When insuring goods in transit, the focus is usually on protecting the goods against transport damage. However, the destruction of a machine or equipment being transported to a factory or other production plant being constructed may prevent the start-up of the entire plant in accordance with the planned timetable until the arrival of a replacement. Replacements for damaged items often take several months. In tightly scheduled projects in particular, the financial loss arising from such a delay may be considerable. Project financiers are also concerned about possible delays and often demand that consequential risks associated with transportation be covered.
The breakdown of an individual machine or equipment during transport may also cause production interruptions and, thus, additional costs to the company. Such transport includes the investment and maintenance-related transport of machines or equipment vital to the company’s production activities.
Marine consequential loss insurance that can be attached to marine cargo insurance covers pre-agreed consequential expenses, such as loss of profit or other financial loss.
In marine consequential loss insurance, it is possible to define and/or limit transport risks which might cause consequential loss or expenses and which the customer wishes to insure. The customer can take out insurance cover for expenses arising from any cargo damage, in which case so-called all risk insurance is in question. Alternatively, the customer can limit the consequential loss insurance cover to include only those consequential expenses which arise from catastrophes (earthquake, washing overboard, sea water entering the vessel) or loss or damage to the means of transport. Another option is to cover only consequential expenses arising from total loss events.
A marine consequential loss insurance relating to marine cargo insurance requires that the customer have a valid marine cargo insurance with If. The key factors affecting the content and price of consequential loss insurance include:
- an itemised specification of the loss of profit or financial loss to be insured
- the estimated time required to arrange a replacement delivery for the damaged item
- the selected time excess, for example 15, 30 or 45 days
- the validity period for consequential loss insurance, typically from the start of transportation to the estimated production start-up day
- the maximum indemnity period for consequential loss, typically 6–12 months from the estimated production start-up day
- the special terms and conditions applied to consequential loss insurance
With respect to project deliveries, in advance If requests a list of so-called critical machines and equipment, including delivery schedules, whose damage during transport may trigger the consequential loss insurance coverage. In addition, If seeks to ensure the safe arrival of such deliveries through its own risk management measures.
Helena Hasi
