CONTAINERS

Transport. Technology. Insurance.

M Münchener Rück
Munich Re Group
The volume of global trade continues to grow substantially year by year – in spite
of regional crises. Over the last thirty years the transportation of goods by sea has
more than doubled to its current level of 5 billion tonnes per annum.

Keeping pace with this development has involved a rapid expansion in the use
of containers. Today the movement of containerized cargo is a fast, efficient, and
economical logistics system that spans the entire world.

With the globalization of the economy progressing at a dynamic pace, the trans-
portation of containers by land, sea, and air may be expected to maintain its position
as a major growth vehicle – reason enough for us as global reinsurers to bring our
clients up to date on the experience gained with this now universally established
transportation system. And that was the aim we pursued in producing this latest

Standard rod.

Bridge fitting of topmost deck container layer. Turnbuckle.

Double stacking cone. Turnbuckle.

Stacking cone. Single stacking cone with adapters of different sizes.

addition to our series of marine publications. It succeeds the brochure we published
on containers in 1977, which has been out of print for some time now. This new
publication also takes an in-depth look at the worrying large loss potential that
already exists today and is certain to increase in the future.

Marine insurers will only achieve successful underwriting and loss minimization –
and an accurate assessment of their reinsurance requirements – if they are fully
aware of the risks involved along the entire container transport chain, including in
particular the sea leg of the journey and the pre-carriage and on-carriage stages.
Our marine experts and their colleagues in the related property and liability fields
are on hand to provide full support.

Bridge fitting also suitable for different heights.

Stacking cone with twist lock, closed. Stacking cone with twist lock, open.
 Container transport – A selection of large losses

Name of vessel Date Place Cause

EVER DECENT / NORWEGIAN DREAM 23.8.1999 English Channel Collision followed by cargo fire
CMA DJAKARTA 12.7.1999 Mediterranean Cargo fire
ACONCAGUA 30.12.1998 Off the coast of Ecuador Cargo fire
DG HARMONY 9.11.1998 South Atlantic Cargo fire, total loss
APL CHINA 26.10.1998 North Pacific Severe damage to deck cargo during a typhoon
APL PRESIDENT ADAMS 26.10.1998 North Pacific Severe damage to deck cargo during a typhoon
MOL ALLIGATOR STRENGTH 26.10.1998 North Pacific Severe damage to deck cargo during a typhoon
EVER UNION 26.10.1998 North Pacific Severe damage to deck cargo during a typhoon
LEERORT 19.9.1998 Colombo Collision with pier
ZIM PIRAEUS 19.9.1998 Colombo Collision with pier
SEA LAND MARINER 20.4.1998 Mediterranean Cargo fire
MSC CARLA 24.11.1997 North Atlantic Heavy seas, loss of forebody
CONTVESSEL FRANCE 15.10.1997 Pacific Cargo fire
DISARFELL 9.3.1997 Iceland Vessel capsized in storm
VIKARTINDUR 6.3.1997 Iceland Vessel ran aground and was broken up
NEDLLOYD RECIFE 2.3.1996 Brazil Vessel ran aground, total loss
SABINE D 12.12.1998 Kiel Canal Vessel capsized after collision
GREAT HANSHIN EARTHQUAKE 25.1.1995 Kobe Earthquake, container terminal
SHERBRO 1.1.1994 English Channel, North Sea Loss of dangerous goods deck cargo
HANJIN INCHEON 12.2.1987 North Pacific First loss of a pure container vessel
ARIADNE 24.8.1985 Mogadishu Vessel ran aground, total loss
EVER LEVEL 25.11.1983 Mouth of the Elbe Collision, fire, general average
ITAPAGE 25.11.1983 Mouth of the Elbe Collision, fire, general average
HORNBERG 7. 4.1982 Rhine Vessel sank after collision
ELMA TRES 26.11.1981 Atlantic Vessel capsized in storm
ANRO AUSTRALIA 26.7.1978 Australia Vessel ran aground
SEA WITCH 2.6.1973 New York Collision when berthing, major fire
ESSO BRUSSELS 2.6.1973 New York Collision when berthing, major fire

902 902
 CONTENTS PAGE

01 CONTAINERS – PAST AND PRESENT 4

02 ORIENTATION IN THE WORLD OF

STANDARDIZED CONTAINERS
20

03 NOTORIOUS PROBLEMS IN CONTAINER

INSURANCE
50

04 MEANS OF TRANSPORTING CONTAINERS

AND THEIR INSURANCE
58

05 ASPECTS OF INSURANCE FOR CONTAINER

CARRIERS AND TERMINALS
84

06 POINTS TO NOTE WHEN INSURING GOODS

IN A CONTAINER
90

07 ASPECTS OF ACCUMULATION 94

08 PRACTICAL EXPERIENCE WITH LOSSES

AND CLAIMS
115

09 RISKS OF CONTAINER TRAFFIC IN THE FUTURE 128

10 GLOSSARY OF CONTAINER TERMINOLOGY 138

3
CONTAINERS – PAST AND PRESENT

CONTAINERS – Past and present

01
MALCOLM MCLEAN’S IDEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
“CONTAINERITIS” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ENGINE OF GROWTH, INNOVATION, AND RATIONALIZATION . . . . . . . 10
CONTAINERIZATION TODAY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Containers are a symbol of modern, efficient world The exchange of goods and merchandise on
trade. Every-one is familiar with the sight of con- today’s worldwide scale is inconceivable using
tainers – making a colourful panorama on the 10,000-tonne ships with conventional cargo-hand-
quayside, towering up on the decks of modern ling gear, traditional inland water cargo vessels,
freighters, or being used as temporary housing goods wagons with sliding doors, and trucks of
and storage facilities on construction sites or as assorted shapes and sizes.
mobile power units on land.
In retrospect, containerization marks a veritable
The brilliant idea of treating break-bulk cargo as if revolution in the transportation sector and, as
it were bulk cargo and moving it in standardized, might be expected, its origins and accomplish-
easy-to-handle containers which can be used “uni- ments are surrounded by legend. In any case,
versally“ for transportation by land, river, and sea it was a long and stony road.
laid the foundations for modern transport logistics.

4
 CONTAINERS – PAST AND PRESENT

01 View from the compass deck of a large container vessel.

5
CONTAINERS – PAST AND PRESENT

MALCOLM MCLEAN’S IDEA

In the First and Second World Wars military and

railway authorities were already experimenting
with standardized containers that had iron lashing
points and corner castings as a means of trans-
porting ammunition, provisions, and other goods.
The triumph of the modern freight container really
began, however, at its birthplace – the sea port. For
this is where freight is transferred from one con-
veyance to another on a large scale. The container
is an embodiment of transition, standing for the
mobility and global availability of goods and mer-
chandise and the services associated with them.
The development of containerization may be com-
pared with the “electronic revolution“ in communi-
cations. Here too a global network – the world
02 TS IDEAL X.
wide web – has evolved, transporting information
of any kind in standardized “packages“ to and
from virtually any point in the world.
Before long, McLean’s company began to operate
It was the year 1937. A young truck driver was under the highly appropriate name of Sea-Land,
waiting impatiently at Hoboken Pier in New Jersey which is now part of the world’s largest container
for his consignment of cotton to be dispatched. vessel operation.

He watched the complex and laborious process of The dimensions he chose for his containers
handling every single bale and every single crate (8’ x 8’, 2.44 m x 2.44 m) were more or less random
individually on the truck and on the quayside. Each and without any regard to the size of the goods,
individual piece of cargo was slung and then lifted the widths of the pallets to be loaded into the con-
onto the ship by a crane. There it had to be tainer, or even the decimal system. But they did
removed individually from the cargo hook and car- correspond to the truck width stipulated by Ameri-
ried to a suitable place for re-stacking. Wouldn’t it can regulations at that time and established them-
be much easier, he thought, to lift the complete selves as the binding basic dimensions for stand-
body of the truck onto the ship without touching ard ISO containers today. The original lengths
the contents at all? of 17’, 24’, and 35’ were soon superseded by
lengths of 20’ (6.1 m) and 40’ (12.19 m), as these
But 19 years were to pass before Malcolm McLean permitted much more efficient handling.
– now a forwarding agent – turned that idea into
reality. With the dual intention of avoiding the
usual tedious loading and unloading processes “CONTAINERITIS“
and of circumventing the different transportation
and dispatch regulations enforced by the various At first, Europeans contemptuously referred to the
US federal states for domestic transport, he loaded new means of transport developed in the United
his truck trailers onto a converted tanker – the States as “containeritis“ and opposed the immense
IDEAL X – in Port Newark, New Jersey, and sent investment needed to set up the associated infra-
them by sea to Houston, Texas. structure at shipping companies, ports, and inland
transportation companies.
Without their chassis, the trailer bodies could even
be stacked on top of each other. Thus the modern But McLean and his competitors went from success
sea container was born and began its triumphal to success in American (and Australian) coastal
conquest of the world. traffic and on domestic US routes between the

6
 CONTAINERS – PAST AND PRESENT

03 Mr. Malcolm McLean. 04 The first consignment of containers to Germany on the

MS FAIRLAND in 1966 sealed the victory of containers after
the first transcontinental shipment from the USA to Europe.

mainland and Puerto Rico and Hawaii. And when seded by semi-container ships and then, by the
McLean’s company started the first regular trans- end of the 1960s, by the first fully-cellular container
atlantic service in 1966, there was no stopping con- vessels with some 800 to 1,000 TEUs. The develop-
tainerization any longer. One company after an- ment of jumbo container ships with a capacity of
other gave way to the competitive pressure in this 3,500 to 4,500 TEUs began in the 1970s and culmin-
open free-trade zone with its extensive freedom ated in today’s open-top vessels capable of carry-
from state intervention and controls and finally ing up to 8,000 TEUs. The possibility of container
went over to transporting these floating “tin vessels carrying up to 15,000 TEUs is now being
boxes“. investigated. This would create veritable giants of
the sea some 400 m long, 65 m wide, and 40 m
The first international standard for containers was high.
published in 1968 and traffic between Europe and
Australia commenced in 1969. In 1972 Sea-Land The simple standard box with its six sides and
offered the first container express service with a eight corners has generated a technology solely
speed of 33 knots (over 60 km/h). Large container devoted to containers and everything associated
vessels opened up the route between the Far East with them. That technology continues to be
and Europe in 1973/74 and the first round-the- marked by vibrant progress and relentless growth,
world service was introduced in 1984. Transcon- particularly in terms of the size of the primary con-
tinental double-decker container trains, introduced tainer ship, the ocean-going vessel.
in North America in the same year, quickly
acquired particular significance as a convenient
way of bypassing the bottleneck of the Panama
Canal.

