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CONTAINERSTransport. Technology. Insurance.

M Münchener RückMunich Re Group

The volume of global trade continues to grow substantially year by year – in spite of regional crises. Over the last thirty years the transportation of goods by sea hasmore than doubled to its current level of 5 billion tonnes per annum.

Keeping pace with this development has involved a rapid expansion in the use of containers. Today the movement of containerized cargo is a fast, efficient, andeconomical logistics system that spans the entire world.

With the globalization of the economy progressing at a dynamic pace, the trans-portation of containers by land, sea, and air may be expected to maintain its positionas a major growth vehicle – reason enough for us as global reinsurers to bring ourclients up to date on the experience gained with this now universally establishedtransportation system. And that was the aim we pursued in producing this latest

Bridge fitting of topmost deck container layer.

Double stacking cone.

Stacking cone.

Turnbuckle.

Standard rod.

Turnbuckle.

Single stacking cone with adapters of different sizes.

addition to our series of marine publications. It succeeds the brochure we publishedon containers in 1977, which has been out of print for some time now. This newpublication also takes an in-depth look at the worrying large loss potential thatalready exists today and is certain to increase in the future.

Marine insurers will only achieve successful underwriting and loss minimization –and an accurate assessment of their reinsurance requirements – if they are fullyaware of the risks involved along the entire container transport chain, including inparticular the sea leg of the journey and the pre-carriage and on-carriage stages.Our marine experts and their colleagues in the related property and liability fieldsare on hand to provide full support.

Stacking cone with twist lock, closed. Stacking cone with twist lock, open.

Bridge fitting also suitable for different heights.

902 902

Container transport – A selection of large losses

Name of vessel Date Place Cause

EVER DECENT / NORWEGIAN DREAM 23.8.1999 English Channel Collision followed by cargo fireCMA DJAKARTA 12.7.1999 Mediterranean Cargo fireACONCAGUA 30.12.1998 Off the coast of Ecuador Cargo fireDG HARMONY 9.11.1998 South Atlantic Cargo fire, total lossAPL CHINA 26.10.1998 North Pacific Severe damage to deck cargo during a typhoonAPL PRESIDENT ADAMS 26.10.1998 North Pacific Severe damage to deck cargo during a typhoonMOL ALLIGATOR STRENGTH 26.10.1998 North Pacific Severe damage to deck cargo during a typhoonEVER UNION 26.10.1998 North Pacific Severe damage to deck cargo during a typhoonLEERORT 19.9.1998 Colombo Collision with pierZIM PIRAEUS 19.9.1998 Colombo Collision with pierSEA LAND MARINER 20.4.1998 Mediterranean Cargo fireMSC CARLA 24.11.1997 North Atlantic Heavy seas, loss of forebodyCONTVESSEL FRANCE 15.10.1997 Pacific Cargo fireDISARFELL 9.3.1997 Iceland Vessel capsized in stormVIKARTINDUR 6.3.1997 Iceland Vessel ran aground and was broken upNEDLLOYD RECIFE 2.3.1996 Brazil Vessel ran aground, total lossSABINE D 12.12.1998 Kiel Canal Vessel capsized after collisionGREAT HANSHIN EARTHQUAKE 25.1.1995 Kobe Earthquake, container terminalSHERBRO 1.1.1994 English Channel, North Sea Loss of dangerous goods deck cargoHANJIN INCHEON 12.2.1987 North Pacific First loss of a pure container vesselARIADNE 24.8.1985 Mogadishu Vessel ran aground, total lossEVER LEVEL 25.11.1983 Mouth of the Elbe Collision, fire, general averageITAPAGE 25.11.1983 Mouth of the Elbe Collision, fire, general averageHORNBERG 7. 4.1982 Rhine Vessel sank after collisionELMA TRES 26.11.1981 Atlantic Vessel capsized in stormANRO AUSTRALIA 26.7.1978 Australia Vessel ran agroundSEA WITCH 2.6.1973 New York Collision when berthing, major fireESSO BRUSSELS 2.6.1973 New York Collision when berthing, major fire

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CONTENTS PAGE

01 CONTAINERS – PAST AND PRESENT 4

02 ORIENTATION IN THE WORLD OF 20

STANDARDIZED CONTAINERS

03 NOTORIOUS PROBLEMS IN CONTAINER 50

INSURANCE

04 MEANS OF TRANSPORTING CONTAINERS 58

AND THEIR INSURANCE

05 ASPECTS OF INSURANCE FOR CONTAINER 84

CARRIERS AND TERMINALS

06 POINTS TO NOTE WHEN INSURING GOODS 90

IN A CONTAINER

07 ASPECTS OF ACCUMULATION 94

08 PRACTICAL EXPERIENCE WITH LOSSES 115

AND CLAIMS

09 RISKS OF CONTAINER TRAFFIC IN THE FUTURE 128

10 GLOSSARY OF CONTAINER TERMINOLOGY 138

4

CONTAINERS – PAST AND PRESENT

CONTAINERS – Past and present

MALCOLM MCLEAN’S IDEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6“CONTAINERITIS” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6ENGINE OF GROWTH, INNOVATION, AND RATIONALIZATION . . . . . . . 10CONTAINERIZATION TODAY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

01

Containers are a symbol of modern, efficient worldtrade. Every-one is familiar with the sight of con-tainers – making a colourful panorama on thequayside, towering up on the decks of modernfreighters, or being used as temporary housingand storage facilities on construction sites or asmobile power units on land.

The brilliant idea of treating break-bulk cargo as ifit were bulk cargo and moving it in standardized,easy-to-handle containers which can be used “uni-versally“ for transportation by land, river, and sealaid the foundations for modern transport logistics.

The exchange of goods and merchandise ontoday’s worldwide scale is inconceivable using10,000-tonne ships with conventional cargo-hand-ling gear, traditional inland water cargo vessels,goods wagons with sliding doors, and trucks ofassorted shapes and sizes.

In retrospect, containerization marks a veritablerevolution in the transportation sector and, asmight be expected, its origins and accomplish-ments are surrounded by legend. In any case, it was a long and stony road.

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01 View from the compass deck of a large container vessel.

MALCOLM MCLEAN’S IDEA

In the First and Second World Wars military andrailway authorities were already experimentingwith standardized containers that had iron lashingpoints and corner castings as a means of trans-porting ammunition, provisions, and other goods.The triumph of the modern freight container reallybegan, however, at its birthplace – the sea port. Forthis is where freight is transferred from one con-veyance to another on a large scale. The containeris an embodiment of transition, standing for themobility and global availability of goods and mer-chandise and the services associated with them.The development of containerization may be com-pared with the “electronic revolution“ in communi-cations. Here too a global network – the worldwide web – has evolved, transporting informationof any kind in standardized “packages“ to andfrom virtually any point in the world.

It was the year 1937. A young truck driver waswaiting impatiently at Hoboken Pier in New Jerseyfor his consignment of cotton to be dispatched.

He watched the complex and laborious process ofhandling every single bale and every single crateindividually on the truck and on the quayside. Eachindividual piece of cargo was slung and then liftedonto the ship by a crane. There it had to beremoved individually from the cargo hook and car-ried to a suitable place for re-stacking. Wouldn’t itbe much easier, he thought, to lift the completebody of the truck onto the ship without touchingthe contents at all?

But 19 years were to pass before Malcolm McLean– now a forwarding agent – turned that idea intoreality. With the dual intention of avoiding theusual tedious loading and unloading processesand of circumventing the different transportationand dispatch regulations enforced by the variousUS federal states for domestic transport, he loadedhis truck trailers onto a converted tanker – theIDEAL X – in Port Newark, New Jersey, and sentthem by sea to Houston, Texas.

Without their chassis, the trailer bodies could evenbe stacked on top of each other. Thus the modernsea container was born and began its triumphalconquest of the world.

Before long, McLean’s company began to operateunder the highly appropriate name of Sea-Land,which is now part of the world’s largest containervessel operation.

The dimensions he chose for his containers (8’x8’, 2.44 mx 2.44 m) were more or less randomand without any regard to the size of the goods,the widths of the pallets to be loaded into the con-tainer, or even the decimal system. But they didcorrespond to the truck width stipulated by Ameri-can regulations at that time and established them-selves as the binding basic dimensions for stand-ard ISO containers today. The original lengths of 17’, 24’, and 35’ were soon superseded bylengths of 20’ (6.1 m) and 40’ (12.19 m), as thesepermitted much more efficient handling.

“CONTAINERITIS“

At first, Europeans contemptuously referred to thenew means of transport developed in the UnitedStates as “containeritis“ and opposed the immenseinvestment needed to set up the associated infra-structure at shipping companies, ports, and inlandtransportation companies.

But McLean and his competitors went from successto success in American (and Australian) coastaltraffic and on domestic US routes between the

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02 TS IDEAL X.

mainland and Puerto Rico and Hawaii. And whenMcLean’s company started the first regular trans-atlantic service in 1966, there was no stopping con-tainerization any longer. One company after an-other gave way to the competitive pressure in thisopen free-trade zone with its extensive freedomfrom state intervention and controls and finallywent over to transporting these floating “tinboxes“.

The first international standard for containers waspublished in 1968 and traffic between Europe andAustralia commenced in 1969. In 1972 Sea-Landoffered the first container express service with aspeed of 33 knots (over 60 km/h). Large containervessels opened up the route between the Far Eastand Europe in 1973/74 and the first round-the-world service was introduced in 1984. Transcon-tinental double-decker container trains, introducedin North America in the same year, quicklyacquired particular significance as a convenientway of bypassing the bottleneck of the PanamaCanal.

These developments were accompanied byadvances in shipbuilding and in the technology ofcontainer vessels, particularly of ocean-goingships. In the 1950s and 1960s containers were car-ried on conventional ships, which, after beingslightly modified, had a storage capacity of a fewdozen containers (normally specified in TEUs =twenty-foot equivalent units). These were super-

seded by semi-container ships and then, by theend of the 1960s, by the first fully-cellular containervessels with some 800 to 1,000 TEUs. The develop-ment of jumbo container ships with a capacity of3,500 to 4,500 TEUs began in the 1970s and culmin-ated in today’s open-top vessels capable of carry-ing up to 8,000 TEUs. The possibility of containervessels carrying up to 15,000 TEUs is now beinginvestigated. This would create veritable giants ofthe sea some 400 m long, 65 m wide, and 40 mhigh.

The simple standard box with its six sides andeight corners has generated a technology solelydevoted to containers and everything associatedwith them. That technology continues to bemarked by vibrant progress and relentless growth,particularly in terms of the size of the primary con-tainer ship, the ocean-going vessel.

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03 Mr. Malcolm McLean. 04 The first consignment of containers to Germany on the MS FAIRLAND in 1966 sealed the victory of containers afterthe first transcontinental shipment from the USA to Europe.

8


05 Cellular container vessels are the backbone of today’s overseas trade …

06 … whereas various other means of transportation are used to handle regional and transcontinental container traffic.

9

AB


ENGINE OF GROWTH, INNOVATION, AND RATIONALIZATION

Containerization prompted the development of aglobal transportation system capable of reachingvirtually any point on earth. The result was a majorrationalization of transport technology as a whole,which has boosted productivity in transportationand handling by a factor of roughly 50 (!). At thesame time, the cost of establishing this system hasbeen high. Experts estimate that at least US$ 65bnhas been invested to date in this area. This devel-opment has also cost many port workers and sea-

men their jobs, with a great deal of expertise intraditional break-bulk handling and transport beinglost as a result.

On the other hand, the advantages of the containersystem are almost overwhelming. Containers canbe used for transportation purposes anywhere –and over a duration of many years. Their handlingis a relatively straightforward operation, whichgenerally follows the same pattern, and their trans-portation can be documented in standardized, condensed form in the freight papers.

10

07 MS FRIESENSTEIN (316 TEUs) – a conventional breakbulk vessel withredesigned container hatches and a container crane.

08 MS LEVERKUSEN EXPRESS (425 TEUs, later 951 TEUs) – one of many conventional vessels converted to a full container ship.

12 TS BREMEN EXPRESS (2,952 TEUs) – one of the first 3rd generation container ships (ushering in the era of large cellular container ships).

11 MS AMERICA EXPRESS (1,416 TEUs) – a common full container ship of the 2nd generation with its own on-board container crane.

Container ships achieve loading and unloadingrates of up to 2,400 tonnes an hour (with peak per-formances being considerably higher) comparedwith the 60 tonnes an hour reached by conven-tional large break-bulk ships. Cargo stored forweeks in draughty and poorly secured docksidesheds or on open quay areas and stockyards isdefinitely a thing of the past.

The throughput of goods in container ports is muchhigher than in conventional ports. The ratio of portdays to sea days has dropped from roughly 50:50(for conventional vessels) to less than 20:80 and

this ratio will continue to fall. Large container shipscarry a much larger break-bulk tonnage than con-ventional ships of the past. They are also usedmuch more intensively so that running costs pertonnage unit handled are reduced considerably(particularly as far as fuel and manning are con-cerned).

And would anyone complain that containerizationhas led to a dramatic reduction in transit lossesand petty losses due to theft and pilferage, as wellas in the incidence of goods being misdirected anddelivered late?

11

09 MS ALSTER EXPRESS (736 TEUs; 1,096 TEUs after being extended) – the first vessel of its type to be built in Germany(1968) as a pure cellular container ship (so-called 1st generation).

10 TS SYDNEY EXPRESS (1,589 TEUs) – fast turbine-powered cellular container ship used on the Europe-Australia route.

13 MS FRANKFURT EXPRESS (3,045 TEUs) – the largest containership in the world when it was delivered in 1981.

14 MS ANTWERPEN EXPRESS (4,864 TEUs) – this type is the largest in the Panamax class in terms of container capacity (since 1999).

CONTAINERIZATION TODAY

In spite of these rapid developments and the suc-cess achieved so far, the process of containeriza-tion is by no means at an end – because now moreand more intercontinental and regional traderoutes want to take advantage of its benefits.

More than 95% of the world’s international trade isseaborne, with regular services and links betweenhundreds of container ports on fixed routes.

Containerization has already established itself firm-ly on the east-west routes of the northern hemi-sphere. This global container “belt“ will continueto expand and become denser. It will also incorpor-ate more and more north-south extensions in theyears to come, with the result that the container-ization of trade and cargo flows will increase sig-nificantly in many countries of Asia, Southern andCentral America, and Africa too.

This will create new opportunities – and risks – forthe operators, the associated service industries,and, not least, for the marine insurance industry.

The opening of more and more national economiesand the mounting pressure of competition result-ing from global trade will mean that container traf-fic will continue to grow at an increasing pace. Factors which used to be of importance, such asroughly equal flows of cargo in both directions, agood local and regional infrastructure, and conven-tional capacity limits in ports or at other transship-ment centres, have receded into the backgroundtoday. In view of the availability of sufficient capital,the speed and extent of containerization are nowdetermined by the consumers and a growing num-ber of multinational companies that are anxious togain a foothold in all markets of the world. Theirobjective is not only to buy and sell products in allthese regions, but also to produce goods there,using local resources and thus giving up their trad-itionally centralized structure, typically built arounda main location. Wherever an advantage can begained from cost or profit differences, companiesalso transfer raw materials, semi-finished products,and finished goods into more favourable areas –often using modern standardized containers.

12


15 Global containerization: day …

Despite various regional crises, experts anticipatethat world trade – after having tripled to more thanfive billion tonnes in the past 30 years, i.e. the periodin which containerization has developed moststrongly – will continue to grow. They believe thatcontainer traffic, which currently has a capacity ofalmost 12 million TEUs and an actual transporta-tion performance of roughly 50 million TEUs peryear, will share in that growth with an above-aver-age rate of between 7% and 10% per annum.

13


16 … and night.


Dalian Express

Bibi Express

Humboldt Express

Heidelberg Express

Hong Kong Express

Köln Express

Frankfurt Express

Hannover Express

Shanghai Express

Hamburg Express

DEVELOPMENT OF SIZE OF CONTAINER SHIPS

14

Hapag-Lloyd

Hapag-Lloyd

Hapag-Lloyd

Hapag-Lloyd

Hapag-Lloyd

Hapag-Lloyd

Hapag-Lloyd


1stgeneration

(16 KTS) (16 KTS)

2ndgeneration

(23 KTS)

3rdgeneration

Panamax Panamax(23 KTS) (17 KTS)

4thgeneration

post-Panamax(23 KTS)

Lessthan1,000TEUs

(approx.)

