As an insurance executive with many years’ experience in ocean marine insurance, I have seen all sorts of things happen to goods in transit. Before I talk about what those things are, let’s consider the fundamental question for anyone who buys or sells goods transported in international trade: Why do I need ocean cargo insurance?

For starters, let’s look at some numbers:
80%: Percentage of the world’s traded goods transported by vessels, according to the International Maritime Organization.
10.3 billion metric tons: Volume of internationally shipped goods in 2016. That’s equivalent to about 1.4 billion elephants, 31,000 Empire State Buildings or, perhaps easier to visualize, one Toyota Camry for every man, woman and child on Earth.
701 million: Global container port traffic, measured in twenty-foot equivalent units, a standard size of shipping container, according to the United Nations Conference on Trade and Development. This number has grown steadily in each of the past five years, by the way.

These numbers tell us that a growing amount of stuff is sent around the world, even before we start to contemplate what those shipments are worth. Protecting that value is where cargo insurance plays a critical role.

Protecting valuable cargo

During my career, I have written cargo insurance on objects ranging from live lobsters to retail electronics, to bulk commodities such as sugar, to heavy industrial equipment. The variety of items that move around the world is truly stunning. And all of it, to one degree or another, has a value to someone.

Cargo on oceangoing ships is exposed to various risks, including but not limited to what the marine industry calls “heavy weather.” If you’re picturing high waves and fierce winds in the open ocean, that’s pretty much a textbook example of heavy weather. Those conditions can batter a vessel that’s docked, too. Other, more commonplace risks include vessel fires, theft and rough handling. Human intervention, such as misdeclared cargo or improper packing or loading, can also wreak havoc on goods in transit.

The key advantage to cargo insurance is that it can offset financial losses for cargo owners when damage occurs in transit. Without coverage, a cargo owner may face losses that force it to delay or scrap its business plans for certain products. Or the cargo owner may suddenly see a profitable current line of business disappear. Have you ever wanted to buy a popular product that suddenly becomes scarce, and because the seller can’t meet demand you decide to buy something else from another manufacturer? A cargo loss can be the root cause of such market shifts.

A tricky part of insuring shipments is getting the valuation right. There are lots of questions to consider, including: Are the goods being purchased to go into inventory, or are they sold to customers prior to import? Does the invoice value of exported goods reflect the selling price or something else? Are the goods new or used? Can the goods in transit be replaced with like kind and quality? An advantage of cargo insurance is its flexibility. This form of insurance can accommodate different values of goods in transit.

Still another advantage is a valuable form of marine cargo insurance known as stock throughput. This covers goods throughout production and processing, from raw material to completed products, until they are delivered to their ultimate destination. In the era of globalization, it’s not uncommon for manufacturers to produce, process and assemble products in multiple countries. Stock throughput policies offer important protection at all phases of the journey.

Shipping cargo is a risky business, but it’s what makes global trade possible. Fortunately, cargo owners have options to mitigate the risks. Ocean cargo insurance is something cargo owners should not go without. Working with an experienced insurance partner in this specialized field can relieve cargo owners of a lot of anxiety. In upcoming articles, we’ll explore much more on ocean cargo risk.

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About Author

Julie Vogele, AMIM
Senior Marine Underwriter at Tokio Marine America
Julie Vogele, a senior marine underwriter with Tokio Marine America, has been underwriting all lines of ocean marine insurance in California for more than 30 years, with a specialty in ocean cargo insurance. She was among the first to earn the Associate in Marine Insurance Management (AMIM) designation from The Institutes in December 1998. Active in the marine insurance industry, Julie has served as past president of the Board of Marine Underwriters of San Francisco and still serves as a member of the BMUSF Board of Directors. She is currently on the Executive Committee of the Association of Marine Underwriters of San Francisco, where she has been president four times. She has also served on the Pacific Coast Advisory Committee for the Inland Marine Underwriters Association. Julie has guest lectured at the California Maritime Academy several times, been an instructor for the AMIM program and presented for the Inland Marine Underwriters Association and the Association of Marine Underwriters of San Francisco.

About Tokio Marine America

As part of our commercial ocean marine product offering, cargo owners and shippers are well served by unmatched financial strength, dedicated underwriting experts, and a suite of flexible and proprietary insurance products that can be tailored to fit your needs.

With over a 100-year history in the U.S., Tokio Marine America (TMA) offers tailored products to a diverse range of customers – from small to large-sized global businesses seeking traditional multi-line coverage, to larger private and public companies requiring full risk management solutions. Our commitment to providing the highest level of service is paramount. More than 93% of our customers recommend TMA based on our superior claims service. TMA is one of only three insurers with an A++ (Superior) XV rating from A.M. Best. With a solid foundation of financial stability, our strength lies in understanding your business and working in partnership to exceed your expectations.

By offering fully integrated solutions to meet our customer’s needs, we endeavor to deliver ANSHIN – safety, security and peace of mind to all our customers.

Tokio Marine America (TMA) is the marketing name for Tokio Marine America Insurance Company (TMAIC).