Neil Pettitt
Vice President, Cargo Practice
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Singapore
Following the recent news about the insolvency of Hanjin Shipping, it is reported by Channel News Asia* on 9 September 2016 that the proposed cash injection by Korean Air Lines (Hanjin Shipping’s largest shareholder) has been further delayed. The situation with Hanjin Shipping is highly fluid, thus the commentary here is as current as it gets.
The size of the operation of Hanjin Shipping makes this insolvency unprecedented in the shipping industry. The previous largest shipper faced with insolvency was US Lines in 1986, who operated circa ships with about 100,000 Twenty Foot Equivalent Unit (TEU), compared to Hanjin with more than 600,000 TEU. Needless to say, Hanjin Shipping’s insolvency is likely to impact a great number of importers and exporters across the world**.
Ramifications for cargo owners will be different based on their own individual circumstances, terms of purchase and sale, when the trade was agreed, dates of shipment, and whether they had carried out their due diligence and managed risk through appropriate and adequate insurance coverage. In respect of insurance, each cargo owner or Assured is most likely to have their own Cargo Open Cover with terms and conditions that are unique to them, and the recommendation is that these terms and conditions need to be closely examined. In addition the reaction by each insurer to this situation could differ. There is therefore no uniform recommendation that could apply to all policy holders.
The immediate suggestion to any cargo open cover holder would be:
The magnitude of Hanjin Shipping and their insolvency is impacting a great number of cargo owners. As a result Marsh is currently conducting a thorough review of cargo policies arranged by us to ensure that the basic terms and conditions stay relevant and are current enough to meet market developments.
References
**http://www.cnbc.com/2016/08/31/hanjin-shipping-vessel-unable-to-dock-at-south-korea-port-yonhap.html
- http://www.wsj.com/articles/troubled-hanjin-shipping-to-sell-healthy-assets-to-rival-1472611190
Vice President, Cargo Practice
Singapore