Exhibition risks in Cargo policies

The recent Cargo Termination of storage in transit clause ( Amended) introduction by the national reinsurer has let the cat among the pigeons. Any intentional storage under marine cargo policies is a strict ‘No-No”. As discussed in the linked post earlier, this does not impact a vast majority of the existing cargo policies wherein intentional storage was not really needed at all, since intentional or deliberate storage locations were anyway covered by the clients under Property insurance. So these storage covers under Marine were ‘mostly cosmetic’ in nature, thrust upon clients by over-enthusiastic intermediaries and underwriters, vying for business. I say ‘mostly cosmetic’, because  at times it had hurt the marine underwriters. One such case where we were at the receiving end, was with a  client whose marine cargo policy was with us while the Property policy was issued by another insurer. The marine policy had an intentional storage cover for some amount. A fire occurred in one of the warehouses and the client, to avoid any confusion sent a single mail to both the marine & Property insurers informing about the loss. The Property insurer, when he came to know of the storage cover under the marine policy, rubbed his hands in glee and said ‘Marine policy has to pay first’. We ended up paying.

Now we look at cases where an intentional storage for some length of time is definitely needed by the client as part of his normal business. One striking example is when goods are sent out for exhibitions/demonstrations and returned back. Typically required by manufacturers/distributors of fashion/lifestyle items, jewelry, machinery, automobiles and many more. With exhibitions and Trade fairs increasing by the day, the requirement for Exhibition covers under marine cargo policies will only increase. The fact to be noted is that the the number of such events, a  client would participate in and the value of items sent for exhibitions vis-a-vis the total number of transits and the turnover under the policy would be a small proportion only. Hence, client look at covering these risks under their Marine open policies in a seamless manner. What is the risk involved in exhibitions/demonstrations?

1. Transit to and from the exhibition site
2. Storage risks whilst being displayed at the exhibition
3. Loss/damage sustained while the demonstrating/operating the goods exhibited ( mainly machinery)

Risks under (1) will obviously get covered under the marine cargo policy. Storage risks under (2) will be required for a limited number of days in each case. It is next to impossible for a client to scout around for storage risks for small values and small duration, every now and then. Hence the need for including this storage under the marine cargo policy which the client already has. As for (3), typically , even a Property policy would exclude this and hence this may be ignored here.

Having established the need for cover, are there such covers available? Most certainly yes. All leading international insurers add the ‘Exhibition/Demonstration clause/condition’ in their policies as a matter of routine. The goods which are transported to the exhibition site are covered during the to and fro transits as also whilst they are displayed, waiting to be displayed and post-display awaiting despatch. The typical limitations put in are–

a) Sub-limit in terms of value of goods covered under this clause

b) Restriction as to the maximum number of days at an exhibition.

c) Should be within the geographical limits spelt out in the marine policy. For               instance, in an inland transit policy, exhibitions overseas cannot be covered.

d) Some insurers add a differential deductible whilst the goods are on display at          an exhibition.

The cover is given not only for the goods insured under the marine cargo policy but also for the stands, fixtures, fittings, exhibition equipment and promotional material. The value for these items may be over and above the sub-limits set for value of the goods exhibited or in some cases included in the overall sub-limit. Further small additions are also possible, which we do not discuss at the moment.

There is a requirement and the cover is available worldwide. The Indian marine insurance industry cannot be insensitive to this requirement. If the concern is the mounting loss ratios, the need is to price the cover right and not to impose a broad-brush ban on all intentional storage covers under marine, how much ever genuine the requirement may be. Do not have the data for losses during exhibitions , but am sure they are not the contributors to the adverse loss ratios prevailing in the industry today.