These developments were accompanied by

advances in shipbuilding and in the technology of
container vessels, particularly of ocean-going
ships. In the 1950s and 1960s containers were car-
ried on conventional ships, which, after being
slightly modified, had a storage capacity of a few
dozen containers (normally specified in TEUs =
twenty-foot equivalent units). These were super-

7
CONTAINERS – PAST AND PRESENT

05 Cellular container vessels are the 06 … whereas various other means of transportation are used
backbone of today’s overseas trade … to handle regional and transcontinental container traffic.

8
 CONTAINERS – PAST AND PRESENT

A
B

9
07 MS FRIESENSTEIN (316 TEUs) – a conventional breakbulk vessel with 08 MS LEVERKUSEN EXPRESS (425 TEUs, later 951 TEUs) – one of
redesigned container hatches and a container crane. many conventional vessels converted to a full container ship.

11 MS AMERICA EXPRESS (1,416 TEUs) – a common full container ship 12 TS BREMEN EXPRESS (2,952 TEUs) – one of the first 3rd generation
of the 2nd generation with its own on-board container crane. container ships (ushering in the era of large cellular container ships).

ENGINE OF GROWTH, INNOVATION, AND men their jobs, with a great deal of expertise in
RATIONALIZATION traditional break-bulk handling and transport being
lost as a result.
Containerization prompted the development of a
global transportation system capable of reaching On the other hand, the advantages of the container
virtually any point on earth. The result was a major system are almost overwhelming. Containers can
rationalization of transport technology as a whole, be used for transportation purposes anywhere –
which has boosted productivity in transportation and over a duration of many years. Their handling
and handling by a factor of roughly 50 (!). At the is a relatively straightforward operation, which
same time, the cost of establishing this system has generally follows the same pattern, and their trans-
been high. Experts estimate that at least US$ 65bn portation can be documented in standardized,
has been invested to date in this area. This devel- condensed form in the freight papers.
opment has also cost many port workers and sea-

10
09 MS ALSTER EXPRESS (736 TEUs; 1,096 TEUs after being 10 TS SYDNEY EXPRESS (1,589 TEUs) – fast turbine-powered cellular
extended) – the first vessel of its type to be built in Germany container ship used on the Europe-Australia route.
(1968) as a pure cellular container ship (so-called 1st generation).

13 MS FRANKFURT EXPRESS (3,045 TEUs) – the largest container 14 MS ANTWERPEN EXPRESS (4,864 TEUs) – this type is the largest
ship in the world when it was delivered in 1981. in the Panamax class in terms of container capacity (since 1999).

Container ships achieve loading and unloading this ratio will continue to fall. Large container ships
rates of up to 2,400 tonnes an hour (with peak per- carry a much larger break-bulk tonnage than con-
formances being considerably higher) compared ventional ships of the past. They are also used
with the 60 tonnes an hour reached by conven- much more intensively so that running costs per
tional large break-bulk ships. Cargo stored for tonnage unit handled are reduced considerably
weeks in draughty and poorly secured dockside (particularly as far as fuel and manning are con-
sheds or on open quay areas and stockyards is cerned).
definitely a thing of the past.
And would anyone complain that containerization
The throughput of goods in container ports is much has led to a dramatic reduction in transit losses
higher than in conventional ports. The ratio of port and petty losses due to theft and pilferage, as well
days to sea days has dropped from roughly 50:50 as in the incidence of goods being misdirected and
(for conventional vessels) to less than 20:80 and delivered late?

11
CONTAINERS – PAST AND PRESENT

15 Global containerization: day …

CONTAINERIZATION TODAY The opening of more and more national economies

and the mounting pressure of competition result-
In spite of these rapid developments and the suc- ing from global trade will mean that container traf-
cess achieved so far, the process of containeriza- fic will continue to grow at an increasing pace.
tion is by no means at an end – because now more Factors which used to be of importance, such as
and more intercontinental and regional trade roughly equal flows of cargo in both directions, a
routes want to take advantage of its benefits. good local and regional infrastructure, and conven-
tional capacity limits in ports or at other transship-
More than 95% of the world’s international trade is ment centres, have receded into the background
seaborne, with regular services and links between today. In view of the availability of sufficient capital,
hundreds of container ports on fixed routes. the speed and extent of containerization are now
determined by the consumers and a growing num-
Containerization has already established itself firm- ber of multinational companies that are anxious to
ly on the east-west routes of the northern hemi- gain a foothold in all markets of the world. Their
sphere. This global container “belt“ will continue objective is not only to buy and sell products in all
to expand and become denser. It will also incorpor- these regions, but also to produce goods there,
ate more and more north-south extensions in the using local resources and thus giving up their trad-
years to come, with the result that the container- itionally centralized structure, typically built around
ization of trade and cargo flows will increase sig- a main location. Wherever an advantage can be
nificantly in many countries of Asia, Southern and gained from cost or profit differences, companies
Central America, and Africa too. also transfer raw materials, semi-finished products,
and finished goods into more favourable areas –
This will create new opportunities – and risks – for often using modern standardized containers.
the operators, the associated service industries,
and, not least, for the marine insurance industry.

12
 CONTAINERS – PAST AND PRESENT

16 … and night.

Despite various regional crises, experts anticipate

that world trade – after having tripled to more than
five billion tonnes in the past 30 years, i.e. the period
in which containerization has developed most
strongly – will continue to grow. They believe that
container traffic, which currently has a capacity of
almost 12 million TEUs and an actual transporta-
tion performance of roughly 50 million TEUs per
year, will share in that growth with an above-aver-
age rate of between 7% and 10% per annum.

13
CONTAINERS – PAST AND PRESENT

DEVELOPMENT OF SIZE OF CONTAINER SHIPS

Dalian Express

Bibi Express

Hapag-Lloyd
Humboldt Express

Hapag-Lloyd
Heidelberg Express

Hapag-Lloyd
Hong Kong Express

Hapag-Lloyd
Köln Express

Hapag-Lloyd
Frankfurt Express

Hapag-Lloyd
Hannover Express

Hapag-Lloyd
Shanghai Express

Hamburg Express

14
 CONTAINERS – PAST AND PRESENT

CROSS-SECTIONS

1st 2nd 3rd 4th

generation generation generation generation
Panamax Panamax post-Panamax
(16 KTS) (16 KTS) (23 KTS) (23 KTS) (17 KTS) (23 KTS)

Less
than 4,000-
1,000 1,000 2,000 3,000 4,000 5,000
TEUs TEUs TEUs TEUs TEUs TEUs
(approx.)

32.25 m Panamax beam

15
THE GLOBAL “CONTAINER BELT“

North America –
East Coast Route
12 Halifax/Canada
13 Boston
North America – 14 New York/Jersey City
West Coast Route 15 Baltimore
16 Norfolk
17 Savannah
1 Seattle
2 Portland
3 San Francisco
4 Oakland
5 Los Angeles
6 Long Beach

US Gulf and
Caribbean Route Mediter-
ranean
7 Houston Route
8 New Orleans
9 Mobile
24 Barcelona
10 San Juan/Puerto Rico
25 Marseilles
11 Freeport
26 Genoa

South American
Route
18 Guayaquil
19 Callao
Container belt for sea transportation 20 Arica
Continental container land bridges 21 Talcahueno
22 Vitoria
Secondary routes
23 São Francisco do Sul
Container terminals

16
 CONTAINERS – PAST AND PRESENT

Western European Route

27 Le Havre
28 Antwerp
29 Felixstowe
30 Rotterdam
31 Bremerhaven/Bremen East Asian Route
32 Hamburg
47 Tokyo
48 Yokohama
49 Osaka/Kobe
50 Pusan
51 Keelung
52 Kaohsiung
53 Hong Kong

Southeast
Asian
Route
44 Port Klang
45 Singapore
46 Bangkok
47 Tokyo
53 Hong Kong

African Route Persian Gulf/

Southern Asian/Australian Route
33 Las Palmas
34 Dakar 39 Dubai
35 East London 40 Mumbai
36 Durban 41 Colombo
37 Mahejanga 42 Fremantle
38 Djibouti 43 Sydney

17
GLOBAL CONTAINER TRAFFIC –TRANSPORT AND DISTRIBUTION

18
CONTAINERS – PAST AND PRESENT

19
ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

17 Cutaway view of a 20’ container.

ORIENTATION in the world of standardized containers

02
Goods of virtually every kind are transported in containers today:
break-bulk goods in standard containers, bulk goods in specially
designed dry-bulk containers, and liquid goods in special tank
containers.