1,000TEUs

2,000TEUs

3,000TEUs

4,000TEUs

4,000-5,000TEUs

CROSS-SECTIONS

32.25 m Panamax beam

15

THE GLOBAL “CONTAINER BELT“

North America –West Coast Route

1 Seattle2 Portland3 San Francisco4 Oakland5 Los Angeles6 Long Beach

North America –East Coast Route

12 Halifax/Canada13 Boston14 New York/Jersey City15 Baltimore16 Norfolk17 Savannah

South AmericanRoute

18 Guayaquil19 Callao20 Arica21 Talcahueno22 Vitoria23 São Francisco do Sul

Mediter-raneanRoute

24 Barcelona25 Marseilles26 Genoa

Container belt for sea transportation

Continental container land bridges

Secondary routes

Container terminals

US Gulf andCaribbean Route

7 Houston8 New Orleans9 Mobile

10 San Juan/Puerto Rico11 Freeport

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Western European Route

27 Le Havre28 Antwerp29 Felixstowe30 Rotterdam31 Bremerhaven/Bremen32 Hamburg

East Asian Route

47 Tokyo48 Yokohama49 Osaka/Kobe50 Pusan51 Keelung52 Kaohsiung53 Hong Kong

SoutheastAsianRoute

44 Port Klang45 Singapore46 Bangkok47 Tokyo53 Hong Kong

Persian Gulf/Southern Asian/Australian Route

39 Dubai40 Mumbai41 Colombo42 Fremantle43 Sydney

African Route

33 Las Palmas34 Dakar35 East London36 Durban37 Mahejanga38 Djibouti

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GLOBAL CONTAINER TRAFFIC –TRANSPORT AND DISTRIBUTION

18


19

20

02

ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

ORIENTATION in the world of standardized containers

“THE BOX“ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21TRANSPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

– Ocean-going container ships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36– Inland water transport (IWT) vessels . . . . . . . . . . . . . . . . . . . . . . . . . 36– Trains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36– Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37– Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37– Intermodal transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

TERMINALS AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44STANDARD MODES OF TRANSPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . 44CONTAINER TERMINOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Goods of virtually every kind are transported in containers today:break-bulk goods in standard containers, bulk goods in speciallydesigned dry-bulk containers, and liquid goods in special tank containers.

17 Cutaway view of a 20’ container.

Almost any kind of cargo can be containerizednowadays. Exceptionally large items such as plantor project parts, which are commonly referred toas out-of-gauge (OOG) cargo, can be transportedon a special deck surface created by placing severalplatform containers side by side. Similarly, veryheavy goods can be mounted on transport cradles,i.e. special bases with the same dimensions asstandard containers which spread the weight even-ly. Special refrigerated containers (called reefers)are becoming increasingly common for goods thatare moisture- or temperature-sensitive and need tobe transported at controlled temperatures. Reefercontainers are cooled either by an on-board refriger-ated air-circulation system such as the Con-Air system (and are then usually referred to as ductedreefers), or by electric or diesel-powered units,either in the form of permanently installed units(integrated reefers) or piggyback units (clip-onreefers). They can even be supplied with a con-trolled atmosphere if necessary (e.g. a higher nitro-gen concentration to delay the ripening of fruit).

“THE BOX“

The term container (from the Latin: continere = to enclose) is a very broad term. The InternationalConvention for Safe Containers (CSC), which pre-scribes the technical specifications, defines thecontainer as an article of transport equipmentwhich is

a) of a permanent character and accordinglystrong enough to be suitable for repeated use;

b) specially designed to facilitate the transport ofgoods, by one or more modes of transport,without intermediate reloading;

c) designed to be secured and/or readily handled,having corner fittings for these purposes; and

d) of a size such that the area enclosed by the fourouter bottom corners is either at least 14 m2

(150 sq. ft.) or at least 7 m2 (75 sq. ft.) if it is fitted with top corner fittings.

Consequently, the term container designates nei-ther a vehicle (except when the container is fixedto a chassis) nor a type of packaging!

In line with this wide definition, the word containeris used in the transportation sector for a large var-iety of boxes of different size, type, and structure.But the most important container is and remainsthe classic standard sea container, which is fre-quently referred to as a general purpose (GP) con-tainer. It is also transported on barges, inland

water transport vessels, trains, trucks, and – atleast the 20’ version – even aircraft in exceptionalcases. The containers most commonly used formaritime traffic are 20’, 35’, 40’, and 45’ containers;mini-containers measuring 10’ are less commonlyused and 30’ containers are only used on a smallnumber of UK routes. There are even 53’ contain-ers, which are used in transcontinental road andrail transport in the United States.

Sea containers are built to ISO standards witha width of 8’ (= 2.438 m). The height may vary but is typically 8’6“, 9’00“, 9’6“, or only 4’ to 4’3“(= half-height).

Containers with a length of more than 40’ are gen-erally extra-high at 9’6“ (= 2.895 m). In many coun-tries these containers, known as high cubes, canonly be transported on land with the aid of a spe-cial chassis that enables them to pass through lowtunnels or under low bridges.

The inside width of classic sea containers has onemajor drawback: it is impossible to stack standard-ized Euro pallets side by side in them. Wider con-tainers have been developed to accommodatethese pallets on standard cellular container ships,but this results in the loss of a stowage place oneither side of the container unless speciallydesigned cell guides are fitted that leave greaterclearance between the container rows.

The variety of container sizes appears to be in totalconflict with the concept of a standardized and uni-form transportation system. As already mentioned,however, these dimensions have a historical con-text. Above all, their development reflects the needto exploit every available space – given today’sincreasingly voluminous but comparatively lightgoods – and to take advantage of economies ofscale.

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18 Container inspection report and container type test.

19 Replacing the temperature log of a refrigerated container.

20 A propeller that cannot be containerized being loaded below deck on a heavy cargo platform container.

21 Cellular stowage system of a largecontainer vessel.

23

24

To increase the flexibility of the means of transportavailable, extra-long and extra-wide containers areprovided with additional corner fittings in the samepositions as standard boxes so that they can besecured safely on standard 40’ or 20’ chassis andtrailers.

The various international bodies have repeatedlyconsidered the possibility of starting from scratchwith a completely new and completely standard-ized “ideal“ container (with lengths of 24’5“ and 2 x 24’5“ = 49’ and a width of 8’6“ or 2.59 m).These discussions have ended inconclusively todate in spite of the more effective use of the spaceavailable and the more extensive standardizationsuch a new start would bring. The investmentsthat would be required for the containers them-selves and for modifications to the means of trans-port are considered too great and too risky notonly for the individual companies but also for thepublic ports.

As a rule, containers have an exceptionally stableand robust steel frame with steel bottom beams andcross members, thus allowing them to be stackednine high. Their tops and sides are normally of cor-rugated steel, aluminium sheet, or fibreglass-rein-forced plywood. The container floors consist of woodplanks or, more commonly nowadays, reinforcedplywood (with a minimum thickness of 28 mm).

The container floor and sides can withstand loadsof roughly 2.5 tonnes per square metre whenspread evenly over the area. Depending on theirdesign and interior fittings, 20’ containers have acubic capacity of roughly 33 m2 and a net weightof between 2 and 2.5 tonnes, while 40’ containershave a cubic capacity of roughly 67 m2 and a netweight of 3.5 to 4 tonnes. The payloads generallyrange from 20 to 28 tonnes for 20’ containers andfrom 28 to 33 tonnes for 40’ containers. Reefershave less capacity and payload due to the additionalinsulating material built into these containers.


Containers come in a wide variety of designs,reflecting the different uses and modes of trans-port involved. They range from standard contain-ers to open-top containers (with or without tar-paulin covers), hard-top containers (with detachablehard tops), platform containers (basically a heavy-duty container floor), flat racks (a container floorwith two end walls, either fixed or collapsible),open-side containers, tank containers, insulatedcontainers, and thermal or refrigerated containers(with or without integrated refrigeration units) tobulk containers and a whole series of special con-tainers for hazardous materials, emergency rescueequipment, measuring equipment, and evenradioactive materials. The doors for access andloading/unloading are usually located at the nar-row rear end of the container, and only rarely onthe long side (side-door containers).

Hundreds of thousands of containers are alsoencountered “on land“ nowadays, serving asmobile laboratories, offices, or accommodation,and are often packed with highly sophisticatedequipment. At the end of their service life manycontainers are still used as storage facilities, oftenon building sites in remote areas.

With the exception of the special types mentionedabove, all containers used for regular sea trans-ports are built to ISO standards. They are testedindividually or undergo type testing and areaccepted and classified by state or state-appointedinstitutions such as classification societies. Theircondition is checked at specified intervals. Allthese details must be recorded and displayed onthe CSC and manufacturer’s plates and the inspec-tion and classification labels affixed to the doorsand sides of the containers.

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22 Dual-purpose flat rack/platform container.

26 20’ general-purpose containers.

30 Ducted reefer.

34 20’ tank containers.

35 40’ dry-bulk container for hazardous cargo, e.g. powder or granulated materials.

31 Integrated reefer.

27 20’ steel containers with side doors.

23 Collapsible 40’ flat rack.

26

36 20’ special container (separation container).

32 40’ high-cube refrigerated container. 33 Special tank container with a clip-on unit to regulate the temperature in the container and/or keep the contents in motion.

28 40’ general-purpose containers. 29 45’ general-purpose containers.

24 20’ half-height containers. 25 20’ open-top container.

27


28


37 Loading a container with project cargo.

29


20’ Hardtop standard container 20’ Flat

40’ Hardtop standard container 40’ Flat

40’ High cube hardtop standard containerL.40’ = 12 192 mm, B.9’6“ = 2 895 mm

20’ Platform

20’ Open-top container 40’ Open-top container

20’ Half-height container 20’ Ventilated container

31

38 Design suggestions to prevent damage caused by incorrect stacking.

32

39 Container test report issued by a classification society.

40 Design plan of a container-lashing system.


33


41 Finite element representation of a modern fully-cellular container vessel.

34


42 Cell-numbering system. 43 Cell structure of a container frigate during the construction phase.

35

TRANSPORT

Ocean-going container ships

Container ships do not have horizontal divisionslike the ‘tween decks of conventional cargo ships.Instead they are divided into vertical holds or bays,each being a multiple of the standard containerlength of 20’, usually 80’. The bays are equippedwith vertical rails called cell guides, between whichthe containers are stacked in tiers. There may beup to nine tiers below deck, depending on the sizeof the vessel. Stacks on deck may be up to six high(vessels capable of carrying stacks of seven are inthe planning stage).

On hatchcoverless, open-top container ships, thecell guides run from the bottom of the vessel to theuppermost container tiers, so that no additionallashing of the containers is required. As all the con-tainers are exposed to the weather and seawaterspray, the bottom containers are not stowed directlyon the floor of the hold but on raised supports, andhighly efficient bilge-pump systems are installed tokeep the bottom of the hold dry. As the automaticCO2 fire-fighting systems used on conventionalcargo vessels need an enclosed space to work effi-ciently, open-top container ships are equipped withhigh-pressure water fire-fighting systems.

Container ships are normally classified in terms oftheir size (and generation – see page 15). In otherwords, a distinction is made on the basis of theircarrying capacity (expressed in DWT or deadweighttonnage) and their container capacity (usuallyexpressed in twenty-foot equivalent units or TEUsand occasionally in forty-foot equivalent units orFEUs). It is also customary to classify them interms of whether they have cell guides (“cellular“)and their own loading gear (“geared“) or not(“gearless“), and whether they are of open-topdesign (“hatchcoverless“).

Feeder vessels with a capacity of between approx.150 TEUs and 800 TEUs distribute containers with-in a certain limited region or along a coast. Theyare supplemented by medium-sized liners (someof which are also used for feeder services) with acapacity of approx. 1,000 to 2,500 TEUs and thelarge intercontinental liners with capacities rangingfrom 3,000 to more than 8,000 TEUs.

Like many other types of ocean-going vessel, mod-ern container ships are generally operated in anextremely competitive international market and aretherefore manned with highly rationalized (i.e.

reduced) crews. This is very prevalent in the caseof shipping companies based in countries withhigh labour costs. They operate under a variety offlags, including what are known as open registersand flags of convenience.

In some parts of the world, tug/barge combinations,i.e. barges pulled or pushed by tugs, are also usedto transport containers within the port area or overshort distances. Frequently even longer distancesalong the coastline are covered.

Inland water transport (IWT) vessels

IWT vessels are particularly safe, but also relativelyslow. In terms of the speed and flexibility central tothe container system, therefore, they cannot com-pete with trains and trucks (unless trucks arebanned from the roads at certain times like week-ends, as they are in a few countries).

As yet, these vessels are only to be found on themajor river systems of Europe and America, andoccasionally in Asia. Nevertheless, IWT vessels orpusher barges built exclusively for container ship-ments already have a capacity of 200 to 600 TEUs(in the case of combined pusher units). Single ves-sels with a hitherto inconceivable container capaci-ty of 800 TEUs are soon to be introduced.

Trains

Many national railway companies and administra-tions changed over to container transport at anearly stage and acquired wagons with specialchassis for the various container sizes. These wagons are now incorporated in numerous goodstrains. In Europe, dedicated container trains rarelyexceed 80 wagons on account of the traction limitsand the traffic geography. Mixed trains, on theother hand, may have as many as 100 wagons.

In Canada and the United States, there are evenlonger double-decker container trains capable ofcarrying up to about 300 large containers.

Of course, in the marshalling yards of seaports andat inland centres where trains are assembled andfed into the railway network, trains with consider-ably more container wagons may accumulate.Despite the sometimes enormous throughput,fully-laden container cars only remain in these stations for between 6 and 12 hours on averagenowadays.

36


Trucks

Containerization has led to the development ofnumerous special trucks and trailers. They areequipped to carry at most two 20’ containerssimultaneously or one 40’ container. Australianroad-trains are an exception and can transport up to 16 such containers at the same time.

The number of trucks converging upon the depotsand storage areas may be considerable.

Aircraft

Air transport was “containerized“ at a very earlystage. Planes used exclusively for cargo, as well ascombined passenger and cargo planes, mainlycarry small dedicated standard aluminium contain-ers (called igloos) which are designed to fit into thecross-section of a specific type of aircraft fuselage.For air cargo that cannot be stowed in igloos, so-called “tins“ are used. These are very slim plat-forms made of light alloy incorporating a lashingsystem specially designed for aeroplanes. Occa-sionally, 10’ and 20’ sea containers may also becarried by large cargo planes, but owing to theirsubstantial tare weight they are not an economic-ally viable option for carrying air cargo on a regu-lar basis. For this reason, aircraft have not yet beenincorporated in the transport chain of the sea con-tainer.

When transporting expensive or high-securitycargo, however, there is a growing trend to makegreater use of aircraft as a means of conveyance inthe otherwise traditionally earth-bound intermodaltransport chain. It may be assumed that the use oflighter materials for the containers themselves willaccelerate this development in the future.

Intermodal transport

The term intermodal transport basically describesthe use of two or more of these means of trans-portation for the conveyance of containers, thusavoiding the physical handling of the cargo itself.This is the very idea that prompted MalcolmMcLean to “invent“ container transportation wayback in the late fifties and to go intermodal,although the term itself was not used at that time.

37


44 MS BAUMWALL (658 TEUs) – a typical feeder ship.

45 MS GOLD EAGLE (1,157 TEUs) – saving fuel with auxiliary sails.

48 MS BORUSSIA DORTMUND (700 TEUs), open-hatch type container feeder ship (without hatch lids).

49 MS CTE ALGECIRAS (1,131 TEUs).

52 MS WERDER BREMEN (700 TEUs).using the sides as advertising space.

53 MS NORASIA SALOME (1,388 TEUs).

38

46 MS CONTSHIP ROME (2,205 TEUs). 47 MS VILLE DE MIMOSA (3,940 TEUs) – a Panamax container ship.

50 MS MONTEVERDE (2,274 TEUs). 51 MS OOCL SHANGHAI (5,430 TEUs) – a post-Panamax container ship.

54 MS NORASIA FRIBOURG (2,780 TEUs) – an open-hatch container ship.

55 MS HANJIN COPENHAGEN (5,618 TEUs) – another post-Panamax container ship.

39

56 Containers also reach remote parts of the world. 57 Loading of containers for air transportation.

59 Fully-cellular inland container vessel.

40


58 Double-stack container transport on special railcars (48’ container on the upper layer).

41


60 Jumbo cargo plane, also for special cargo loaded in general-purpose containers.42

62 Stern of a container ship with Panamax dimensions.

61 View from the control cabin of a container crane.

43

TERMINALS AND EQUIPMENT

All the major ports of the world have been adaptedto accommodate container traffic. In addition, alarge number of purpose-built container terminalshave sprung up over the past decades to accom-modate the ever-increasing volume of containertraffic. These container terminals (also known ascontainer yards) are usually sprawling areas.

On the quays there are special gantry cranesequipped with adjustable spreaders for loadingand unloading containers of various sizes. Like thecontainer vessels, these by no means small craneshave continually increased in size over the years.They embody the essential features of container-ization: they constitute a major investment and areusually operated by a single specially trained per-son. Although modern container cranes areequipped with a range of electronic aids to speedup operations, an immense amount of concentra-tion is still required on the part of the operator,who therefore needs to be relieved at short inter-vals. He is assisted by a supervisor working on thequay or on the ship. They can handle up to 90 con-tainers an hour (a peak value that can only bemaintained for a short time).

Large yards are required to store the containersawaiting transportation and to guarantee thesmooth transshipment of the containers by thegantry cranes in line with the stowage plan. Thecontainers are normally transported from thesestorage yards to the loading berth or railway trans-shipment yard by straddle carriers or by tractorsand chassis which handle the entire ground-leveltransport inside the terminal. Large telescopingstackers known as reachstackers and smaller (rub-ber-tyred or rail-mounted) mobile gantry cranes(rail or yard gantry cranes) are used to stack andre-stack the containers. There are plans to intro-duce fully automatic handling systems and theseare now being tested. In some ports they arealready operational.

