As shipping container losses soar, freight forwarders can play a crucial role in protecting businesses

Story by

Johnny Mccord

Tags /

  • Business
  • Freight
  • Insurance

This winter, the supply chain industry was stunned by reports of massive shipping container losses, and for good reason. Between 2017 and 2019, an average of 779 containers were lost in transit each year. Then, in just November and December of 2020, that figure skyrocketed to 2,675—and the rate of container loss remains elevated.

Unfortunately, while freight forwarders, just like you, are keenly aware of the growing threats to ocean-going cargo—not to mention the limited protection offered by carrier liability policies—your customers may not be.

What must they understand about the growing threats to their valuable cargo? And, how can you better protect their businesses from risk exposure?

Here are a few thoughts you might share with them—and some insight into how you can lend a hand.

Mega ships, violent weather, and COVID: The perfect storm

MASSIVE CONTAINER SHIPS
The shipping industry is under immense pressure to produce larger, faster ships to support our growing reliance on global trade. In fact, the United Nations Conference on Trade and Development reports that shipping vessels have grown by 155% between 2006 and 2020.

And, as the old adage goes, “The bigger they are, the harder they fall.”

Today, we’re moving cargo on, in essence, vast floating cities with containers stacked 20 stories high. These containers act as high-rise sails—amplifying the ship’s roll in heavy seas and straining lashings.

Meanwhile, crews are challenged to properly stack these containers. Inaccurate weightings on bills of lading and improperly packed containers are not uncommon, and this creates the potential for perilously top-heavy stacks and shifting contents.

So, now, when something goes wrong—it goes drastically wrong.

You don’t need to be an engineer to understand that violent rolling in heavy seas will trigger a pendulum swing in these massive stacks, ultimately leading to their collapse.

Of course, losing containers overboard isn’t the only threat to shipments—fires are also claiming containers. In fact, Allianz Global Corporate & Specialty SE’s Safety and Shipping Review 2020 found that, approximately every 10 days, a cargo-related fire occurred on an oceangoing vessel. The reason: Fire-fighting capabilities simply haven’t scaled with our growing ships. On average, fire hoses have increased from one to two since the 1970s, while crew sizes have declined by a quarter.

The danger is compounded by improperly declared and secured containers—and we only need to look back to the summer of 2020 for evidence of this. As you likely recall, 2,750 metric tons of improperly stored ammonium nitrate detonated in the Port of Beirut, killing 200, injuring thousands, and leaving behind $15B in property damage.

This known issue prompted a National Cargo Bureau investigation to determine the extent of the problem. The results are cause for alarm:

  • More than half of the 500 containers it inspected failed with one or more deficiencies
  • Nearly a quarter of import containers carrying dangerous goods did not pass inspection
  • Nearly 4 of every 10 export containers holding dangerous goods failed

COVID-DRIVEN DEMAND—AND BRAIN FOG

In response to the pandemic, not only did we make a rapid pivot in the ways we work, but our consumption habits changed, as well. And, that spike in demand, all while manufacturers struggled with supply chain disruption, created a whole host of issues.

Not least of which is that when a vessel now makes an ocean crossing, it’s going to be filled to the brim with containers—and then some.

Now, layer in the human element.

The chronic, unrelenting stress we’ve all experienced, impacts our ability to learn, remember, and make sound decisions. As UC-Irvine neuroscientist, Mike Yassa, shared with The Atlantic, “We’re all walking around with some mild cognitive impairment.”

As captains’ and their crews’ mental health has been taxed like never before, they simply aren’t functioning as they otherwise might—especially under intense just-in-time pressures.

Consider all of this within the context of overworked crews and a reduced labor force, and it’s easy to see why containers might be improperly lashed—or why captains might sail into storms rather than lose precious time circling around them.

SEVERE STORMS AND ROUGH SEAS

You’ve heard the stories. In November, the ONE Apus lost 1,816 containers after reportedly sailing into a severe storm. In January, the Maersk Essen lost 750 containers in heavy seas. The list goes on.

These massive ships, piloted by stressed and strained captains and crews, are now also contending with increasingly frequent and severe weather.

In fact, this winter, container ships encountered the second strongest winds in the North Pacific since 1948, according to The Weather Channel chief meteorologist, Todd Crawford. And, these strong winds fueled rough seas and massive waves.

This could become our new normal.

For some time, climate models have demonstrated how warming is destabilizing our jet streams, bringing on heavier, more persistent storms. And, now, scientists are also finding evidence that upper-ocean warming is powering stronger waves.

At the end of the day, this means ships must contend with more unpredictable, more violent weather.

What your customers should know about protecting their valuable cargo

BROADEN COVERAGE

It’s not uncommon for cargo owners to believe their valuable containers are fully covered by their carrier’s liability insurance. That’s not the case.

What your customers may not realize is that their carrier’s insurance policy is filled with exclusions—only covering carrier negligence, which you or the cargo owner must prove.

Additionally, when these policies do pay out, they typically pay just a fraction of the full invoiced value of the shipment.

The result: An unpleasant surprise that poses a threat to your customer’s cash flow and, potentially, their business continuity.

“Ship happens,” as they say—and it’s why we always recommend freight forwarders secure all-risk coverage for their customers.

This broadest-available coverage protects against common threats to containers, like fire and Acts of God. It also settles claims based on the full invoice value of the shipment and covers the expense of expedited goods replacement.

ACCELERATE FINANCIAL RECOVERY

Domestic carrier liability claims are a headache all on their own. Now, roll-in international conventions and a whole mess of legalities, and filing an international claim grows increasingly complex.

This is where all-risk coverage provides added value.

With shippers in the first party position, they’re no longer reliant on the carrier to file a claim—reducing time-consuming hassles and accelerating their recovery.

Cutting-edge tech is making all-risk coverage broadly accessible

Might you encounter some resistance when first suggesting all-risk coverage? Perhaps. It wouldn’t be a surprise to be asked why you’re just now adding this cost to the chain.

The answer is simple: Until now, traditional, transactional coverage was far too expensive and too slow to acquire—putting it out of reach to all but the largest enterprise businesses.

Now, however, AI and automation are more accurately underwriting risk, eliminating traditional underwriting costs, and simplifying and accelerating claims. The end result: Broad, affordable coverage that gives every business the opportunity to protect against loss and secure future growth.