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As Incidents at Sea Increase, so Does Demand for Insurance

The number of incidences of containers becoming lost or damaged while in transit continues to increase. In fact, the industry has not experienced this much container disruption in the past five years combined.

Undoubtably, a pattern is emerging. Harsh and hard to predict weather patterns, coupled with record volumes, must be at the root of this surge in the number of incidents. Estimates show more than 9,000 TEUs of freight have been lost since late October, and additional cargo has been physically damaged during that same time.

“It cannot be just coincidence that these accidents are happening at record numbers because shipping companies are under tremendous pressure to quickly transport goods around the globe,” said Anthony Fullbrook, president of OEC Groups North American region. “Since these accidents are triggering the law of General Average, clients are incurring additional costs on top of the historically high rates they are already paying to safely transport their goods.”

General Average is a centuries-old piece of maritime law designed to fairly distribute costs associated with loss at sea. It was developed in a time when goods were lost more frequently and was put in place to protect those involved from unpreventable losses. As a result, anyone who has goods on a vessel that experiences damage is partially financially responsible.

“Fair or not, this is how the industry has been operating for centuries,” said Joe Klobus, OEC’s Insurance and Claims Analyst, “Customers who have not incurred damage are still responsible for a portion of the overall loss.”

Recently, customers have been inquiring about cargo insurance because it covers the loss of a client’s cargo and any cost resulting from General Average. Clients have realized that this minor expense gives them peace of mind when their goods are in transit because the insurance reimburses them for any unexpected accident or loss.

“Purchasing cargo insurance is the only way for clients to fully protect themselves from any incident that occurs while their goods are in transit,” said Mr. Klobus. “Customers are already paying a premium to ship their goods. The insurance is one of the few things that gives them peace of mind in this highly unusual climate.”

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