Today, all logistic processes in the terminal –including the loading of ships, trucks, and trains –are aided and controlled by computers with anonline connection to the operation centres of thecontainer carriers and shipping companies, and inmany cases to customs authorities, police, andshipping agents.

As a rule, large storage areas are needed in thecontainer terminals for empty containers that arewaiting to be used. Space is also required for

repair and maintenance shops and for containersthat are waiting to be repaired, inspected, or over-hauled. There must also be separate storage areasfor containers with hazardous materials and forreefers that have to be connected to the terminal’srefrigeration system or power supply.

Most terminals also have a packing station (calleda container freight station or CFS). Here, goodsthat have been delivered break-bulk to the port andaccount for less than a full container load arestowed (“stuffed“) in pier-to-pier containers. Whenthey arrive at the destination port, these pier-to-pier containers are again taken to a CFS wherethey are unloaded (“stripped“). The goods areeither handed over to the individual consignees atthe CFS or forwarded by conventional means. Inthis way, the thriving break-bulk service of the pasthas to some extent been maintained in the con-tainer era.

STANDARD MODES OF TRANSPORT

The transport chain involves carrying containersby road, rail, and inland waterways from the pointof loading to the port of dispatch and from theport of discharge to their final destination. Thereare a number of new expressions and definitionsassociated with multimodal and intermodal trans-port:

FCL (full container load) means that the consign-or’s goods fill the container. The full container isdelivered to the container terminal and collectedfrom there.

LCL (less than container load) means that the con-signor’s goods do not fill the container and aretransported along with other cargo in the container.The container carrier is responsible for stowingand/or unloading these goods

An FCL/FCL shipment is consequently a door-to-door container shipment, while an LCL/LCL ship-ment means a pier-to-pier (or depot-to-depot) ship-ment.

Mixed forms are naturally also possible, such asdoor-to-pier or pier-to-door (LCL/FCL, FCL/LCL).These generate other problems relating to the pre-carriage and on-carriage stages, packaging, hand-ling, and the risk of theft and pilferage. Moreover,the container terminal and the CFS need not belocated inside the port terminal but may be in thevicinity or even further inland.

44


In the case of FCL, the container is “stuffed“ (andthe cargo secured) by the shipper, i.e. the dispatcher,and “stripped“ by the recipient of the goods. Usually, the container leaves the port or terminalarea to be stuffed or stripped and then proceeds tothe corresponding pre-carriage or on-carriage portor terminal.

The loading and unloading of LCL containers at theport terminal or the corresponding inland terminal(CFS), on the other hand, is the responsibility ofthe carrier, who organizes (and pays for) theseoperations. The carrier is either a shipping company,or a container carrier that does not operate ships ofits own and merely rents slots on vessels instead(non-vessel operating common carrier), or a con-solidator (forwarding agent).

CONTAINER TERMINOLOGY

Like all other fields of commerce and technology,worldwide container traffic has produced its ownparticular jargon with innumerable technical termsand abbreviations for its many services and prod-ucts. At the end of this brochure we have appendeda short and by no means exhaustive glossary of common expressions and abbreviations. It isintended as an aid for marine insurers who areconfronted with this terminology in survey reportsand other cargo-related papers when handlinglosses.

45


63 General view of the equipment used in the container transport chain and its interfaces:trucks, straddle carriers, gantry cranes, container ship.

64 Driver’s view from a straddle carrier.


47


48

50

03NOTORIOUS PROBLEMS IN CONTAINER INSURANCE

NOTORIOUS PROBLEMS in container insurance

INSURABLE INTERESTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 51PROBLEM FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53CONTAINER HULL INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54CONTAINER THIRD-PARTY LIABILITY INSURANCE . . . . . . . . . . . . . . . . 55CONTAINER INSURANCE MARKETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

30.4

22.8

6.8

5.5

5.4

5.3

4.9

4.0

1.9

1.8

11.2

Open tops

Integrated reefers

Insulated vans

Folding flat racks

Fixed flat racks

Platforms

Ventilated vans

Tanks

Bulk units

Others

Half-heights

BREAKDOWN OF SPECIAL CONTAINERS

BY TYPE

Percentage of worldwide container fleet

A simple 20’ standard container may be purchased today foraround US$ 1,750. Reefers normally cost between US$ 7,500 andUS$ 20,000, while tank containers – depending on the type – rangefrom US$ 15,000 to US$ 200,000 (and more) in special cases.Assuming an average value of US$ 2,500 per container, a fully-laden 6,000-TEU container ship would be carrying containers worthUS$ 15m altogether. It therefore stands to reason that containerinvestors are anxious to have their risks covered by insurance.

Standard containers 86.0%

Special containers 14.0%

COMPOSITION OF WORLD CONTAINER FLEET

INSURABLE INTERESTS AND CONDITIONS

Any number of companies involved in the trans-portation of containers may have an economic –and therefore insurable – interest in the associatedcapital and liability risks. This applies to shippingcompanies and other transportation and logisticscompanies, such as road hauliers, forwardingagents, and railway companies, regardless ofwhether they are combined transport operators(CTOs) and have their own container fleets for theentire transport chain or merely take charge ofthird-party containers for individual legs of thejourney. It also applies to operators who offer theirservices for the entire journey or for individual legsusing their own containers although they do nothave their own conveyances, such as non-vesseloperating common carriers (NVOCCs). Some cargoowners, such as manufacturers, ship their goods intheir own containers.

About half of the world’s containers are suppliedby leasing companies, without which it would havebeen impossible to finance and thus accomplishthe enormous expansion in container traffic thathas taken place. This results in insurance and co-insurance interests of both concurrent and sequen-tial nature. On account of the different interestsand risks involved, they must be recorded accur-ately by the underwriters and defined as preciselyas possible in the insurance policies.

To begin with, the lessor – who owns the contain-ers – is interested in avoiding any kind of financialloss due to physical loss or damage. That interestis maintained even if – as is usually the case – thelessee contractually agrees to assume the risksassociated with using the containers, including theobligation to obtain insurance cover.

In addition to straightforward lessee insuranceschemes, there are arrangements such as thoseincluded in Damage Protection Plans, for instance,under which the lessors themselves obtain insur-ance cover – naturally in return for higher leasingpayments. Furthermore, it is also common for largerleasing companies to obtain their own additionalinsurance to cover the residual risks (such as thoseassociated with repositioning containers) and con-tingency cover for the aforementioned main con-tainer covers. Operators of container depots towhom leasing companies or CTOs have assignedthe maintenance of their containers may also becontractually obliged to obtain insurance cover ontheir own behalf.

The days in which many marine insurers consideredincluding containers in vessels’ hull insurance –more or less as special equipment – are definitelyover.

Experience shows that, depending on the tradingarea and the composition of the cargo, it is neces-sary to have 2.5 to 3.5 times as many containers aseach vessel can carry. Before and after the sea legof their journey the overwhelming majority of con-tainers go their own way, without any connectionto the specific vessel used to transport them. Inthis day and age of consortia and syndicates, onlya fraction of the containers carried by many shipsare owned directly by the shipping company, andfar more are owned by cooperation partners oreven competitors.

Most of the world’s insurance markets regard con-tainer insurance as an independent line of busi-ness. In view of the mobility intrinsic to containers,it is usually classed as a type of marine insurance.

The insurance covers three areas associated withcontainers: physical loss or damage to the insuredcontainer, including special risks such as loss ofuse or cost of return transport if the user runs intofinancial difficulty; confiscation of the insured con-tainer and political risks; and finally, liability lossesdue to third-party claims for damages in conjunc-tion with use of the insured container.

51

NOTORIOUS PROBLEMS IN CONTAINER INSURANCE

GLOBAL CONTAINER MARKET

4%

45%

51%

Shipping lines 51.0%

Other lessors and others 4.0%

Top ten lessors 45.0%

65 Cover note. 66 “22,000 tons of steel just for the hull!” – informationbrochure about a container ship of the 3rd generation.

52

Some markets have drawn up their own standardterms, particularly for insuring the container itself.In the majority of cases, these terms have beendrawn up on an all-inclusive basis (all risks) and ona limited basis (total loss only and/or certain typesof expenditure, such as salvaging costs and gener-al average contributions).

However, container hull and third-party liabilityinsurances have always been an area characterizedby highly individual clauses and exclusions in thestandard terms and conditions, not only as ameans of providing tailor-made cover but also as away to take advantage of an excessively competi-tive situation.

PROBLEM FACTORS

The variety of policy designs and the relativelysmall number of insurers in this line of business,plus the comparatively large total premium vol-ume (the premium paid by a major container oper-ator for container insurance may easily be as highas the premium required to cover the entire fleetfor hull insurance and protection and indemnity(P&I)), are a reflection of the permanent problemsfacing this class of insurance:

– In spite of standardization, design and safetyconventions, and continuous classification, thequality produced by the over 60 container manu-facturers around the world varies considerably.

– Containers tend to be “globetrotters”. Conse-quently, even in the case of small “local” port-

folios, which are ostensibly easier for insurers tohandle and monitor, there still remains the possi-bility of long-distance shipments on occasion andthe loss or theft of complete containers.

– Containers are first and foremost boxes that aremade for transport and are therefore treated as aworking piece of equipment. It is the containerand not the cargo that is handled, transshipped,stored in the open, transported, and therebyexposed to a whole variety of climatic andmechanical stresses. On average every containeris damaged at least once a year in such a waythat it is no longer safe to use.

– Apart from those of special design, containersare “cheap” insured objects. They can be leasedfor as little as US$ 1–1.5 a day! In most cases,the companies or individuals that handle themdo not own them. This leads to carelessness anda lack of interest in the fate of individual contain-ers. Even with all of today’s computerized con-tainer control systems, it has proven exceedinglydifficult to establish strict service and repair con-trols which adequately ensure that individualcontainers, let alone entire fleets, are maintainedand repaired properly. The performance andquality of repairs suffer under the enormouspressure of competition and, as far as ongoingcontrols are concerned, the costs incurred for theinspectors alone are more or less prohibitive.

– Both the insured and the insurer inevitablydepend on third parties – such as a terminal ordepot – to report any loss or damage. In practice,it is virtually impossible for the insured to imme-

53

Limits of indemnity and

premium breakdown of a container line

8%

12%

45%

35%

Shipowners’ liability: limit of indemnity US$ 4.2bn/45.0%

Container hull and liability: limits of indemnity/12.0%:– Hull US$ 0.7bn– Liability US$ 0.5bn

Hull insurance: insured value US$ 1.1bn/36.0%

Loss of hire: limit of indemnity US$ 12m p.a./8.0%


diately report all incidents with a certain losspotential as required in the terms and conditionsof most insurance policies. This task has to bedelegated to the professionals involved in thecontainer transport chain.

– The moral hazard inherent in container insuranceis substantial because the parties involved arenormally exposed to fierce global competitionand extreme pressure on their profit margins.

CONTAINER HULL INSURANCE

Containers are only brand new and unused once intheir life cycle. It is therefore hardly surprising thatthe insurance for the initial delivery of a new con-tainer, which is taken out by the manufacturers asa rule, is the only type of container insurance thatdoes not pose any problem.

Losses due to improper handling predominate inmany statistical analyses. This is particularly evi-dent in the case of containers used for short dis-tances with high transshipment rates. Incorrectlyset spreaders damaging the roof of containers orfork-lift trucks piercing the side walls or damagingthe bottom are everyday occurrences. Despite thestrength of the container frame, it is not uncom-mon for containers to be distorted by beingstacked too high or with too much weight onuneven ground in the terminals.

Losses involving damage caused by the sea crash-ing against containers stowed in exposed positionson deck are also increasing.

The central problem in hull insurance for contain-ers is the length of their service life and the associ-ated wear and tear.

Insurers that write the customary one-year coveron an all-risks basis should insist on the suminsured (ideally the replacement value) being sub-ject to a depreciation scale. This should commencein the second year at the latest and decline fromroughly 100% to 30% within a period of years con-ditional on the type of container and how it is putto use. A damaged container may soon bedeclared a constructive total loss because, in eco-nomic terms, purchasing a new container oftenmakes more sense than having the old onerepaired. Although indispensable from an under-writing point of view, high deductibles can easilyconstitute such a large proportion of a container’svalue that container insurance becomes unattract-

67–68 Containers must be loaded, secured and transported properly!

69 Regular cleaning is required to prevent damage to the load and to the container(e.g. by acids and other aggressive materials).

70 Regular maintenance and repair of the container is essential.

54

ive for the prospective client. Moreover,deductibles are prone to generate running battleson the question of which and how many of theloss events drawn together in a claim actually trig-ger their application.

When repairs are needed, they can hardly ever becarried out at the container’s home base under theinsurers supervision – in spite of the fact that thepossibilities for manipulation in the containerinspection and repair business are comparableonly to those of the automobile sector.

And as far as large losses and total losses are con-cerned, container insurance has a number of spe-cial features that are not exactly advantageous tothe insurer either. In most cases, for instance, theinsurance terms and conditions stipulate that gen-eral average contributions are to be indemnified infull even if the standard contribution value of thecontainers exceeds the insured value. The trans-port of containers on deck is included in the insur-ance cover without any restriction nowadays. Thisalso applies to containers carried on non-containervessels, semi-container ships, and open-top con-tainer ships – even if their position on deck meansthey are particularly exposed to damage by highseas and heavy weather.

But that is not all. If, for example, the cover alsoincludes the cost of repatriation as an element ofloss minimization or as a specially agreed exten-sion, the insurer is left with the vague hope thatthe number of containers used over a wide areawill be small. And although “insolvency” (of thecarrier, the lessor, or the lessee) is basically ex-cluded as a cause of loss, it is very difficult for theinsurer to establish, and indeed it is often reinstatedin the policy. Furthermore, the various accumu-lation factors associated with major losses duringocean transport or storage on land are oftenimpossible to anticipate and only become apparentwhen an insured event has occurred. Even if thestock of containers and their value are determinedwith great attention to detail and limits of indemnityare specified in the individual policies, there is nosubstitute for carefully planned reinsurance cover!

CONTAINER THIRD-PARTY LIABILITY INSURANCE

Third-party claims for damages may be assertedagainst the carriers or owners of containers in vir-tually every part of the world – and on the basis ofhighly divergent liability systems. In the event ofproperty damage and/or personal injury in connec-

tion with container accidents, there are many par-ties, in addition to the owners of the cargo, thatmight be inclined to claim against any of the com-panies involved in the transport chain (e.g. privateindividuals, health and personal accident insurers,terminal operators, and public authorities).

Particularly in the case of leased containers, thelessors and their insurers often find themselvesconfronted many years later with a whole series ofclaims for damages actually addressed to the lesseeor the lessees vicarious agents. Although they arenot in any position to say much about the groundsor justification for these claims, they are compelledto defend themselves and incur claims defencecosts even if the claims are ultimately declined.

If faced with a third-party liability claim, the carriermay not have much chance of recovering anythingfrom a consortium or from other companies in thetransport chain. This may be due to the complexityof the legal system or for purely economic rea-sons. At any rate, the financial loss soon falls tothe container liability insurer, the party with the“deep pocket”.

CONTAINER INSURANCE MARKET

In spite of the substantial premium volumes, whichare viewed with envy by many an insurer, thenumber of markets offering cover for containersremains very small.

The business is written by specialist insurers, andwith particular success by the mutual companies.Container carriers, leasing companies, terminaloperators, hauliers, agents, and the other parties inthe container transport chain are offered an all-round insurance product on an all-risks or named-perils basis, including the special covers alreadymentioned for confiscation, repatriation, and polit-ical risks (including war on land). With insurancemodels geared to the practical needs of insurersand a wealth of expertise acquired over a period ofmany years, these specialist insurers are a majorchallenge to would-be competitors. The containerinsurance market requires that all the players havean in-depth knowledge of the subject, are able toprovide intensive service, and are in a position tooffer property insurance for the container transporthardware in combination with the correspondingpublic liability insurance.

There is a great deal of overlap between the vari-ous types of cover offered in container insurance.

55

At the same time, insureds are seeking cover forever-increasing sums insured and are seekingmore and more protection against loss of use andother kinds of operational consequences – a diffi-cult task, even for marine reinsurers.

56


71 Container stack with ducted reefers.

The fact that container vessels had a much higherratio of sea days to port days than conventionalships meant that they were also exposed to roughweather conditions for much longer periods. Theyusually travelled at much higher speeds than con-ventional ships. Moreover, they had a new andhitherto untested cellular structure which wasdesigned to provide sufficient strength in spite ofthe unusually large opening in their decks (some-times more than 85%).

The hull underwriters’ fears were unfounded.Thanks above all to modern computer-aideddesign and the calculation methods used by ship-builders and classification societies, the vessels’cellular structure proved to be strong enough towithstand the greater torsion stresses caused bythe motion of the sea and the different loadingconditions. At the same time, container shipsturned out to be a particularly low-risk class of shipto insure for their new construction value and theywere generally repair-friendly. The traditionalterms and conditions of construction and hull

58

04

MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE


OCEAN-GOING VESSELS

When the first fully-cellular container vessels went into service in the late1960s, they were regarded with considerable scepticism by marine insurers onaccount of their special characteristics. Wherever permitted by market practice,a “prototype surcharge” was applied.

