News & Insights

Ever Given grounding highlights marine and cargo insurance hazards

Published 24 June 2021

The grounding of the Ever Given in the Suez Canal has raised some interesting questions on how marine insurance responds to the risks involved in transporting goods, says Gallagher National Head of Marine Stephen Rudman in the H1 2021 Gallagher Business Insurance and Risk Market Update.

The incident served as a timely reminder of the value of marine and cargo insurance, and why self-insurance is a hazardous business for cargo owners and shippers.

  • The Ever Given grounding highlights risks involved in shipping cargo.
  • Uninsured cargo risks significant financial loss.
  • Responsibility for arranging marine insurance is determined in the terms of sale.


While the shipping container was stuck for six days it blocked the path of almost 400 ships and prevented nearly US$10bn of trade. In response to the potential claims from affected businesses the vessel’s owner, Shoei Kisen Kaisha, declared general average (GA) – a means of damage sharing under maritime law by which all parties in a maritime venture proportionally share any losses, in the common interest.

When a general average is declared or salvage services received, the shipowner or salvor have lien over the cargo unless the cargo owner provides a security or a guarantee, or they will insist on a cash deposit.

The GA costs are estimated to be about $16m. The consequences for shippers/cargo owners with uninsured cargo is that it leaves them vulnerable to losing their cargo and suffering financial loss. In contrast, shippers with insured goods will have those deposits covered by their insurers.

Salvage also requires a guarantee provided by the owners, making GA and salvage alone good reasons why cargo owners/shippers should not opt for self-insurance. It’s unlikely high value goods would ever be shipped without insurance or that a bank would lend money to finance a sale without the collateral security of an insurance policy.
 

Responsiblity for cargo insurance

The terms of an international sale between a seller and an overseas buyer dictate who should arrange marine cargo insurance.

Incoterms 2000 defines the respective rights and obligations of both parties to an international contract of sale, including the definition of the ‘critical point’ during transportation of goods when the risk of loss or damage is transferred from the seller to the buyer. The critical point determines whose responsibility it is to arrange marine cargo insurance.

In current insurance market conditions and in areas of such complexity it’s more important than ever to obtain the input of a marine specialist when arranging cargo insurance.

Let our Marine, Cargo and Logistics insurance experts help you navigate the changing tides while you focus on the horizon.

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Insurance market information you need to face the future with confidence

To read this and other articles for insights from our experts on Australian insurance market conditions, download the Gallagher H1 2021 Business Insurance and Risk Market Update.

Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective.
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