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Soaring south-south trade brings forwarders onerous risks: insurer
THE fast-growing south-south trade between Latin America, Africa and Asia brings with it serious new risks forwarders have seldom before experienced, says TT Club regional insurance specialist Andrew Kemp.
South-south shippers require warehousing, sub-assembly and packing, with tight margins for error and harsh financial penalties for breakdowns, said the transport insurer in a speech prepared for delivery on December 9 to the TOC Container Supply Chain: Middle East Conference in Dubai.
The value of exports on this trade now exceeds that between the developing and developed countries, representing 32 per cent of global trade, he said, citing World Bank figures.
"As a consequence of providing these additional services, whether sub-contracted or provided within their own operation, forwarders are typically accepting extended contractual exposure, in terms not only of the period during which customer's goods are in their custody but also usually more onerous terms and conditions," Mr Kemp said.
"This trend is not limited to operators in the Middle East. Indeed we are seeing such developments across the globe. However, I'm highlighting the consequences of the changes to an operator's risk profile to the freight transport sector in the region," Mr Kemp said.
"Simply put, the more complex the services undertaken, the greater the chance of errors and omissions," he said, adding that the TT Club had experienced an expanded range of claims because of extended liabilities.
With the increased complexity in services and contractual arrangements it is becoming important to select a specialised insurer able to assess and advise on the level of risk exposure in contracts, he said.
"Awareness of these circumstances, and the seeking of professional advice on the extent of the possible risks which may result, are essential for the modern day forwarder and logistics operator to assimilate, particularly when involved in the rapidly developing Middle East hub," he said.
The TT Club, a mutual insurer, provides insurance and related risk management services to the transport sector. Membership includes ship operators, ports and terminals, road, rail and air freight operators, logistics companies and container lessors.
South-south shippers require warehousing, sub-assembly and packing, with tight margins for error and harsh financial penalties for breakdowns, said the transport insurer in a speech prepared for delivery on December 9 to the TOC Container Supply Chain: Middle East Conference in Dubai.
The value of exports on this trade now exceeds that between the developing and developed countries, representing 32 per cent of global trade, he said, citing World Bank figures.
"As a consequence of providing these additional services, whether sub-contracted or provided within their own operation, forwarders are typically accepting extended contractual exposure, in terms not only of the period during which customer's goods are in their custody but also usually more onerous terms and conditions," Mr Kemp said.
"This trend is not limited to operators in the Middle East. Indeed we are seeing such developments across the globe. However, I'm highlighting the consequences of the changes to an operator's risk profile to the freight transport sector in the region," Mr Kemp said.
"Simply put, the more complex the services undertaken, the greater the chance of errors and omissions," he said, adding that the TT Club had experienced an expanded range of claims because of extended liabilities.
With the increased complexity in services and contractual arrangements it is becoming important to select a specialised insurer able to assess and advise on the level of risk exposure in contracts, he said.
"Awareness of these circumstances, and the seeking of professional advice on the extent of the possible risks which may result, are essential for the modern day forwarder and logistics operator to assimilate, particularly when involved in the rapidly developing Middle East hub," he said.
The TT Club, a mutual insurer, provides insurance and related risk management services to the transport sector. Membership includes ship operators, ports and terminals, road, rail and air freight operators, logistics companies and container lessors.
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