It will be seen that a full 42% of losses handled by Eikos Risk Applications (by number of incidents) result from temperature variation damage, unrelated in any way to breakdown of the refrigeration equipment. In the standard cover provided by the insurance market not only is machinery breakdown necessary but it must break down for longer than 24 hours.

Insurance is in fact never the whole solution and in certain instances, as can be seen, actually responds quite dismally to the real risks that are faced in everyday trade.

Proper management of this type of risk entails thorough understanding of supply chain risk in its broadest sense; supply chain analysis and management, pre and post loss management (e.g. specialist marine surveyors), alternative risk financing methodology; knowledge of insurance markets who understand this risk often entailing access to international insurers, good claims management and management information systems and the infrastructure to manage a complex "insurance" portfolio. Sound relationships with the chosen carriers and involvement by them in the risk management effort is also crucial.

PART TWO:

It is not typically a prerequisite of a marine insurance policy that independent temperature recorders be used. However, in our opinion, it is essential that Shippers do in fact utilise independent temperature recorders on all shipments.

The reason for this is that, in terms of South African insurance law, the onus is on the Assured (i.e. the Shipper), to prove that a loss is recoverable in terms of the Policy. This means that Shippers will have to demonstrate to Insurers that temperature variation was, or was not, the cause of a particular loss. This is done by providing the Insurer with the temperature recordings for the voyage. Admittedly, this data is captured on the Partlow chart too, but in our experience, the chances of Shippers obtaining a legible copy of the Partlow chart from the shipping line or the PPECB, are unfortunately not very good at all – notwithstanding the PPECB’s General Loading and Carrying Temperature Instructions for Perishable Cargoes that states that:

"All temperature charts, or good quality copies thereof, must be returned to the PPECB immediately after completion of the voyage. All other relevant information pertaining to the shipment must also be forwarded to the Board."

If the Partlow chart is requested from the shipping line, in our experience, most shipping lines will simply state that it is against their company policy to release the charts.

From an insurance point of view therefore, it is certainly in the Shipper’s best interest to utilise independent temperature recorders so that they have immediate access to the data required to prove a loss against an insurance policy. Given that nearly 45% of all losses incurred by perishable cargoes are temperature damage related, this is obviously extremely important.

In our opinion, it is important that at least two temperature recorders per container are utilised. We have been privy to many incidents where the recordings on one instrument do not correspond with those of the second instrument, depending of course where each was situated within the container. This could lead to a situation whereby there was indeed a variation in temperature significant enough to have caused temperature damage to part of the cargo, but the Shipper is unable to demonstrate this to the Insurer as, due to the location of the temperature recorder within the container, it did not register the same temperature conditions that the damaged cargo was subject to. The following extract from an actual survey report illustrates the above point most succinctly:

"Throughout this trace, there is a regular pattern of peaks and troughs. We are of the opinion that these indicate the instrument’s proximity to the front of the container and reflect the carrying containers refrigerator "cooling/ defrost" cycles. We would suggest therefore that the lower recordings would be the closest to the prevailing temperature within the container."

A further illustration of the importance of situating and operating the temperature recorder in absolute compliance with the manufacturer’s recommendations is illustrated by the following extract from another actual survey report:

"Considering the evidence to hand, we are of the opinion that the temperature recording devices were not accurately reflecting the delivery air temperature to the container. We strongly suspect that the recorders were attached to palletised cartons, the produce within which was naturally respiring and heating, irrespective of the delivery temperature of air to the container. Consequently, the instruments have recorded a spurious temperature, which reflected a combination of the ambient air and the excessively overheating produce."

In view of the above, it is very important that Shippers make detailed notes of the exact location of each recorder in the container, and then forward this to the Receiver in respect of each and every shipment. Surveyors should always inquire as to the location of the temperature recorders within the container, and in most instances, the Receiver cannot recall exactly where in the container the recorders were situated. As is evident from the above scenarios, this information could prove vital in proving a claim against the insurance policy. We therefore strongly recommend that this be adopted as standard practice on all shipments.

PART THREE:

Regrettably, we still encounter much frustration, from both Insurers and Shippers alike, in respect of product quality related losses, which are not typically covered under a marine insurance policy. Such incidents represent 30% of all losses, and the single biggest perishable cargo loss we have handled was a Product Quality issue, so it is certainly an issue worth investigating further.

In most instances, what occurs is that all practices and processes, from the packing of the product to the de-stuffing of the container at final destination are carried out perfectly, and yet still the product arrives in a deteriorated condition and is rejected by the Receiver.

Even though there is no evidence of the operation of an insured peril (e.g. the refrigerating machinery malfunctioning) during the voyage, the Shipper’s argument is that if the cargo was in perfect condition when it left South Africa but arrived at final destination in a deteriorated condition then, by deduction, such deterioration must have occurred during the voyage and should therefore be recoverable from Insurers.

The Shipper produces a PPECB Export Certificate to substantiate the fact that the product was indeed fit for export at the time of shipping. However, Insurers are not obliged to accept a PPECB Export Certificate as conclusive evidence that the product was indeed in sufficiently good condition to endure the known rigours and/or duration of the intended voyage. More importantly however, there must be evidence of the operation of an insured peril in order for a claim to be recoverable under the insurance policy, and in the absence of any such evidence, the Insurer declines the claim.

