Underwriters urged to be cautious due to claims difficulties
An insurer has warned that it is often difficult to recover claims against mainland shipping companies for cargo damage.
And it is almost impossible to obtain recovery from inland carriers, says Japanese cargo insurer Yasutoshi Konnai, who travelled extensively in China to produce a report for the International Union of Maritime Insurance's (IUMI) cargo insurance committee.
He urged caution when insuring trade in the mainland due to the high risks involved.
Transport infrastructure in the eastern coastal region was similar to advanced countries, but the system inland was less developed and lagged behind the pace of economic development, he said.
'Cargo underwriters need to be very well informed about the current condition of inland transport, the risks of each transport mode and the situation of inland carriers,' he said.
Rail was most widely used for inland transportation of cargo. The risks were less on rail than for other forms of transport, and long-distance haulage was about half the rate of trucked freight.
Because inland carriers did not present written contracts to cargo owners and clerks did not understand contracts of carriage, he recommended the use of carriers which issued through bills of lading to inland destinations.
Companies such as Cosco, Orient Overseas Container Line and K-Line operated combined services - in co-operation with Yangtze Shipping and Min Sheng Shipping - and issued through bills of lading to cargo owners.
'Cargo insurers should understand the risks relating to the means and routes of transportation, and underwrite the risks properly,' he said.
He proposed that insurers try to add value to their products for loss prevention.
Mr Konnai cited two claims last year from the Japanese marine insurance market to back his case about inland transport in the mainland.
In the first, steel coils valued at US$120,000 stored in a port warehouse were damaged by leaks from a hydrant. The shipment had taken more than two months to pass customs and was in storage for more than four months, leading to its loss.
The second case involved bagged chemicals worth $80,000 which were transported by a barge down the Yangtze River to Shanghai. The chemicals became a total loss when the barge was holed and sank.
Mr Konnai said that because risk on inland waterways could be significant, a clear definition of carrier liability was necessary.