“Pool” system levy a possible solution for misdeclared cargo claims: Cannock summary

The container has served to ‘distance’ shippers, forwarders and vessel owners from the goods being carried by the vessel for which they are responsible, says Matt Cannock, Managing Director for Asia at Markel International, In a piece for the Insurance Marine News web site and he proposes a pool levy

He notes that it is “increasingly common for cargo to be shipped ‘door-to-door’ in full container loads”. Although this process is quick and efficient, it raises problems for hull insurers, which are being denied an important part of a jigsaw puzzle when it comes to accurate risk assessment. A misdeclared of dangerously filled container is “Russian roulette for the containership owner” and there is no way to pick accurately who will and who will not have these losses, says Cannock.

In practice the ultimate responsibility for the safe stowage and honest declaration of goods increasingly falls on the sellers of the goods to be shipped. These might not have the required skills to do the job competently and they almost certainly will not have adequate insurance to cover for their liability for any subsequent losses incurred by third parties.

One possible solution to this knotty problem could be, says Cannock, along the lines of the way mandatory third-party liability motor insurance operates in the UK, with the Motor Insurers Bureau pool mechanism.

“In the case of poorly stowed or misdeclared containers, a per-container carried levy could be applied by container vessel operators to establish a pool to respond in the event of a fire loss caused by such an incident”. Cannock thinks that such a levy “would act as a powerful incentive to ensure that best stowage practice was more widely adopted and misdeclaration a less common event.”

He accepts that establishing such a pool would be no small undertaking, but concludes that “the current competition in the marine insurance market is masking a real problem in the global supply chain and searching for a solution now should be a priority because that competition is ultimately unsustainable.”