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New tasks bring new risks, warns leading insurer

[ December 9, 2011   //   ]

Freight forwarders and other transport intermediaries face increasing risks in emerging markets, as they tackle additional supply chain services for their customers, warned an insurance expert.

Speaking at the Cargo and Freight Insurance Annual Conference in Moscow on 8 December, Andrew Kemp, European regional director of international transport liability insurer, TT Club, said that manufacturers and retailer continue to outsource more of their sub-assembly, inventory handling and distribution processes and were expecting their freight suppliers to take on ever more complex risks.

“Those traditional freight forwarders, who have, in the recent past seen the opportunity to expand the service role by offering extended warehousing, packaging, delivery fulfilment and even purchasing functions for many shippers are not always fully aware of the liabilities for cargo loss and third-party damages that these additional tasks are opening them up to,” said Kemp.

This was especially true where the cargo owners are unwilling to invest in distribution infrastructure. While the out-sourcing of such tasks can bring significant new business opportunities to logistics companies, they can also be complex: “A typical new type of activity would be the packaging, for the local retail market of an item with a sales promotion attached.  This task is straightforward in itself but brings with it risks of errors and possible damage to the items. This would be something not experienced by transport operators in the past.”

Cargo owners are also increasingly requiring forwarders to cover the full value of their goods throughout the sometimes lengthy and involved supply chain. This can be an onerous and unfamiliar risk for the forwarder, who is seeing his contractual obligations extended beyond standard terms and conditions.

As a specialist insurer, TT Club frequently gives advice to its Members on the liabilities customer contracts could give rise to and sees the importance of providing tailor-made cover.