“THE BOX“ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
TRANSPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
– Ocean-going container ships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
– Inland water transport (IWT) vessels . . . . . . . . . . . . . . . . . . . . . . . . . 36
– Trains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
– Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
– Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
– Intermodal transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
TERMINALS AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
STANDARD MODES OF TRANSPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
CONTAINER TERMINOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

20
 ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

Almost any kind of cargo can be containerized water transport vessels, trains, trucks, and – at
nowadays. Exceptionally large items such as plant least the 20’ version – even aircraft in exceptional
or project parts, which are commonly referred to cases. The containers most commonly used for
as out-of-gauge (OOG) cargo, can be transported maritime traffic are 20’, 35’, 40’, and 45’ containers;
on a special deck surface created by placing several mini-containers measuring 10’ are less commonly
platform containers side by side. Similarly, very used and 30’ containers are only used on a small
heavy goods can be mounted on transport cradles, number of UK routes. There are even 53’ contain-
i.e. special bases with the same dimensions as ers, which are used in transcontinental road and
standard containers which spread the weight even- rail transport in the United States.
ly. Special refrigerated containers (called reefers)
are becoming increasingly common for goods that Sea containers are built to ISO standards with
are moisture- or temperature-sensitive and need to a width of 8’ (= 2.438 m). The height may vary but
be transported at controlled temperatures. Reefer is typically 8’6“, 9’00“, 9’6“, or only 4’ to 4’3“
containers are cooled either by an on-board refriger- (= half-height).
ated air-circulation system such as the Con-Air
system (and are then usually referred to as ducted Containers with a length of more than 40’ are gen-
reefers), or by electric or diesel-powered units, erally extra-high at 9’6“ (= 2.895 m). In many coun-
either in the form of permanently installed units tries these containers, known as high cubes, can
(integrated reefers) or piggyback units (clip-on only be transported on land with the aid of a spe-
reefers). They can even be supplied with a con- cial chassis that enables them to pass through low
trolled atmosphere if necessary (e.g. a higher nitro- tunnels or under low bridges.
gen concentration to delay the ripening of fruit).
The inside width of classic sea containers has one
major drawback: it is impossible to stack standard-
“THE BOX“ ized Euro pallets side by side in them. Wider con-
tainers have been developed to accommodate
The term container (from the Latin: continere = these pallets on standard cellular container ships,
to enclose) is a very broad term. The International but this results in the loss of a stowage place on
Convention for Safe Containers (CSC), which pre- either side of the container unless specially
scribes the technical specifications, defines the designed cell guides are fitted that leave greater
container as an article of transport equipment clearance between the container rows.
which is
The variety of container sizes appears to be in total
a) of a permanent character and accordingly conflict with the concept of a standardized and uni-
strong enough to be suitable for repeated use; form transportation system. As already mentioned,
b) specially designed to facilitate the transport of however, these dimensions have a historical con-
goods, by one or more modes of transport, text. Above all, their development reflects the need
without intermediate reloading; to exploit every available space – given today’s
c) designed to be secured and/or readily handled, increasingly voluminous but comparatively light
having corner fittings for these purposes; and goods – and to take advantage of economies of
d) of a size such that the area enclosed by the four scale.
outer bottom corners is either at least 14 m2
(150 sq. ft.) or at least 7 m2 (75 sq. ft.) if it is
fitted with top corner fittings.

Consequently, the term container designates nei-

ther a vehicle (except when the container is fixed
to a chassis) nor a type of packaging!

In line with this wide definition, the word container

is used in the transportation sector for a large var-
iety of boxes of different size, type, and structure.
But the most important container is and remains
the classic standard sea container, which is fre-
quently referred to as a general purpose (GP) con-
tainer. It is also transported on barges, inland

21
22
18 Container inspection report and
container type test.
19 Replacing the temperature log of
a refrigerated container.
20 A propeller that cannot be
containerized being loaded below deck
on a heavy cargo platform container.
21 Cellular stowage system of a large
container vessel.

23
ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

To increase the flexibility of the means of transport As a rule, containers have an exceptionally stable
available, extra-long and extra-wide containers are and robust steel frame with steel bottom beams and
provided with additional corner fittings in the same cross members, thus allowing them to be stacked
positions as standard boxes so that they can be nine high. Their tops and sides are normally of cor-
secured safely on standard 40’ or 20’ chassis and rugated steel, aluminium sheet, or fibreglass-rein-
trailers. forced plywood. The container floors consist of wood
planks or, more commonly nowadays, reinforced
The various international bodies have repeatedly plywood (with a minimum thickness of 28 mm).
considered the possibility of starting from scratch
with a completely new and completely standard- The container floor and sides can withstand loads
ized “ideal“ container (with lengths of 24’5“ and of roughly 2.5 tonnes per square metre when
2 x 24’5“ = 49’ and a width of 8’6“ or 2.59 m). spread evenly over the area. Depending on their
These discussions have ended inconclusively to design and interior fittings, 20’ containers have a
date in spite of the more effective use of the space cubic capacity of roughly 33 m2 and a net weight
available and the more extensive standardization of between 2 and 2.5 tonnes, while 40’ containers
such a new start would bring. The investments have a cubic capacity of roughly 67 m2 and a net
that would be required for the containers them- weight of 3.5 to 4 tonnes. The payloads generally
selves and for modifications to the means of trans- range from 20 to 28 tonnes for 20’ containers and
port are considered too great and too risky not from 28 to 33 tonnes for 40’ containers. Reefers
only for the individual companies but also for the have less capacity and payload due to the additional
public ports. insulating material built into these containers.

24
 ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

Containers come in a wide variety of designs, Hundreds of thousands of containers are also
reflecting the different uses and modes of trans- encountered “on land“ nowadays, serving as
port involved. They range from standard contain- mobile laboratories, offices, or accommodation,
ers to open-top containers (with or without tar- and are often packed with highly sophisticated
paulin covers), hard-top containers (with detachable equipment. At the end of their service life many
hard tops), platform containers (basically a heavy- containers are still used as storage facilities, often
duty container floor), flat racks (a container floor on building sites in remote areas.
with two end walls, either fixed or collapsible),
open-side containers, tank containers, insulated With the exception of the special types mentioned
containers, and thermal or refrigerated containers above, all containers used for regular sea trans-
(with or without integrated refrigeration units) to ports are built to ISO standards. They are tested
bulk containers and a whole series of special con- individually or undergo type testing and are
tainers for hazardous materials, emergency rescue accepted and classified by state or state-appointed
equipment, measuring equipment, and even institutions such as classification societies. Their
radioactive materials. The doors for access and condition is checked at specified intervals. All
loading/unloading are usually located at the nar- these details must be recorded and displayed on
row rear end of the container, and only rarely on the CSC and manufacturer’s plates and the inspec-
the long side (side-door containers). tion and classification labels affixed to the doors
and sides of the containers.

25
22 Dual-purpose flat rack/platform container. 23 Collapsible 40’ flat rack.

27 20’ steel containers with side doors.

26 20’ general-purpose containers.

31 Integrated reefer.

30 Ducted reefer.

34 20’ tank containers.

26 35 40’ dry-bulk container for hazardous cargo, e.g. powder or granulated materials.
24 20’ half-height containers. 25 20’ open-top container.

28 40’ general-purpose containers. 29 45’ general-purpose containers.

32 40’ high-cube refrigerated container. 33 Special tank container with a clip-on unit to regulate the temperature
in the container and/or keep the contents in motion.

36 20’ special container (separation container).

27
ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

28
ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

37 Loading a container with project cargo.

29
30
ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

20’ Hardtop standard container 20’ Flat

40’ Hardtop standard container 40’ Flat

40’ High cube hardtop standard container 20’ Platform

L.40’ = 12 192 mm, B.9’6“ = 2 895 mm

20’ Open-top container 40’ Open-top container

20’ Half-height container 20’ Ventilated container

31
38 Design suggestions to prevent damage caused by incorrect stacking.

32
 ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

39 Container test report issued by a classification society.

40 Design plan of a container-lashing system.

33
ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

41 Finite element representation of a modern fully-cellular container vessel.

34
 ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

42 Cell-numbering system. 43 Cell structure of a container frigate

during the construction phase.

