hacking. Cyber-crime knows no geographical bounds, unlike, say, a Florida hurricane. Mr Webb reckons that insurance policies will at a minimum need explicitly to recognise that cyber-risks are covered or to exclude them—just as many policies already include exemptions for terrorism or war.

Although insurers are already helping companies with more humdrum data breaches, the industry still lacks a clearly formulated response to a larger-scale cyber-calamity. Inga Beale, CEO of Lloyd’s, is optimistic that the market, thanks to its exacting modelling exercises and its unique risk-sharing structure, is better equipped than most. But only a devastating, real-life cyber-attack would test how effective its preparations have been.

 

Source: Economist

With Promises For Infrastructure, Regulations, Trump Sets Bar High For Shippers

In a year of disruption that has ranged from container shipping consolidation to radical changes wrought by e-commerce, few shippers and transportation providers planned for billionaire businessman, reality television star, and Republican nominee Donald Trump winning the US presidential election.

Like the political experts and pollsters who saw Democratic candidate Hillary Clinton as the solid favorite to win the presidency, shipper executives — even those who supported Trump — planned for a continuation of President Barack Obama’s legacy. The Trans-Pacific Partnership might have been shelved under a Clinton administration after the former secretary of state flip-flopped on the issue, but free-trade policies and regulations already on the books likely would have survived.

Yet shippers now face a brave new world in which they try to gauge whether the Trump administration will make good on its promises to deliver $1 trillion in infrastructure investment; reset — or withdraw from — trade deals, most notably NAFTA; and repeal regulation or at least curb new rules. In addition to the challenge of assembling a team to implement these goals, Trump faces strong corporate pressure to avoid a trade war or do anything too radical to hurt already fragile US consumer spending. The reworking of trade deals is onerous, and politicians generally support freight infrastructure spending until they have to figure out how to pay for it — typically a career-killing vote to raise fuel taxes. Trump’s foreign policy also will determine the direction of trade as sanctions on Iran, Russia, and Cuba are now in play.

Even so, Trump, a former Democrat who has consistently defied expectations, may be able to draw more concessions out of trade partners, give shippers and transportation providers some regulatory relief, and rally a much-needed improvement in the roads, highways, and ports that shippers depend on to move their goods predictably, efficiently, and without higher costs.

Meanwhile, US-flag proponents say Trump’s emphasis on national security and growing jobs could boost US shipbuilding and strengthen the Jones Act. More traditional free-market conservatives in the Republican-controlled House and Senate, however, could marshal curbs on the maritime law requiring US-built ships manned by Americans to move oceangoing goods within the United States.

 

Source: JOC

Builders Risk Insurance: 8 Things You Need To Know

Coverage for insureds with construction exposures beyond the limited parameters of a standard commercial property form is accomplished through the use of the simplified language builders risk form and endorsements.

The policy may be used to cover the interest of the building owner, the contractor, or both, as their interests may appear.

Here are eight important facts about builders risk insurance that contractors, building owners, agents and brokers should know.

1. Builders risk coverage is written for a minimum one-year term to cover a new building or structure under construction or an existing structure undergoing additions, alterations or repairs.

2. The rules in the Insurance Services Office’s (ISO) Commercial Lines Manual state that policy inception should begin no later than the date that construction “starts above the level of the lowest basement floor” or, if there is no basement, the date construction begins.

3. The rules permit pro rata cancellation when construction is completed, whether insurance on the completed structure is rewritten in the same company or companies or not. If the policy is cancelled before the structure is completed, the general cancellation provisions found in the common policy conditions apply.

4. Builders risk coverage can be written on exposures during construction that may not be eligible for certain coverages when occupied. The rationale is that buildings eligible for builders risk coverage are commonly unoccupied; therefore, eligibility criteria that depend on occupancy or use don’t apply during the course of construction. Examples of such exposures include boarding or rooming houses (with a maximum of four units), dwellings and farm properties.

5. ISO’s Builders Risk Coverage Form, CP 00 20, is the basic avenue to builders risk coverage in the simplified language commercial property program. The amount of coverage is based on the value of the building upon completion (including the value of permanent fixtures and decorations). Insurance on that value is provided from the outset of construction until coverage ceases.