OCEAN-GOING VESSELS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58INLAND WATER TRANSPORT VESSELS AND OTHER CONVEYANCES . 74

insurance policies did not need any modification.Whenever problems arose, it was soon found thatthey were related not specifically to the features ofcontainer ships as such but to general develop-ments in shipping and shipbuilding.

These included such developments as: the intro-duction of the bulbous bow, which acted like a ramin the event of a collision (although in fact the double-walled structure of container ships tendedto limit the scale of damage); the unacceptable fail-ure rate of automated ship’s systems in the initialphase; the trend towards more and more expen-sive losses involving the vessels’ engines as aresult of manufacturers increasingly completingtheir tests on new types of engines in the course ofdaily operations at sea rather than in the factoriesand shipyards.

Container ships currently account for roughly 10%– and rising – of the world’s total tonnage. Theirage structure is twice as good as that of the sec-ond-best class of ships (with 60% of container ton-nage being less than ten years old). And as a ruleeven relatively old container ships are in a goodstate of repair because that is what the speed andquality of the container transport system and thecompetitive situation require.

Nevertheless, there are also a number of criticalaspects that hull insurers should not overlook:

The stability of container ships and the additionalstability reserves they need are of particular impor-tance owing to the vessels’ high centre of gravity.This is accounted for by computer-aided load plan-

ning, nowadays the task of shore-based planningand co-ordination offices, and the carriage of bal-last water.

Although not frequent, accidents due to instabilitydo happen – typically in exceptionally high seas –if the individual factors for the stability calculationsare grossly “undermined” by reality. This is the situ-ation, for instance, when the weight and centre ofgravity of the cargo inside the containers signifi-cantly exceed the values recorded in the officialdocuments or empirical expectations and theyhave not been or could not be verified – as issometimes the case even today. A vessel’s stabilitymay also be dangerously reduced if there are largefree surfaces inside tanks; or if substantial extraweight builds up on deck as a result of ice forma-tion or breaking seas which do not drain off quicklyenough between the deck containers.

As a result of ongoing improvements in vesseldesign and endeavours to increase slot capacitieswhile retaining the vessels’ current dimensions,additional slots can nowadays only be created ondeck and no longer in the hold. In many cases, thiscan only be done by raising the number of tiers ondeck. At the same time, limitations on the width ofvessels play a less significant role nowadays – atleast as far as feeders and medium-sized containerships are concerned. Accidents due to instabilityare therefore much less likely to impact hull insurersin the future.

59


72 Container ship in heavy seas.


73 Torsional stress.

74 Load due to bow flare slamming.

Local stress and deformation of a container ship(exaggerated representation) in heavy seas usingfinite-element calculation models

60

75 Bending load (hogging).

61


76 Local deformation of ship structure due to bow flare slamming.

78 A bulbous bow can project more than 8 m and be mainlybelow the water line – a particular hazard in the case ofcollisions and during docking manoeuvres.

77 Container ship in dry dock. Due to the bulbous bow, the dynamic bow pressure of the ship is changed so that fuel saving up to 10% is possible.

62

79 Ram impact effect following a collision with a bulbous bow.

63


80 Finite-element models for design analysis of container ships.

64

Ship onwave crest

Ship inwave trough

Ship in oblique wave

In spite of the attention given to detail at thedesign stage, the renewed trend towards higherspeeds has led to increasing problems with themechanical strength of vessels, resulting in moreinstances of structural damage, particularly in thecase of very large container ships. The sheer sizeof these vessels, the enormous distance from thebridge to the bows, the height of the stem whichobscures the view ahead, and the immense differ-ence between eye level and sea level: these are allfactors that may cause even experienced crews tolose their immediate sense of the state and forceof the sea.

This goes hand in hand with schedules that aresometimes very tight and the untiring efforts of thecrew to keep to these schedules – two classicingredients of numerous accidents due to shipsnot reducing their speed in good time or steeringthe wrong course in heavy weather.

Vessels move through the water in six degrees offreedom. Of these, the rolling motion exerts thegreatest influence on the way containers behave inhigh stacks on deck. Yet the relationship betweenthe torsion of hull and hatches, cargo movements,and the various lashing and fastening materials isstill not fully clear, neither in theory nor in practice.

Experience with major hull losses in trans-Pacifictraffic also involving loss of or damage to contain-ers as a result of heavy weather shows that theloss potential is immense in both areas, althoughthe containers and cargo appear to be more loss-prone than the vessels themselves (for furtherdetails see Chapter 08).

Whether the spectacular loss of the MSC Carla,which broke apart in heavy weather, was related tothe vessel having been lengthened and whetherthere are any conclusions that hull insurers shoulddraw from this as far as their portfolios are con-cerned, remains to be seen.

A problem that commonly affected break-bulkfreighters is gaining momentum in container ship-ping too: cargo fires. They are difficult to accesseven on deck and particularly if they start in con-tainers with hazardous materials. It is often beyondthe capability of the crews, continually dwindlingin size as they are, to get them under control suc-cessfully. In spite of the segregation requirementsof the International Maritime Dangerous Goods(IMDG) Code and the adherence to them whenstowing containers loaded with hazardous cargo,the sheer volumes involved (sometimes account-ing for between 10% and 40% of the cargo) make itincreasingly likely that more cargo fires will breakout, constituting an environmental risk besides.The outcome may easily be an actual or construct-ive total loss of the vessel, as recent experiencehas shown.

Many hull and cargo insurers are still very con-cerned about two groups of properties specific tothe design of container ships:

Since the early nineties, some jumbo containerships and feeders have been operating with com-pletely open, hatchcoverless hulls, the aim being tomake loading and unloading even easier, quicker,and cheaper and to cut down further on the timespent in port. The initial scepticism – engendered

66


CONTAINER SHIPS TOTAL WORLD MERCHANT FLEET

1989 1991 1993 1995 1997 1999

80

60

40

20

0

Mill

ion

DW

T

Mill

ion

DW

T

800

600

400

200

0

1989 1991 1993 1995 1997 1999

among other things by the fact that the cargo isnow even less sheltered – has gradually declinedin the light of the positive experience gained inpractice. Although the relatively large width ofthese vessels and their high freeboard appear tohave withstood all extreme high seas and weatherrisks to date, it is only a matter of time before oneof these vessels comes dangerously close to thelimits of its additional bilge capacity.

As far as stranding and salvaging are concerned,many hull insurers expect modern, predominantlygearless container ships to have fewer self-helpoptions. This will lead to higher salvaging costsand possibly higher general average expenses,possibly requiring indemnification on the part ofhull insurers (but only in the case of relativelysmall cargo values and relatively expensive ves-sels).

Although it has become more or less secondary inimportance to hull insurers today, there is anotherproblem which had a dramatic but unfortunatelynot widely noted effect on the hull portfolios ofmany insurers and reinsurers in the early days ofcontainerization. The many conventional freighterswere replaced by smaller numbers of containerships of rapidly growing size and hence distinctlyhigher value. While the exposure of individual risksincreased dramatically, the balance in the portfoliosdeclined considerably, and the premium remained– at best – unchanged. Although this was histori-cally important in the development of marine hullinsurance, it no longer has much impact on theday-to-day business of insurers and reinsurers.Provided the premium level is technically reason-

able, newly established or newly combined andexpanded portfolios of modern container ships caneasily provide the initial balance necessary forprofitable business, as statistical analyses haverevealed. In view of the capacities available in theinsurance market and the fall in the value of con-tainer ships in recent years, the required degree ofreinsurance can be easily obtained nowadays with-out assigning to reinsurers only the peak risks withlow premiums and high liabilities, as used to bethe case.

However, there is one additional strain on hullinsurers of container ships that has definitelybecome an everyday reality. General average casesinvolving containers may concern hundreds oreven thousands of parties, the so-called cargointerests. In view of the complex and time-consum-ing claims settlement procedures, more and morehull policies – for higher and higher sums insured– are tending to include general average absorp-tion clauses. These stipulate that the GA contribu-tions are assumed in full by the owner of the ves-sel and hence by the hull insurer, without anyfurther distribution of the general average.

67


INSTITUTE OF SHIPPING ECONOMICS

AND LOGISTICS (ISL), 1999

39

Tankers Bulk carriers Container ships Generalcargo ships

Passenger/Cargopassenger ships

47

16

25

59

31

37 33

31 30

47

23

29

60

45

30

15

0

No

. of

ship

s in

%

Up to 1978

1979–1988

1989–1998

32

21

CONTAINER SHIP FLEET

1980 1983 1986 1989 1992 1995 1998

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Ships of 4,000 TEUs and above

3,000 TEUs to 3,999 TEUs



500 TEUs to 999 TEUs


TE

U t

ota

l (in

th

ou

san

ds)

MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE81 Fires in containers on ships

mostly develop as a conse-quence of collisions (flyingsparks) or self-ignition and/orwrong handling/stowing ofcargo.

82 Grounding of container ship –not always an iceberg isrequired to lose expensivecargo!

83 Severe weather damage on ajumbo container ship.

84 Grounding of barge carryingcontainers.

68

85 Container unintentionallyloaded on a cruise ship after acollision with a container ship.

69

86 Container ship with a broken backafter stranding. Later the ship brokeitself up using its own shipboardcranes!

87 Detail view of “breaking point” of the hull.

70


88 Container ship broken apart inheavy seas. The foreship with morethan 1,100 containers sank during salvage operations.

89 Stranded container ship; an oil slickcan be seen in the foreground.

71


90 A fire in just one container with hazardous cargo can have devastating effects.

72

INLAND WATER TRANSPORT VESSELS ANDOTHER CONVEYANCES

Hull insurers of special container tonnage haveacquired even less negative experience with inlandwater transport vessels to date than with ocean-going vessels. The values involved are smaller andthe sums insured naturally lower. Bad weatherwith rough waters and other natural hazards havelittle or no significance and – if the worst comes to the worst – it is easier and usually cheaper tosalvage and repair the affected vessel.

As far as the other conveyances used to transportcontainers are concerned – trucks, trains, and aeroplanes – the focus of attention from the verybeginning was on reliable and secure lockingmechanisms. Consequently, insuring the con-veyances, unlike the cargo itself, has not come upagainst any problems that were not already knownbefore the introduction of containerization.

74


91 General average documents.92 An inland container ship passing through a lock.


76

77

93 Ice passage on the Great Lakes.


94 Jumbo container ship leaving the shipyard.

78


95 Jumbo container ship.

80

96 Jumbo container ship under tug assistance.

82


83

05

ASPECTS OF INSURANCE FOR CONTAINER CARRIERS AND TERMINALS

Aspects of INSURANCE FOR CONTAINER CARRIERS AND TERMINALS

COMBINED TRANSPORT OPERATORS . . . . . . . . . . . . . . . . . . . . . . . . . . 84TERMINALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

COMBINED TRANSPORT OPERATORS

With the spread of containerization, many of the conventional break-bulk liner companies developed into container carriers in the form of combined transportoperators. The core element of their liability as ocean carriers, namely their liabilityunder contract (and possibly in tort) for the carriage of goods, is covered by P&Iinsurers. These insurers are usually mutual companies and offer the ocean carrierscomprehensive and above all fairly inexpensive insurance cover by pooling majorrisks or reinsuring them with commercial reinsurance companies. The largest ofthese companies soon adjusted to the change in their insureds’ liability andabsorbed the associated higher risk exposure of these container shipping clientswithin their flexible classes of insurance.

97 Large container terminals can accommodate more than 40,000 TEUs.

84


Third-party liability insurance options within P&Iare limited though when NVOCCs or CTOs, nor-mally land carriers or forwarding agents, have tobe insured or included in the insurance. Theseclients are referred to the special market outlinedin Chapter 03.

The liability and insurance profile of a modern CTO differs considerably from that of a conven-tional break-bulk shipping company. It is much less concerned with the international liability con-ventions for ocean carriers, since fewer losses arenow incurred while transporting the containers bysea. CTOs issue door-to-door bills of lading ratherthan port-to-port freight contracts as in the past.Since most CTOs follow the rules recommendedby the International Chamber of Commerce forcombined transport bills of lading, they – and their insurers – also require practical and legalknowledge of the liability situation of the otherconveyances in the transport chain.

In the event of a claim, an efficient reporting system will usually give CTOs and their insurers an indication of the leg of the journey on which the loss or damage has occurred and under what circumstances.

An efficient reporting system is a prerequisite forrecourse action as such and also provides CTOsthat have third-party claims lodged against themwith the interesting opportunity of being able totake recourse to the parties in possession of thecontainer at the time of the loss on the basis ofsubcontracts and other contractual agreementswith terminals, railway carriers, road hauliers, forwarding agents, depot operators, and other contracting parties (i.e. their vicarious agents).

Professional CTOs with an efficiently organizedand tightly controlled container operation gener-ally have better loss figures (and above all lowerbasic losses) than conventional carriers. Their(sub)recoveries are also frequently more successful.

85

Given a high level of control and good organiza-tion, CTOs are often able to prove that the con-tainerized goods cannot have suffered any damagewhile being transported by the CTO. The claimsdefence rates of such companies consequently differ significantly from those of conventional shipping companies.

Some CTOs outsource claims defence and claimshandling to their P&I insurer’s correspondents,with whom they already have a long-standing rela-tionship, or even directly to their P&I insurer. Thisnot only provides insurers with an additionalsource of income, but also allows them to directlyparticipate in shaping their risks – provided theyare sufficiently qualified and sufficiently aware oftheir clients’ activities. The large container carriersrightly attach as much importance to efficiency inthe handling of insurance claims as to their mar-keting, their operations, and their sales organiza-tion.

TERMINALS

Some CTOs are also terminal operators. Theirliability is then no different from that of any otherterminal operator.

The liability risk for many terminals is still coveredby insurance policies that evolved more or less bychance in the past. These constitute a random mix-ture of quayside liability, public liability, transship-ment liability, and warehousing liability, and rarelya well-coordinated combination. Most insuredsrely on standard hold-harmless agreements andthe restrictions on liability specified in the smallprint of their own terms of business. Their trueexposure may suddenly become painfully clearthough if, for instance, a container with a sophisti-cated precision machine – possibly the key elem-ent for a plant nearing completion overseas – isdamaged on the quay.

Container terminals naturally also have consider-ably more extensive insurance interests.

Together with the container freight stations, thecontainer terminals are key links in modern con-tainer transport chains.

Container terminals are usually extensive areas,with a relatively small number of permanent build-ings and facilities but a large and ever-changingarray of container-handling equipment.

The terminal buildings are mainly purpose-builtstructures with low-cost furnishings and equip-ment (the only exception being the expensivecomputer hardware). Apart from these buildingsand other fixed installations (repair shops, CFSs,power supply units, and refrigeration units) thereare large cranes and industrial trucks which indi-vidually, and especially collectively, are worth sub-stantial amounts of money. Despite their mobility,cranes and trucks are usually covered by machin-ery or engineering insurance. They only appearoccasionally in marine insurance either as border-line cases or within the framework of packagepolicies. These pieces of equipment are, like con-tainer ships, normally in use around the clockthroughout the one-year term of the policy andhave provided many an engineering insurer withunpleasant surprises.

Insofar as these terminals are not publicly ownedor operated by the government and therefore gowithout commercial insurance cover, they are nor-mally covered by a series of other insurance poli-cies for buildings and property, possibly with busi-ness interruption insurance and often with addi-tional special insurance for computer systems. Inaddition to the transshipment liability cover for terminal operators already mentioned above, theyfrequently also have conventional public liabilityinsurance (with elements of employers liability thatvary from country to country). As regards the scopeof cover and the limit of indemnity, the public liability insurance frequently follows the customarymarket standards for general liability insurance.

Marine insurers may be tempted to comply withrequests for this type of cover or extension, notonly in the interests of client orientation but alsowith the intention of offering an alternative to thespecial container insurances mentioned above.Nevertheless, it is always advisable to combineforces with other underwriting sections in the com-pany when an “all-in” package policy is requestedfor such container terminals. In this way experi-ence is pooled. And if a single final premium isrequested by the client, this is the only way toensure that the various underwriting criteria are all considered and included in the calculation.

Here too, Munich Re provides support with itsglobal experience. The trend towards mergersbetween major container carriers and terminaloperators, and even port administrations, is con-tinuing. And this is a favourable situation for com-panies to organize their own international insur-

86


ance programmes, increasingly with captive constructions or with elements of alternative risktransfer.

For some cedants, an awareness of such pro-grammes or of the related products and practicesin other insurance markets to which they suddenlygain access as a result of these international pro-grammes may give them the decisive competitiveedge.

87


98 Bill of lading.

99 Reachstacker for transporting empty containers at the terminal.


88

100 Container gantries for jumbo container ships.

89

90

06POINTS TO NOTE WHEN INSURING GOODS IN A CONTAINER

POINTS TO NOTE WHEN INSURING GOODS in a container

Some marine insurers still believe that 30 years of container traffic, particularlydoor-to-door transport, have brought a distinct improvement in the results asfar as cargo losses are concerned. That may be true in terms of the number ofclaims, but, as in other sectors, the average size of these claims has in factconstantly increased.

