Salvage guarantees
Salvage security posted by cargo owners is driven by an arbitration board in London under the Lloyd’s open form salvage contract. In that arbitration process, only certain underwriters’ guarantees are recognized, primarily underwriters in London with strong financials. A local insurer in Malaysia might have diffi culty being able to post its own security, and may have to buy a bond or other fi nancial instrument to post security for salvage, which would be charged back, and become part of the cargo claim.
Recognized guarantees mean fewer delays
The fi nancial security and salvage guarantees issued by multinational insurers are recognized by the salvage arbitration group in London directly. It can be issued quickly, is accepted immediately, and the cargo can be released much faster for delivery on to its fi nal destination. until an acceptable guarantee is posted, whether it is for general average or for salvage security, the cargo will not be released. A centralized global process for the review and vetting of salvage security affords insureds the opportunity to have guarantees issued promptly on their behalf for the quick release of their cargo.
Indirect costs for customers due to delays in the release of cargo
- Cancellation of the customer’s contract or purchase order for failure to meet the delivery schedule.
- Cancellation of future orders from the customer and adverse selection to an alternative supplier resulting in future revenue declines.
- Cancellation or reduction in orders from other customers arising from industry knowledge of the delays experienced.
- Interruption of the manufacturing fl ow to replace the goods if there is an extended delay.
There’s a hole in my container!
Another example of the sort of problems encountered by insureds concerns issues with containers and packaging. A typical scenario could involve retail industry. A line of clothing that is manufactured in Asia needs to be shipped directly to a European buyer just in time for its seasonal release.
However, it would only take a fresh water leak from a hole in one of the sea containers carrying a part of the shipment of clothing during the course of transit, to cause a humidity condition within the container. While the clothing would not directly be damaged by the water, the moisture would allow a mildew odor to affect
that part of the shipment.
Shipment rendered un-saleable
When delivered to the distribution centre, the clothes, while physically undamaged, would have a smell that would deter any would-be buyer, also affecting the other clothes on the store shelves. It might be that not all the clothes would be affected, perhaps only particular sizes, but the clothes would be rendered un-saleable. The result would be that the entire clothing line, and its launch, could be threatened.
Risk mitigation
Such a problem can be avoided by a simple loss prevention measure. Having a container inspection program put in place by the supplier, the hole in the container could be identified before the container is loaded with the cargo for shipment to Europe, and the entire loss could be avoided.
Inspection programs of containers and packaging is a simple yet vital risk mitigation measure that may remove or reduce potentially devastating, and yet avoidable, losses.
The solution
In such a situation, the Zurich Marine claims team, in conjunction with local appointed experts, would implement an action plan that utilized a cutting edge ozone treatment process to eliminate the mildew odor and recondition the clothing, making it once again
saleable by the European buyer or distributor.
This solution would not only have reclaimed the affected
clothing, but also prevented a larger issue for the insured. The entire order could have been cancelled due to damage to a portion of it, and may have jeopardized the overall relationship between the designer and retailer had the clothing line not been available for sale at the outset of the new season.
