Underwriters oppose scheme

Press, 7 June 1978, Page 13

Underwriters oppose scheme

New Zealand marine insurance underwriters hotly oppose radical new international regulations on cargo insurance being considered by the United Nations Commission on International Trade Law, says the “Insurance Council Bulletin.” At present, ship owners have only limited liability for the loss or damage of cargo: importers and exporters have to arrange their own total coverage for their goods in transit. But, according to an insurance Council of New Zealand research officer (Mr R. Ward) moves are afoot to change the Hague Rules so that strict total liability for cargo losses is placed on shipowners.

The new scheme was being pushed by developing countries and some big shipping lines. It might add substantially to freight rates and create havoc with New Zealand’s marine insurance industry, said Mr Ward. “No company in New Zealand would be able to afford the massive coverage involved if shipowners had to accept total liability. Total cargo losses on some big new container ships would run into hundreds of millions of dollars. The business would have to go to the big insurance centres overseas. “The present system where a multitude of insurance companies are

involved in paying claims is more realistic because it spreads the losses and creates a competitive business where exporters and others can shop around for the best coverage,” he said.

The shipowner’s liability would almost certainly be incorporated in the freight cost.

“There are many legal and administrative complexities in the proposed system which would add to the legal costs of establishing liability for losses,” Mr Ward said.

“Under the existing scheme it is to the advantage of insurance companies and exporters to see that goods are safely packed against damage.

There is less incentive for this when insurance charges are automatically included in freight rates.”