When an incident occurs, many are found without sufficient cover and end up facing large losses.

With over 12,000,000 cargo containers in circulation1, insurance plays a pivotal role in providing protection.

Cargo – who pays the price?According to the Office of National Statistics, goods worth over £59 billion were imported and exported from the UK in 2016. These goods can be travelling by road, air, sea or rail, from across the globe. Theft, physical damage, and disappearance are some of the ways in which cargo can be lost or damaged and this can be costly to a business.

Over £59 billion worth of goods were imported and exported from the UK in 2016.

Who’s responsible?

In the event of an incident, there can be confusion about where liability lies, especially where multiple parties are involved - and the misconception that the other party will pay compensation if damage occurs.

Freight forwarders make arrangements to enable cargo to travel using one or a combination of modes of transport, over thousands of miles.

The Law, along with the firms trading terms, restricts their legal liability for damage caused to goods whilst in their control. Strict limits can often be stipulated by trade associations, such as the time after delivery within which a claim can be made i.e. 7 days.

Over 12,000,000 cargo containers in circulation.

1 Source - UK P&I club

There are a number of issues that can result in large losses. These can include theft, accidental loss or damage as well as fire and explosion. Hijacking, extreme weather events and political unrest can also cause damage and affect the supply chain.

CA R GO - WH O PAYS THE PRICE?

Furthermore, damage limits set by The UK Road Haulage Association and British International Freight Association are calculated per tonne, regardless of the value of the cargo. For example, the Road Haulage Association limits compensation to £1,300 per tonne - so even if the haulage firm is at fault, the amount of compensation available may be insufficient.

How much is owed?

Where cargo is damaged or lost, and if there has been negligence, the demand for compensation is usually calculated in Special Drawing Rights.

Special Drawing Rights (SDRs) were created by the International Monetary Fund (IMF) to resolve the issue around currency fluctuations between countries so that the performance of currency would not distort individual exchange rates.

In the event of a loss - by not having insurance on goods and relying solely on being compensated from the forwarders, could lead to a shortfall in the amount you receive. For example, at today’s rate, a firm will only receive £10.38 per kg2 in compensation for road cargo regardless of its value to the insured.

2 Source - IMF

Mode of Conveyance

Global Convention

SDR per kilo

Value of SDR per kilo (as at 1/3/2017)

Ray Ban Wayfarer sunglasses per kilo (£125 at 100g)

Xbox One per kilo(£220 at 3.2kg)

BMW 3 Series per kilo (£25,580 at 1475kg)

Road CMR Convention 8.33 £10.26 £1,250 £68.75 £17.34

Sea Hague-Visby 2 £2.46 £1,250 £68.75 £17.34

Rail CIM Convention 17 £20.94 £1,250 £68.75 £17.34

Air Hague Protocol 17 £20.94 £1,250 £68.75 £17.34

Illustrative examples of compensation available using SDR

The table below provides illustrative examples of compensation available under SDR. The Global Conventions mentioned govern the international carriage of goods by the different modes of transport identified. These have been incorporated into UK law and, amongst other purposes, they define the compensation limit of a carrier when losses occur to goods while in their responsibility.

The goods in transit section on a combined commercial policy will not provide full storage cover or transit outside of the UK. Marine cargo covers are global and can insure both before and after the journey.

Allianz Complete Cargo is designed for businesses with a single transit value of up to £2.5million. It is an assignable policy that can cover businesses transporting £50 million worth of goods annually within the UK and importing/exporting goods up to £62 million annually, worldwide. Visit www.allianzquotesme.co.uk for further information.

CA R GO - WH O PAYS THE PRICE?

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Allianz Insurance plc. Registered in England number 84638. Registered office: 57 Ladymead, Guildford, Surrey GU1 1DB, United Kingdom. Allianz Insurance plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 121849.

Specialty 2017

In 2016, global cargo theft was estimated to grow by £1 billion.

Source: BSI Group