When insuring international trade, expect the world

Think how few things you and your clients wear, use or drive that are wholly made in the USA, and you get a sense of the magnitude of international trade. International trade also is no longer the domain of global giants alone. Many regional and Main Street clients are in the import/export game, wrestling with the same challenges as their larger counterparts.

One major challenge stems from a lack of quality vessels or “tonnage” to transport cargo. Unprecedented trade volume, particularly in China and throughout Asia, has stretched availability thin.

Diverse terrain
Another difficulty is the diverse terrain of world trade. Treatment of cargo varies significantly warehouse to warehouse, and port to port. Local customs, regulations, security and labor practices all come into play. How many businesses have had a shipment tripped up by unfamiliar customs requirements? Even cargo under tight watch can fall into thieves’ hands. A commodity that is loaded with great care in Baltimore, Md., may not be so genteelly unloaded in India.

For numerous reasons, shipments are delayed, damaged, lost or stolen around the globe with a frequency that is probably not surprising. What is surprising is how significantly the effects of those losses could be mitigated. Prudent advance planning and prompt action to investigate damages and recover goods can mitigate damage to a shipper’s bottom line and customer relations. However, acting fast to recover lost goods–even knowing who to call–can be difficult if not impossible for a shipping manager sitting in Cincinnati whose cargo turns up short in Shanghai, China.

What can agents do from behind the desk to help clients in such predicaments? Plenty, if they align themselves with a cargo insurer that provides true warehouse to warehouse protection for shipments anywhere in the world. Such support should include three key components: loss control and engineering; worldwide claims and recovery expertise; and a healthy underwriting appetite.

Local loss control and engineering
A reliable marine insurer should have boots on the ground worldwide to help clients sidestep the myriad losses that can occur when shipping to foreign lands. Marine loss control and engineering experts situated around the globe can provide practical information to help agents and their clients anticipate and eliminate obstacles to smooth trade. Regional experts can bring to bear contacts and relationships to help clients navigate faraway exposures.

So, the insurer can connect, for example, the agent and client to a trusted shipper in Rotterdam, the Mumbai warehouse with a track record of keeping cargo safe, and state-of-the-art techniques to prevent theft when trade takes goods to Mexico City.

Worldwide claims expertise
Clients expect qualified claims personnel a call away to investigate and manage their losses anywhere in the world. That means that whether a shipment is waylaid en route to Singapore or San Paolo, Brazil, the client should have representation at the local port, posting bond, securing the cargo’s release, and getting it onto another ship as quickly as possible.

Hand in hand with those loss management capabilities go dedicated recovery and subrogation resources that produce tangible results. One large company has been recovering 35 percent of every claim dollar paid through insurer recovery efforts. Such efforts meaningfully mitigate losses, protect a company’s loss ratio and keep insurance premiums manageable.

With such claim resources available through an insurer or broker–one local call away–a shipping manager in Ohio could indeed act fast to investigate a cargo shortage in Shanghai.

A robust underwriting appetite
A marine insurer with the aforementioned loss control engineering and claim strengths also should have a “can-do” attitude toward cargo risks. With a solid network of loss control engineers and claims professionals acting as his eyes and ears worldwide, an underwriter should be able to collaborate with clients and brokers to address even difficult cargo risks in a way that makes sense for all parties. The underwriter should know the local landscape and be able to manage it, helping a client to access better tonnage, circumvent sloppy cargo handling or outwit would-be cargo thieves. By so doing the underwriter can efficiently write risks others would turn away.

Complex foreign customs, rules and regulations make the world of trade a daunting place, and many insurers shy away from international shipping risks or seek only picture-perfect exposures. Those insurers do not have the global loss control, claim and recovery infrastructure to successfully underwrite and service the risks.

Clients should not settle for sub-par protection or relinquish control of the insurance aspects of international transactions to trade partners. Rather, seize control and demand nothing less than an insurer that combines sound cargo coverage with service that prevents losses, protects goods and mitigates problems virtually any place on the globe. When trading internationally, your clients should expect no less than the world from an insurer.

Richard J. Decker is president of AIG Global Marine for AIG Companies, based in New York.