Facing natural disasters: how can we cope? – by Rares Colteanu, Chief Cargo Underwriter
CertAsig Cargo Insurance
Nature has repeatedly proven that it is capable of producing tremendous loss and can change the course of events in the split of a second.Natural disasters rarely happen, but when they do they can cause immense damage. The results of such events and their impact on society the business environment is extensively analysed by leading insurers and reinsurers.Not to be neglected, loss of or damage to goods and merchandise during transportation should be top priority by companies that might face such events. These companies should consider that the greatest natural risks that might endanger their operations include: earthquakes (storms, floods, volcanic eruptions, forest fires or avalanches.Globally, entire regions are frequently hit by nature’s fury. Not long ago, in 2012, New York and New Jersey harbours were struck by hurricane Sandy. Although preventive measures had been taken, cargo damage was considerable and one of the sectors that seriously felt the effects of the hurricane was automotive. About 16.000 new cars located in the container terminal, were disposed of as a result of the damage suffered. Total losses amounted to over $350 million. About 15.000 other cargo containers, 2500 trucks in the port area, other goods and yachts were affected by hurricane Sandy, the value of marine insurance claims being estimated at over $2.5 billion.
Another example in this sense is that of a port container ship carrying 7041 TEU (4382 containers), severely hit on 17 June 2013, causing it to break in half, which led to its sinking. According to the company that owned the ship, the accident was due to bad weather conditions. Another ship transporting MSC containers broke in the port of Durban, South Africa, following a fierce storm that pushed it over the harbour (VIDEO). Natural disasters have not spared the regions neighbouring Romania either. A devastating earthquake hit Turkey on 17 August 1999, causing major damage in Istanbul and the surrounding areas. Shortly after the earthquake, a tsunami was hit the Marmara Sea, and its tidal waves destroyed the naval bases in the Izmit Bay. Much of the coastal area was flooded and sea levels increased significantly. There have been several unwanted events in the Black Sea area as well. Last year, a news release warned that a strong storm and wind blowing over 60-70 kilometres per hour forced port closing, and waves hit the protection dikes.Returning to figures, in 2017 alone, the estimated value of damage caused by natural disasters was over $130 billion, an amount that steadily increased as compared to the annual average of the past 10 years, when losses were less than $58 billion.Our team has not ignored natural disasters. For such emergency situations, CertAsig responds to market needs, offering solutions to eliminate the harmful effects that, in other circumstances, might affect your entire business.
Even though we often think that a natural catastrophe such as a high magnitude earthquake only affects buildings or static risks, we should not forget that goods, the ships involved in the transport of goods and ports may also suffer.Unlike static risks typical of Property insurance, Marine – Cargo insurance are commonly mobile. However, goods may remain in one place for a longer period of time (up to 60 days, according to Cargo Clauses (ICC), and sometimes more). Despite the fact that the potential accumulation of losses can be estimated based on various models, this cannot be precisely determined in advance. It is impossible to know exactly when a certain number of risks will aggregate in a particular place and exactly what they amount to. Moreover, loss accumulation scenarios, risk models, and vulnerability curves that have proven useful in Property insurance cannot provide satisfactory results when determining the probable maximum loss in marine activity.At the same time, the expansion of global trade has led to the modernization of shipping and port terminals, which are becoming increasingly larger to accommodate higher traffic and encourage cost efficiency.To avoid losses that might occur as a result of such events, CertAsig advises its clients to make sure they have cargo insurance during transportation – CARGO.
What does goods in transit insurance cover – CARGO?
- Insurance condition “C”:
- fire or explosion;
- shipwreck, sinking or overturning of the ship or vessel; toppling or derailment of the land transport vehicle; collision or contact of the ship, vessel, or means of transport with any external object other than water;
- unloading goods to a port of refuge;
- sacrifice in common damage;
- overboard throwing;
- expenses and contributions to common damage and / or rescue expenses;
- common fault in case of collision.
- Insurance condition “B” – extra risks covered in addition to condition “C” above:
- earthquake, volcanic eruption, or lightning;
- waves taking goods overboard; water, whether from sea, lakes or rivers getting into the ship, vessel, means of transport, container, liftvan or storage container
- total damage to a parcel fallen over board or dropped during loading / unloading from the ship or other means of transport
- Insurance condition “A”: – full cover / all risks
– All risks
And yet, what is the answer to our initial question: how do we cope with natural disasters? Let’s start by changing our mentality and the way we relate to these phenomena!CertAsig team encourages their clients to adopt a proactive attitude and take all the preventive measures available to deal with unwanted situations. The solution is at your fingertips –CertAsig Cargo insurance!For further information on this insurance product, please contact Rares Colteanu – Head of Cargo Insurance.
Rares Colteanu, Head of Cargo Insurance