Goods at sea

Loss Adjusting

With 90% of goods transported by sea, loss adjusters are constantly intervening in an emergency to limit the economic consequences.

Most of the goods in the world are transported by sea. The figures are unambiguous. With a market estimated at nearly €2 trillion for the coming year, maritime transport represents more than 90% of world trade by volume. From containerized goods on deck to heavy packages at the bottom of the hold, from liquid to solid bulk, the maritime transport sector is omnipresent.

In this context where goods are constantly traveling around the world, how can we assess this ultra-globalized ecosystem? To answer this question, let’s take to the open sea.

Ad Valorem

The role of the loss adjuster is to understand the environment in which they operate. For this purpose, it is essential to establish here the insurance context. From the importer to the consignee of the goods, all the players in the maritime transport chain are subject to limitations of liability. Such as conventional ceilings in the various transport contracts to protect carriers. In accordance with the Wisby and Hague Conventions, their limit of liability is set at 2 Special Drawing Rights (SDR) per kilo transported. In other words, if a five-tonne container falls into the water in the event of a total loss, the sea carrier will have to reimburse a sum of around €12,000 (i.e. 2 SDRs x 5,000 kilos).

However, it is unlikely that our five-ton container was only worth €12,000. The owner of the goods is unable to recover the lost value from the responsible third party. He, therefore, turns to his insurer. Worldwide, insurance companies have set up ad valorem policies to cover losses up to the value of the goods. Both the importer and the exporter subscribe to this marine insurance. Let us take an example.

A South American exporter is unloading several tons of frozen shrimp into a vessel bound for France and the port of Le Havre. Upon arrival on the Normandy coast, veterinary teams inspect the goods. This enables them to observe that the temperature is above the regulatory -18°C. The shrimps are declared non-compliant and blocked under consignment. After an in-depth analysis within 48 hours, the goods are released in the best-case scenario or definitively blocked with notification of refusal to enter the European territory. When the owner acknowledges receipt of this refusal, the loss adjusters can intervene at the request of the insurer. At the end of the assessment, it turns out that the parcels were deposited in such a way that they blocked the exit of cold air. For the insurer, this inadequate method of loading is not damaged specific to the transport but to the loading of the container. After the insurer’s withdrawal, it is up to the buyer to take recourse to his seller in the event of payment in advance. We will see it. Each claim is different.

From cold to dry

Shrimp is just one example. All kinds of goods are going around the world right now. For each of them, there are specific risks and claims. Risks and therefore procedures that every player in maritime transport must be aware of in order to take the necessary precautionary measures, whether or not they are the cause of the damage. A small example. A carrier receives a refrigerated container on Monday but does not realize that it is malfunctioning until Friday. His obligations are to inform his client about the risk of damage. Therefore, the loss adjuster intervenes at the request of the principal. On average and according to the returns of the loss adjustment, about 40% of the damages concern dry or non-refrigerated containers. Another 40% is also estimated to concern temperature-controlled containers. As for the remaining 20%, they mainly deal with heavy packages, damage during handling operations or pollution in bulk.

A few details on the very object of our loss adjustment: the merchandise. Refrigerated, dry, temperate, heavy, each has its own specificities. Let’s start with the transport of goods under controlled temperatures. An entire logistics system is set up to transport cargo that must meet specific temperature conditions. Cosmetic and pharmaceutical products (+20°), fresh products (+2° to +5°), and frozen products (-18°) are not stored in the same way. These essential prerequisites for the preservation of the goods do not mask possible indexing errors, in this case setting the wrong temperature. This inattention of human origin often results in the total destruction of the goods. Although the consequences are the same, the cause is different for dry goods. Very often, it is a question of damage to containers with holes in them where water has infiltrated. The goods arrive wet and are therefore unusable. But that’s not all.

Sailing around the world on a ship of nearly 10,000 tonnes is no easy task for the crew on board. The same is true for the cargo that is stowed away. There are many incidents of undocking. Products move and break. In the case of heavy cargo, handling clashes involving industrial machinery can literally multiply the price of compensation to several tens of thousands of euros. In high-stakes cases, the loss adjuster must establish the exact sequences during transport in order to determine the concomitant cause(s) of the loss. Faced with perishable goods and costly immobilization costs, it is in an emergency that the loss adjuster’s intervention is most welcome.

Responding to an emergency

As soon as the mission is taken up, the loss adjuster must know how to judge and prioritize the missions and correspondence to be carried out. A damaged vessel that is immobilized costs several tens of thousands of euros. In its hold, goods are in the process of perishing. Within the framework of an ad valorem intervention, the loss adjuster is at the initiative of all the survey operations. He contacts the importer or the commission agent directly if the latter is the one who signed the contract. After getting to know all the players involved in the transport operation, he makes inquiries with the veterinary services and the warehouse where the immobilized container is located. It is only at this point that the first invitations are sent out. Claims files in maritime transport are not subject to the 21-day time limit provided for in the agreements. The loss adjuster decides. Enough to set the pace in cases where time is precious.

The loss adjuster can, therefore, summon the operators in question during the day, even if he has to be accompanied by a bailiff for the most recalcitrant ones. The objective is to keep this contradictory character and thus issue the first observations. The clock is ticking and the costs are rising. Between the initial cost of the claim and the safeguard measures, the loss adjuster has no right to make a mistake. He is therefore busy deploying an extensive and efficient rescue network. These specialists are indispensable to save a maximum of goods. With that, the hope that this claim estimated at 20 000€ does not turn into 100 000€. This obliges to confront the owners, sometimes convinced that this sorting is useless under the pretext of being covered by their insurance. And yet, one of the very principles of the maritime transport contract is that it is always up to the owner of the goods to minimize his prejudice and never to a third party. The surveyor must always concentrate on the technical and regulatory aspects. Through his knowledge of the environment and the obligations of each party, he brings his added value.

This can be done through prevention. Sometimes the expert may include in his report an entire paragraph on the preventive measures to be taken following the recurrence of certain claims. From increased checks during transport to storage and loading plans, the expert must propose solutions that are in line with the financial and commercial reality of carriers whose margins remain limited in normal times. Indeed, the crisis we are currently experiencing is a real brake on maritime transport. Several days of transport are lost. This is enough to cause a lot of damage.

It is a well-known phrase: “The bigger the ship, the greater the risk“. The reality is much more complicated from the expert’s point of view. The latter operates in a globalized macro-economic context in which each player in the transport sector has legal obligations, from the buyer to the seller via the carrier. It is in perpetual urgency that the expert intervenes in order to limit the economic and financial consequences on the whole of this chain.


Automotive & Transports Loss Adjuster

TGS x GM Consultant – Stelliant Group

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