Shipping companies are being directly impacted by the economic slowdown and it is possible that some will fall into bankruptcy. When a shipping company fails, cargo may be left stranded and significant costs can be incurred to arrange for on-forwarding to the intended destination.
The CargoCover policy includes an extension of coverage, per the Insolvency Clause, that protects the insured cargo owner against additional costs reasonably incurred as a result of insolvency of the owners, managers, charterers, or operators of the vessel. However, as with any Insolvency Clause and insurance coverage in general, the insured must be able to show that prior to loading they took reasonable and practicable measures to establish the financial reliability of the party in default.
What constitutes reasonable measures will depend on the situation, but where a forwarder is selecting vessels for a specific voyage, one aspect that should be given consideration prior to the commencement of transit is the financial status of the parties involved, based on S&P or A.M. Best ratings or a RightShip report.