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How COVID-19 is affecting cargo insurance

The Coronavirus pandemic has affected many businesses in a number of different ways, including cargo carriers and cargo owners. For example:

  • Quarantines and travel restrictions;
  • Delays to the production of goods;
  • Goods in transit delayed, rerouted or stopped short of their final destination due to border closures or restrictions.

Even after transportation recommences, it could take months to unravel the backlog. This is assuming businesses can source containers in the right locations. According to Alphaliner, more tonnage of container ships is now idled around the world than during the global financial crisis.1

Unfortunately, these serious impacts on your supply chains and your business are unlikely to have been anticipated, which could leave you less insured than you imagined.

What are the insurance implications for cargo owners and cargo carriers?

  • Cargo insurance generally excludes loss/damage due to delay. Carriers and cargo insurance also generally does not cover additional costs incurred because of cargo being fulfilled short of the intended destination. Although cargo insurance will usually continue to provide physical loss/damage coverage on goods.
  • Perishable goods may have coverage for spoilage if caused by a peril, but may not for loss of market/deterioration due to delayed delivery.

So, what can cargo owners and cargo carriers do?

  • Review your current insurance cover. Look carefully at your policy wording for any specific stipulations and follow any recommendations provided by your insurer.
  • Review your contractual terms with customers, and act prudently when moving customer goods and deciding cargo prioritisation as quarantines lift or change.
  • Consider your strategy and any steps you could take to prepare your business once transportation recommences.

You may also find our COVID-19 resource centre useful. This has been created to house all important news and information to update you on the potential implications for your business. The resources are updated daily as the situation develop, so please check back often.

Source:
1 nytimes.com ‘Virus disrupts China’s shipping, and world ports feel the impact’

This is a marketing communication FP20.212.

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