Canadians owe so much to ships and those who sail them. Marine Insurance, however, deals with more than just the movement of cargo by sea, for it also incorporates air, road, rail, post, road ferry and courier transit.
Following several quarters of financial difficulties, banks stopped providing financial support to Hanjin Shipping, which has triggered their restructuring and payment default to several counterparties, inclusive of fuel suppliers, port authorities and even its employees. Hanjin Shipping reported a net loss of $233.6 million in Q1/16 citing freight rates’ drop to record lows. By last Friday, Hanjin said 44 out of its 98 container ships have been denied access to ports around the world and one ship was seized. Hanjin isn’t alone in struggling in the current market, several transportation companies have been dealing with increased volatility in fuel costs and currency swings that test even the most sophisticated and larger operators.
Hanjin’s demise demonstrates the perils several companies face in regards to Trade Disruption. Either directly owned money by Hanjin (its suppliers) or having products sitting in containers on their ships (its clients) where its unlikely these products will reach destination in time for their optimal distribution, several dozen companies are now struggling to figure how they will survive without the funds or with contractual penalties deriving from the shipper credit default. Companies of all sizes can run counterparty risk scenarios, however the reality is, these scenarios are only as good as the real protection arranged to indemnify the company, in case they occur.
Daniel R. Galvao
In 2012 directors of Northstar Aerospace Inc. were held personally liable by the Ontario Ministry of Environment for contaminating the surrounding area of their Cambridge, Ontario manufacturing facility. Unfortunately for Northstar, environmental remediation costs were excluded from the directors’ and officers’ insurance policy.
In the end, “the directors and officers were forced to pay approximately $800,000 out of their own pockets for the completion of interim remediation work,” and “subsequently reach a settlement with the Ministry of Environment to withdraw the remediation order at $4.75 million.
“Our vision for Eagle is to become a one-stop insurance provider for risks associated with “Things That Move”.
We’re excited to share our new vision for Eagle Underwriting.
Changes in the insurance marketplace and the globalization of business for companies of all sizes, have resulted in the need to view many risks differently – especially those with a transportation component.
Eagle underwriting’s ‘things that move’ strategy was developed in response to a challenging insuring climate that is making it difficult for brokers and clients to source adequate insurance protection, at a time when business risk itself is undergoing rapid change.
Much of the insurance industry sees players making substantial changes in strategy and direction based on what other carriers are doing, rather than examining what their clients actually need. Narrowly defined profit centres prevent many carriers from examining the while risk, and it is not uncommon for parts of an attractive account to be declined, simply because it falls slightly outside of one departments target class or fails to meet a minimum premium threshold.