In order to convince Insurers that the loss was indeed caused by the operation of an insured peril during the voyage, the Shipper highlights every little temperature fluctuation and/or one or two day delay, that occurred during the voyage, and argues that it was these fluctuations and/or delays that gave rise to the loss. Seldom do such arguments meet with any success as these "incidents" are not unexpected or unforeseen, but occur in the vast majority of shipments, but yet do not result in a loss. In such instances, the Insurer is guided by the considerable experience of the surveyor appointed to report on the loss. Some examples of what surveyors typically report in such instances are:

• "the damage had to be attributed to the pre-shipment condition of the fruit"
• "the product were of forward maturity prior to dispatch"
• "the advanced maturity of some of the fruit mixed with immature green fruit showed a contrast of fruit maturity at the point of shipment"
• "the damage was caused by the pre-shipment condition of part of the fruit and the decision of shippers to opt for the temperature pattern of 0º/+7.5º Celsius.

Not surprisingly, such incidents seem to be particularly prevalent in the early and late stages of the season. As a result, we have seen some Shippers actually withdrawing from export sales prematurely, fully aware of the increased risk of such consignments and the fact that Insurers will not respond to such losses.

We naturally advocate this as "best practice", or would suggest that serious consideration be given to air freighting such cargoes to obviate the risk of the cargo arriving in a deteriorated condition. Admittedly, the cost of air freighting the cargo is much higher, but this additional cost should be considered in the context of the cargo arriving in a deteriorated condition and the Insurer declining the claim, and the Shipper having to absorb the entire loss cost … "better the devil you know than the devil you don’t".

In so far as some Insurers seeming reluctance to accept a PPECB Export Certificate as anything other than prima-facie evidence of the condition of the product, it is interesting to note that some Shippers have commenced utilising the services of independent quality assessors/assessment companies. If you have recently commenced doing this, please ensure that you have advised your insurers accordingly, as it is material fact and as such, must be communicated to your Insurer.

Porthole containers continue to cause the greatest number of losses, both in the frequency and the severity of losses, but particularly in severity. This is particularly true of temperature damage losses, where the loss tends to extend to more than one container by virtue of the fact that several containers are being cooled simultaneously by the same refrigerating equipment, whereas with an integral reefer container, the temperature damage is limited to just one container.

From a risk financing point of view, this means that the "maximum probable loss" (M.P.L.) is lower for integral containers than it is for porthole containers, thus making them a "better risk". Some Insurers may even apply a higher premium tariff and/or excess in respect of porthole containers.

PART FOUR:

Losses attributable to the insufficiency and/or inadequacy of packing, including the manner in which cargo is stowed within a container, is typically a specific exclusion of a marine insurance policy

Due to the strict protocols of importing countries, the actual packaging (i.e. cartons, etc.) of the product does not typically give rise to many losses, but the actual stowage of the cargo in the container is still the cause of some losses.

Typically, what occurs is that loose cartons are stowed on top of the palletised cargo, seemingly in order to maximise all "available" space in the container. Whereas this practice may or may not be ultimately sited as the cause of a particular loss, what it does do is give Insurers grounds to avoid liability based on the fact that cargo was (a) stacked above the load limit line, which in turn (b)impacts on the air flow within the container. This clearly leaves the Shipper vulnerable to the "insufficiency of packing / improper stow" exclusion. In addition thereto, some Insurers may go so far as to argue that such a practice constitutes the Shipper failing to act as a "prudent un-insured", and on which grounds they may seek to avoid liability. Is it really worth prejudicing your insurance arrangements for a few extra cartons?

Another stowage issue, which is a potential cause of losses, is where the loading pattern of the pallets within the container is not correct, which can impact on the circulation of air within the container. Correct stowage is critical as it results in optimum air circulation, which reduces the build up of gases, heat and water vapour. Some important features of correct stowage are, for example, the distance between the container door and the rear end of the stow, the space between pallets and/or cartons, the positioning of the cargo relative to the t-section floor.

The PPECB’s General Loading and Carrying Temperature Instructions for Perishable Cargoes states that:

"The Board (PPECB) issues the Master of the vessel carrying the product from South Africa with written temperature and carrying instructions."

In addition hereto, it is common practice for the Shipper to provide the Ship’s Agent and/or Shipping Line with carriage instructions too.

Unfortunately however, breakdowns in the communication of the required temperature carriage instructions between the Producer and/or the Export Agent/Shipper and/or the Forwarding Agent and/or the PPECB and/or the Ship’s Agent and/or the Shipping Line and/or the Ship’s Master do occasionally occur and usually result in damage to the cargo. This problem is most prevalent where a "dual temperature regime" is being employed.

Typically what occurs is that the Ship’s Agent and/or Shipping Line and/or Ship’s Master receives conflicting temperature carriage instructions from the Shipper and the PPECB, and by default, follows the instructions provided to them by the PPECB. Unfortunately, the PPECB instructions may not always be correct. In one instance, for example, a temperature of –0.5ºC was erroneously shown as –5.0ºC.

Unfortunately, human error will inevitably occur from time to time, and in order to manage this risk, we recommend that Shippers attempt to secure an agreement from the Ship’s Agent and/or Shipping Line that they will, in all instances, forward a copy of the instruction they receive from the PPECB and/or any other party(ies) to the Shipper. This system of checks and balances will give the Shipper an opportunity to verify that the correct instructions have indeed been received by the Ship’s Agent and/or Shipping Line.

If you are successful in achieving such an agreement, please advise your brokers accordingly.

We understand that the setting of vents has increasingly become an activity performed by Cold Stores, whereas historically this has been the domain of the PPECB. From what we can ascertain, this activity has seemingly become the task of Cold Stores by default, and Cold Stores may or may not have the necessary expertise to actually accommodate this activity.

We therefore recommend that Shippers work closely with the Cold Stores and PPECB to ensure that the vent settings required by different varieties are indeed met.