Presenter: Host: Kyle Nichols, CRM, FCIP, MBA Catherine Viglas - - PowerPoint PPT Presentation

Presenter: Host:

Kyle Nichols, CRM, FCIP, MBA

President Hugh Wood Canada Ltd.

Catherine Viglas

President & CEO CITT

Marine Insurance - An introduction

Pres esented ented by Kyle Nichols

• ls,

, Presid esident ent Hugh Wood Canada da

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Agenda

• Marine Insurance: An Introduction
• What is Marine Insurance
• Marine Insurance a Brief History
• Types of Insurance

– Freight Forwarders Legal Liability – Cargo – Warehousemans Legal Liability

• Supply Chain
• How Does Marine Insurance Work?
• Considerations when selecting a brokerage
• How we can help

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Marine Insurance – An Introduction

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What is Marine Insurance?

The function of all insurance including marine is to transfer the risk of loss and/or liability arising out of the ownership or interest in an asset to a third party.

• Marine Insurance, more specifically, is one of the oldest recorded

insurances in the world and was created to respond to the risks associated with the movement of goods.

• Within `marine insurance` there are several types of insurance that

aim to address specific risks.

• Globally, it a market valued at over $30BB in premium globally

and increasing annually

• Insurance is an essential part of the industry working to facilitate

the global movement of goods around the world

• It protects the supply chain and its stakeholders

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Where does marine insurance come from: Marine Insurance – a brief history

• 5000 BC the merchants in China have been recorded to share their risk

across more vessels to avoid significant losses when crossing treacherous rivers/seas

• Lloyd's of London became the global hub in the 1700s

– Place of knowledge – Place of transaction

• As the market grew so to did the formalities not only of the shipping

trade but of the insurance terms which protected the ship owners, the traders and the asset owners

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Fundamentals of Insurance

As stated, the function of all insurance is to transfer the risk of loss and/or liability arising out of the ownership or interest in an asset to a third party.

• Key T

erms to know when reading insurance contracts: – Insur urable able interest est: : T

• be a party to the contract you must have a

financial interest or benefit direct or indirect, in the insured object i.e. cargo – Indemni emnity ty: The principle of making an insured whole at the moment just prior to the loss i.e. no gain or loss – Utmos

• st

t good

• d faith

ith: common law principle of acting honestly; to not mislead or withhold information

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Incoterms

• Incoterms and Insurance

Incoterm 2010 Seller Carrier Port Ship Port Termina l Named Place Buyer EXW Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer FCA Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer CPT Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer CIP Seller Seller

Insurance Insurance Insurance Insurance Insurance

Buyer DAT Seller Seller Seller Seller Seller Seller Buyer Buyer DAP Seller Seller Seller Seller Seller Seller Seller Buyer DDP Seller Seller Seller Seller Seller Seller Seller Seller

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Types of Marine Insurance

Based on today’s audience, there are three types of insurance that are more common than others:

– Freight forwarders legal liability (FFLL); – Marine Cargo (Cargo) – Warehousemans legal liability (WLL)

3rd party coverage 1st party coverage

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Freight Forwarders Legal Liability (FFLL)

• Freight Forwarders’ Legal Liability:

– Legal Liability coverage protects the purchaser from 3rd party claims of negligence. – FFLL has been specifically designed to cover the exposures of FF

• perations:
• Specifically a FFLL policy covers your legal liability of the goods in transit as

well as your professional liability in the arrangement of the goods in transit.

• Liability can be imposed on the carrier in cases where:

– The carrier is not seen to have carried goods in “due dispatch” (in other words, “within a reasonable amount of time”) – The carrier could at the outset of the dealings reasonably foresee the shipper or any other party having an interest in the cargo suffering loss caused by delay – The carrier could be held liable for the damage to goods in their care, custody and control

• In the case where Freight Forwarders’ are offering insurance they must be

licensed to do so

– Certain provinces (AB, MB, SK) require a license to undertake this activity

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Freight Forwarders Legal Liability cont…

• Key wording/coverage details

– Third Party Liability

• Bodily injury and property damage coverage
• Financial loss due to negligent act(s) i.e. delay, breach of import/export

regulations, error or omission on bill of lading

• Defense costs

– Key exclusions

• Certain excluded cargo classes (cash, bullion, art, cigarettes & tobacco, spirits)
• Operation of marine vessel/auto unit
• Liquidated damages
• War
• Strike
• Confiscation

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Freight Forwarders Legal Liability cont…

• Claim examples

– Freight Forwarder arranged the shipment of marine parts to China. The freight was not properly secured for transit by the shipper and arrived damaged. – Trucker picked up shipment of goods at the warehouse. T aking a normal route to the airport the truck was hi-jacked and the freight stolen – Deep pockets theory (contingent liability): Arrangement of transport of goods (load broker) does not undertake due diligence of carriers through the transport chain and an accident occurs. The carrier involved in the accident has no insurance. The Load broker’s insurance would be called upon

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Marine Cargo

• Marine Cargo:

– This is direct, or 1st party coverage for the property in transit. – The owner of the property would secure this coverage on the goods they have an interest in. – Should there be loss or damage to the goods while in transit or storage they would seek coverage from the cargo policy

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Cargo cont…

• Key wording/coverage details

– Insurable Interest – Goods Insured – T erritory – Conveyances – Perils

• Key exclusions

– War, capture, detainment seizure… – Strikes – Delay – Inherent vice – Economic and trade sanction exclusion

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Cargo cont…

• Grounding of Höegh Osaka – January 5, 2015
• Freight Forwarder arranged the shipment of marine parts to China. The

machine was not properly secured for transit by the shipper and arrived damaged.

