General average
General average is a global maritime industry loss mitigation convention whereby ship owners and cargo interests
proportionately contribute to fully reimburse those in the venture who sustained loss or damage in preventing the total loss of a vessel, crew and its cargo. undamaged interests must confi rm their contribution by way of a fi nancial guarantee before their cargo or interest is released while their fi nal contribution is calculated, Sometimes years later.
General average losses require the coordination of both local and global marine claim professionals. Marine claim experts locally must manage the loss and interact with local authorities while global resources assist in arranging the financial guarantee security and communicating with the various interests involved in the venture.
Increase in general averages
A noticeable trend at the moment is the declaration of many more general average claims. The majority of these events are the result of engine failures and mechanical breakdown of the vessel. This is, in part, directly attributable to the lay-up of the world fleet during the economic downturn.
Of course, this depends on the carrier, and some are much better at maintaining their fleets than others. But the laying-up of the world fl eet has been a big contributor to the number of general averages that have exploded onto the marine cargo market in
the last two years, in comparison to the number of general averages that were declared in the previous fi ve-to-seven years. General average was more rare in the mid-2000s, because with robust freight rates it made more sense to keep the vessels
running and properly maintained.
However, when they are laid up, vessels are often poorly maintained, or not maintained at all. When the economy starts to recover, these vessels are brought back into service without any major refits or signifi cant maintenance having been carried out, resulting in an increase in breakdowns and fires.
Case study: Where is my cargo?
A common problem can be securing the timely release of cargo, especially where the goods are perishable. A classic scenario would be an insured purchasing an entire ship load of perishable goods. During departure, the vessel is grounded by heavy weather. The insured would be notified that their cargo had been delayed by the event and would not be delivered on schedule. In order to have their cargo released for delivery to the final destination on board on another vessel, they would have to agree to pay significant additional money to the vessel owners for their contribution toward the damage sustained in the incident to the vessel and cargo under General Average.
General Average Guarantee
In such a situation, Zurich marine claims teams would co-ordinate their activity in its various offices worldwide to engage the vessel owners, and agree to post a General Average guarantee for the sum required to allow the goods to be released. Zurich’s claims teams could assist in arranging for the trans-shipment of the cargo from the damaged vessel to a new vessel.
The cargo could be delivered with no damage sustained. The goods could then subsequently be sold in the local market and the insured would be able to continue conducting business with no out-of-pocket expenses. The insured would see minimal disruption to their operations and would have met theirGlobal experience
In such a case, little could have been done to avoid the situation and in the end, there may be no damage sustained to the insured cargo. By selecting a global insurer with local marine claim expertise, the financial obligations of the insured can be met and the cargo delivered, with Zurich managing the claim to the advantage of both companies. obligations to their customers.
