Updated: Apr 28, 2022
Incidents at Sea Becoming a Common Occurrence
The unimaginable has now become commonplace as the last two-months have seen a shockingly above average number of incidents at sea resulting in cargo damage, items lost at sea, vessels running aground, and ships sinking.
As a result, a new trend is growing among importers who are looking to protect themselves from not just losing their cargo but also other costs that tend to arise from these incidents—exploring cargo insurance options. The new trend is emerging because many are realizing that the high cost of shipping and a growing possibility of loss has made transporting cargo without some kind of sufficient protection plan impractical.
For example, earlier this month the CMA CGM-owned Rabelais suffered an onboard explosion and fire while it was travelling fifty-six miles Northwest of Sabang, Indonesia. Also, Evergreen’s Ever Forward (the Ever Given’s sister vessel), was recently freed this month after weeks of being stuck when it ran aground in the Chesapeake Bay in early March.
Other incidents that occurred during the past two months include:
The Marintrust 01 sank (March 2022)
The Banglar Samriddhi and the MV Helt were both sunk by explosives as a result of the conflict between Russia and Ukraine (March 2022)
The Felicity Ace, a luxury car carrier, incurred a fire that burned for weeks—causing the vessel and its millions of dollars of cargo to eventually sink (February-March 2022)
The Paivi and the Bjoerke endured a head-on collision in Germany’s Kiel Canal (March 2022)
Another car carrier, the Al Salmy 6, sank and lost millions of dollars in cargo (March 2022)
Containers on the Maersk Dyros fell overboard (March 2022)
The MSC Kim suffered engine failure and went adrift in the Gulf of St. Lawrence (March 2022)
The Mumbai Maersk ran aground (February 2022)
A stack collapse on ONE’s Madrid Bridge (January 2022)
“Before the pandemic a list like that would’ve been unthinkable throughout the course of one year, let alone a month,” said Joe Klobus, Claims & Insurance Manager of OEC Group’s Northeast Region. “While these incidents seem terrible for vessel owners, the people who are really bearing the brunt of the financial burden are importers who have cargo on these vessels and are uninsured. They are the ones who have to financially reimburse vessel owners for any ship damage in the case of General Average and absorb the financial burden of any lost or damaged cargo.”
Another reason for the increasing popularity of cargo insurance is because more importers recognize the risks from recent geopolitical issues and a rising number of seaborne losses. Additionally, importers are looking to protect an increasingly more expensive cost of goods and transportation costs while simultaneously reducing their financial risk regarding the loss of goods in transit.
“Judging from the last two months, the threat and probability that an importer will have to reimburse or be reimbursed for lost or damaged cargo is very real,” said Anthony Fullbrook, President of OEC Group’s North American Region. “Therefore, it should now be a matter of course for everyone to take out cargo insurance and avoid having to deal with a surprise financial obligation.”