100th Anniversary of Titanic highlights financial implications for SA marine industry players

April 14 – 15 marks the 100th anniversary of the sinking of the R.M.S.Titanic, one of the most ironic maritime disasters in history. The commemoration of the sinking of “the unsinkable”, is a harsh reminder that nothing is totally protected.

This is according to Andre Brooks, Marine Customer Relationship Manager of Lion of Africa Insurance, says the anniversary highlights the need for players in South Africa’s growing marine industry to ensure that they are insured against major risks – even if the risk seems an impossibility.

Brooks refers to the sinking of the Titanic and other vessels such as the R.M Lusitania and the more recent Costa Concordia, which has resulted in billions of rands in losses, show us that combating risks at sea must be taken seriously. “Although the maritime industry has always played a huge role in the South Africa’s economy, a worrying trend has emerged, as a result of market conditions, whereby industry players are taking on dangerous amounts of risk by cutting expenses such as insurance,” says Brooks.

Brooks says that whether carrying passengers or cargo are by sea, without adequate insurance cover you are exposed to potentially myriad risks during a voyage. Your cargo could be exposed to loss and/or damage arising from the vessel sinking or running aground and among others, piracy and fire.

“Uninsured losses of this nature could have a crippling effect on smaller to medium businesses with very few companies being able to absorb these types of catastrophe losses to their bottom line. A factor often over-looked by international traders is that of the commercial terms of sale between the parties. These commercial terms usually govern the transfer of the financial risk and responsibility between the traders and they need to be carefully scrutinised and negotiated to ensure cargo is adequately covered throughout,” says Brooks.

Also of utmost importance, according to Brooks, is that the international trader pays close attention to the classification of a vessel on which their cargo is being transported, with specific reference to vessel age and seaworthiness.

In the past five years, South Africa has experienced an increase in ships running aground, which includes, among others, the Seli 1, which ran aground in Blouberg, Cape Town in 2009 and the Safmarine Agulhas which was stranded in East London in 2006.

Brooks says that climate change is steadily having more and more of a profound effect on the shipping industry globally and the potential for greater storm conditions increases the chance that cargo vessels will get into difficulties, run aground or sink.

“It is paramount that the players in the marine sector look to minimise risks by taking adequate financial precautions,” concludes Brooks.