35
ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

TRANSPORT reduced) crews. This is very prevalent in the case

of shipping companies based in countries with
Ocean-going container ships high labour costs. They operate under a variety of
flags, including what are known as open registers
Container ships do not have horizontal divisions and flags of convenience.
like the ‘tween decks of conventional cargo ships.
Instead they are divided into vertical holds or bays, In some parts of the world, tug/barge combinations,
each being a multiple of the standard container i.e. barges pulled or pushed by tugs, are also used
length of 20’, usually 80’. The bays are equipped to transport containers within the port area or over
with vertical rails called cell guides, between which short distances. Frequently even longer distances
the containers are stacked in tiers. There may be along the coastline are covered.
up to nine tiers below deck, depending on the size
of the vessel. Stacks on deck may be up to six high
(vessels capable of carrying stacks of seven are in Inland water transport (IWT) vessels
the planning stage).
IWT vessels are particularly safe, but also relatively
On hatchcoverless, open-top container ships, the slow. In terms of the speed and flexibility central to
cell guides run from the bottom of the vessel to the the container system, therefore, they cannot com-
uppermost container tiers, so that no additional pete with trains and trucks (unless trucks are
lashing of the containers is required. As all the con- banned from the roads at certain times like week-
tainers are exposed to the weather and seawater ends, as they are in a few countries).
spray, the bottom containers are not stowed directly
on the floor of the hold but on raised supports, and As yet, these vessels are only to be found on the
highly efficient bilge-pump systems are installed to major river systems of Europe and America, and
keep the bottom of the hold dry. As the automatic occasionally in Asia. Nevertheless, IWT vessels or
CO2 fire-fighting systems used on conventional pusher barges built exclusively for container ship-
cargo vessels need an enclosed space to work effi- ments already have a capacity of 200 to 600 TEUs
ciently, open-top container ships are equipped with (in the case of combined pusher units). Single ves-
high-pressure water fire-fighting systems. sels with a hitherto inconceivable container capaci-
ty of 800 TEUs are soon to be introduced.
Container ships are normally classified in terms of
their size (and generation – see page 15). In other
words, a distinction is made on the basis of their Trains
carrying capacity (expressed in DWT or deadweight
tonnage) and their container capacity (usually Many national railway companies and administra-
expressed in twenty-foot equivalent units or TEUs tions changed over to container transport at an
and occasionally in forty-foot equivalent units or early stage and acquired wagons with special
FEUs). It is also customary to classify them in chassis for the various container sizes. These
terms of whether they have cell guides (“cellular“) wagons are now incorporated in numerous goods
and their own loading gear (“geared“) or not trains. In Europe, dedicated container trains rarely
(“gearless“), and whether they are of open-top exceed 80 wagons on account of the traction limits
design (“hatchcoverless“). and the traffic geography. Mixed trains, on the
other hand, may have as many as 100 wagons.
Feeder vessels with a capacity of between approx.
150 TEUs and 800 TEUs distribute containers with- In Canada and the United States, there are even
in a certain limited region or along a coast. They longer double-decker container trains capable of
are supplemented by medium-sized liners (some carrying up to about 300 large containers.
of which are also used for feeder services) with a
capacity of approx. 1,000 to 2,500 TEUs and the Of course, in the marshalling yards of seaports and
large intercontinental liners with capacities ranging at inland centres where trains are assembled and
from 3,000 to more than 8,000 TEUs. fed into the railway network, trains with consider-
ably more container wagons may accumulate.
Like many other types of ocean-going vessel, mod- Despite the sometimes enormous throughput,
ern container ships are generally operated in an fully-laden container cars only remain in these
extremely competitive international market and are stations for between 6 and 12 hours on average
therefore manned with highly rationalized (i.e. nowadays.

36
 ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

Trucks

Containerization has led to the development of

numerous special trucks and trailers. They are
equipped to carry at most two 20’ containers
simultaneously or one 40’ container. Australian
road-trains are an exception and can transport
up to 16 such containers at the same time.

The number of trucks converging upon the depots

and storage areas may be considerable.

Aircraft

Air transport was “containerized“ at a very early

stage. Planes used exclusively for cargo, as well as
combined passenger and cargo planes, mainly
carry small dedicated standard aluminium contain-
ers (called igloos) which are designed to fit into the
cross-section of a specific type of aircraft fuselage.
For air cargo that cannot be stowed in igloos, so-
called “tins“ are used. These are very slim plat-
forms made of light alloy incorporating a lashing
system specially designed for aeroplanes. Occa-
sionally, 10’ and 20’ sea containers may also be
carried by large cargo planes, but owing to their
substantial tare weight they are not an economic-
ally viable option for carrying air cargo on a regu-
lar basis. For this reason, aircraft have not yet been
incorporated in the transport chain of the sea con-
tainer.

When transporting expensive or high-security

cargo, however, there is a growing trend to make
greater use of aircraft as a means of conveyance in
the otherwise traditionally earth-bound intermodal
transport chain. It may be assumed that the use of
lighter materials for the containers themselves will
accelerate this development in the future.

Intermodal transport

The term intermodal transport basically describes

the use of two or more of these means of trans-
portation for the conveyance of containers, thus
avoiding the physical handling of the cargo itself.
This is the very idea that prompted Malcolm
McLean to “invent“ container transportation way
back in the late fifties and to go intermodal,
although the term itself was not used at that time.

37
44 MS BAUMWALL (658 TEUs) – 45 MS GOLD EAGLE (1,157 TEUs) –
a typical feeder ship. saving fuel with auxiliary sails.

48 MS BORUSSIA DORTMUND (700 TEUs), 49 MS CTE ALGECIRAS (1,131 TEUs).

open-hatch type container feeder ship
(without hatch lids).

52 MS WERDER BREMEN (700 TEUs). 53 MS NORASIA SALOME (1,388 TEUs).

using the sides as advertising space.

38
46 MS CONTSHIP ROME (2,205 TEUs). 47 MS VILLE DE MIMOSA (3,940 TEUs) –
a Panamax container ship.

50 MS MONTEVERDE (2,274 TEUs). 51 MS OOCL SHANGHAI (5,430 TEUs) –

a post-Panamax container ship.

54 MS NORASIA FRIBOURG (2,780 TEUs) – 55 MS HANJIN COPENHAGEN (5,618 TEUs) –

an open-hatch container ship. another post-Panamax container ship.

39
 56 Containers also reach remote parts of the world. 57 Loading of containers for air transportation.

59 Fully-cellular inland container vessel.

40
 ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

58 Double-stack container transport on special railcars (48’ container on the upper layer).

41
ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

42 60 Jumbo cargo plane, also for special cargo loaded in general-purpose containers.
61 View from the control cabin of a container crane.

62 Stern of a container ship with Panamax dimensions. 43

ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

TERMINALS AND EQUIPMENT repair and maintenance shops and for containers
that are waiting to be repaired, inspected, or over-
All the major ports of the world have been adapted hauled. There must also be separate storage areas
to accommodate container traffic. In addition, a for containers with hazardous materials and for
large number of purpose-built container terminals reefers that have to be connected to the terminal’s
have sprung up over the past decades to accom- refrigeration system or power supply.
modate the ever-increasing volume of container
traffic. These container terminals (also known as Most terminals also have a packing station (called
container yards) are usually sprawling areas. a container freight station or CFS). Here, goods
that have been delivered break-bulk to the port and
On the quays there are special gantry cranes account for less than a full container load are
equipped with adjustable spreaders for loading stowed (“stuffed“) in pier-to-pier containers. When
and unloading containers of various sizes. Like the they arrive at the destination port, these pier-to-
container vessels, these by no means small cranes pier containers are again taken to a CFS where
have continually increased in size over the years. they are unloaded (“stripped“). The goods are
They embody the essential features of container- either handed over to the individual consignees at
ization: they constitute a major investment and are the CFS or forwarded by conventional means. In
usually operated by a single specially trained per- this way, the thriving break-bulk service of the past
son. Although modern container cranes are has to some extent been maintained in the con-
equipped with a range of electronic aids to speed tainer era.
up operations, an immense amount of concentra-
tion is still required on the part of the operator,
who therefore needs to be relieved at short inter- STANDARD MODES OF TRANSPORT
vals. He is assisted by a supervisor working on the
quay or on the ship. They can handle up to 90 con- The transport chain involves carrying containers
tainers an hour (a peak value that can only be by road, rail, and inland waterways from the point
maintained for a short time). of loading to the port of dispatch and from the
port of discharge to their final destination. There
Large yards are required to store the containers are a number of new expressions and definitions
awaiting transportation and to guarantee the associated with multimodal and intermodal trans-
smooth transshipment of the containers by the port:
gantry cranes in line with the stowage plan. The
containers are normally transported from these FCL (full container load) means that the consign-
storage yards to the loading berth or railway trans- or’s goods fill the container. The full container is
shipment yard by straddle carriers or by tractors delivered to the container terminal and collected
and chassis which handle the entire ground-level from there.
transport inside the terminal. Large telescoping
stackers known as reachstackers and smaller (rub- LCL (less than container load) means that the con-
ber-tyred or rail-mounted) mobile gantry cranes signor’s goods do not fill the container and are
(rail or yard gantry cranes) are used to stack and transported along with other cargo in the container.
re-stack the containers. There are plans to intro- The container carrier is responsible for stowing
duce fully automatic handling systems and these and/or unloading these goods
are now being tested. In some ports they are
already operational. An FCL/FCL shipment is consequently a door-to-
door container shipment, while an LCL/LCL ship-
Today, all logistic processes in the terminal – ment means a pier-to-pier (or depot-to-depot) ship-
including the loading of ships, trucks, and trains – ment.
are aided and controlled by computers with an
online connection to the operation centres of the Mixed forms are naturally also possible, such as
container carriers and shipping companies, and in door-to-pier or pier-to-door (LCL/FCL, FCL/LCL).
many cases to customs authorities, police, and These generate other problems relating to the pre-
shipping agents. carriage and on-carriage stages, packaging, hand-
ling, and the risk of theft and pilferage. Moreover,
As a rule, large storage areas are needed in the the container terminal and the CFS need not be
container terminals for empty containers that are located inside the port terminal but may be in the
waiting to be used. Space is also required for vicinity or even further inland.

44
 ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

63 General view of the equipment used in the container transport chain and its interfaces: 64 Driver’s view from a straddle carrier.
trucks, straddle carriers, gantry cranes, container ship.

In the case of FCL, the container is “stuffed“ (and

the cargo secured) by the shipper, i.e. the dispatcher,
and “stripped“ by the recipient of the goods.
Usually, the container leaves the port or terminal
area to be stuffed or stripped and then proceeds to
the corresponding pre-carriage or on-carriage port
or terminal.

