CHAPTER 5: RISKS IN

INTERNATIONAL TRANSPORT
LEARNING
OBJECTIVES
Understand risks in different modes
of transport
CONTENT CHAPTER 5

1 Risks in m a ri t i m e
transport

2 Risks in Air transport

3 Risks in other modes of

transport in logistics service
 1. IN MARITIME TRANSPORT
1.1 Definition

The oldest class of insurance is marine insurance.

Risks of loss and damage that may happen to a ship, person or cargo which
is transported by seaway.
 1. IN MARITIME TRANSPORT
1.2 Risk management in m a r i t i m e transport
The key issues of risk management in shipping are as follows:
• best practice – focus on a risk management system • ship ownership and strategic risks;
in a shipping company; • risks to the vessel, people and systems;
• risk – the exposure and the uncertainty; • corporate risks;
• understanding risk appetite and how it shapes • on multi-levels;
management strategy; • multilayered;
• quantitative and qualitative elements in risk • take account of the ‘big picture’; and
management evaluation and strategy; • take account of day-to-day operations.
 1. IN MARITIME
TRANSPORT
1.2 Risk management in m a r i t i m e transport

Although there is no ‘official list’ of the risks affecting the shipping industry,
the most likely risk elements include:
• strategic;
• market;
• credit;
• financial;
• operational;
• legal;
• organisational; and
• sovereign.
 1. IN MARITIME
TRANSPORT
1.3 Cargo management i n m a r i t i m e transport

In terms of cargo management, further issues can be examined as follows:

• nature of the cargo;
• nature of risk (e.g. dangerous or hazardous cargoes);
• size of cargo;
• weight of cargo;
• value of cargo; and
• sensitivity and vulnerability of cargo.
 1. IN MARITIME
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1.4 Risks i n m a r i t i m e transport

- Insurable risk Act of God (storm, volcano....)

Stranding/ grounding
Sinking and capsize
Fire, explosion
Collision
Jettison
Barratry
Missing ship
Piracy/ Theft, pilferage or non -
delivery (TPND)
  Others:
+ Rain fresh water damage (RFWD)
+ Non – delivery (ND)
+ Leakage, shortage
+ Breaking, bending, denting
+ Hook damage (HD)
+ Contact with other cargo (COC)
+ Mouldy
+ Contamination
+ Rub/ scratch
 1. IN MARITIME
TRANSPORT
1.4 Risks i n m a r i t i m e transport

- Insurable risk
 1. IN MARITIME
TRANSPORT
1.4 Risks i n m a r i t i m e transport

- Extra risk
War
SRCC: strike, riot, civil commotion
(including terrorists or any person
acting from a political motive)
 1. IN MARITIME
TRANSPORT
1.4 Risks i n m a r i t i m e transport

-Excluded risks
Loss damage or expense attributable to willful misconduct of the Assured
Ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of
the subject-matter insured
Loss damage or expense caused by insufficiency or unsuitability of packing or
preparation of the subject-matter insured
Loss damage or expense caused by inherent vice or nature of the subject-matter
insured
Loss damage or expense proximately caused by delay, even though the delay be
caused by a risk insured against
 1. IN MARITIME
TRANSPORT
1.4 Risks i n m a r i t i m e transport

-Excluded risks
Loss damage or expense arising from insolvency or financial default of the owners
managers charterers or operators of the vessel.
Loss damage or expense arising from the use of any weapon of war employing
atomic or nuclear fission and/or fusion or other like reaction or radioactive force
or matter.
In no case shall this insurance cover loss damage or expense arising from
unseaworthiness of vessel or craft, unfitness of vessel craft conveyance container
or lift van for the safe carriage of the subject-matter insured, where the Assured or
their servants are privy to such unseaworthiness or unfitness, at the time the
subject-matter insured is loaded therein.
 1. IN MARITIME
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1.4 Risks in m a r i t i m e transport
Additional Exclusion Clauses as per Re-insure Treaty of most Vietnamese Insurance
company:
•Seepage and pollution exclusion
•Liability exclusion
•War exclusion
•Terrorism exclusion
•Radioactive contamination, chemical, biological, bio-chemical and electromagnetic
weapons exclusion
•Nuclear energy risks exclusion
•Political risk, financial guarantee and credit risk exclusion
•Information Technology Hazards
 1. IN MARITIME
TRANSPORT
1.4 Risks in m a r i t i m e transport
Additional Exclusion Clauses as per Re-insure Treaty of most Vietnamese Insurance
company (Cont.):