In the interests of their own cargo business, insurers are therefore well advisedto pay critical attention to a number of characteristic features of this transportsystem.

101 Container ship at berth.

FCL OR LCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91SHIPMENT ON DECK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91COMPETITION AND CHOICE OF QUALITY . . . . . . . . . . . . . . . . . . . . . . . 91LIABILITY AND RECOURSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91GENERAL AVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92PREMIUM CALCULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

Container shipping companies and indeed all theparties involved in transporting containers tend tobe very optimistic when talking about the advan-tages of container transport – not only because ofthe significant competitive interest they have butalso because they are frequently unaware of themany cases in which those with an interest in thecargo fail to seek recourse when the recipients dis-cover minor damage at the containers’ final destin-ation. For this reason, all cargo insurers shouldgain their own impression of the situation by mak-ing a detailed analysis of their own containertransport claims.

FCL OR LCL

In all cases, they should know whether the insuredgoods transport involves a full container load (FCL)or a less than full container load (LCL). FCL meansdoor-to-door delivery of an unopened container.LCL usually means that the goods are transportedwithout the protection of a container during pre-carriage and/or on-carriage and stowed togetherwith other goods, thus being subjected to furtherhandling or “manipulation”.

All the goods to be carried as LCL shipments mustbe able to withstand all the strains of conventionaltransport and storage without the additional pro-tection of a container. The carrier or consolidatorthat puts the cargo together, loads, and secures itin the container must fulfil this task professionally.This requires the employment of highly qualifiedpersonnel with the necessary specialist know-how.In practice, it is of utmost importance to selectquality service providers, meaning that the trans-shipment companies and hauliers have skilled andadequately trained personnel to make sure that thegoods are intact when they reach the recipient.

SHIPMENT ON DECK

Marine insurers must remember that their clients’containers are always stored outdoors and – con-trary to their clients’ expectations – may beshipped in an exposed position on the deck of acontainer ship or in an open-top ship. Here, at theterminals, and throughout the transport (be itinland or sea), extreme fluctuations in temperatureand moisture must be considered “normal”. Ex-perience shows that the danger of loss or damagedue to heavy weather and/or high seas exists onlarge and jumbo container ships too – and isincreasing! The slightest leak in the container mayhave serious consequences for the cargo.

COMPETITION AND CHOICE OF QUALITY

Container transport is characterized by extremelyfierce competition nowadays. At the broad upperend of the scale, the transport services provided areof truly high quality. Unfortunately, cargo ownersand their insurers do not always have a selectionto choose from or any alternative solutions.

This makes it even more important to examine theage, quality, and cleanliness of the containerspecifically chosen for the intended shipment andto make sure that it is a suitable type, and notmake assumptions based on the ISO certificates orISM (International Safety Management) certifica-tion of the container ships and their operators.

LIABILITY AND RECOURSE

Container traffic and especially freight law are regu-lated by many different legal systems throughoutthe world so that recourse action in particularrequires the attention of in-house experts withmany years of experience and pin-pointed externalsupport at least in more difficult cases.

Assigning these tasks to external agencies may bea highly efficient and economical alternative inspite of the assumed loss of knowledge thisentails. This is particularly true if it involves a sub-rogation office with global operations that keeps inclose contact with the client and maintains asteady flow of information on its current activitiesand on the options available.

Much thought has been given to the internationalstandardization of legal regulations but as yet noneof the considerations have achieved any degree ofacceptance on a wide scale. The 1970 TCM con-vention governing container shipments and stand-ard contracts for combined carriage has hardly any realistic chance of being ratified by the majortrading nations. In practice, (combined) containershipments are handled using a variety of legal docu-ments, which have only partially been standard-ized. Combined transport operators only issuethrough bills of lading, which may be based ontheir own terms of business and different legalsystems.

A multitude of legal disputes have arisen in thisregard, few of which have been settled by a courtof law. Three aspects are prevalent: the question of whether the loss location is known or unknown,general average cases, and the problems of astandard unit-based limit on the carrier’s liability.

91

POINTS TO NOTE WHEN INSURING GOODS IN A CONTAINER

If the place of loss is known, the national law ofthe country concerned is normally applied (in linewith the so-called network liability system). If, onthe other hand, the loss location is not known orcannot be established beyond doubt, the leg of thejourney subject to the strictest laws is chosen(under the new transport regulations in Germany,therefore, the law of carriage by land).

When recourse action is taken against a containercarrier, the carrier often exercises its right to limitits liability per unit or package (equivalent in valueto 666.67 special drawing rights, currently someUS$ 1,000) or by weight. Unfortunately, this is handled differently from country to country.

By and large, the courts have ruled that if the con-tainer is specified in the bill of lading without adeclaration of how many items it contains, theentire container must be treated as a unit of liabil-ity in accordance with the requirements governingthe carrier’s liability. However, if the number ofitems making up the containerized cargo is statedin the bill of lading, this is taken as the decidingfactor – to the cargo insurer’s advantage. The samealso applies even in the case of “said to contain”clauses. Under the terms of the widely appliedHague-Visby rules, the parties with an interest inthe cargo and their insurers may also invoke theweight-based liability equal to two special drawingrights, which is of greater advantage to them.

GENERAL AVERAGE

The handling and settlement of general averageclaims for container shipments may turn out to bemuch more complicated than in other areas if onlybecause of the large number of parties with aninterest in the cargo. For practical purposes,though not entirely acceptable in legal terms, thisis based to a large extent on a combination ofdocumented and assumed figures.

Not only vessel, freight, and cargo inside the con-tainers, but also the containers themselves mustcontribute to a general average. These mandatorycontributions are integral parts of all customarycovers under container, hull, and cargo policiesand are therefore generally also met by the marineinsurer.

PREMIUM CALCULATION

Marine insurers have frequently discussed thequestion of whether the transportation of goods incontainers has a positive or negative influence onthe risk and what effect it should have on the pre-mium. On this issue they have undertaken a rad-ical change of course on more than one occasionover the past 30 years. In view of the fact that con-tainers are always apt to be shipped on deck, anumber of marine insurers and in some casesentire markets initially charged an extra premiumfor containers shipped on deck, thereby continuingthe principles developed for the insurance of con-ventional goods shipped on deck.

The loss experience gained over the years wasgenerally positive and prompted them to eventu-ally abandon this approach, which opened thedoor to formal or hidden discounts on premiumsfor containerized cargo.

In view of the large proportion of containerizedtrade and the pressure of competition on pre-miums, marine insurers have largely abandonedall attempts to include containerization as a separ-ate risk factor in their pricing. Whether this will con-tinue to be the case or whether it will be possibleto restore premiums to a technically sound level asa means of establishing an adequate basis forprofitable container cargo insurance business willlargely depend on two aspects: the loss experiencein container transport in the past and the appraisalof the problems to be expected as a result ofincreasing containerization in the future. This is aquestion that marine insurers will have to reviewagain from time to time.

92

102 Capsized feeder ship with hatch lids out of place.

103 Containers floating in the waterway.

104–105 Besides damage to goods, pollution of the environ-ment and the disposal of stranded containers are

considerable risk and cost factors.

93

94

07

ASPECTS OF ACCUMULATION

Aspects of ACCUMULATION

106 A classic example of accumulation.

UNKNOWN ACCUMULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95ACCUMULATION PER CONTAINER AND BY MEANS OF TRANSPORT . . . . 95ACCUMULATION IN CONTAINER TERMINALS . . . . . . . . . . . . . . . . . . . . . . . 103RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

All along the container transport chain, cargoes converge or are bundled together in one way or another: on the container conveyances themselves and in the phases of pre-storage, interim storage, and post-storage at ports, termin-als, inland freight stations, CFSs, or merely on the premises of a forwardingagent, land carrier, or consolidator. Such concentrations of values are exposed to a variety of hazards and risk probabilities. These aspects are referred to in theinsurance industry as accumulation and insurers take account of them in whatthey call accumulation control. Primary insurers and reinsurers in the marineinsurance sector are equally affected, albeit from different perspectives and with different consequences.

The question of accumulation in connection withcontainer shipments has so far been approached ina fairly undifferentiated manner, at least outwardly.Attention has focussed on the total loss of a largefully-laden container ship – which is somethingthat has never occurred in over 30 years of con-tainer traffic. The figures quoted in this contextrange from US$ 2bn to US$ 5bn.

We are not in favour of encouraging an inflation of large figures in such a serious matter withoutdeeper thought and have conducted several sur-veys of our own. These may prove interesting forall marine insurers, including those operating outside the main container routes.

UNKNOWN ACCUMULATION

It is surprising to find that in spite of the globalreal-time communications and data network, mod-ern policy arrangements are such that marineinsurers are no longer informed as a rule when thecontainerized goods they are insuring are about tobe loaded or have been loaded onto a conveyance.Also, in today’s accelerated trading systems, thefreight documents are often issued inland, longbefore the identity of the container ship or anyfeeder vessels is known (let alone whether the container is to be stowed on or below deck).

For this reason, the individual conveyances arehardly ever specified in declarations under opencargo policies nowadays.

Bearing in mind the ever-growing capacity of mod-ern container conveyances in conjunction with theconstant increase in the values involved – modernconsumer goods, for instance – there is a cleardanger that hundreds or even thousands of con-signments and bills of lading – with the associatedinsurance policies or at least the declarations – will accumulate on a single journey without theinsurers and reinsurers being aware of their max-imum liability on that journey.

Whilst incomplete information on the insuredcargo transport is in itself an obstacle to properunderwriting, accumulation can become a veritablenightmare for insurers and reinsurers. How manyindividual risks are involved and on what basis canretentions and reinsurance cessions be made with-out one or both of the partners getting an unwel-come or possibly critical surprise?

In the same way that reinsurance can be based on“any one policy/declaration/bill of lading”, the re-insurance partnership can be based on “any onerisk/bottom/vessel/conveyance” or on “any oneevent/accident/occurrence” as the measure for thecession. Both versions and mixed forms involvefamiliar advantages and disadvantages as regardsinformation and administration, as well as thescope of reinsurance cessions; they limit or createa need for additional protection of the retention.

In the event of a major loss, a great deal will inevit-ably depend on the circumstances of the particularcase concerned. Nevertheless, the nature of con-tainer transport is such that a few general pointscan be made:

ACCUMULATION PER CONTAINER AND BYMEANS OF TRANSPORT

– “Single” accumulation per container

Since almost any type of cargo can be container-ized and transported on container ships, the valueof the individual consignments within a containermay be considerable. Values of up to US$ 1.5m arenot unrealistic for a single 20’ container whenladen with such high-quality consumer goods ascigarettes, perfume, or electronic or optical equip-ment.

If containers are used to transport works of art,antiques, or precision machines, the value can eas-ily exceed US$ 5m. As already mentioned, this issomething terminal operators often appear to for-get when calculating the sum insured for theirpublic liability insurance.

In the case of LCL shipments, expensive cargoes of limited weight and size which are insured underdifferent policies may easily congregate in onecontainer. But experience shows that the limitsmentioned above for the individual containers arerarely exceeded.

– Air transport

The above-mentioned limits do not apply to airfreight, which is traditionally the domain of particu-larly high-quality goods and tight delivery sched-ules. On the other hand, expensive individual car-goes in each container can normally be registeredby the insurers in good time, thanks to the betterflow of information and the greater attention paidby all the parties concerned.

95


107 Marine reinsurance treaty documents.

96

The concentration of containers at the inland freightcentres (“hubs”) of major container operators, forwarding agents, and consolidators does notinvolve problems that are specific to containers. In fact, the fire losses at such centres – some ofwhich have been substantial – have regularlyinvolved goods that were not or not yet container-ized, whilst fully-laden containers and containersthat were being loaded and unloaded on theramps were usually pulled out of the danger zonein good time in the course of fire-fighting.

– Road transport

In the majority of countries, road transport entailsa maximum accumulation of two 20’ containersper truck unit.

– Rail transport

In most countries, railway trains do not usuallyexceed a length of 60–80 wagons. Only the double-decker trains criss-crossing the North Americancontinent reach lengths of 120–150 wagons, givinga total of 240–300 containers. Owing to the topo-graphical and geographical constraints involved,these maximum lengths are unlikely to changevery much in the foreseeable future.

Experts doubt that a complete container trainwould be a total loss if it derailed or crashed off abridge. The accident scenarios to date, particularlythose involving fires and explosions on boardmoving container trains or in marshalling yards,show that only a very limited number of adjacentwagons are affected.

97


108 Uniform block stack in a packed container.

109 Fork-lift trucks loading containers.

110–111 Luxury passenger cars and motor bikes are often transported individually.

This is an aspect to which more attention must be paid in the future given the fact that new andlighter materials will increasingly be used in theconstruction of containers and that the capacity oflarge container ships will continue to increase. Intheory, one hundred trains are needed in Europe toaccommodate the entire cargo from a large con-tainer ship with 7,000 TEUs. In practice, with thepart-loads that are customary, between 40 and 45dedicated trains are needed. These have to beassembled by the railway companies in or near theports and then fed into the inland railway network.

The average time containers spend in the port area– and therefore in the main accumulation area –has fallen to only six hours. But capacity limits andlonger delays due to additional regulations on haz-ardous materials will soon make this difficult toattain in many places, however tight the schedulesmay be in the container transport sector.

– Inland water transport

The capacity of the container vessels developed forinland waterways has increased steadily to around500–600 TEUs for tug-barge combinations, andvessels with a capacity of 800 TEUs are soon to gointo service.

Although these modern IWT vessels are well-equipped and manned by professional crews sothat, even on the basis of insurance loss statistics,they may be considered safe conveyances, itwould be unwise to discount the possibility of atotal loss of containers on an inland waterway.

– Accumulation on ocean-going vessels

The question of accumulation control is particularlyimportant for marine insurers when it comes to

98


112 High values are also transported by road. 113 Loading of air cargo.

ocean transport. But does every marine under-writer in the course of his day-to-day business con-sider the fact that growing capacity on-board hasled to ocean-going vessels regularly transportingcontainer concentrations equivalent to those of asmall or medium-sized container terminal?

The containers on these vessels are exposed to thearchetypal hazards of ocean travel: grounding andstranding, capsizing and collision, windstorm, ice,and other natural perils, and fire and explosion.

The analysis of shipping accidents reveals thatcontainer ships are in this respect no differentfrom other types of ship: accidents at sea, thoughsteadily declining in number, are still primarilycaused by human error. It is easy to attribute thisto the continuing reduction in manning and a lackof training and qualification, with the result thatmany crews cannot cope with the increasingly

sophisticated technology on modern container vessels.

The truth of the matter is, however, that improve-ments in the safety of vessels – particularly of con-tainer ships – has paradoxically generated a newrisk potential of its very own. Since accidents havebecome less common, many crews have no experi-ence of an emergency situation and are thereforeunused to dealing with such incidents. And that issomething which even training on a simulator can-not remedy.

The ISM Code was designed to establish basicconditions for safe ship operations and can bringabout further improvements in this respect, pro-vided it is implemented and applied correctly.

Whatever the precautions taken, though, emer-gency situations are almost always different from

99


114 An inland container ship: one of the safest and cheapest means of transportation but with considerable accumulation potential.


101

115 Tank containers and hazardous goods should be stored in speciallydesignated areas.

what was practised in training courses and learnedin theory. Although weather forecasts are moredetailed nowadays, the weather conditions areregularly misinterpreted on container ships of allsizes. The motion of the sea and the loads towhich the vessels – and often the crews – areexposed are often assessed incorrectly. In manycases, bad decisions on the action to be taken inpoor weather are only made worse by the pressureapplied by some shipping companies and charter-ers to adhere to tight schedules.

In October 1998, for example, four large containerships were involved in a single incident, namely ahurricane in the Pacific. One of these vessels lostno fewer than 406 containers and more than 1,000of the remaining containers on deck were dam-aged or destroyed.

Navigation errors and the failure of the navigationinstruments that are virtually standard on contain-er ships nowadays such as radar equipment, plot-ters, and anti-collision warning devices, haverepeatedly been responsible for ships runningaground and colliding. This results in losses notonly under hull insurance but also under cargoinsurance if containers are destroyed or lost over-board. There have also been cases of vessels cap-

sizing because of incorrect ballasting or trimmingwhile being loaded or unloaded, or because largeamounts of cargo have become dislodged at sea,or because the speed has not been adjusted inheavy seas. These losses have so far only involvedsmaller container ships and, particularly, feedervessels.

The accumulation values of containers, vessels,and terminals are difficult to determine precisely(thus warranting safety margins!). But why is this?

As far as the containers are concerned, the mainreasons are– the wide range of purchase prices because of the

many types of container available and the con-siderable differences in price charged by differentmanufacturers in different countries and

– the fluctuations in the market prices of new andused containers – and the vast differences intheir age and condition.

In terms of the containerized goods the main rea-sons are – the extremely wide variety of goods transported,– fluctuations in the volume of cargo and the util-

ization of available capacity from season to sea-son and market to market,

102


116 It is often difficult to establish the whereabouts of goods after accumulation losses.

– fluctuations due to general market trends, and – the general lack of accurate data on bulky goods,

such as expensive industrial plant components,which occupy several slots on board but whichusually fail to appear in statistics or lists – at leastin TEUs.

