Tuesday, 22 July 2025
صحيفة مال

No Result
View All Result
  • Home
  • العربية
  • Home
  • العربية
No Result
View All Result
صحيفة مال
No Result
View All Result

Insurance Governance in International Shipping: Absent When Claiming, Present When Collecting?

22 Jul 2025

Layal Qudsi

Who holds insurance companies accountable when they disappear at the first claim? How does an insurance policy transform from a promise of protection into a legal defense document against the client? And where does the much-touted governance go when cargo is damaged and the client begins to assert their rights?

Doesn’t it seem as though governance is only activated for premium collection, and deliberately suspended when it comes to paying out compensation? Are we facing “institutional risk manufacturing” or a network of interests immune to accountability? These are not merely theoretical questions, but a daily reality for some shippers and importers worldwide, in the absence of genuine governance that would do justice to the weaker party in the relationship: the insured.

Real Gaps in Cargo Insurance Governance:

  1. Insurance Policies Designed to Protect the Company, Not the Cargo: Insurance contracts for shipments, especially in international transport, are often drafted in vague legal language that serves the interests of the insurance company. Clauses related to “exclusions,” “force majeure,” and “scope of coverage” grant the company interpretive freedom, making it both adversary and judge. This drafting approach contradicts the contractual principles stipulated in the UNIDROIT Principles of International Commercial Contracts, which emphasize in Article 4.6 that “any ambiguous term in a contract shall be interpreted against the party who drafted it,” and reinforce in Article 1.7 the principle of good faith in negotiation and performance. Ignoring these principles brings us back to a major dilemma in insurance governance: precise terms are used for collection, but they transform into legal traps when claiming.

Figures Reveal Corruption Costing the Global Economy Trillions of Dollars!

Corruption in maritime supply chains is not just a word; it represents massive real losses. According to the Financial Action Task Force FATF in 2023, corruption and bribery in maritime transport cause estimated losses of $2.6 trillion annually! Imagine if insurance companies only compensated half of these losses, leaving clients to bear the brunt. Data from Swiss Re and Munich Re reveal that corruption-related insured losses reached $15 billion over five years, with deliberate delays in compensation payouts for over 40% of claims. The International Maritime Organization IMO describes the situation as a transparency crisis costing the global economy over $500 billion annually, calling for technological solutions to rescue the sector, but change remains slow. These figures lead us to a crucial question: How do insurance companies continue to protect themselves from clients while leaving millions to suffer the consequences of corruption and losses?

Protecting Insurance Companies or the Insured? A Case Study of the Prestige Tanker Incident

The Prestige oil tanker incident in Spain in 2002 proved that insurance policies transform into a legal shield for insurance companies rather than a protective tool for the insured. After the tanker sank and polluted approximately 2,700 km of Iberian coastlines, the Spanish Supreme Court ruled that the insurance company, The London P&I Club, was directly liable up to its policy limit, even though the international CLC Convention typically allowed for traditional coverage limits. On the other hand, the European Court of Justice ruled in 2022 that a pre-signed arbitration agreement cannot be used to obstruct the recognition of a judicial decision in a member state, even if through arbitration in London. Perhaps most significantly, the Coruña court initially ordered compensation of $1.57 billion for Spain and $61 million for France, which the Supreme Court later confirmed, raising the total damages to approximately $1.6 billion.

  1. Weak Independent Accident Investigation: When a loss or damage occurs, there is no independent body to investigate the causes. The insurance company relies on its own experts and issues an internal report, determining whether it will pay or reject compensation, which opens the door to conflicts of interest and a lack of transparency.
  2. Deliberate Procrastination in Compensation Procedures: Even in cases where compensation seems clear, claims are met with a series of complex requirements, delays, and legal reviews, as if the goal is not to protect the client, but to exhaust them until they waive their right or accept symbolic compensation.
  3. Absence of Specialized Regulatory Oversight for the Marine and Logistics Insurance Sector: Although shipments may cover millions of dollars’ worth of goods, the legal supervision of related insurance policies in many countries is managed in the same way as car insurance policies—with a bureaucratic vision that does not reflect the complexity of the supply chain or pursue the corruption hidden behind signatures.