The loading and unloading of LCL containers at the

port terminal or the corresponding inland terminal
(CFS), on the other hand, is the responsibility of
the carrier, who organizes (and pays for) these
operations. The carrier is either a shipping company,
or a container carrier that does not operate ships of
its own and merely rents slots on vessels instead
(non-vessel operating common carrier), or a con-
solidator (forwarding agent).

CONTAINER TERMINOLOGY

Like all other fields of commerce and technology,

worldwide container traffic has produced its own
particular jargon with innumerable technical terms
and abbreviations for its many services and prod-
ucts. At the end of this brochure we have appended
a short and by no means exhaustive glossary
of common expressions and abbreviations. It is
intended as an aid for marine insurers who are
confronted with this terminology in survey reports
and other cargo-related papers when handling
losses.

45
46
ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

47
ORIENTATION IN THE WORLD OF STANDARDIZED CONTAINERS

48
49
NOTORIOUS PROBLEMS IN CONTAINER INSURANCE

NOTORIOUS PROBLEMS in container insurance

03
INSURABLE INTERESTS AND CONDITIONS . . . . . . . . . . . . . . . ....... 51
PROBLEM FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... 53
CONTAINER HULL INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . ....... 54
CONTAINER THIRD-PARTY LIABILITY INSURANCE . . . . . . . . . ....... 55
CONTAINER INSURANCE MARKETS . . . . . . . . . . . . . . . . . . . . . ....... 55

A simple 20’ standard container may be purchased today for

around US$ 1,750. Reefers normally cost between US$ 7,500 and
US$ 20,000, while tank containers – depending on the type – range
from US$ 15,000 to US$ 200,000 (and more) in special cases.
Assuming an average value of US$ 2,500 per container, a fully-
laden 6,000-TEU container ship would be carrying containers worth
US$ 15m altogether. It therefore stands to reason that container
investors are anxious to have their risks covered by insurance.

COMPOSITION OF WORLD CONTAINER FLEET BREAKDOWN OF SPECIAL CONTAINERS

BY TYPE

Open tops 30.4

Integrated reefers 22.8

Insulated vans 11.2

Folding flat racks 6.8

Fixed flat racks 5.5

Platforms 5.4

Ventilated vans 5.3

Tanks 4.9

Bulk units 4.0

Standard containers 86.0% Others 1.9

Special containers 14.0%

Half-heights 1.8

Percentage of worldwide container fleet

50
 NOTORIOUS PROBLEMS IN CONTAINER INSURANCE

INSURABLE INTERESTS AND CONDITIONS To begin with, the lessor – who owns the contain-
ers – is interested in avoiding any kind of financial
Any number of companies involved in the trans- loss due to physical loss or damage. That interest
portation of containers may have an economic – is maintained even if – as is usually the case – the
and therefore insurable – interest in the associated lessee contractually agrees to assume the risks
capital and liability risks. This applies to shipping associated with using the containers, including the
companies and other transportation and logistics obligation to obtain insurance cover.
companies, such as road hauliers, forwarding
agents, and railway companies, regardless of In addition to straightforward lessee insurance
whether they are combined transport operators schemes, there are arrangements such as those
(CTOs) and have their own container fleets for the included in Damage Protection Plans, for instance,
entire transport chain or merely take charge of under which the lessors themselves obtain insur-
third-party containers for individual legs of the ance cover – naturally in return for higher leasing
journey. It also applies to operators who offer their payments. Furthermore, it is also common for larger
services for the entire journey or for individual legs leasing companies to obtain their own additional
using their own containers although they do not insurance to cover the residual risks (such as those
have their own conveyances, such as non-vessel associated with repositioning containers) and con-
operating common carriers (NVOCCs). Some cargo tingency cover for the aforementioned main con-
owners, such as manufacturers, ship their goods in tainer covers. Operators of container depots to
their own containers. whom leasing companies or CTOs have assigned
the maintenance of their containers may also be
About half of the world’s containers are supplied contractually obliged to obtain insurance cover on
by leasing companies, without which it would have their own behalf.
been impossible to finance and thus accomplish
the enormous expansion in container traffic that The days in which many marine insurers considered
has taken place. This results in insurance and co- including containers in vessels’ hull insurance –
insurance interests of both concurrent and sequen- more or less as special equipment – are definitely
tial nature. On account of the different interests over.
and risks involved, they must be recorded accur-
ately by the underwriters and defined as precisely Experience shows that, depending on the trading
as possible in the insurance policies. area and the composition of the cargo, it is neces-
sary to have 2.5 to 3.5 times as many containers as
each vessel can carry. Before and after the sea leg
of their journey the overwhelming majority of con-
tainers go their own way, without any connection
to the specific vessel used to transport them. In
GLOBAL CONTAINER MARKET this day and age of consortia and syndicates, only
a fraction of the containers carried by many ships
4%
are owned directly by the shipping company, and
far more are owned by cooperation partners or
even competitors.

Most of the world’s insurance markets regard con-

tainer insurance as an independent line of busi-
51% ness. In view of the mobility intrinsic to containers,
it is usually classed as a type of marine insurance.

The insurance covers three areas associated with

45% containers: physical loss or damage to the insured
container, including special risks such as loss of
use or cost of return transport if the user runs into
Shipping lines 51.0% financial difficulty; confiscation of the insured con-
Top ten lessors 45.0% tainer and political risks; and finally, liability losses
due to third-party claims for damages in conjunc-
Other lessors and others 4.0%
tion with use of the insured container.

51
 65 Cover note. 66 “22,000 tons of steel just for the hull!” – information
brochure about a container ship of the 3rd generation.

52
 NOTORIOUS PROBLEMS IN CONTAINER INSURANCE

Some markets have drawn up their own standard folios, which are ostensibly easier for insurers to
terms, particularly for insuring the container itself. handle and monitor, there still remains the possi-
In the majority of cases, these terms have been bility of long-distance shipments on occasion and
drawn up on an all-inclusive basis (all risks) and on the loss or theft of complete containers.
a limited basis (total loss only and/or certain types
of expenditure, such as salvaging costs and gener- – Containers are first and foremost boxes that are
al average contributions). made for transport and are therefore treated as a
working piece of equipment. It is the container
However, container hull and third-party liability and not the cargo that is handled, transshipped,
insurances have always been an area characterized stored in the open, transported, and thereby
by highly individual clauses and exclusions in the exposed to a whole variety of climatic and
standard terms and conditions, not only as a mechanical stresses. On average every container
means of providing tailor-made cover but also as a is damaged at least once a year in such a way
way to take advantage of an excessively competi- that it is no longer safe to use.
tive situation.
– Apart from those of special design, containers
are “cheap” insured objects. They can be leased
PROBLEM FACTORS for as little as US$ 1–1.5 a day! In most cases,
the companies or individuals that handle them
The variety of policy designs and the relatively do not own them. This leads to carelessness and
small number of insurers in this line of business, a lack of interest in the fate of individual contain-
plus the comparatively large total premium vol- ers. Even with all of today’s computerized con-
ume (the premium paid by a major container oper- tainer control systems, it has proven exceedingly
ator for container insurance may easily be as high difficult to establish strict service and repair con-
as the premium required to cover the entire fleet trols which adequately ensure that individual
for hull insurance and protection and indemnity containers, let alone entire fleets, are maintained
(P&I)), are a reflection of the permanent problems and repaired properly. The performance and
facing this class of insurance: quality of repairs suffer under the enormous
pressure of competition and, as far as ongoing
– In spite of standardization, design and safety controls are concerned, the costs incurred for the
conventions, and continuous classification, the inspectors alone are more or less prohibitive.
quality produced by the over 60 container manu-
facturers around the world varies considerably. – Both the insured and the insurer inevitably
depend on third parties – such as a terminal or
– Containers tend to be “globetrotters”. Conse- depot – to report any loss or damage. In practice,
quently, even in the case of small “local” port- it is virtually impossible for the insured to imme-

Limits of indemnity and

premium breakdown of a container line

8%

12%

45%

Shipowners’ liability: limit of indemnity US$ 4.2bn/45.0%

Hull insurance: insured value US$ 1.1bn/36.0%

Container hull and liability: limits of indemnity/12.0%:

– Hull US$ 0.7bn
35% – Liability US$ 0.5bn

Loss of hire: limit of indemnity US$ 12m p.a./8.0%

53
 diately report all incidents with a certain loss
potential as required in the terms and conditions
of most insurance policies. This task has to be
delegated to the professionals involved in the
container transport chain.

– The moral hazard inherent in container insurance

is substantial because the parties involved are
normally exposed to fierce global competition
and extreme pressure on their profit margins.
67–68 Containers must be loaded, secured and transported properly!

CONTAINER HULL INSURANCE

Containers are only brand new and unused once in

their life cycle. It is therefore hardly surprising that
the insurance for the initial delivery of a new con-
tainer, which is taken out by the manufacturers as
a rule, is the only type of container insurance that
does not pose any problem.

Losses due to improper handling predominate in

many statistical analyses. This is particularly evi-
dent in the case of containers used for short dis-
tances with high transshipment rates. Incorrectly
set spreaders damaging the roof of containers or
fork-lift trucks piercing the side walls or damaging
the bottom are everyday occurrences. Despite the
strength of the container frame, it is not uncom-
mon for containers to be distorted by being
stacked too high or with too much weight on
uneven ground in the terminals.

Losses involving damage caused by the sea crash-

ing against containers stowed in exposed positions
on deck are also increasing.

The central problem in hull insurance for contain-

ers is the length of their service life and the associ-
ated wear and tear.