The value of the cargo cannot realistically be docu-mented in a standard and reliable manner eitheron the basis of the capacity used or on the basis of the weight of the goods. Even if an average orflat-rate value could be calculated more or less correctly, it would still need substantial correctionin individual instances or would require the inclu-sion of a sizeable safety margin since the criteriamentioned above are subject to constant change.Moreover, the proportion of empty containers (easily 10%) cannot be included in the calculation,as the leading container carriers are extremelysecretive about this for marketing reasons. And economic trends can make these figures fluctuate by up to 50% within a very short space of time.

Nevertheless, a flat-rate valuation of container car-goes is indispensable. The value used by MunichRe is based on empirical values provided by aver-age adjusters, container carriers, and leading for-warding agents for the period from 1990 to thepresent.

Taking a large number of individual reports as abasis, we calculated an average value of US$ 1,795per tonne. This does not appear too unrealisticwhen considered in relation to the foreign tradestatistics for certain imported and exported goods.It has also been found that cargo values have risensignificantly in relation to the weight – though notin a straight line.

Based on the further observation that the averageload of a 20’ container is 10 tonnes and a 40’ con-tainer 18 tonnes, and allowing for a safety marginof 10%, this yields an average value of roughlyUS$ 20,000 for a 20’ container and roughlyUS$ 36,500 for a 40’ container – for the cargoalone! Average cargo values of almost US$ 100,000per container have been reached on some voy-ages, such as on routes between the United Statesand Europe, as well as in trans-Pacific traffic.

Compared with this method, a no more than fairlyreliable compilation of average or actual sumsinsured for container cargo in individual marketsor trade relations would be, for obvious practicalreasons, a difficult, if not impossible task.

When valuing container ships, on the other hand,marine insurers have a reliable and readily access-ible source in the form of the sums insured andagreed values for the various types and age classes.The collapse of the freight market has led to a dramatic fall in ship prices too. These low pricesare used in the table below. In some future calcu-lations, therefore, the values should be adjustedupwards (or possibly even downwards) to be inline with the applicable market level for containerships.

The values in the table on page 113 speak forthemselves. The disquieting, yet realistic prospectremains that a substantial proportion of the hullinsurance for the vessel, the containers, and thecargo – and possibly even the terminals as well –may be covered by one and the same insurer andthat, in the event of a total loss, the sums exceed-ing the “per bottom” or occurrence limit of thereinsurance treaties could remain within the in-surer’s retention.

ACCUMULATION IN CONTAINER TERMINALS

Determining container slot capacities at large portand inland container terminals is a difficult task formarine insurers. For strategic reasons, the termin-als themselves announce very different figures,which are sometimes at great variance with thosepublished in trade journals.

However, it must be assumed that individualterminals or terminal complexes at the largerocean ports such as Hong Kong have a maximumcapacity of 63,500 TEUs. The figure is likely to bearound 45,000 TEUs for ports such as Hamburgand Bremerhaven and between roughly 12,000 and 16,000 TEUs for other well-known terminals in major ports.

Depending on the individual lines of business inwhich the terminals specialize, there is a widerange in the numbers of connections available forreefers. The majority have about 200 connections,although larger terminals may have between 600and 1,000 connections. In exceptional cases, theymay even reach 2,500 connections at peak times,as is the case again in Hong Kong.

It may be useful in individual instances to deter-mine the capacities of inland container terminalsas well. The inland ports of Duisburg and Germers-heim in Germany, for instance, have containercapacities of roughly 15,000 TEUs each!

103

There is naturally little point in considering a ter-minal’s full container capacity when determiningthe accumulation risk unless the risk analysis hasshown that a total loss or at least large-scaledestruction of the terminal is conceivable onaccount of the geographical location, the topo-graphical conditions, and the anticipated hazards.

RISKS

– Radioactive contamination

The standard terms and conditions of marineinsurance exclude loss or damage resulting fromaccidents involving radioactive materials and fromexplosions at nuclear power plants with subse-quent radioactive fallout. Part of the contaminationrisk can be reintroduced into marine cargo policiesin special cases, covering contamination of goodscaused by radioactive material stowed togetherwith the insured goods in the same container orconveyance.

Industrial fallout, i.e. soot and corrosion attribut-able to nearby power stations, industrial plants,and dockyards, is equally unlikely to result in accu-mulated losses at a container terminal. The goodsare safely protected inside their containers, thevast majority of which are closed and can becleaned or repaired without excessive effort.

– Air crashes

An air crash, on the other hand, may result in amajor loss if a large terminal is involved, althoughhere too, the magnitude of loss depends on thetype of cargo and containers concerned and istherefore entirely a matter of chance.

Although not a common loss event, the risk of an aircraft crashing outside the area served by aneighbouring airport is very real, as illustrated by the accident in Bremerhaven on 31st January1995. Two Phantom F4 fighter jets collided duringa training flight over the North Sea; one crashedinto the Weser estuary and the other into a con-tainer depot near the Bremerhaven container terminal.

Fortunately, the containers stored at the depotwere empty and the jet crashed into a repair facil-ity and not into a storage shed with fully-ladencontainers. So it was pure luck that the US$-3mloss was not a financial disaster.

The scenario of an aircraft crashing into a containerterminal specializing in the storage of hazardousmaterials could take on much more serious pro-portions. Not only would the containers and theircargo be a partial or even total loss, the conse-quential damage to the environment and the needto dispose of hazardous chemicals could easilyresult in a loss costing tens or even hundreds ofmillions of dollars.

Generally speaking, though, marine insurers wouldnot be affected by this loss scenario because of thestandard international practice of strict liability foraircraft coupled with compulsory insurance.

As far as accumulation at terminals is concerned,then, we are left with political risks and exceptionalnatural hazard events.

– Political risks

Terminals are effectively shielded, they are protect-ed by special security measures, and they are nor-mally in operation 24 hours a day. For these rea-sons, experts consider it to be virtually impossibleor at least extremely improbable that a containerterminal (even a medium-sized one) with all itscontainers and their contents could be destroyedcompletely during a strike, an act of sabotage, or aterrorist attack.

Although the risk potential is definitely present inacts of war or civil war, the exclusion of “war-on-land” covers that is still normally applied ensuresthat marine insurers are released from their obliga-tion to indemnify. Nonetheless, this can be a high-ly problematical issue for insurers and reinsurersthat do opt to underwrite such hazards for contain-ers and goods transported on land (including theassociated interim storage).

– Natural hazards

Natural hazards, on the other hand, are a majorthreat. Depending on their geographical location,container terminals are exposed to such risks asearthquake, storm surge and flood, volcanic erup-tion, and tsunami.

Storm surge and flood are among the subjects thatMunich Re has studied in depth. The conclusion isthat, in spite of improved flood protection meas-ures, a residual risk cannot be excluded for someparts of the container terminals in, for example,Rotterdam, Bremerhaven, and Hamburg.

104


117–118 Accumulation: not only the load is important.

119 Stacks of containers after a landslide (cf. next photograph).


108


109


111

However, the experts do agree that, as a result ofthe considerable structural alterations that havebeen made and the new polders that have beenbuilt in the affected areas, the storm surges in Hol-land in 1953 and particularly in Hamburg in 1976cannot be taken as a basis for extrapolating futurestorm surge scenarios. They assume that, in theworst case, only the bottom tier of containers atthe terminals will be exposed to water and only fora few hours. This is not likely to result in the com-plete destruction of the containers or of the goodsinside them. Terminal operators and port author-ities have also given assurance that any breaks inthe power supply and refrigeration supply lines fortemperature-controlled containers can be restoredwithin a very short time, thus also minimizing losses.

On the other hand, there are some quite sizeablecontainer terminals that are definitely located inregions with a moderate or high earthquake risk.This is clearly shown on Munich Re’s World Map ofNatural Hazards and the earthquake hazard mapsfor specific regions.

The marine insurers’ experience has been fairlypositive in this respect, as, for instance, followingthe earthquake in Kobe, Japan, on 25th January1995. In spite of the massive damage particularlyin the port of Rocco Island and its container termin-als, which are built on reclaimed land, and the considerable liquefaction effects, the loss to themarine insurance industry remained relatively low.Most of the containers with expensive cargoremained intact or were only slightly damaged.The stacks were generally stable, but one row ofempty containers collapsed. Despite the immensedestruction on the island and in metropolitanKobe, the power supply for the roughly 240 reeferswas restored so quickly that major losses wereaverted.

All the same, it would be dangerous to draw gen-eral conclusions from this individual case. Theearthquake happened at a time of the year whenthe volume of goods in the port is generally smalland the temperatures low. These factors in particu-lar helped to keep the losses down. An identicalearthquake in the summer would have causedmuch greater damage.

The bulk of the losses involved damage to cranes,transporters, and other handling and port equip-ment, some of which were not insured at the time.Most of the damaged equipment had derailed orhad been thrown over and was buckled and bent.One unit broke off entirely and crashed onto a shipon the quay.

Volcanic eruption is included under customary all-risks marine insurance and could similarly havecatastrophic effects at a terminal. With the excep-tion of Naples, there are no sizeable terminals in ornear areas currently threatened by lava streams orejecta. Nevertheless, volcanic eruptions, like earth-quakes and seaquakes, are capable of generatingsea waves of immense destructive force whichcould reach the large container terminals on thecoasts of Asia, for example. It is therefore perfectlycorrect to include terminals in the followingaccumulation calculations.

112


113


Low High Average

1 Single container/truck

40’ (or 2 x 20’) container and cargo approx. US$ 5,000 5,000,000 37,500Truck/chassis approx. US$ 25,000 250,000 125,000

Total approx. US$ 30,000 5,250,000 162,500

2 Container trains

a) Europe80 containers (40’) with cargo approx. US$ 3,000,00080 wagons/chassis approx. US$ 10,000,0002 locomotives approx. US$ 3,500,000

Total approx. US$ 16,500,000

b) USA300 containers (48’–53’) with cargo approx. US$ 30,000,000150 wagons/chassis approx. US$ 37,500,0006 locomotives approx. US$ 10,500,000


3 Inland waterway container ships/tug-and-barge combinations

a) Units with 200 TEUsContainers and cargo approx. US$ 4,000,000Vessel/barge approx. US$ 2,500,000


b) Units with 800 TEUsContainers and cargo approx. US$ 16,000,000Vessel/barge approx. US$ 9,000,000


4 Ocean-going container ships

a) Feeders ships (500 TEUs)Container and cargo approx. US$ 10,000,000Vessel with equipment approx. US$ 12,500,000


b) Panamax (4,400 TEUs) (Europe-Asia)Containers and cargo approx. US$ 100,000,000Vessel with equipment approx. US$ 70,000,000


c) Jumbo (6,800 TEUs) (Europe-Asia)Containers and cargo approx. US$ 150,000,000Vessel with equipment approx. US$ 80,000,000


5 Container terminals (40,000 TEUs)

Terminal with equipment, buildings, etc. approx. US$ 550,000,000Full and empty containers approx. US$ 1,000,000,000

Total approx. US$ 1,550,000,000

plus ships being loaded and unloaded approx. US$ 900,000,000(miscellaneous feeders, all-containerand jumbo ships, including on-board cargo)

Total approx. US$ 2,450,000,000

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PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

120 Forces acting on containers loaded on deck.

114


08PRACTICAL EXPERIENCE WITH

LOSSES AND CLAIMS

It is widely agreed that containerization has in many respectsimproved the risk of transporting goods, resulting in better claimsstatistics for marine insurers. In many countries, it is also firm evidence of the success achieved by insurers in their loss preven-tion efforts.

MECHANICAL DAMAGE AND TRANSIT LOADS . . . . . . . . . . . . . . . . . . 116DAMAGE DUE TO MOISTURE AND CONDENSATION . . . . . . . . . . . . . 120BIOTIC DAMAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120THE HUMAN FACTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120LOSS PREVENTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

115

As far as the transport of containerized goods isconcerned, risk exposure and claims experiencefocus on four main areas.

MECHANICAL DAMAGE AND TRANSIT LOADS

Even in normal traffic, containers and the goodsinside them are exposed to considerable accelera-tion and braking forces, which can amount to sev-eral times the dead weight of the goods, particular-ly when the going is really tough.

However important good stowage, firm lashings,and appropriate packaging of the goods in the con-tainer may be, there are a number of recurrentcauses of damage which cannot be prevented evenif containers are loaded in a professional manner.

Under the pressure of economic demands, ship-builders are continually increasing the numbers ofcontainers that can be carried on deck. In the earlyyears this applied to roughly one-third of the con-tainers. The rate has now risen to around 50% andeven more on some ships, with containers stackedin six tiers. For reasons of stability only empty con-tainers may be stacked on the top tiers of someships. Even then, all the tiers taken together repre-

sent an enormous area that is exposed to the forceof the wind. This – together with the motion of thesea and a correspondingly violent rolling move-ment of the vessel, which may also be caused bysudden grounding – exposes the upper tiers of aheavily laden container ship to enormous trans-verse acceleration forces and makes them swaydistances of 20 to 30 metres – and that possiblymore than 100,000 times in the course of a singlevoyage!

This constant rolling movement, which may inten-sify during the sea passage, depending on theweather the vessel encounters, causes violentchanges in pressure and loads on the deck andhatch structures bearing the containers, as well ason all the intermediate supports, the containerlashing points, and of course on all elements of thelashing system. The parallelograms of forces areconstantly changed by this movement and therehave been numerous instances of individual con-tainers, upright stacks, and even complete contain-er blocks being lost overboard. If this happens out-side the harbour, it is difficult to salvage them andthe containers are usually lost completely – togetherwith their contents. When containers are lost over-board they tend to remain afloat for several days,thereby posing a danger to shipping. In the event

116


121 Comparison of bow cross-sections of 2nd and 3rd generation container ships. 122 Bow damage as a consequence of frame failure: buckled frame.

3rd generation

2nd generation

10 m W.L.

of a collision with another vessel, the damage isgenerally indemnified by the P&I Club of the vesselon which they were originally carried and possiblyunder the container liability insurance mentionedabove.

Seas slamming against containers carried on deckcan cause similarly heavy losses. Since the outertiers on many vessels are virtually an extension ofthe ship’s side, they create a particularly large tar-get for breakers, especially along the bows andshoulder of the foreship. Seas breaking on deckwith tonnes of what is known as “green water”can easily smash the container walls and destroytheir contents – even if the rigid outer frame of thecontainer remains securely lashed on deck. Theseverity and number of such losses could increaseas a result of the trend away from flared bows(which push the water to the sides and keep theforeship “dry”) towards slimmer and faster bowswith less overhang (over which breakers can rollmore easily).

Containers occasionally “crash” when being loadedor unloaded at terminals or handled at storageareas. Such mishaps may be due to a containernot being unlocked properly so that the crane orstraddle carrier lifts up one side of the container

below as well. Or the container may simply dropbecause of a material fracture or an accidentalopening of the spreader. There have also beeninstances of crane operators trying to lift two adja-cent but unconnected 20’ containers as if theywere a single 40’ container.

Sometimes these incidents produce nothing morethan dislodged cargo, sometimes they result in thecomplete destruction of the goods and a construct-ive total loss of the container.

117


123 Bow damage as a consequence of frame failure: distorted deck in foreship.

118

124 Container drop test with a 40’ container of a total mass of 35.56 t.In this test vertical accelerations upto 250 G in the middle of the sidewalls were calculated.


119

Stowage practices in train marshalling yards haveimproved considerably and customers now receivequite detailed advice from container carriers. Con-sequently there has been a significant decline inthe number of losses due to impact. But when theydo happen, they involve forces of up to four timesthe weight of the cargo, so that poorly blocked andbolted goods are torn out of their anchorage andpossibly hurled through the end wall or door sideof the container. Containers are not usually de-signed to withstand impacts exceeding twice theacceleration of gravity G (= 9.81 m/s2).

DAMAGE DUE TO MOISTURE AND CONDENSATION

Since the transportation of containerized goods isusually covered at all-risk terms and conditions,cargo insurers soon find themselves being calledon to indemnify damage due to moisture and con-densation. This is by far the main cause of lossesin container traffic.

Containers are like scaled-down versions of aship’s hold and are therefore subject to the samemicroclimatic conditions as those found on a con-ventional vessel. In the course of a long voyage,they pass through different climate zones with dif-ferent temperatures (possibly visiting four contin-ents on the way and encountering different sea-sons and rain and dry periods!). Condensationmay form, leaving considerable quantities of wateron the cargo or on the roof, walls, and doorsinside the container. This can amount to as muchas 50–70 litres in a 20’ container. How much wateractually accumulates depends on the temperaturedifference, the moisture content of the remainingair and the goods in the container, the packagingmaterials, and the residual moisture in pallets orthe wooden container floor. This will damage notonly the goods but also the containers themselves.