•Non-Marine Exclusion (Cargo)

•Cyber Attack Exclusion
•Termination of Transit Clause (Terrorism) 2009
•Termination of Transit Clause (Terrorism) JC2001/056 (Amended)
•Joint Excess Loss Committee Electronic Date Recognition Endorsement – C (XLEDRC)
•Sanction Limitation & Exclusion Clause - JC2010/014 - 11/8/2010 JELC communicable
disease exclusion JX2020–009A 06/11/2020
FORWARDER
/CARRIER
Do they have risk to be insured?
Recall Chapter 4.....

Property (Object) & Liability Insurance

 1. IN MARITIME
TRANSPORT
1.5 Liability insurance
The three main types of liability insurance in marine field:

1.P&I Club (for the shipowner’s liability)

2.TT Club (for the freight forwarder’s common liability)
3.Liability Insurance for FIATA Bill of Lading
 1. IN MARITIME
TRANSPORT 1.5 Liability insurance

1.5.1 Club P&I Insurance

•The insurance covers the members’ legal liabilities to third parties
•The liabilities must arise out of the operation or management of the ship
***Risks covered by a P&I Club***
•Personal injury / illness / death (Crew, Passengers, Stevedores, Third parties):
oCrew repatriation/ Crew substitute expenses
oLoss of crew effects/ Medical costs
oRepatriation expenses/ Sick wages
oDeviation/substitution expenses
oContractual entitlement
oDamages/compensation
 1. IN MARITIME
TRANSPORT 1.5 Liability insurance

***Risks covered by a P&I Club (cont.)***

•Collision
•Wreck removal
•Towage
•Damage to fixed and floating objects
•Pollution
•Cargo damage/shortage
•Fines
•Stowaways
 1. IN MARITIME
TRANSPORT 1.5 Liability insurance

***P&I Uncovered Risks***

Uncovered risks can be defined in:
•The Laws
e.g. The Marine Insurance Act 1906 in U.K sets out a number of exceptions
which apply to all policies unless they contain a term to the contrary.
•The Institute Clauses which are generally attached to the policy
The Institute Clauses contain a number of clauses exempting the insurer from
liability where the loss of or damage to the subject-matter insured arises from
certain causes
•The Policy
Sometimes exceptions are found expressly stated in a policy.
 1. IN MARITIME
TRANSPORT 1.5 Liability insurance

1.5.2 TT Club (for the freight forwarder’s liability):

•Though P&I Clubs insure the largest tonnage of ocean traffic, not all liability
risks in cargo transport are insurable at P&I clubs.
•P&I Clubs are open only to its members who are essentially the ship-owner. If
the transport takes place over land or with ships that do not belong to the ship
owner and that are not chartered by him, he will not be able to insure his
liabilities with his P&I Club.
•It is also difficult to insure the usual P&I club liabilities in the open market.
 1. IN MARITIME
TRANSPORT 1.5 Liability insurance

1.5.2 TT Club (for the freight forwarder’s liability):

TT Club was established as a mutual non-profit insurer, similar to the P&I Clubs,
using all premiums and investment income for paying claims, administration
costs and building up reserves with the Board of Directors drawn from the
Club's membership.
Our insurance covers five main areas:
•Warehouse fires;
•Container risks for ship operators and others;
•Transport and logistics operator liabilities;
•Cargo handling facility liabilities and assets;
•Port authority liabilities and assets;
•Forwarders’ cargo all risks
The following
table gives a
summary of
the TT Club’s
covered risks