Insurers that write the customary one-year cover

on an all-risks basis should insist on the sum
insured (ideally the replacement value) being sub-
69 Regular cleaning is required to prevent damage to the load and to the container ject to a depreciation scale. This should commence
(e.g. by acids and other aggressive materials). in the second year at the latest and decline from
70 Regular maintenance and repair of the container is essential.
roughly 100% to 30% within a period of years con-
ditional on the type of container and how it is put
to use. A damaged container may soon be
declared a constructive total loss because, in eco-
nomic terms, purchasing a new container often
makes more sense than having the old one
repaired. Although indispensable from an under-
writing point of view, high deductibles can easily
constitute such a large proportion of a container’s
value that container insurance becomes unattract-

54
ive for the prospective client. Moreover, tion with container accidents, there are many par-
deductibles are prone to generate running battles ties, in addition to the owners of the cargo, that
on the question of which and how many of the might be inclined to claim against any of the com-
loss events drawn together in a claim actually trig- panies involved in the transport chain (e.g. private
ger their application. individuals, health and personal accident insurers,
terminal operators, and public authorities).
When repairs are needed, they can hardly ever be
carried out at the container’s home base under the Particularly in the case of leased containers, the
insurers supervision – in spite of the fact that the lessors and their insurers often find themselves
possibilities for manipulation in the container confronted many years later with a whole series of
inspection and repair business are comparable claims for damages actually addressed to the lessee
only to those of the automobile sector. or the lessees vicarious agents. Although they are
not in any position to say much about the grounds
And as far as large losses and total losses are con- or justification for these claims, they are compelled
cerned, container insurance has a number of spe- to defend themselves and incur claims defence
cial features that are not exactly advantageous to costs even if the claims are ultimately declined.
the insurer either. In most cases, for instance, the
insurance terms and conditions stipulate that gen- If faced with a third-party liability claim, the carrier
eral average contributions are to be indemnified in may not have much chance of recovering anything
full even if the standard contribution value of the from a consortium or from other companies in the
containers exceeds the insured value. The trans- transport chain. This may be due to the complexity
port of containers on deck is included in the insur- of the legal system or for purely economic rea-
ance cover without any restriction nowadays. This sons. At any rate, the financial loss soon falls to
also applies to containers carried on non-container the container liability insurer, the party with the
vessels, semi-container ships, and open-top con- “deep pocket”.
tainer ships – even if their position on deck means
they are particularly exposed to damage by high
seas and heavy weather. CONTAINER INSURANCE MARKET

But that is not all. If, for example, the cover also In spite of the substantial premium volumes, which
includes the cost of repatriation as an element of are viewed with envy by many an insurer, the
loss minimization or as a specially agreed exten- number of markets offering cover for containers
sion, the insurer is left with the vague hope that remains very small.
the number of containers used over a wide area
will be small. And although “insolvency” (of the The business is written by specialist insurers, and
carrier, the lessor, or the lessee) is basically ex- with particular success by the mutual companies.
cluded as a cause of loss, it is very difficult for the Container carriers, leasing companies, terminal
insurer to establish, and indeed it is often reinstated operators, hauliers, agents, and the other parties in
in the policy. Furthermore, the various accumu- the container transport chain are offered an all-
lation factors associated with major losses during round insurance product on an all-risks or named-
ocean transport or storage on land are often perils basis, including the special covers already
impossible to anticipate and only become apparent mentioned for confiscation, repatriation, and polit-
when an insured event has occurred. Even if the ical risks (including war on land). With insurance
stock of containers and their value are determined models geared to the practical needs of insurers
with great attention to detail and limits of indemnity and a wealth of expertise acquired over a period of
are specified in the individual policies, there is no many years, these specialist insurers are a major
substitute for carefully planned reinsurance cover! challenge to would-be competitors. The container
insurance market requires that all the players have
an in-depth knowledge of the subject, are able to
CONTAINER THIRD-PARTY LIABILITY INSURANCE provide intensive service, and are in a position to
offer property insurance for the container transport
Third-party claims for damages may be asserted hardware in combination with the corresponding
against the carriers or owners of containers in vir- public liability insurance.
tually every part of the world – and on the basis of
highly divergent liability systems. In the event of There is a great deal of overlap between the vari-
property damage and/or personal injury in connec- ous types of cover offered in container insurance.

55
NOTORIOUS PROBLEMS IN CONTAINER INSURANCE

At the same time, insureds are seeking cover for

ever-increasing sums insured and are seeking
more and more protection against loss of use and
other kinds of operational consequences – a diffi-
cult task, even for marine reinsurers.

71 Container stack with ducted reefers.

56
57
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

04
MEANS OF TRANSPORTING CONTAINERS
AND THEIR INSURANCE

OCEAN-GOING VESSELS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
INLAND WATER TRANSPORT VESSELS AND OTHER CONVEYANCES . 74

OCEAN-GOING VESSELS

When the first fully-cellular container vessels went into service in the late
1960s, they were regarded with considerable scepticism by marine insurers on
account of their special characteristics. Wherever permitted by market practice,
a “prototype surcharge” was applied.

The fact that container vessels had a much higher The hull underwriters’ fears were unfounded.
ratio of sea days to port days than conventional Thanks above all to modern computer-aided
ships meant that they were also exposed to rough design and the calculation methods used by ship-
weather conditions for much longer periods. They builders and classification societies, the vessels’
usually travelled at much higher speeds than con- cellular structure proved to be strong enough to
ventional ships. Moreover, they had a new and withstand the greater torsion stresses caused by
hitherto untested cellular structure which was the motion of the sea and the different loading
designed to provide sufficient strength in spite of conditions. At the same time, container ships
the unusually large opening in their decks (some- turned out to be a particularly low-risk class of ship
times more than 85%). to insure for their new construction value and they
were generally repair-friendly. The traditional
terms and conditions of construction and hull

58
 MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

72 Container ship in heavy seas.

insurance policies did not need any modification. ning, nowadays the task of shore-based planning
Whenever problems arose, it was soon found that and co-ordination offices, and the carriage of bal-
they were related not specifically to the features of last water.
container ships as such but to general develop-
ments in shipping and shipbuilding. Although not frequent, accidents due to instability
do happen – typically in exceptionally high seas –
These included such developments as: the intro- if the individual factors for the stability calculations
duction of the bulbous bow, which acted like a ram are grossly “undermined” by reality. This is the situ-
in the event of a collision (although in fact the ation, for instance, when the weight and centre of
double-walled structure of container ships tended gravity of the cargo inside the containers signifi-
to limit the scale of damage); the unacceptable fail- cantly exceed the values recorded in the official
ure rate of automated ship’s systems in the initial documents or empirical expectations and they
phase; the trend towards more and more expen- have not been or could not be verified – as is
sive losses involving the vessels’ engines as a sometimes the case even today. A vessel’s stability
result of manufacturers increasingly completing may also be dangerously reduced if there are large
their tests on new types of engines in the course of free surfaces inside tanks; or if substantial extra
daily operations at sea rather than in the factories weight builds up on deck as a result of ice forma-
and shipyards. tion or breaking seas which do not drain off quickly
enough between the deck containers.
Container ships currently account for roughly 10%
– and rising – of the world’s total tonnage. Their As a result of ongoing improvements in vessel
age structure is twice as good as that of the sec- design and endeavours to increase slot capacities
ond-best class of ships (with 60% of container ton- while retaining the vessels’ current dimensions,
nage being less than ten years old). And as a rule additional slots can nowadays only be created on
even relatively old container ships are in a good deck and no longer in the hold. In many cases, this
state of repair because that is what the speed and can only be done by raising the number of tiers on
quality of the container transport system and the deck. At the same time, limitations on the width of
competitive situation require. vessels play a less significant role nowadays – at
least as far as feeders and medium-sized container
Nevertheless, there are also a number of critical ships are concerned. Accidents due to instability
aspects that hull insurers should not overlook: are therefore much less likely to impact hull insurers
in the future.
The stability of container ships and the additional
stability reserves they need are of particular impor-
tance owing to the vessels’ high centre of gravity.
This is accounted for by computer-aided load plan-

59
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

Local stress and deformation of a container ship

(exaggerated representation) in heavy seas using
finite-element calculation models

73 Torsional stress.

74 Load due to bow flare slamming.

60
75 Bending load (hogging).

61
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

76 Local deformation of ship structure due to bow flare slamming.

77 Container ship in dry dock. Due to the bulbous bow, the dynamic bow
pressure of the ship is changed so that fuel saving up to 10% is possible.

78 A bulbous bow can project more than 8 m and be mainly

below the water line – a particular hazard in the case of
collisions and during docking manoeuvres.

62
79 Ram impact effect following a collision with a bulbous bow.