6. Covered property (for which a limit of insurance must be shown in the declarations) includes the building or structure while in the course of construction and extends to foundations and certain items of property intended to become a permanent part of the building while located in, on or within 100 feet of the described premises.

7. Insurers consider builders risk coverage to cease when the insured occupies the structure because builders risk rates don’t contemplate the increased exposures of premises that are occupied.

8. ISO also provides another Builders Risk Coverage Form, IH 00 70 12 13, which is designed to provide broad coverage for the property that building contractors need to insure: building materials and supplies, fixtures, machinery and equipment to service the building.

 

Source: Property Casualty 360

The Origin Of Shipping And Insurance

Shipping is one of the oldest businesses in the world. Risk management and insurance are also equally old business.

All are closely linked with one another. In fact the development of insurance took place in support of the shipping industry. In the early days the ship-owner, trader and ship-captain were a single entity. A rich influential person got a ship built, procured some commodity that is readily available in his area and then sailed to another place for business. He would normally barter the goods in exchange for commodity available in the new land. Gradually gold and then coins and currency became the medium of exchange. Fortune favors the brave.

The pioneer in shipping gradually became a rich man. He was not anymore ready to undergo all the rolling and pitching at sea. He employed a trusted man as the captain of his ship. He still remained owner of the ship and the cargo. However, during those days with no radio telecommunication there was no way for him to know anything until the ship was sighted on the horizon again. Sometimes the ship was never seen again – either lost at sea or hijacked by pirates.

Another businessman came with a bright idea. He agreed to share the risk in exchange for a token payment. Because, he shared similar risks with few other ship-owners, he managed to keep the premium low and thereby flourished his business. This is how the concept of hull insurance took birth in this world. However, it was also necessary to know “how good the ship is and the risk it represents”. This we will deal at a later stage.

With the passage of time more changes took place. The ship-owner was no more the cargo owner. The ship-owner placed a ship and accepted cargoes from different traders. The cargo owners also looked for similar security and there came the concept of cargo insurance. Hundreds of years later the ship-owners came across claims from others for damages caused by the way of operation of the ship. Sometimes the claim was too big to handle by a single ship-owner. The ship-owners got together and created a common fund to protect themselves from such claims. This became the eventual protection and indemnity insurance. Because of being mutual in nature, they were called P&I clubs.

An important group of organisations that has considerable influence on the design, construction, equipment and safety of ships is Classification Societies. Classification is defined as “a division by groups in order of merit” – and this was what was precisely attempted in the early days of ship classification. It was done for the benefit of ship-owners, cargo owners and underwriters in order to ascertain the risk a particular ship represented. The origin of classification is linked with the name Lloyd, and we shall discuss the history.

It was customary in the seventeenth and eighteenth centuries for merchants, shippers and underwriters to meet in tea shops/ coffee houses in London to discuss business. Ship lists were circulated in these establishments, which contained information concerning ships; and these lists were particularly helpful in providing underwriters with information concerning the degree of risk involved in insuring the ships and their cargoes.

Amongst these coffee houses was one owned by an enterprising man called Edward Lloyd. His coffee house was originally in Tower Street but he later moved to Lombard Street (I think there is now a branch of Sainsbury, supermarket chain stores located there). Lloyd provided a list or bulletin about ships as far back as 1702 and after being withdrawn for a time it was issued again in 1734 and has continued to be published the present day as Lloyd’s List (perhaps the oldest newspaper being published today). It is still published but only the electronic version. The last printed issue was published on December 19, 2013.

Another interesting development in shipping took place when the housewives of Bristol area approached their MP Samuel Plimsol to do something in the parliament to save seafarers’ lives from the greedy ship-owners who would load the ship with cargoes to such an extent that ships could not remain afloat at sea. The first load line (1876) act was named after the MP as Plimsol Mark Act.

One of the most remarkable safety improvements came through radio-communication by Marconi. He was an Italian but developed his first radio transmission and reception facility in the UK in 1897 on a boat called “Electra” given to him by British government. As time went on, the provisions relating to information about ships got more formalized and eventually a Register was published.

