The recent high profile grounding of Rena off the New Zealand coast has served as a further reminder as to the importance of  cargo insurance for your clients.

The most recent update states that the vessel is listing 20 degrees with over 80 containers lost overboard and many more damaged. The hull has a visible crack and the main concern is that the vessel may break apart. To make matters worse, oil continues to leak from the vessel, and the clean up and removal of Rena's bunkers are the priority tasks for Salvors and the authorities.

They have made it clear that salvaging the cargo is of secondary concern.

Here are four reasons why anyone with cargo onboard the Rena may be suffering from sleepless nights:

The worry is that Rena may break apart and create another situation like that of the MSC Napoli where many containers washed up on the English shore in 2007.  Reports suggest that 88 containers have been lost overboard. Even if the vessel is saved, many of the containers will be damaged due

to the heavy listing of the Rena and the collapse of the container stack. The hull is also breached and many containers will be heavily damaged.

   If you're insured you will know that the insurance company will promptly handle your claim.

The shipowner will most likely declare General Average.  General Average is declared when the journey of the vessel is being threatened by a major peril. All parties involved in the voyage (including the cargo owners) must pay their share of the cost of saving the vessel and its cargo, even if the individual cargo is not damaged or lost.  This means that cargo owners cannot pick up their cargo until security has been provided, even if their cargo is not damaged.

   If you're insured the insurance company will promptly issue an Average Guarantee whilst

you provide an Average Bond. This will result in the prompt release of your cargo whilst your insurer handles the General Average contribution.  Without adequate insurance, the adjusters will most likely request a cash deposit of a proportion of your cargo value, and the cargo will be held in trust until the necessary contribution is paid. This can takes months and even years.

If a cargo owner has incurred a loss on the Rena, then they will be wishing to seek recovery from whoever they believe responsible. The carrier will often seek to defend themselves against such a claim or avoid paying altogether, and will try to apply their limitation.

   If you're insured the insurer will take up the recovery of your claim to ensure the responsible parties pay their share of the loss. Even if you have a good relationship with the carrier it does not mean they will look at your claim in a more favourable light to others.  The carrier, with their P&I Club and lawyers, will look to vigorously defend these claims and will try to avoid paying under their contractual defences. Naturally, the cargo owner's insurance company with their experts, lawyers and recovery agents will look to break these defences and limitations.

While the vessel is stranded, shippers and receivers alike will experience the uncertainty of not knowing the situation with their cargo. To compound this, shippers may find themselves with the additional uncertainty of delays in retrieving their cargo or handling their claim. Marine insurance is a specialized industry where the processes involved can be complicated, and requests and terminology difficult to understand.

   If you're insured you know your cargo will be released promptly with the appropriate securities, and any claim will be handled promptly. Insurers will ensure that claims are handled smoothly and you can rest assured that your interests are properly protected.

Freight forwarders should always talk to their clients about the importance of cargo insurance. Lost and damaged cargo is only part of the story; General Average is more common than most people realize and amounts to approximately 10% of the losses suffered by marine insurers because of the size and frequency of GA claims, which are broadly unavoidable. To make things more complicated, owners of uninsured cargo have little chance of recovering their losses if the fault does not lie with the carrying vessel.