Losses from delays, damage, re-routing and business interruption pose significant risks for South African businesses planning to chart new courses in the year ahead, cautions Standard Bank.
According to a report by reinsurance specialist Guy Carpenter & Company, the massive explosions that took place at the Tianjin Port in China last month could generate insurance losses of up to $3.3 billion.
This can have major repercussions for local businesses, as China is a major bulk importer of cargo from South Africa. The Tianjin Port is the third largest port in China, and fourth largest globally.
“The marine supply chain is one which is vulnerable to events such as the Tiajin Port scenario and it is often only once the impact is felt by firms that they seek insurance remedies. Given the calculations in terms of the quantum of losses as a result of the explosion we expect to see an uptick in the number of firms seeking comprehensive marine cover,” says Noelene Joseph, National Product Manager at Standard Bank Insurance Brokers (SBIB) South Africa.
Exports destined for Tianjin Port and imports coming out of same port may have to be diverted. “This will cause delays and may mean additional costs being incurred from a business operations perspective.”
Ms. Joseph explains as an example that South African manufacturers who import components and raw materials via Tianjin may encounter delays with replacing materials lost or damaged in the explosion. This could cause considerable loss of revenue for those businesses.
“Similarly, exporters too may be forced to find alternative outlets for their cargo and will need to respond quickly to create new supply chain relationships with the various players along the value chain such as logistics operators, freight forwarders, road hauliers and shipping lines, amongst others”.
Importers whose cargo (particularly perishable goods) was delayed may be hardest hit as there is no insurance cover for delays on goods. This is due to the fact that, while insurance does cover damage incurred during the transportation of goods and services, agreements do not necessarily cover delays in the supply chain which can have a material impact on businesses’ in the short and long term.
“It is advisable that the insured contact their insurer to notify them of the delay in the supply of goods to ascertain what, if any remedies are available to them in terms of their contract,” explains Ms. Joseph.
In these scenarios, the insured needs to contact their insurance company immediately. The transportation of goods and services across states requires that the insured be covered both for the transit of said goods and for the goods once they reach their destination.
Ms. Joseph says, “It is also important to bear in mind that countries are governed by specific legislation and regulation regarding the insuring of goods, and sometimes these policies and regulations are complex to navigate”.
“A strong track record in providing global solutions is important and due to our extensive African footprint, Standard Bank Insurance Brokers is able to consult on all of these aspects, including regulation across the different jurisdictions, while also delivering on the requisite level of technical support,” says Ms. Joseph.
No cover is the same and the type of cover to buy is not an exact science. She says it is important for an insured party to take the time to understand the risks to determine if they will have enough coverage, and Standard Bank Insurance Brokers take every due diligence to provide an “easy to understand” summary of terms and conditions.
“Irrespective of the insurer you choose, we would like to urge all our exporters and importers to read their insurance policies with caution and to ask questions. Know what you are covered for in order to understand your risks and safeguard against any unnecessary financial losses,” concludes Ms. Joseph.