TT Club, the London-based specialist insurer with a global network, is reminding transport operators with interests in the Russian market of a five-fold liability risk profile associated with doing business in the region. TT Club’s representative partner in Russia, Panditrans underlined these risks in a recent presentation given at the TransBaltic industry conference in St Petersburg.
Speaking at the conference, Panditrans Deputy Director Alexander Petrenko, highlighted that in addition to claims for loss or damage to cargo, operators could be liable for financial losses through errors and omissions, as well as third-party liabilities, and fines and duties imposed by state authorities. Furthermore, there is a range of costs arising from the consequences of any incident involving a container or CTU (cargo transport unit). Aside from this, liability to a contractual party, usually limited by applicable international and local laws and conventions, may be significantly increased depending on the circumstances of the incident, such as whether gross negligence or reckless conduct on the part of an employee or hired subcontractor.
“The level of risk for some types of incident, such as cargo theft and armed hijacking, may be higher in the region, but a lack of knowledge and experience of regulations, the law and judicial procedures are also likely to expose operators to considerable unexpected costs”, explains Paul Knighton, a Senior Underwriter with TT Club. “Operators should never consider cargo cover alone as sufficient. All carriers, truckers and forwarders need to carry out a thorough assessment of common liabilities, both local and international, when providing transport services to Russia and the FSU”.
The TT Club’s warning comes as some signs of a recovery in container trade volumes to the region are being reported. As a consequence of well-documented economic and political difficulties Russian container movements experienced an estimated 25% decline in 2015. However, a more recent recovery in the Russian economy has fuelled increases in container transport during the first half of this year. The Russian Association of Road Carriers reports a 6% year-on-year rise over the six-month period, representing two billion tonnes of freight and container traffic on rail railroads has gone up by 5.6% to 1.5 million TEU in the same period.
While rates of growth similar to those recorded prior to the global economic downturn are unlikely, the increase in trade will encourage operators, who must once more apprise themselves of the specific liabilities involved in transporting goods in the region. “Our twenty-five year plus experience in the FSU has lead us to conclude that in practical terms the transport operator is liable for almost everything in the event of an incident”, warns Petrenko. “In order to assist the operator in understanding the complexity of the situation, we have analysed our claims history and identified four main factors which commonly impact on risk exposure.”
These four elements are:
• The Human factor: From genuine mistakes, errors and omissions to fraud by own employees or sub-contractors;
• The Professional Factor: Poor internal procedures and lack of basic risk management policies;
• The Juridical Factor: Imperfection of applicable international and local legislation and disputable court practices;
• The Insurance Factor: Low level of insurance ‘culture’ and a shortage of insurance products specifically designed for the needs of transport operators.
TT Club and Panditrans strongly advise transport and logistics service providers operating in Russia and the FSU to carry out thorough risk management reviews to identify their possible liability exposure and to seek insurance cover that will give them assurance that the cost of such liabilities can be adequately met.