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  • Insuring risk

     
     

    The preceding texts are intended to assist in assessing the risks and obligations, other than purely commercial ones, that accompany particular types of contracts. The need for insurance will be obvious to everyone - the scope of cover that is needed depends on the total exposure to risk and is best assessed by seeking professional guidance from an insurance broker, an underwriter or one's bankers. Obviously this guide cannot provide a comprehensive overview of all potential options and solutions.

    Just as it is essential to fully appreciate and quantify one's exposure to certain risks, so one must understand the obligation to inform the underwriters fully of all the factors of the risk to be insured against. If this is not done it may be considered that the risk was misrepresented, rendering the insurance null and void. The relationship between client and underwriters is in many ways very similar to that between borrower and banker - full disclosure is the best approach.

    Insurance is a business with firm rules and regulations. The costs of insurance coverage are not based on firm tariffs, however, but rather are the result of the underwriters' experience with the particular type of risk. Underwriters keep check of the amount of premium collected and the losses paid out. This loss experience will determine whether premiums are reduced, remain the same or are increased.

    Alternatively the scope of cover may be reduced or even cancelled entirely. It is therefore in the exporter's own interest to avoid losses and claims, that is, to practice loss avoidance.

    Finally, parties taking out insurance should always determine whether or not the cover they purchase includes loss as a result of terrorist action. If this is not specifically mentioned in a policy document then it may not be covered.

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