Today this register is the number one reference for shipbrokers, charterers and others keen to know about the status/ condition of the ship. Originally business of classifying ships and insuring them went under the same roof but eventually the two activities became completely separate. Both activities took the name of the coffee house proprietor. The Classification side took the name Lloyd’s Register of Shipping (the oldest classification society). Founded in 1760 to examine merchant ships and classify them according to their condition, today the organisation’s expertise and activities extend far wider than shipping field – shore based industries including steel mills and oil refineries, offshore explorations and installations.

Today Lloyd’s Register is an independent authority, non-profit making, and relying entirely on fees charged for surveys and other services rendered. It is controlled by a Committee representing ship-owners, ship and engine builders, the Institute of London Underwriters, the Royal Institute of Naval Architects and Shipbuilders. The national committees also include similar national bodies.

Other classification societies also follow the pattern set by LR. They are like independent standard institutes having common rules. A ship or an installation remains classed so long it meets the standard. Because, they operate without any bias, they are equally trusted by ship-owners, traders, underwriters and even national administrations who delegate a lot of statutory survey and certification to them. However, it must be understood that functions may be delegated to classification societies but administration as Party State shall always bear the responsibility.

We shall now discuss a very important aspect of shipping and insurance. It is to be noted that early shipping, insurance and classification developed on its own without any legal constrains. Those days there were no national nor international laws governing those activities. They were self regulatory and it worked wonderfully well. By making necessary Act of Parliament, the British Government formally legitimized the working of Lloyds. This is why London still remains the centre for resolution of most of the legal disputes and arbitration.

With the development of time shipping became the most international business in the world becoming subject to international conventions and protocols. Most of the early conventions were drafted by CMI and adopted through diplomatic conference called by a lead nation. After the World War II and development of the UN network, most of the maritime conventions are adopted through a number of UN agencies such as UNCTAD, UNCITRAL, ITU, ILO and IMO.

Today the International Maritime Organisation (IMO), a specialised agency of the UN, is the international guardian of safety and security of operation of ships and protection of the marine environment. However, neither the UN nor any of its agencies can enforce the international standards for ships around the world. This aspect is left with sovereign nations. It is the duty of the Party States to transpose the provisions of international conventions into national legislation and enforce them over own ships (wherever they may be) and other ships within their jurisdiction. This measure is known as Flag State and Port State jurisdiction.

Now we shall discuss a little about development of port facilities. Remember, in the early part of this paper we said about some of the ships never returning to owners. They either went down due to perils of the sea or taken over by pirates. So, port facilities needed to provide shelter from both weather and pirates. However, it was not necessary to go far inland as pirates would not chase that far being mindful of their return journey. Ports were based on hinterland – either in proximity of raw materials or in proximity of large population to deliver the consumer goods. Natural locations were sheltered basins or mouth of the river going to sea.

Port facilities would normally develop a few miles upstream where depth of water is still sufficient to navigate safely. Immediately after that there would be evidently a bridge across the river to make it a hub of trading activities. London, New York, Calcutta and Chittagong are examples of such ports. In today’s world of economy of scales, main-line global operators have big ships touching key points around the world. So, port and transhipment facilities are developing at key junction points like Singapore, Hambantota (Sri Lanka) and Algeciras (Spain).

However, ports are not as well regulated as shipping is. There is no separate UN agency to deal exclusively with port matters. ILO and UNCTAD have developed a number of guidelines that are widely followed by sea-ports all over the world. Ports provide the shore-based facilities that shipping requires to operate. This is why many international shipping regulations also extend over ports. All marine operations within the port areas have to comply with SOLAS and COLREG.

In respect of protection of marine environment, ports have to meet the MARPOL requirements. In addition to national contingency plan for combating accidental pollution, ports are required to have their own contingency plans. Ports have to work hand in hand with maritime administration for compliance with ISPS Code. Handling of all dangerous goods within the port areas is done in conformity with IMDG Code. IMO has developed training standards for marine pilots (for handling ships within port areas) and IMO wants ports to have efficient VTS.

 

Source: Hellenic Shipping News

5 Reasons You Need Cargo Insurance For Your Import And Export Goods

Businesses make money by selling products. If your business imports or exports its products, you’re investing in your company every time you ship cargo. It’s surprising how many businesses don’t protect that investment with cargo insurance and pay heavily for it in the end.

