Minimizing your Risk through Cargo Insurance September 2019 Presented by Roanoke Trade

Did you know? 30% of losses during transit are unavoidable. Lloyd’s of London reports that, on average, a ship sinks everyday. No carrier is obligated to pay for losses beyond their control (i.e. Acts of God.) A cargo underwriter expects to pay $.60 in losses for every $1.00 premium collected. Chances of loss during transit are far greater than the risk of a fire in a warehouse. Most damage occurs en route to/from ports. The majority of claims paid are theft related, not damage. Relying on the carrier is a mistake!

What is Cargo Insurance? “All Risk” Cargo Insurance provides door-to-door coverage regardless who the carrier is or how many carriers are used. Provides “All-Risk” coverage for physical loss or damage from any external cause while in transit. Claims made under Cargo Insurance paid by insurance company for full invoice value of goods. The defenses of the Bill of Lading, etc. do not apply; Terms & Conditions of insurance policy apply Expenses incurred to mitigate a loss or protect goods from further damage usually reimbursable, so long as insurance company approved expenses

Why Insure Your Goods To protect your business against potential loss To control the coverage and ensure financial protection Carrier is liable only when damage is caused by them and recovery is limited Coverage is “All-Risk”/ Warehouse to Warehouse

What If Cargo Is Not Insured? Your client faces a significant risk of financial loss. In addition to the problems posed by General Average, carriers limit their liability. First, the claimant must prove that they experienced a loss. Then it must be proved that the carrier was negligent. Having achieved this, their recovery from the carrier is limited as follows:

Carrier’s Limits of Liability Ocean Carriers $500/package or CSU* International Air Carriers $9.07/lb. or approx. $20/kg.; Indirect Air Carriers **if MP4 applies, $11.36/lb. or $24.99/kg. Domestic Airlines $.50/lb. customary Domestic Truckers $.50/lb. customary, but varies by carrier Warehouseman/Railroads Varies, refer to tariff or warehouse receipt Couriers (UPS, FedEx) $100 any one shipment * Customary Shipping Unit **Warsaw Convention vs. Montreal Protocol 4 amendment For a carrier to have liability: Must prove a loss occurred Must prove loss took place while in their possession (care, custody and control) Must prove the carrier was “negligent”

Cargo Theft – Heat Map CargoNet has noted over 15% decrease in reported cargo theft from 2016 to 2018. 2. Total loss value dropped from $117.3 million in 2016 to $53.4 million in 2018, approximately a 54 percent ($63.9 million) decline.​ 3. Weekends (Friday, Saturday, Sunday) remain the most common days that cargo theft incidents are likely to occur. Shipments are much more likely to be left unattended over the weekends, and a significant number of reported cargo theft incidents involved unattended shipments 4. CA, TX and FL remain one of the top targeted States. With the exception of IL, the top targeted states within the US are coastal States. These three states account for 45% of reported cargo thefts in 2018

Cargo Theft by Commodity

Cargo Theft by Location The “Other” location consists of: residences, airports, terminal yards and carrier drop lots. This is typically listed as one of the top targets since it encompasses multiple location types that are too small to list on their own Warehouses were the second most common location for cargo thefts in 2018, accounting for 17 percent of all cargo thefts.

What to do in the event of a claim? Document the condition of the cargo Minimize the loss – protect from any further damage Notify your insurance provider Preserve all packing, damage goods and seals File a formal claim against the carrier Retain all shipping documents

General Average – now what? To carry out settlement of a General Average claim, all freight must be held/detained and then the following takes place: The value of the voyage is determined “Participation” is determined The loss amount is determined The participation percentage is applied to the loss amount to determine the security deposit The security deposit, also called the General Average Guarantee, is provided to the vessel owner or General Average adjuster by your insurance company in exchange for the release of your customer’s cargo

How security amounts are determined on a General Average claim Sample Calculation of how the Required Security Amount is Determined on a General Average Claim $50 million vessel value and $50 million of cargo on vessel yields a $100 million voyage value. If a shipper has $1 million of cargo on the vessel, they are a 1/100, or 1% participant, in the event of a General Average claim. It is determined that $5 million of the vessel’s cargo (none of which was the shipper’s) was jettisoned to float the vessel off of a sand bar after grounding. The shipper is responsible for posting 1% of $5 million ($50,000) as a security deposit.

Thank you for your time and attention Questions? Thank you for your time and attention