63
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

Ship on
wave crest

Ship in
wave trough

Ship in
oblique wave

80 Finite-element models for design analysis of container ships.

64
65
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

In spite of the attention given to detail at the Whether the spectacular loss of the MSC Carla,
design stage, the renewed trend towards higher which broke apart in heavy weather, was related to
speeds has led to increasing problems with the the vessel having been lengthened and whether
mechanical strength of vessels, resulting in more there are any conclusions that hull insurers should
instances of structural damage, particularly in the draw from this as far as their portfolios are con-
case of very large container ships. The sheer size cerned, remains to be seen.
of these vessels, the enormous distance from the
bridge to the bows, the height of the stem which A problem that commonly affected break-bulk
obscures the view ahead, and the immense differ- freighters is gaining momentum in container ship-
ence between eye level and sea level: these are all ping too: cargo fires. They are difficult to access
factors that may cause even experienced crews to even on deck and particularly if they start in con-
lose their immediate sense of the state and force tainers with hazardous materials. It is often beyond
of the sea. the capability of the crews, continually dwindling
in size as they are, to get them under control suc-
This goes hand in hand with schedules that are cessfully. In spite of the segregation requirements
sometimes very tight and the untiring efforts of the of the International Maritime Dangerous Goods
crew to keep to these schedules – two classic (IMDG) Code and the adherence to them when
ingredients of numerous accidents due to ships stowing containers loaded with hazardous cargo,
not reducing their speed in good time or steering the sheer volumes involved (sometimes account-
the wrong course in heavy weather. ing for between 10% and 40% of the cargo) make it
increasingly likely that more cargo fires will break
Vessels move through the water in six degrees of out, constituting an environmental risk besides.
freedom. Of these, the rolling motion exerts the The outcome may easily be an actual or construct-
greatest influence on the way containers behave in ive total loss of the vessel, as recent experience
high stacks on deck. Yet the relationship between has shown.
the torsion of hull and hatches, cargo movements,
and the various lashing and fastening materials is Many hull and cargo insurers are still very con-
still not fully clear, neither in theory nor in practice. cerned about two groups of properties specific to
the design of container ships:
Experience with major hull losses in trans-Pacific
traffic also involving loss of or damage to contain- Since the early nineties, some jumbo container
ers as a result of heavy weather shows that the ships and feeders have been operating with com-
loss potential is immense in both areas, although pletely open, hatchcoverless hulls, the aim being to
the containers and cargo appear to be more loss- make loading and unloading even easier, quicker,
prone than the vessels themselves (for further and cheaper and to cut down further on the time
details see Chapter 08). spent in port. The initial scepticism – engendered

CONTAINER SHIPS TOTAL WORLD MERCHANT FLEET

80 800

60 600
Million DWT
Million DWT

40 400

20 200

0 0
1989 1991 1993 1995 1997 1999
1989 1991 1993 1995 1997 1999

66
 MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

among other things by the fact that the cargo is able, newly established or newly combined and
now even less sheltered – has gradually declined expanded portfolios of modern container ships can
in the light of the positive experience gained in easily provide the initial balance necessary for
practice. Although the relatively large width of profitable business, as statistical analyses have
these vessels and their high freeboard appear to revealed. In view of the capacities available in the
have withstood all extreme high seas and weather insurance market and the fall in the value of con-
risks to date, it is only a matter of time before one tainer ships in recent years, the required degree of
of these vessels comes dangerously close to the reinsurance can be easily obtained nowadays with-
limits of its additional bilge capacity. out assigning to reinsurers only the peak risks with
low premiums and high liabilities, as used to be
As far as stranding and salvaging are concerned, the case.
many hull insurers expect modern, predominantly
gearless container ships to have fewer self-help However, there is one additional strain on hull
options. This will lead to higher salvaging costs insurers of container ships that has definitely
and possibly higher general average expenses, become an everyday reality. General average cases
possibly requiring indemnification on the part of involving containers may concern hundreds or
hull insurers (but only in the case of relatively even thousands of parties, the so-called cargo
small cargo values and relatively expensive ves- interests. In view of the complex and time-consum-
sels). ing claims settlement procedures, more and more
hull policies – for higher and higher sums insured
Although it has become more or less secondary in – are tending to include general average absorp-
importance to hull insurers today, there is another tion clauses. These stipulate that the GA contribu-
problem which had a dramatic but unfortunately tions are assumed in full by the owner of the ves-
not widely noted effect on the hull portfolios of sel and hence by the hull insurer, without any
many insurers and reinsurers in the early days of further distribution of the general average.
containerization. The many conventional freighters
were replaced by smaller numbers of container
ships of rapidly growing size and hence distinctly
higher value. While the exposure of individual risks
increased dramatically, the balance in the portfolios
declined considerably, and the premium remained
– at best – unchanged. Although this was histori-
cally important in the development of marine hull
insurance, it no longer has much impact on the
day-to-day business of insurers and reinsurers.
Provided the premium level is technically reason-

INSTITUTE OF SHIPPING ECONOMICS CONTAINER SHIP FLEET

AND LOGISTICS (ISL), 1999
59
60 4,000

47 47 3,500
TEU total (in thousands)

45 3,000
No. of ships in %

39
37
33 2,500
31 32
30 31
30 29
2,000
25
23
21
1,500
16
15 1,000
500
0 0
Tankers Bulk carriers Container ships General Passenger/Cargo
cargo ships passenger ships
1980 1983 1986 1989 1992 1995 1998

Ships of 4,000 TEUs and above

Up to 1978
3,000 TEUs to 3,999 TEUs
1979–1988
2,000 TEUs to 2,999 TEUs
1989–1998
1,000 TEUs to 1,999 TEUs
500 TEUs to 999 TEUs
100 TEUs to 499 TEUs

67
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE
81 Fires in containers on ships
mostly develop as a conse-
quence of collisions (flying
sparks) or self-ignition and/or
wrong handling/stowing of
cargo.

82 Grounding of container ship –

not always an iceberg is
required to lose expensive
cargo!

83 Severe weather damage on a

jumbo container ship.

84 Grounding of barge carrying

containers.

68
85 Container unintentionally
loaded on a cruise ship after a
collision with a container ship.

69
86 Container ship with a broken back
after stranding. Later the ship broke
itself up using its own shipboard
cranes!

87 Detail view of “breaking point” of the hull.

70
 MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

88 Container ship broken apart in

heavy seas. The foreship with more
than 1,100 containers sank during
salvage operations.

89 Stranded container ship; an oil slick

can be seen in the foreground.

71
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

90 A fire in just one container with hazardous cargo

can have devastating effects.

72
73
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

INLAND WATER TRANSPORT VESSELS AND

OTHER CONVEYANCES

Hull insurers of special container tonnage have

acquired even less negative experience with inland
water transport vessels to date than with ocean-
going vessels. The values involved are smaller and
the sums insured naturally lower. Bad weather
with rough waters and other natural hazards have
little or no significance and – if the worst comes
to the worst – it is easier and usually cheaper to
salvage and repair the affected vessel.

As far as the other conveyances used to transport

containers are concerned – trucks, trains, and
aeroplanes – the focus of attention from the very
beginning was on reliable and secure locking
mechanisms. Consequently, insuring the con-
veyances, unlike the cargo itself, has not come up
against any problems that were not already known
before the introduction of containerization.

91 General average documents.

92 An inland container ship passing through a lock.

74
75
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

76
93 Ice passage on the Great Lakes.

77
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

94 Jumbo container ship leaving the shipyard.

78
79
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

95 Jumbo container ship.

80
81
96 Jumbo container ship under tug assistance.

82
MEANS OF TRANSPORTING CONTAINERS AND THEIR INSURANCE

83
ASPECTS OF INSURANCE FOR CONTAINER CARRIERS AND TERMINALS

05 INSURANCE FOR CONTAINER CARRIERS

Aspects of
AND TERMINALS
COMBINED TRANSPORT OPERATORS . . . . . . . . . . . . . . . . . . . . . . . . . . 84
TERMINALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

COMBINED TRANSPORT OPERATORS

With the spread of containerization, many of the conventional break-bulk liner

companies developed into container carriers in the form of combined transport
operators. The core element of their liability as ocean carriers, namely their liability
under contract (and possibly in tort) for the carriage of goods, is covered by P&I
insurers. These insurers are usually mutual companies and offer the ocean carriers
comprehensive and above all fairly inexpensive insurance cover by pooling major
risks or reinsuring them with commercial reinsurance companies. The largest of
these companies soon adjusted to the change in their insureds’ liability and
absorbed the associated higher risk exposure of these container shipping clients
within their flexible classes of insurance.

97 Large container terminals can accommodate more than 40,000 TEUs.

84
 ASPECTS OF INSURANCE FOR CONTAINER CARRIERS AND TERMINALS

Third-party liability insurance options within P&I In the event of a claim, an efficient reporting
are limited though when NVOCCs or CTOs, nor- system will usually give CTOs and their insurers
mally land carriers or forwarding agents, have to an indication of the leg of the journey on which
be insured or included in the insurance. These the loss or damage has occurred and under what
clients are referred to the special market outlined circumstances.
in Chapter 03.
An efficient reporting system is a prerequisite for
The liability and insurance profile of a modern recourse action as such and also provides CTOs
CTO differs considerably from that of a conven- that have third-party claims lodged against them
tional break-bulk shipping company. It is much with the interesting opportunity of being able to
less concerned with the international liability con- take recourse to the parties in possession of the
ventions for ocean carriers, since fewer losses are container at the time of the loss on the basis of
now incurred while transporting the containers by subcontracts and other contractual agreements
sea. CTOs issue door-to-door bills of lading rather with terminals, railway carriers, road hauliers,
than port-to-port freight contracts as in the past. forwarding agents, depot operators, and other
Since most CTOs follow the rules recommended contracting parties (i.e. their vicarious agents).
by the International Chamber of Commerce for
combined transport bills of lading, they – and Professional CTOs with an efficiently organized
their insurers – also require practical and legal and tightly controlled container operation gener-
knowledge of the liability situation of the other ally have better loss figures (and above all lower
conveyances in the transport chain. basic losses) than conventional carriers. Their
(sub)recoveries are also frequently more
successful.

