New Year, New Insurance Review
The start of the new year is the time to make resolutions, and risk managers should resolve to review their operations to ensure that risk and insurance programs are in order.
Your risk review should address several key questions:
Are you planning to offer new services?
If so, consider your insurance obligations before the transaction closes. In one recent case, an operator negotiated with his customer to warehouse high-value electronics in the Dominican Republic. He signed an operation agreement that contained an indemnification running to his customer and an insurance provision requiring a significant limit to cover the full value of the goods in a catastrophic loss.
Unfortunately, the cover required under the agreement proved difficult to obtain, and the cost was disproportionately high in relation to the revenue derived from the service. Be sure you get the full picture of what you agree to provide.
Have you signed new agreements with customers or service providers?
Because customers and service providers constantly update their agreements, it is prudent to review them to ensure they are in line with your company’s insurance program. In the best of all worlds, service agreements are vetted before they are signed. But, this is often not the case in offices having multiple locations or where agreements are not centrally negotiated.
Do you need to consider regulatory compliance issues?
The most significant new regulation affecting shippers is the U.S. Customs and Border Protection (CBP) Importer Security Filing requirement. Although the rule, also known as 10+2, was enacted in January 2009, CBP deferred its enforcement until January 2010. Compliance with the regulation is now mandatory.
Under the regulation, importers and their agents are required to submit an Importer Security Filing containing 10 data elements 24 hours before goods are loaded onto a vessel. Ocean carriers must also provide two message sets within 48 hours of the vessel’s departure. Failure to comply with the regulation can result in fines or other penalties, such as denying entry of the goods.
While the regulation seeks to ensure that importers provide the required information accurately and on time, it also affects the agents who are entrusted with supplying this information. Recent events have again landed terrorism in the headlines, and compliance with this regulation, which is intended to address a terrorist threat, will be readily enforced.
If you are an intermediary, make sure you take the necessary steps to receive the required information in a timely manner. Have your professional liability insurer confirm that your insurance extends to this service. Also confirm that it will respond to financial losses suffered by your customer, and cover fines and other penalties incurred as a result of breaching the regulation.
Would you like to insure aspects of your business that are not currently insured?
This is your opportunity to become introspective about your operation and insurance cover. Meet with your attorneys and loss prevention specialists. Identify areas that present the greatest risks, and gauge your appetite for managing them. Then establish a plan of action in the event of a loss. Your organization will become more attractive to your insurer, which could lead to broader coverage when you need it.