Publisher: Maaal International Media Company
License: 465734
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:
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.
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:
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.