Category Risk Management

Winter cold front reminder of cargo risk management needs

25 April 2013 Compass Insurance Company Limited (?Compass?)

With the first major cold front of the winter having struck last week, the recent floods and gale force winds, which spread from the Eastern and Western Cape all the way to the Gauteng interior, brought with them a stark reminder of the need for businesse

Disruptions on the roads, as well as the recent high seas between Table Bay and Plettenberg Bay, highlighted the need for businesses transporting cargo by both land and sea to protect themselves from massive potential losses through damages and delays. That is according to Phillip Rentschler, Managing Director at Transit Underwriting Management, a specialist insurance underwriter, writing on behalf of Compass Insurance Company Limited.

Rentschler comments, “Although we often think of South Africa as having relatively good weather, extreme conditions do play a major role in marine and overland cargo transport considerations and the accompanying insurance requirements. At sea, cargo ships are obviously very vulnerable to severe weather all year round. Last week’s high seas brought a warning for all sea vessels, especially smaller ships, to modify their sailing schedules as far as possible. This can, of course, cause physical damages to cargo because of delays, even when the ship arrives safely in harbour.

“On land, risk management strategies also need to be employed throughout the year, as South Africa’s different major climate zones can bring poor weather conditions, whether wind, rain or snow, from January to December. The recent cold front, which began in the coastal areas, has apparently not yet lost all of its momentum, with early winter snowfall expected over the southern parts of the Drakensburg Mountains.”

Rentschler says that when transporting goods by both land and sea, marine cargo and transit insurance cover is something that should be considered as part of a risk management strategy.

“For example, while all types of cargo can be affected by weather-related damage, it is typically bulk cargo, such as grain and fertiliser, which becomes quite badly damaged by water ingress. Another problem lies with most types of fast-moving consumer goods, especially where suppliers and/or retail outlets would not allow goods onto the market that have sustained any type of damage that makes the product ‘unattractive’ from a consumer’s perspective.”

From the marine cargo perspective, Rentschler says the most common weather-related claims include delays resulting from high wind conditions, especially during the summer months in Cape Town. “Another great concern for marine insurers is loss of cargo resulting from heavy seas during the stormy winter months. The loss of containers overboard is a very real concern, and no ship is immune from the dangers associated with being on the high seas during foul weather conditions.”

Rentschler has commented previously that South Africa’s road infrastructure is under severe load: “Although some of the roads are generally in fairly good condition, regular maintenance is key to avoid the entire grid from deteriorating beyond help.”

He believes that the worst sections for road transport include sections of the N2 through northern Kwazulu-Natal, the main roads towards the border crossings with neighbouring Mozambique and Zimbabwe, and many of the roads in the outlying rural areas. “Often transporters are responsible for overloading, which further impacts on the damage to our roads. This is further exacerbated by heavy rains causing severe washouts. I strongly urge that action be taken to fix or upgrade the roads in these areas, both from the perspective of helping with reducing cargo transport insurance claims as well as to help prevent unnecessary loss of life,” Rentschler concludes.

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