Water damage due to the ingress of seawater alsocomes into this category. This may be caused byminor leaks in the top and side walls, loose adhe-sive or material sealing the joint between the sidewalls and the frame, and most particularly by rub-ber door seals that are brittle or damaged. In manycases, leaks are due to misplaced spreader cornerlocks piercing holes in the top or by the fork armsof a fork-lift truck missing the fork pockets at thebottom of the container and piercing the sidewall.Containers stowed on deck, particularly those atthe forward end of the ship are continuouslyexposed to spray from breaking seawater. If the

containers are not absolutely water tight, this willcertainly have a lasting effect on the cargo andlead to a loss that has to be indemnified.

BIOTIC DAMAGE

Incidents involving delicate and therefore mostlyexpensive goods continue to occur quite regularly.They may be “contaminated” by other goods inthe container, the remains of previous cargoes,fresh paint, or by the residue from gases or chem-icals that have been applied for pest-control pur-poses. Another cause of such damage, if not dis-covered in good time, is insect infestation.

THE HUMAN FACTOR

A container is an independent and to some extentsupplementary closed receptacle and as such itimpedes unauthorized access to the goods inside.The security standards applied by large containerconsortia and the operators of container terminalshave improved considerably over the past fewyears. These include gate controls for containersand goods, access controls for personnel, lighting,fencing, and surveillance at terminals, and evenstricter measures to prevent access by the ship’screws.

According to the long-term statistics, theft and robbery account for 20–25% of losses involvingconventional cargo. Theft and robbery lossesinvolving cargo carried in containers, on the otherhand, have been steadily declining. Nevertheless,in spite of their lead seals and locks, containerscan still be broken into with relative ease on thedoor side and, in the case of some designs, frombelow when mounted on trailers or chassis.

The risk of theft and robbery increases dispropor-tionately outside the major port terminals and particularly during extended pre-carriage and on-carriage. This applies even more, of course, to LCL containers with conventional pre-carriageand on-carriage.

Containers do not normally bear any outward indi-cation of the nature of their contents. However, thecomputer-based management and documentationof container shipments makes it possible for crim-inal organizations and even individuals to gainaccess to the cargo manifest and other electronic-ally transmitted transport documents. This hasresulted in a new form of theft, namely the hijacking

120


of entire containers. The on-carriage is simply redirected to a place where the container is quicklyand secretly unloaded. It is not uncommon fordrivers to work hand in hand with (computer) per-sonnel at the terminals in such cases. Losses run-ning into millions can easily arise when containerswith cigarettes, spirits, cosmetics, or computerhardware are hijacked and then stripped of theircargo.

A new form of fraud has also developed with thegrowth of containerization. When opening a seem-ingly correctly sealed container, the consigneefinds nothing but earth, scrap, or things that are ofabsolutely no value to him. The weight is the sameas that specified in the documents but the “cargo”itself bears absolutely no relation to what has beenordered. The central question here is whether thegoods declared and covered by the insurance everexisted. An interesting study on this subject hasbeen published by the International MaritimeBureau in London.

Cases of classic misdirection or non-delivery ofcomplete containers are rare. The computerizedmonitoring of container in logistics systems is fartoo thorough and tightly meshed. All the same,every terminal can cite cases in which they havehad to search for containers that have been misdir-ected or deposited in the wrong place.

125 Containers jammed together because the connections were not unlocked prior to unloading.

126–127 Damage due to pollution, moisture, and freezing in containers.

121

As a rule, this kind of slip-up does not immediatelyresult in an insurance claim. It would be a differentmatter, though, if computer systems were downfor days on end because of a breakdown in thepower supply or as a result of problems encoun-tered in migrating data from one computer systemto another, or a virus in a central computer at a ter-minal or operation centre, or a natural disaster.Insurers could then find themselves having to payclaims for goods disappearing – not only undermarine policies but also under marine consequen-tial loss policies with a broad scope of cover.

LOSS PREVENTION

Many publications are now available on loss pre-vention in the field of container transport. Thestandards in loading and transporting containershave improved considerably – thanks to the expert-ise that has been built up in the inland transportsector and the advice provided by container car-riers, forwarding agents, and consolidators. Marineinsurers and their associations have also con-tributed to this development in many countries – in their own best interests.

122


128 Loss prevention – (almost) unlimited possibilities!

Nevertheless, an analysis of container-relatedclaims shows that the simple basic rules are stillnot always observed in what then turn out to becostly individual cases.

– The first rule is to choose a good container carrier – to whom recourse can be taken if neces-sary – and the right type of container for thecargo involved. Although containers are basicallystandardized, there are many different types forevery conceivable purpose. They come in manydifferent sizes and can be tailor-made for individ-ual cargoes (see Chapter 02).

– Whether the container is loaded by the cargoowner or the forwarding agent, it must be in aflawless state of repair to be worth the money.There is absolutely no need for even relativelyold containers to be out of shape or dented. Thecorner fittings and interior lashing points mustbe in good condition and the doors must closetightly. The much-cited light incidence test insidethe container with closed doors is all too com-monly omitted before loading commences.


123

124


129 Bales of wool.

130 Well stowed container.

131 One way of securing the load.

132 Bagged goods protected against condensation by means of

separation paper.

133 Partially loaded container.

125

– The entire container, and not only the floor,should be strong enough to carry the intendedcargo. It should be clean, without any trace ofodours or residue from past cargoes, and shouldbe free of nails and other old fastening material.

– Although it offers additional protection, the con-tainer is not a form of packaging but a transportreceptacle! Because of the different stressesencountered on the various legs, the cargo mustbe protected by transportation packaging that issuitable for the whole journey. Even if it is notstated in the booking or in the terms of ship-ment, it is quite possible that the goods will haveto be unloaded temporarily in the course oftransportation – during a customs inspection, forinstance. So the only way to ensure real protec-tion is to use proper seaworthy packaging.

– The goods should not only be packed properly.They should also be stowed correctly so thatthey can withstand the considerable acceleratingforces that occur on the journey. In cases ofdoubt, expert advice should be sought from thecarrier, forwarding agent, or other specialists.

– The cargo must be distributed as evenly as pos-sible in terms of its weight and area. If differenttypes of goods are loaded together, they must becompatible. Different types of packaging (e.g.bags and drums and crates) must be separated.Sharp-edged sides or corners should be shieldedand delicate cargo cushioned. To prevent thecargo from slipping, it can be blocked or lasheddown, and any free spaces in the container mustbe filled with old pallets, cardboard, or othermaterial. Since extreme temperature fluctuationscan never be entirely excluded, goods that aresusceptible to moisture and corrosion must beprotected against water, condensation, and dampair. In many cases, losses could have been pre-vented by using a ventilated container.

Time after time it is the simple basic rules and notspecialist know-how that decide the fate of con-tainerized goods – and consequently the results of the cargo insurer’s portfolio!

126


138 Plastic seals may be a problem.

136 Wire seals are difficult to open.

134 Lead seals.

127


137 Typical container seals.

135 Sheet-metal-seals.

139 Such a classic padlock cannot be “cracked” easilywith a bolt cutter.

140 Seal numbers make identification easier and also reveal that a container has been opened and the seal replaced.

128

In spite of regional crises, world trade and the associated transport volumes are constantly growing. Greater demand in many parts of the world from consumerswith a rising standard of living and the increasing division of labour in the worldeconomy (the key word being “globalization”) both generate an increase in trans-port movements. The proportion of containerized ocean shipping will increase evenfaster as more and more people populate the coastal regions of our earth. Con-tainerization will also spread in the inland trade sector, releasing immense reservesand generating a potential for rationalization and thus creating further benefits especially in Russia, China and other parts of Asia, South America, and Africa. Atthe same time, competition will increase, and with it the pressure on all concerned –including all the different areas of the container transport system as well – to gocloser and closer to the limits of what is technically feasible.

09

RISKS OF CONTAINER TRAFFIC IN THE FUTURE


129

141 Typical inland waterway ship with container load.

The plans for four or five gigantic ocean containerterminals (“mega-hubs”) are already far advanced.Located at geographically strategic points, theseterminals will be fed by the parts of the world withthe largest cargo volumes and will no doubt be ina position to disregard all restrictions on the sizeand draught of the planned jumbo container ships.This leaves planning engineers, dockyards, andclassification societies with plenty of food forthought. There are already ideas for vessels with acapacity of 12,000 to 15,000 TEUs, for whichtoday’s 5,000-TEU ships will effectively act as feed-ers.

These vessels will be wide and fast, with twinengines – another new challenge for hull insurers.If they are carefully designed and prudently oper-ated, there is basically no reason to question thesafety of such container ships. The sums insuredfor the hulls will be lower than those of today’spassenger liners, so that the insurance market willbe able to handle them without any difficulty.

The risk of accumulation in terms of both cargoinsurance and P&I, however, will become muchmore evident when container capacity is againdoubled in this way. An even higher percentage ofcontainers will be exposed to wind and weather. Inspite of the vessels’ increased width, more losseswill have to be expected as a result of green waterdamaging containers stowed on deck and fires(which are difficult to control on board).

Such vessels will only be profitable if transship-ment at the hubs is optimized even further. Theywill require docks that permit a new and muchfaster generation of gantry cranes with tandem ortriple spreaders to work the ships from both sides.It is possible that – at least in the initial phase –marine insurers will again be confronted with themechanical transshipment losses that had osten-sibly been overcome with the advent of container-ization.

Today, containerized goods are transported onships with a capacity of around 7,000 TEUs. Andthat is as much as marine insurers know. In thesedays of information technology and real-time data transfer, it is remarkable that – because of thepressure of global competition – container carriersprovide them with less and less risk-related infor-mation. Consequently, it is important to bear inmind the following: any information that is of rele-vance to the aspect of safety will also be of greaterrelevance to the aspect of legal liability in thefuture.

At present, in an environment of free competitionand with the partitioning of their spheres, neitherthe owners of the many small consignments northe cargo insurers, the hull insurers, the liabilityinsurers, or the container insurers appear to haveenough influence to improve the flow of informa-tion and become involved in decisions relating tothe development of containerization in the future.

130


CONTAINER SHIP FLEET

Ships of 4,000 TEUs and above






TE

Us

ove

rall

in t

ho

usa

nd

s

1980 1983 1986 1989 1992 1995 1998

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Withdrawal and abstention from marine insurancebusiness are not satisfactory alternatives either.The question is whether marine insurers could beintegrated in the electronic handling of containertraffic.

Without this integration, the basic operating condi-tions for individual marine insurers and their part-ners in the background have temporarily eased insome areas as a result of containerization but onno account can they guarantee profitable businessin the future even if the premiums begin to riseagain.

Containers are a fact of life for the younger gener-ation of marine insurers. It will be a challengingtask for this time-honoured branch of insurance to provide the support that is needed to cope withthe emerging trends in container transport and tomake sure that their mighty impact is shared fairlybetween insurers and reinsurers. Munich Re willcontinue to be a reliable partner in this process.

131


CONTAINER FLEET GROWTH

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998

TE

Us

in t

ho

usa

nd

s

20

18

16

14

12

10

8

6

4

2

0

Gro

wth

in %

Fleet in TEUs

Growth in %

142 Repair docks that can accommodate jumbo container ships are few and far between, with the result that tugging expenses are often high in the event of a loss.

143 High-speed container catamarans are still at the planning stage.


132


134

145 Fully automatic container handling andtransportation system for terminals.

144 There have been numerous studies dealing with faster and more efficient container trans-shipment systems.

135


136

AAdjusting loading wall Sheet lining which allowsdunnage bars to be fitted into the container at anypoint.

ADR The European agreement concerning theinternational carriage of dangerous goods by road.Stands for Accord européen relatif au transportinternational des marchandises dangereuses parroute.

Ambient temperature The temperature of a sub-stance surrounding a body. Thus the ambient temperature of a container holding a refrigeratedcargo would be the temperature of the air to whichit is exposed outside.

Anti nose-dive leg A support provided at the frontend of a container chassis used to support that endduring loading operations, i.e. for when the initialweight of the cargo or FLT is at the front andbeyond the point of balance.

ASA American Standards Association.

Axle loading The total downward pressure exertedby a vehicle through any given axle. This may thenbe transmitted through two or four wheels.

BBlade One of the extremely thin wide forks on afork lift used for sliding beneath loads which arenot on pallets. Also known as chisel fork.

Bonded goods Dutiable goods upon which dutyhas not been paid, i.e. goods in transit or ware-housed pending customs clearance.

Box A term for a container.

Bridge fitting A fitting piece (with integrated turn-screw) to keep top sides of adjacent containerstogether. Part of the lashing equipment.

BSI British Standards Institute.

Bulk freight container Any container which by itsown peculiar design, i.e. roof loading hatches anddoor or front wall discharge hatch, will allow bulkhandling of commodities.

Bulkhead Athwartships separation dividing a shipinto watertight sections (known as holds). Some-times also used to denote the front wall, i.e. oppos-ite to the doors of a container.

CCA Controlled atmosphere

Car pallet A flat tray with corner posts for transport-ing cars on container ships.

Cattle container A partly open container equippedwith rails, boxes, and cribs for livestock transporta-tion.

138

GLOSSARY OF CONTAINER TERMINOLOGY

10GLOSSARY of container terminology

Celcure A trade name for a copper-chrome-arsenitesolution, used to treat timber against wood-boringinsects.

Cell guides The guidance system enabling contain-ers to be lowered into and lifted from the hold ofthe vessel. The holds have vertical guides intowhich the containers are lowered to form securestacks restrained at all four corners.

Centre of gravity The point at which a load willbalance or is in equilibrium.

CFS Container freight station.

Chisel fork See Blade.

Clip-on unit A portable refrigeration unit designedto clip on to insulated containers which normallyrely on a central refrigeration system for their coldair supply.

Closed container A container that can only bepacked through one or more doors in the end orside walls.

Collapsible container A container with walls thatare hinged (at the front and back ends in collapsibleflat racks) or removable so that its effective volumemay be reduced for transporting in an empty con-dition.

Combined transport operator A forwarder render-ing combined traffic and operating as carrier (seeMTO).

Container freight station Where parcels of cargoare grouped and packed into containers. Alsoknown as containerbase, consolidation depot, ordepot.

Container head Sometimes used to mean the endopposite to the doors. Also known as containerfront or bulkhead.

Container load A consignment which fully occu-pies the internal capacity of a container or reachesthe maximum payload for that particular unit.

Container part load A consignment which neitheroccupies the full capacity of a container nor equalsthe maximum payload and will, therefore, allowthe inclusion of other part loads.

Container pool An agreement between varioustransport carriers and/or container leasing compa-nies concerning the exchange of containers.

Controlled atmosphere Sometimes used in add-ition to temperature control to prolong the storagelife of fruit.

Corner fitting The cast top and bottom of eachcontainer corner post used for handling and secur-ing a container.

Corrugated container A container with corrugatedwalls and ends for added strength.

Cryogenic Using a freezing mixture for refriger-ation.

CTO Combined transport operator.

Cushion tyre A solid rubber tyre made of fairly softrubber or composition.

CWE Cleared without examination (at customs).

DDamage protection plan A method defined in contracts for insuring leasing containers againstdamages.

Data plate A plate affixed to a container givingdetails of gross and tare weights and externaldimensions.

Demurrage Compensation payable to a containeror truck owner for the detention of his equipmentbeyond a certain time limit.

Depot See Container Freight Station.

Dispatch bays The point from which containers arephysically loaded or unloaded.

139


A– D

Devanning A term sometimes used for the processof unpacking a container.

Dew point The temperature at which condensationforms. When air comes in contact with a surfacethat is at or below its dew point temperature, con-densation will form on that surface.

Dock leveller A device to span the difference inlevel between the loading bank and the containerfloor. It also bridges the gap between the bank andthe container.

Document holder May be located on the containerdoor or front wall and sealed. Contains the cus-toms certificate of container approval.

Dolly A set of wheels set under the front of a con-tainer to provide support when the motive unit isdisconnected.

Door-to-door The through-transport of a containerand its contents from consignor to consignee.

Down-rated The amount by which the lifting cap-acity of a fork lift is reduced as a result of fittingattachments.

Down time The period during which equipment ora piece of machinery is not operating or producing.

DPP Damage protection plan.

Dricon A chemical for the treatment of timberagainst wood-boring insects.

Dry-bulk container A container especially built forcarrying grain, powder, sand and other free-flow-ing solids in bulk.

Dry freight Any dry cargo not requiring controlledtemperature protection.

Dry ice Solid CO2 (carbon dioxide).

DTI Department of Trade and Industry.

Dunnage A material (usually disposable) used tosecure cargo or protect it from chafe. Also in someinstances for fabricating temporary floors to allowspillage to drain away.

Dunnage bag See Inflatable dunnage.

EEmptying Unpacking goods from containers.

F FCL Full container load.

FCR Forwarder’s certificate of receipt.

Feeder ship A container vessel used in short-seatrade to serve ports at which deep-sea containerships do not call.

FEU Forty-foot equivalent unit.

Flashpoint The temperature at which a liquid pro-duces enough vapour to form an inflammable mix-ture with air.

Flat rack A flat platform container.

Floor loading The static and dynamic loads im-posed on the floor by the payload and the wheelsof handling equipment.

FLT Fork-lift truck.

Footprint The area of the tyre measured in squareinches which actually comes into contact with thesurface on which it is operating under a givenload. For the purposes of container-floor design,the footprint of a pneumatic and cushion tyre isestimated at 22 square inches.