Read more: TT
club wording
2022
TT Club members
 1. IN MARITIME
TRANSPORT 1.5 Liability insurance

1.5.3 Liability Insurance for FIATA Bill of Lading

• The FIATA Bill of Lading (FBL) is a negotiable marine ocean Bill of Lading,
subject to completion according to ICC UCP 500 rules. It can also serve as a
Forwarder House Bill with a suitable endorsement or as a multimodal transport
document. The FBL is used worldwide under the same set of conditions,
offering the customer a substantial degree of protection.
• The liability of the forwarder under the terms of the FBL is based on the
UNCTAD/ ICC Rules for Multimodal Transport Documents (ICC Publication
481).
• There are no specific insurance requirements for the use of the FBL other than
the user having to arrange appropriate insurance with a first class
insurance company to cover their liabilities.
 1. IN MARITIME
TRANSPORT 1.5 Liability insurance

1.5.3 Liability Insurance for FIATA Bill of Lading

•A forwarder issuing a FBL must ensure that all insurance arrangements related
to these liabilities have been clarified.

What are these liabilities?

 2. IN AIR TRANSPORT
2.1 Definition
Risks associated with the activities in transport
cargo by air.
These include hull, cargo, and liability

Liability in air transport

(airline/FF/ground service operator)
 2. IN AIR TRANSPORT
2.2 Types
+ Aviation activities give rise to a number of exposures and
various forms of aviation insurance cover is available to provide
security against these exposures.
+ Aviation insurance is available to aircraft owners, operators
and manufacturers as well as airport.
Asset damage (hull, cargo)
Liability Risks: passengers, consignors and non-passenger
third parties, aircraft manufacturer, airport operator,

What are these liabilities?

 2. IN AIR TRANSPORT
2.2 Types
Most insurance company offer insurance with terms &
conditions for insurable risks & excluded risks basing on
ICC AIR 1982/2009
Basically: insurable risks: applied for all risks except for
excluded risks mentioned in ICC AIR 1982/2009
Further reference to MIC, PJICO air cargo insurance package
PJICO MIC
 3. IN OTHER MODES OF TRANSPORT
Inland cargo
+ Subject - matter insured: cargo transported by land, rail and inland water
In Vietnam
From Vietnam to neighbor countries (Laos, Cambodia, South China)

+ Insurance rules: Ministry of Finance, Bảo Việt, PVI, Bảo Minh, PJICO, PTI, …
 3. IN OTHER MODES OF TRANSPORT
Inland cargo
Risks covered (similar to ICC C)
Except as excluded by the provisions of clauses 5,6,7,8,9 below, under this condition, Bao
Viet Insurance Corporation (herein after named as the Insurer) shall be liable for:
1 loss of or damage to the subject matter insured reasonably attributable :
1.1 Fire of explosion;
1.2 Means of conveyance being overturned or derailment; vessel or craft or conveyance
being stranded, sunk, capsized , collision or contact with any external object other than
water.
1.3 Discharge of cargo at a port of distress
1.4 Earthquake typhoon, inundation, cyclone, catastrophic earth wave, volcanic eruption
or lightning;
 3. IN OTHER MODES OF TRANSPORT
Inland cargo
Risks covered (similar to ICC C) (cont.)
1.5 Blowing down of tree collapse of bridge or tunnel and other structures;
1.6 Means of conveyance being missing.
2 loss of or damage to the subject matter insured caused by:
2.1 General avarage sacrifice;
2.2 Jettision or washing overboard;
Total loss of any package dropped whilst loading on to or unloading from conveyance.
 3. IN OTHER MODES OF TRANSPORT
Typical transport and logistics risks include:
Carrier delays and non-performance. Hacking
and theft.
Lack of security procedures.
Mergers and acquisitions.
Liability for loss or delays.
Bankruptcy of transport providers.
Lack of inventory.
New security and safety legislation affecting logistics.
Recall risks & responsibility in INCOTERMS 2020