While the logistical supply chain is rapidly containerising and the rise of reefer containers appears unstoppable, Peter Haagen from RaetsMarine, part of MS Amlin, prefers the specialised reefer for the transport of fruit, whether or not containerised. Is Peter old-fashioned or does he have a point?
Dutch transport insurers have become more wary of insuring fruit in recent years. “A number of insurers don’t want to insure fruit anymore, or they want to limit the coverage considerably,” says Peter. MS Amlin is specialised in marine insurance, both freight transport insurance and carrier liability. Peter has a background with shipping company Seatrade, and he’s seen both sides of the coin. “The fresh produce sector is an important sector for the Netherlands. We should be proud of it. Dutch insurers, however, are less enthusiastic because of the claims that make fruit primarily unappealing, and that image should be adjustable. It’s a combined responsibility of the fresh produce sector, as well as of the insurers.”
He hastily adds that a lack of knowledge among insurers is partly the basis of the negative image that insurers experience in fruit. In his capacity as transporter, he experienced that importers sometimes make claims on the insurance for damages that came about during transport but not because of transport. An example is an exotics importer who imported a small exotic product. The business was lucrative, but very risky. Much product didn’t arrive in a good state, after which a claim on the insurance followed. “The recourse taken against the transporter based on the allegations that it concerned transport damage subsequently never stood a chance.”
After Peter received the file, and conducted an investigation, it soon turned out that total transport time was much longer than the exotic’s shelf life. Damage did occur during the transport, but not because of the transport, and it was, in fact, asking for trouble.
In the past, Peter also saw recourse against fruit for which the cause of the damages was inherent defect, but which were apparently presented to insurers as transport damages, and covered and paid out as such, and subsequently, the transporter was addressed, “to no avail, naturally.”
“When an importer receives a product that doesn’t meet expectations, they have various options. If the damages are transport-related according to the expert report, and therefore covered by insurance, that’s a seductive option.” Of course the damages mostly manifested during transport, but that doesn’t automatically mean the cause of the damages can be blamed on transport. “The insurers also have to acknowledge blame,” Peter thinks. Because insurers are active in many sectors, most insurance companies lack sector knowledge. “Insurers are too uninformed, so they can’t properly understand it. They stood watching, and conclude, for convenience’s sake, that it’s a bad risk.”
Specialised reefer or container?
Carrier liability is governed by international treaties and all shipowners have a P&I insurance. In the past, you only had mutual insurers united in the International Group (IG). Nowadays, Fixed P&I is also pursued more and more. Firstly, the insurance is based on the solidarity principle. An IG Club doesn’t have a profit motive, but members. The members pay an advanced payment to the Club annually, to cover damages. If at the end of the year more money was paid out than received, the members have to financially step in. A Fixed P&I is similar to regular insurance and is issued by a profit-making company. Those who choose this insurance, pay a premium.
The revolution brought about by reefer containers in the logistical supply chain also has consequences for insurers. “In fresh produce, containers are increasingly used,” Peter also knows. “Trade is driven by profit, and containers are easier and cheaper in transport.” Yet Peter prefers specialised reefers from the point of view of an insurer. “As an insurer for fruit, I have better experiences with reefers than with containers in general.”
Quick reefers, cheap containers
He compares the advantages of specialised reefers to those of containers. An important argument is that transit time for specialised reefers is much shorter. From Chile to Rotterdam, a container ship takes about 29 days. A specialised reefer crosses the distance in 18 days. “That makes quite a difference if selling periods are limited due to short shelf lives. On the other hand, containers are generally cheaper and require fewer actions in the transport supply chain. A container can also be loaded directly from the boat unto the lorry.”
A second advantage of specialised reefers is a better cooling system. “Temperatures can only be maintained in containers. Reefer ships have more options.” A disadvantage for this method of transportation is that it only works properly with large batches, such as bananas, citrus, apples or pears.
However, cooling problems on reefer ships usually result in much higher claims than when a load in a container is declared total loss. “If something goes wrong on a specialised reefer, everything will go wrong,” Peter acknowledges. “For those shipping companies, each customer is valuable, and they will be more dedicated to deal with a claim properly. For many container shipping companies, reefers are the cherry on top, and the commercial importance tends to be inferior. Just the fact that container shipping companies outsource claims to call centres in India is telling.”
Best of both worlds
Another risk for container transport is in the number of hubs passed by reefer containers before it ends up with the importer in the Netherlands. “The container also has to be cooled and connected in time at the hubs. For every interruption in the cooling process, quality drops,” Peter explains. “Sometimes, containers are placed on two or three ships during transport, with all the attendant risks. The quality of reefer containers is improving.”
“Specialised reefers are a dying breed. No new boats are built anymore,” Peter says. The ultimate combination, combining the ‘best of both worlds,’ is therefore in Peter’s eyes a specialised reefer container ship. It would combine the logistical advantage of containers with the speed of specialised reefers.
“As an insurer, I would like to see fruit on boats like that. The question is whether customers are willing to pay for it,” Peter concludes.