TT Club, a specialist insurer, has shared insights found in collaboration with its Russian partner Panditrans that reveal transport operators could face a five-fold liability risk profile by doing business in Russia.
Panditrans has warned that a range of consequent costs will arise from any incident involving a container or cargo transport unit (CTU) in the region.
Alexander Petrenko, Panditran's Deputy Director, informed delegates the TransBaltic industry conference in St Petersburg that 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.
This includes factors such as whether gross negligence or reckless conduct is due to an employee or hired subcontractor.
Petrenko said: “Our twenty-five year plus experience in the FSU has led us to conclude that in practical terms the transport operator is liable for almost everything in the event of an incident. 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.
Paul Knighton, Senior Underwriter at TT Club, said: “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. 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.”
Liability risks for operators:
- Claims for loss or damage to cargo
- Financial losses through errors and omissions
- Third-party liabilities
- Fines and duties imposed by state authorities
The TT Club’s warning comes after reports that Russia is beginning to show signs of a recovery in its container trade volumes. The country's container movements experienced an estimated 25% decline in 2015.
However, a more recent recovery in the region's economy has fuelled increases in container transport during the first half of this year.
The Russian Association of Road Carriers reports a six percent year-on-year rise over the six-month period. According to Russian Railways (RZD), this represents two billion tons of freight and container traffic on rail railroads increasing by 5.6% to 1.5 million TEU in the same period.
TT Club has claimed that rates of growth similar to those recorded prior to the global economic downturn are unlikely and the increase in trade will encourage operators, who must once more apprise themselves of the specific liabilities involved in transporting goods in the region.
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.