Fork pocket One of the recesses sometimes provided in the sides of the container bottom forthe entry of the forks of fork-lift trucks.

Forwarder’s certificate of receipt The forwardingagent’s through-documents for goods, negotiableworldwide.

Four-way pallet A pallet so constructed that theforks of a FLT may enter from any side.

Free lift The distance the forks of a FLT can risewithout the overall collapsed height of the mastincreasing.

140


Full container load. Usually loaded by the shipperfor one consignee.

Full-tilt container A container with the full sidesand roof, maybe also the ends, covered by tar-paulin, drop sides notwithstanding.

Fully-loaded weight and capacity A container ideally loaded to its fullest capacity of weight andvolume.

FWC Fully-loaded weight and capacity.

GG factor Indicates the constant multiplying factorswhen considering the effects of acceleration onmass, e.g. a force of 6 G in relation to a 2-ton loadwould be equivalent to 12 tons.

Genoa corner fitting A container corner fittingmade to ISO recommended design and used bythe lifting apparatus to grip the container by inter-locking. Sometimes called corner casting.

GRP Glass-reinforced plastic.

Grabomatic A FLT attachment that will grip and liftdrums, two at a time, by the top rims.

Gross vehicle weight The combined total weight ofa vehicle and its container inclusive of the primemover.

Gross weight The total weight of a container, i.e.the container, its payload, and any loose internalfittings.

Groupage Service providing facilities for smallconsignments to be consolidated and transportedin a container.

Groupage depot An area where container contentscan be consolidated or disseminated.

GVW Gross vehicle weight.

HHalf-height container A container, open-top with or without soft or hard cover, between 4’ and 4’3”high.

Half-tilt container A container with the larger partof its sides, or sides and roof, covered by tarpaulinor similar material.

Hard-top container A closed container with a roofthat opens or lifts off.

Header bar A beam or bar (usually above the enddoors of an open-top container) which may beswung to one side or removed to improve access.

Heated container A container built with insulatedwalls, doors, floor, and roof, fitted or capable ofbeing fitted with a heating appliance which iscapable of raising and maintaining the tempera-ture inside the container at a required level.

House-to-house See Door-to-door.

House-to-pier A container packed inland butunpacked at the pier of the destination port.

Humidity See Relative humidity.

Hygroscopic substance A substance which is cap-able, under the right conditions, of absorbingwater vapour from the surrounding atmosphere.Such a substance will continue to absorb moistureuntil the vapour pressure of the absorbed water is equal to that of the water vapour in the air. It isthen said to be in equilibrium. The equilibriummoisture content of the substance is dependent onboth its temperature and the relative humidity andtemperature of the surrounding air. If the moisturecontent is above the equilibrium value, the sub-stance will give up water until equilibrium condi-tions are reached.

IIICL Institute of International Container Lessors,New York.

IMO International Maritime Organisation.

Inflatable dunnage Flexible bags positioned withinthe stow and inflated so that movement of cargomight be prevented.

Inlet A collapsible inlet made of rubber or syntheticmaterials, used in containers for the transport ofliquids or free-flowing solids.

141


D – I

Insulated container A container with the walls,roof, floor, and doors insulated to reduce the effectof external temperature on the cargo.

Insulated tank container A container frame holdingone or more thermally insulated tanks for liquids.

Interface The point at which two systems meet, i.e.road transport and terminal – terminal and ship.

International Maritime Organization Not all coun-tries are signatories to this organization, but mostof the major maritime nations are. It is the vehiclethrough which dangerous goods and other regula-tions can become internationally acceptable.

ISO International Standards Organization.

J Joinable container A container whose dimensionsand specifications are fixed so as to permit theloading of the containers onto a container flat sothat the whole unit can be handled as one ISO container.

L Lancashire flat A type of flat with headboard atone end.

Land bridge A descriptive term for an overland transit coming between two ocean passages duringa container’s journey from starting point to destin-ation.

Latticed-sided An open or closed container with atleast one side consisting of elements with open-ings between them.

LCL Less-than-full container load.

Less-than-full container load A container which isfilled with consignments of cargo for more thanone consignee or from more than one shipper.

Liquid propane gas A type of fuel for mechanicalhandling equipment.

Lo-lo Load on-load off. Describes ocean transportas distinct from ro-ro.

LPG Liquid propane gas.

MMT “Empty” (container).

MTO Multimodal Transport Operator.

Methyl bromide A fumigant used to kill infestationin various commodities. May on occasion be usedto fumigate the container. An odourless and poten-tially dangerous poison.

Module A volume described in multiples of similarmeasurements to that of the container. Altering amodule can, under some circumstances, improvethe utilization of a container.

Multimodal Transport Operator A forwarderrendering combined traffic and operating as a carrier (see CTO).

Multi-tank container A container frame enclosingtwo or more separate tanks for liquids.

N NVO(C)C Non-vessel operating (container) carrier.

Net weight The difference between the grossweight and the tare weight of the container. Alsoknown as payload.

Non-vessel operating (container) carrier

1) NVOCCs operate as carriers and should be evalu-ated by applying the same service, price, and delivery standards. 2) US definition: NVOCC means a common carrierthat does not operate the vessel by which oceantransportation is provided and is a shipper in itsrelationship with the Ocean Common Carrier.

OOne-way lease The lease of a container for the forward voyage only, the container being returnedto lessor at or near destination.

OOG Out-of-gauge cargo.

142


Open container A container with sides and/or endsof bars, grills, mesh or entirely open, with orwithout roof.

Open-sided container Doors, shutters, or tarpaulinallowing one or both sides to open up completely.

Open-top container A container with a tarpaulinroof or solid removable roof that can be loadedand unloaded from above.

Open-topped reefer An open-topped container that is temporarily protected by a removable insulatedcover.

Open-wall container A container without one ormore side or end walls but having at least a base,end structures, and a top frame with corner fittings.

Out-of-gauge cargo Exceptionally large items suchas plant or project parts.

Overheight cargo Cargo loaded into an open-topcontainer so that the level of the cargo rises abovethe normal level of the roof struts. This type ofstowage can be accepted by operators under certain conditions.

P P&I Protection and indemnity insurance

Payload Cargo weight on which freight is paid.

Pier-to-house The transport of containers packed at the port of loading and unpacked at an inlanddestination.

Pier-to-pier The transport of containers packed atthe port of loading and unpacked at the port ofdestination.

Piggy-back Hauling trailer-mounted containers onrailway flat cars. Sometimes known as TOFC (trail-er on flat car).

Pillow tanks Collapsible inlets for the transport of liquids, free-flowing solids, etc., in containers.

Plain flat container Container base and cornerposts, loose stanchions or runners for sides andends notwithstanding.

Plain van container Another name for a generalpurpose container.

Polarstream The name of a liquid nitrogen refriger-ation system.

Polyurethane Insulation which can be in “block”,“poured”, or “frothed” form. Made up of minutecells containing freon gas.

Portainer (crane) A port (vessel) container gantrycrane.

Protection and indemnity insurance Liability covertaken out by the shipping company owner. P&IClubs are mutual insurance societies.

Protim salts For the treatment of timber againstwood-boring insects.

Q Quoin A shaped timber wedge used to secure bar-rels against movement.

RRailtainer crane A railway container gantry crane.

Rating The maximum permissible combinedweight of the freight container and its contents.

Reachstacker A large fork-lift truck with extendedlifting and reaching capabilities.

Reefer An insulated container with provision forcontrolling the air temperature within the container.Short for refrigerated container.

Relative humidity The ratio (expressed as a per-centage) of the amount of moisture in the air tothat in saturated air at the same temperature.

Rolling The side-to-side rocking movement of aship.

143


I – R

Ro-ro Roll on-roll off. A type of ship that can takecontainers while still on trailers and other rollingstock.

SScissor lift A platform device, usually power oper-ated, which can lift a load from the ground, or anyintermediate level, to container floor height.

Sheathing Materials forming the outside of theroof, sides, ends and doors. These act as restraintsto help prevent the main frame from racking.

Shrink foil wrapping Heat treatment that shrinksan envelope of polythene or similar substancearound several units, thus binding them into a sin-gle whole. May be used to secure items in smallpresentation packs or to secure packages on a pallet. Also known as shrink wrapping.

Side-door container A closed container with a reardoor and at least one side door.

Side loader A lift truck with the lifting equipmentoperating to one side – for handling containers.

Skeletal trailer A trailer constructed specifically forthe safe carriage of ISO containers.

Skids Battens fitted beneath stillages, boxes, orpackages to raise them clear of the floor and alloweasy access for fork-lift trucks, slings, or otherhandling equipment.

Sling Endless rope, wire, or strap used for liftingcargo.

Sno flo A trade name for a liquid CO2 refrigerationsystem.

Soft-top container A container with a removablewaterproof “tilt”. Also known as a top-loader oropen-top.

Solo-tank container A tank for liquids enclosed incontainer frame.

Special container A container specially designedand built for carrying a special cargo.

Stacking cone A fitting piece between two contain-ers (at each corner).

Steel container Usually has a ribbed configurationor a double-skin design if used without secondaryposts.

Straddle carrier A truck capable of lifting a con-tainer within its own framework.

Stripping A term sometimes used for unpacking acontainer.

Stuffing A term sometimes used for packing a con-tainer.

TTank container A container especially built fortransporting liquids and gases in bulk.

Tare weight The weight of a container without itscargo.

TCM An international convention governingcontainer shipments and standard uniform con-tracts for combined carriage. Stands for Conven-tion sur le Transport International Combine deMarchandises.

Terminal The area where containers are stackedready to be loaded into the vessel or are stackedimmediately after discharge from the vessel.

Thermal conductivity The quantity of heat (e.g. inBritish Thermal Units [BTU]) transferred throughone inch of material per square foot of surface, perhour, per degree Fahrenheit. Generally referred toin terms of K-Factor, which is determined by theequation: Inch K factor = sq. ft., hour, °F.

TEU Twenty-foot equivalent unit.

Tilt Canvas or other waterproof material used tocover or protect the interior of an open-top oropen-sided container.

144


S – W

TIR A road transport operating agreement reachedby European governments and the USA for theinternational movement of goods by road. Gener-ally permits sealed loads to cross national frontierswithout inspection or tariff penalties. Stands forTransports internationaux par la route.

Twist lock A fitting piece between two containerswith locking device (handle).

Two-way pallet A pallet constructed in such a waythat the forks of a FLT may gain access from twosides only.

Tyne One of the forks of a FLT.

U Unit load A number of individual packages bond-ed, palletized or strapped together to form a singleunit for more efficient handling by mechanicalequipment.

Ullage The “deficiency” of a liquid, i.e. the spacenot filled in a drum, tank, tank hold, tank container,etc. Usually the “gap” between the surface of aliquid and the top of the tank, etc.

VVanning An American term sometimes used forpacking a container.

Ventilated container A container with openings inthe side and/or end walls to allow the ingress ofoutside air when the doors are shut.

W Waste cube When cargo does not completely fill orfit the interior of the container due to bad packing,awkward shapes, weight limitations, or lack ofcargo.

145


146


Cover Corbis (Container) & Oliver Rheindorf, Hamburg,Germany

1 Germanischer Lloyd, Hamburg, Germany2–4 CSX Lines, Charlotte, NC/USA5 Corbis, Hamburg, Germany6 Tony Stone, O. Rheindorf, Hapag Lloyd AG, S.

Reintsema, (all in Hamburg, Germany)7 S. Reintsema, Hamburg, Germany8 Hapag Lloyd AG, Hamburg, Germany9–11 Germanischer Lloyd, Hamburg, Germany 12–15 Hapag Lloyd AG, Hamburg, Germany16 Hamburger Hafen- und Lagerhaus-

Aktiengesellschaft, Hamburg, Germany17, 18 Germanischer Lloyd, Hamburg, Germany19–21 Hapag Lloyd AG, Hamburg, Germany22–32 Oliver Rheindorf, Hamburg, Germany33 Germanischer Lloyd, Hamburg, Germany34 Oliver Rheindorf, Hamburg, Germany35, 36 Germanischer Lloyd, Hamburg, Germany37 Hapag Lloyd AG, Hamburg, Germany38–41 Germanischer Lloyd, Hamburg, Germany42,43 Zeller Associates GmbH/CPD, Hamburg, Germany44 Zeller Associates GmbH/S. Reintsema, Hamburg,

Germany45–47 Germanischer Lloyd, Hamburg, Germany48 Zeller Associates GmbH/S. Reintsema, Hamburg,

Germany49–55 Germanischer Lloyd, Hamburg, Germany56 Hapag Lloyd AG, Hamburg, Germany57 Lufthansa Cargo AG, Frankfurt/Main, Germany58 Germanischer Lloyd, Hamburg, Germany59 Hapag Lloyd AG, Hamburg, Germany60 Aviaexport, Moscow, Russia61–64 Hamburger Hafen- und Lagerhaus-

Aktiengesellschaft, Hamburg, Germany65 ATS Hamburg Versicherungsmakler GmbH,

Germany66 Hapag Lloyd AG, Hamburg, Germany67 Oliver Rheindorf, Hamburg, Germany68 Munich Re archives69, 70 Eurogate GmbH & Co. KGaA, KG, Hamburg,

Germany71 Bilderberg, Hamburg, Germany72–77 Germanischer Lloyd, Hamburg, Germany78, 79 Munich Re archives80 Germanischer Lloyd, Hamburg, Germany81, 82 Munich Re archives83 Alexander Gow, Inc., Seattle/Washington, USA84 Munich Re archives85 Ian Bowman, Kent/United Kingdom86, 87 Germanischer Lloyd, Hamburg, Germany88 Reuters, Berlin, Germany89, 90 Marine Claims Handling Agencies GmbH,

Hamburg, Germany

91 Hans-Jürgen Zeyse, Hamburg, Germany92 Hapag Lloyd AG, Hamburg, Germany93 Corbis, Hamburg, Germany94–96 Oliver Rheindorf, Hamburg, Germany97 Hamburger Hafen- und Lagerhaus-

Aktiengesellschaft, Hamburg, Germany98 P & O Nedlloyd, Hamburg, Germany99 Oliver Rheindorf, Hamburg, Germany100, 101 Germanischer Lloyd, Hamburg, Germany102–105 Marine Claims Handling Agencies GmbH,

Hamburg, Germany106 Oliver Rheindorf, Hamburg, Germany107 Munich Re archives108 Hapag Lloyd AG, Hamburg, Germany109 Hamburger Hafen- und Lagerhaus-

Aktiengesellschaft, Hamburg, Germany110 Hapag Lloyd AG, Hamburg, Germany111 Hamburger Hafen- und Lagerhaus-

Aktiengesellschaft, Hamburg, Germany112 Oliver Rheindorf, Hamburg, Germany113 Lufthansa Cargo AG, Frankfurt/Main, Germany114 Hapag Lloyd AG, Hamburg, Germany115 Oliver Rheindorf, Hamburg, Germany116 dpa, Hamburg, Germany117 Hapag Lloyd AG, Hamburg, Germany118 Alexander Gow, Inc., Seattle/Washington, USA119 Reuters, Berlin, Germany120 Zeller Associates GmbH, Hamburg, Germany121–124 Germanischer Lloyd, Hamburg, Germany125 Zeller Associates GmbH, Hamburg, Germany126, 127 Marine Claims Handling Agencies GmbH,

Hamburg, Germany128 Hapag Lloyd AG, Hamburg, Germany; Munich Re

archives; Oliver Rheindorf, Hamburg, Germany;Germanischer Lloyd, Hamburg, Germany; ZellerAssociates GmbH/S. Reintsema, Hamburg, Germany; Pressestelle Zoll, Hamburg, Germany

129 Book “Container Stowage”130, 131 Munich Re archives/Strauch132–140 Oliver Rheindorf, Hamburg, Germany141 Hapag Lloyd AG, Hamburg, Germany142 Zeller Associates GmbH/S. Reintsema, Hamburg,

Germany143 Germanischer Lloyd, Hamburg, Germany144 HDW/Noell Cransystems; Germanischer Lloyd,

Hamburg, Germany145 Germanischer Lloyd, Hamburg, Germany

Picture credits

Photo no. Source Photo no. Source

Pages Source

108, 110 E.W. Mast/MR Archives

147


© 2002Münchener Rückversicherungs-GesellschaftCentral Division: Corporate CommunicationsKöniginstrasse 10780802 MünchenGermany

http://www.munichre.com

Responsible for content:Operational Division: CUGC 1.3

In conjunction with Zeller Associates GmbH, Hamburg

We would like to thank the following for their kind support in theproduction of this publication:

EUROGATE GmbH & Co. KgaA, HamburgGermanischer Lloyd, HamburgHamburger Hafen- und Lagerhaus-Aktiengesellschaft, HamburgHapag Lloyd AG, HamburgFa. Wilhelm Kelle, HamburgLufthansa Cargo AG, Frankfurt/CologneMCH Marine Claims Handling Agencies GmbH, HamburgReederei Jürgen Ohle, DrochtersenSecuritas Gesellschaft für Seeverpackungen m.b.H., Hamburg

Order number: 302-02657

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