Who Truly Benefits?

Current governance in the cargo insurance sector is not designed to protect rights equally; instead, it institutionalizes bias in favor of companies. The entity that writes the contract, imposes its terms, interprets them, and settles compensation is the same entity that financially benefits from reducing coverage and evading payments. In the absence of an effective independent regulatory body, the actual beneficiary of current governance is the insurance companies themselves, not the clients or the supply chains.

Recommendations for Reforming Insurance Governance in Shipping

To effectively reform insurance governance within the shipping industry, I propose the following critical measures:

  1. External Legal Review of All Insurance Contracts: Conduct a comprehensive external legal review of all insurance contracts. This is crucial to ensure fair wording and prevent ambiguous clauses that could be exploited against the insured.
  2. Establish an Independent Maritime Insurance Dispute Resolution Body: Create an independent authority dedicated to resolving maritime insurance disputes. Such a body would guarantee impartial decisions and ensure that parties in conflict are separate from the insurance company itself.
  3. Mandatory ISO Standard Implementation for Licensing: Require companies to implement ISO 28000 (Security Management Systems for the Supply Chain) and ISO 37001 (Anti-bribery Management Systems) as fundamental conditions for licensing. This must be coupled with strict, periodic oversight to prevent corruption and ensure supply chain security.
  4. Complete Separation of Loss Assessment: Ensure a full separation in loss assessment processes by appointing independent valuers who are not employed by insurance companies. These valuers must also be subject to regular oversight.
  5. Launch a Public Registry for Non-Compliant Companies: Establish a public registry for companies that unjustifiably delay or refuse compensation payments. This will enhance accountability and transparency within the market.

The Imperative for Reform

Ultimately, if governance isn’t applied when losses occur, what is its true value? And if insurance contract clauses have become financial instruments designed to protect companies from clients, rather than protecting clients from risk, when will reform truly begin?

Imposing strict governance on insurance contracts and establishing independent investigation and arbitration bodies for logistics disputes is no longer an option—it is an urgent necessity to maintain market stability. The presence of a transparent and fair regulatory authority, combined with rigorous oversight of the sector, represents the first line of defense against corruption and waste. These measures will protect investors’ funds and bolster our national economy.

اقرأ المزيد

Previous

Global AI Hub Law: Positioning Saudi Arabia as a Global Digital Hub

Related

Global AI Hub Law: Positioning Saudi Arabia as a Global Digital Hub

Public Investment Fund After Surpassing One Trillion Dollars

To the Global Investor: Saudi Arabia Today Isn’t Just an Opportunity—It’s a Mature Legal and Governance Ecosystem Protecting Your Expansion

Private Equity and Venture Capital Reshaping Sports: A New Playbook for Global Investors





Articles

الكاتب

Insurance Governance in International Shipping: Absent When Claiming, Present When Collecting?

Layal Qudsi

الكاتب

Global AI Hub Law: Positioning Saudi Arabia as a Global Digital Hub

Omar Almutairi

الكاتب

Public Investment Fund After Surpassing One Trillion Dollars

Dr. Ihsan Ali Buhulaiga

الكاتب

To the Global Investor: Saudi Arabia Today Isn’t Just an Opportunity—It’s a Mature Legal and Governance Ecosystem Protecting Your Expansion

Layal Qudsi

اقرأ المزيد

Publisher: Maaal International Media Company
License: 465734

Quick links

  • News
  • Articles
  • Home

Contact Us

055 144  3666  
info@maaal.com  

© 2025 All rights reserved to Maaal Newspaper

No Result
View All Result
  • العربية
  • Home

© 2020 All rights reserved to Maaal Newspaper - Publisher: Maaal International Media Company - License: 465734