• Trucker picked up shipment of goods at the warehouse. T

aking a normal route to the airport the truck was hi-jacked and the freight stolen

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Warehousemans Legal Liability (WLL)

• Legal Liability coverage that protects a warehouse operator's against

failure to exercise reasonable care in the handling and storage of a customer's goods results in loss of, or damage to, those goods.

• This coverage can be purchased as a separate policy or as part of a

Logistics Insurance Package (most times with the FFLL). When included in the FFLL it is important to note because it can have it’s own limit along with it’s own terms and exclusions.

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The Supply Chain

• Marine insurance is the first step towards insuring the supply chain of

your own company as well as your position within it with your clients

• If global trade is table stakes then you have to define and protect your

position within it

• Can marine insurance be a strategic tool for you in this regard

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The Supply Chain cont…

• How insurance interacts with the supply chain

– Property, business interruption (BI) and contingent business interruption (CBI) – Marine Insurance: Cargo, Freight Forwarders Legal Liability (FFLL) – Trade Disruption Insurance (TDI)

• Stock/Inventory

Supplier location

Cargo/FFLL

Goods in transit

Stock/Inventory

Warehouse location

Cargo/FFLL Stock/Inventory

TDI

A s s e t s

Property/BI /CBI Property/BI /CBI Property/BI /CBI/WLL

R e v e n u e

Goods in Transit Customer location

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Claims Example

• Explosion in the Port of Tianjin, August 12, 2015 & August 15, 2015

– What happened? A series of explosions that occurred at a container storage station at the Port of Tianjin starting on Wednesday, August 12. The first two explosions occurred within 30 seconds of each other, and they were followed by another eight on August 15. – Why? Chinese state media reported that the initial blast was from unknown hazardous materials in shipping containers at a plant warehouse owned by Ruihai Logistics, a firm specializing in handling hazardous materials. – Loss: The official report released in early February 2016, providing sobering statistics of the event – 165 deaths; 8 people missing and 798 injured; 304 buildings, 12,500 vehicles and 7,500 containers either damaged or destroyed

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How does Marine Insurance Work?

There are several players within the insurance transaction:

• Insurance

urance compa panies: nies:

– Lloyds remains one of the top marine insurers – Several ‘stock’ companies have large premiums invested in the space – Several niche/marine only insurers play in this space

• Broker
• kers

– Local vs. Global – Speciality vs. General – Agent vs. Brokerage

Marine Insurer’s will only accept business through the broker channel therefore the selection of broker is paramount to placing an effective program.

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Considerations when Selecting a Brokerage

It is impor

• rtan

tant t to ask k the follow lowing ng quest stion ions s when assess sessing ng a Broker

• ker:

Q: Do you have employees who specialize in the placement of marine insurance? – Specialist brokers are an asset in defining and designing and implementing coverage – Specialist claims/adjusters will quickly understand, file, advocate and settle a claim Q: Do you have access to international markets? – A broker’s market access is a key differentiator – Global capabilities are an asset The extent that the broker knows the ins and outs of marine industry and there access to expertise and knowledge based resources is important to understand when selecting who to work with.

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Why Marine Insurance should be a consideration?

• It has a long history of adding value to the supply chain by reducing risk

to the parties

• There is no shortage of markets and capacity to tailor the coverage you

need dependant on your priorities

• It protects against your bottom line, if only for defense cost coverage
• It can boost your top line as a value add to your clients
• It can assist in understanding and de-risking your supply chain
• Access to specialist resources – in the event of a claim these resources

are where you really get your ROI

• T
• protect yourself in gaps of coverage in other policies. i.e. property

and commercial general liability policies.

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How can we help:

Our trading principles guide our “Client First” process providing global reach with personal and professional service

We are proud to be an independent and privately owned global insurance broker with direct access to both Lloyd’s and all major insurers around the world. We are not conflicted by or accountable to corporate shareholders or owned by an insurance company Our people and our reputation are our assets. We have worked hard to create an exceptional team of high calibre insurance professionals who are passionate about clients, aspire to be seen as a trusted partner and relish the opportunity to challenge convention. We have an excellent reputation for integrity and professionalism. Our clients’ interests always come first. We have an uncompromising determination to achieve excellence in everything we undertake. We believe that client service is rewarded with client loyalty. Our specialist teams work in partnership delivering a full service approach based on our clients’ needs, allowing us to deliver integrated solutions which are fit for purpose. We constantly strive to anticipate the rapidly changing needs of our clients and to develop new services and products to address these. We focus on industry sectors where our experience, expertise and resources set us apart from our competitors. Our dedicated risk management and claims management teams are vital to us in delivering a complete proposition to exceed our clients’ expectations. Without question we are able to compete at the highest level and leverage our well respected market position; yet small enough to give a professional and personal advisory service. 23

HW International Group

The HW International Group has worked to develop partnerships with likeminded brokers across the globe. Instead of relying on the references of others, we have strived to cultivate our own unique relationships with impressive local organizations. This allows us local connections that few others have.  New York, NY  Philadelphia, PA  Seattle, WA  Bellefonte, PA  London, United Kingdom  Stevenage, United Kingdom  T

• ronto, Canada

 Cologne, Germany  Hamm, Germany  Paris, France  Madrid, Spain  Melbourne, Australia  Athens, Greece  Hong Kong, China

HWI Global Partners

HW International Group

International Network of Hugh Wood International Group:

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Webinar inar Q&A &A And/or

• r

Conta tact ct me me direc ectly tly at knichols@ ichols@hwcan hwcanada.co ada.com 416.229 .229.3248 .3248 www.hwcanada.com

Hugh Wood Canada Ltd. 4120 Yonge St., Suite 201, T

• ronto, Ontario M2P 2B8

1-800-240-7055

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