Whether importing or exporting, using air freight or ocean freight for your international shipping, marine cargo insurance covers loss and/or damage of cargo while it is in transit between the points of origin and final destination.

Many try to save a little money up front by not insuring their cargo, but here’s just five of the many reasons why that’s a bad idea.

1. Reduce exposure to financial loss.

If you’re an exporter who has not been paid for the goods at the time of shipment, or an importer who has paid for all or part of the goods prior to receiving them, you run the risk of suffering a financial loss if the goods are lost or damaged during transit.

2. General Average – Expedite the release of your cargo.

You may be required to post a bond and/or cash deposit in order to obtain release of your cargo following a general average – even though there was no loss or damage to your goods. By purchasing insurance, your insurance company assumes the responsibility and expedites the release of your cargo. General Average is an internationally accepted principle where if certain types of accidents occur to the vessel, all parties share in the loss equally.

3. Contractual Requirement

Your sales contract may obligate you to provide ocean cargo insurance to protect the buyer’s interest or their bank’s interest. This is especially true when selling goods CIP or CIF. Failure to do so cannot only subject you to financial loss if there is loss or damage to the goods, but non-compliance with the terms of your contract with the buyer can lead to loss of sales and legal problems.

4. Coverage for limited carrier liability

The carriers, by law, are not responsible for many common causes of loss that occur in transit (for example, acts of God, general average, etc.). And, even if they are liable, carriers’ liability in the event of a loss is limited – either by contract in the bill of lading or by law. In most cases, you will only recover cents on the dollar from the carrier.

5. Have more control over insuring terms

Relying on the buyer’s or seller’s insurance may be a viable option, but you must be satisfied that the insurance has in fact been purchased and that the insuring terms, valuation, and limits provided by each insurer on each shipment are adequate to meet your needs. And, if there is a claim dealing with a foreign insurance company, perhaps in a different language, it can be time consuming and frustrating. If there’s a claims issue, you’re often dealing with courts in a foreign country.

 

Source: Universal Cargo

Will Your Insurance Cover Hurricane Matthew’s Damage?

Hurricane Matthew has come and gone but many Southeastern cities are picking up the pieces. The Atlantic Coast is reporting major flooding and the death count is up to 19.

Commercial real estate owners are surveying the damage.

GlobeSt.com caught up with Clark Schweers, Forensic Insurance and Recovery practice leader at BDO USA, to glean some insights in the aftermath of the deadly storm. He shares his perspective on Hurricane Matthew’s business disruption and implications in the real estate industry in this exclusive interview.

“From an insurance perspective, there doesn’t need to be physical damage to trigger a claim,” Schweers tells GlobeSt.com. “Commercial owners might have, or could consider adding, other types of coverage into their policies. It’s important to consider ancillary provisions when determining what the financial impact is to your business, and to protect against potential losses in the event of a natural disaster.”

Specifically, Schweers points to ingress and provisions within a property insurance policy is particularly valuable for businesses located on islands in the path of a storm. If a natural disaster or weather event results in a partial or complete inability for guests or customers to reach a particular asset, he says, this coverage allows a business to make an insurance claim.

“For example, a hotel on a barrier island might sustain no physical damage, but a bridge connecting the island to the mainland may need to be closed for inspection or damage,” he says. “That would restrict guests’ access to the location.”

Then there’s loss of attraction coverage. This allows a commercial business to make a claim if damage or closure to facilities or attractions that drive business to the asset or insured location occurs.

“From a real estate perspective, construction demand has been skewed toward coastal properties in recent years, and there have been relatively few natural disasters of similar magnitude to Hurricane Matthew in the last decade,” Schweers says. “As a result, the real estate industry has responded very well to consumer demand to develop condos, apartments, hotels, shopping malls and other assets around coastal population centers.”

As Schweers sees it, there’s rightful concern in the commercial real estate industry right now. The assessments on damage are not yet in, but it doesn’t look good.

“In the case of Hurricane Matthew, this is an unprecedented and unique storm whose path was uncertain,” Schweers says. “The potential damage area extended along hundreds of miles and several states, which could expose landlords and REITs with assets in these areas to potential financial repercussions.”

 

Source:  GlobeSt.