85
ASPECTS OF INSURANCE FOR CONTAINER CARRIERS AND TERMINALS

Given a high level of control and good organiza- The terminal buildings are mainly purpose-built
tion, CTOs are often able to prove that the con- structures with low-cost furnishings and equip-
tainerized goods cannot have suffered any damage ment (the only exception being the expensive
while being transported by the CTO. The claims computer hardware). Apart from these buildings
defence rates of such companies consequently and other fixed installations (repair shops, CFSs,
differ significantly from those of conventional power supply units, and refrigeration units) there
shipping companies. are large cranes and industrial trucks which indi-
vidually, and especially collectively, are worth sub-
Some CTOs outsource claims defence and claims stantial amounts of money. Despite their mobility,
handling to their P&I insurer’s correspondents, cranes and trucks are usually covered by machin-
with whom they already have a long-standing rela- ery or engineering insurance. They only appear
tionship, or even directly to their P&I insurer. This occasionally in marine insurance either as border-
not only provides insurers with an additional line cases or within the framework of package
source of income, but also allows them to directly policies. These pieces of equipment are, like con-
participate in shaping their risks – provided they tainer ships, normally in use around the clock
are sufficiently qualified and sufficiently aware of throughout the one-year term of the policy and
their clients’ activities. The large container carriers have provided many an engineering insurer with
rightly attach as much importance to efficiency in unpleasant surprises.
the handling of insurance claims as to their mar-
keting, their operations, and their sales organiza- Insofar as these terminals are not publicly owned
tion. or operated by the government and therefore go
without commercial insurance cover, they are nor-
mally covered by a series of other insurance poli-
TERMINALS cies for buildings and property, possibly with busi-
ness interruption insurance and often with addi-
Some CTOs are also terminal operators. Their tional special insurance for computer systems. In
liability is then no different from that of any other addition to the transshipment liability cover for
terminal operator. terminal operators already mentioned above, they
frequently also have conventional public liability
The liability risk for many terminals is still covered insurance (with elements of employers liability that
by insurance policies that evolved more or less by vary from country to country). As regards the scope
chance in the past. These constitute a random mix- of cover and the limit of indemnity, the public
ture of quayside liability, public liability, transship- liability insurance frequently follows the customary
ment liability, and warehousing liability, and rarely market standards for general liability insurance.
a well-coordinated combination. Most insureds
rely on standard hold-harmless agreements and Marine insurers may be tempted to comply with
the restrictions on liability specified in the small requests for this type of cover or extension, not
print of their own terms of business. Their true only in the interests of client orientation but also
exposure may suddenly become painfully clear with the intention of offering an alternative to the
though if, for instance, a container with a sophisti- special container insurances mentioned above.
cated precision machine – possibly the key elem- Nevertheless, it is always advisable to combine
ent for a plant nearing completion overseas – is forces with other underwriting sections in the com-
damaged on the quay. pany when an “all-in” package policy is requested
for such container terminals. In this way experi-
Container terminals naturally also have consider- ence is pooled. And if a single final premium is
ably more extensive insurance interests. requested by the client, this is the only way to
ensure that the various underwriting criteria are
Together with the container freight stations, the all considered and included in the calculation.
container terminals are key links in modern con-
tainer transport chains. Here too, Munich Re provides support with its
global experience. The trend towards mergers
Container terminals are usually extensive areas, between major container carriers and terminal
with a relatively small number of permanent build- operators, and even port administrations, is con-
ings and facilities but a large and ever-changing tinuing. And this is a favourable situation for com-
array of container-handling equipment. panies to organize their own international insur-

86
 ASPECTS OF INSURANCE FOR CONTAINER CARRIERS AND TERMINALS

98 Bill of lading.

ance programmes, increasingly with captive

constructions or with elements of alternative risk
transfer.

For some cedants, an awareness of such pro-

grammes or of the related products and practices
in other insurance markets to which they suddenly
gain access as a result of these international pro-
grammes may give them the decisive competitive
edge.

87
ASPECTS OF INSURANCE FOR CONTAINER CARRIERS AND TERMINALS

99 Reachstacker for transporting

empty containers at the terminal.

88
100 Container gantries for jumbo container ships.

89
POINTS TO NOTE WHEN INSURING GOODS IN A CONTAINER

POINTS TO NOTE WHEN INSURING GOODS

06
in a container

101 Container ship at berth.

FCL OR LCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SHIPMENT ON DECK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
COMPETITION AND CHOICE OF QUALITY . . . . . . . . . . . . . . . . . . . . . . . 91
LIABILITY AND RECOURSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
GENERAL AVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
PREMIUM CALCULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

Some marine insurers still believe that 30 years of container traffic, particularly
door-to-door transport, have brought a distinct improvement in the results as
far as cargo losses are concerned. That may be true in terms of the number of
claims, but, as in other sectors, the average size of these claims has in fact
constantly increased.

In the interests of their own cargo business, insurers are therefore well advised
to pay critical attention to a number of characteristic features of this transport
system.

90
 POINTS TO NOTE WHEN INSURING GOODS IN A CONTAINER

Container shipping companies and indeed all the COMPETITION AND CHOICE OF QUALITY
parties involved in transporting containers tend to
be very optimistic when talking about the advan- Container transport is characterized by extremely
tages of container transport – not only because of fierce competition nowadays. At the broad upper
the significant competitive interest they have but end of the scale, the transport services provided are
also because they are frequently unaware of the of truly high quality. Unfortunately, cargo owners
many cases in which those with an interest in the and their insurers do not always have a selection
cargo fail to seek recourse when the recipients dis- to choose from or any alternative solutions.
cover minor damage at the containers’ final destin-
ation. For this reason, all cargo insurers should This makes it even more important to examine the
gain their own impression of the situation by mak- age, quality, and cleanliness of the container
ing a detailed analysis of their own container specifically chosen for the intended shipment and
transport claims. to make sure that it is a suitable type, and not
make assumptions based on the ISO certificates or
ISM (International Safety Management) certifica-
FCL OR LCL tion of the container ships and their operators.

In all cases, they should know whether the insured

goods transport involves a full container load (FCL) LIABILITY AND RECOURSE
or a less than full container load (LCL). FCL means
door-to-door delivery of an unopened container. Container traffic and especially freight law are regu-
LCL usually means that the goods are transported lated by many different legal systems throughout
without the protection of a container during pre- the world so that recourse action in particular
carriage and/or on-carriage and stowed together requires the attention of in-house experts with
with other goods, thus being subjected to further many years of experience and pin-pointed external
handling or “manipulation”. support at least in more difficult cases.

All the goods to be carried as LCL shipments must Assigning these tasks to external agencies may be
be able to withstand all the strains of conventional a highly efficient and economical alternative in
transport and storage without the additional pro- spite of the assumed loss of knowledge this
tection of a container. The carrier or consolidator entails. This is particularly true if it involves a sub-
that puts the cargo together, loads, and secures it rogation office with global operations that keeps in
in the container must fulfil this task professionally. close contact with the client and maintains a
This requires the employment of highly qualified steady flow of information on its current activities
personnel with the necessary specialist know-how. and on the options available.
In practice, it is of utmost importance to select
quality service providers, meaning that the trans- Much thought has been given to the international
shipment companies and hauliers have skilled and standardization of legal regulations but as yet none
adequately trained personnel to make sure that the of the considerations have achieved any degree of
goods are intact when they reach the recipient. acceptance on a wide scale. The 1970 TCM con-
vention governing container shipments and stand-
ard contracts for combined carriage has hardly
SHIPMENT ON DECK any realistic chance of being ratified by the major
trading nations. In practice, (combined) container
Marine insurers must remember that their clients’ shipments are handled using a variety of legal docu-
containers are always stored outdoors and – con- ments, which have only partially been standard-
trary to their clients’ expectations – may be ized. Combined transport operators only issue
shipped in an exposed position on the deck of a through bills of lading, which may be based on
container ship or in an open-top ship. Here, at the their own terms of business and different legal
terminals, and throughout the transport (be it systems.
inland or sea), extreme fluctuations in temperature
and moisture must be considered “normal”. Ex- A multitude of legal disputes have arisen in this
perience shows that the danger of loss or damage regard, few of which have been settled by a court
due to heavy weather and/or high seas exists on of law. Three aspects are prevalent: the question
large and jumbo container ships too – and is of whether the loss location is known or unknown,
increasing! The slightest leak in the container may general average cases, and the problems of a
have serious consequences for the cargo. standard unit-based limit on the carrier’s liability.

91
 If the place of loss is known, the national law of PREMIUM CALCULATION
the country concerned is normally applied (in line
with the so-called network liability system). If, on Marine insurers have frequently discussed the
the other hand, the loss location is not known or question of whether the transportation of goods in
cannot be established beyond doubt, the leg of the containers has a positive or negative influence on
journey subject to the strictest laws is chosen the risk and what effect it should have on the pre-
(under the new transport regulations in Germany, mium. On this issue they have undertaken a rad-
therefore, the law of carriage by land). ical change of course on more than one occasion
over the past 30 years. In view of the fact that con-
When recourse action is taken against a container tainers are always apt to be shipped on deck, a
carrier, the carrier often exercises its right to limit number of marine insurers and in some cases
its liability per unit or package (equivalent in value entire markets initially charged an extra premium
to 666.67 special drawing rights, currently some for containers shipped on deck, thereby continuing
US$ 1,000) or by weight. Unfortunately, this is the principles developed for the insurance of con-
handled differently from country to country. ventional goods shipped on deck.

By and large, the courts have ruled that if the con- The loss experience gained over the years was
tainer is specified in the bill of lading without a generally positive and prompted them to eventu-
declaration of how many items it contains, the ally abandon this approach, which opened the
entire container must be treated as a unit of liabil- door to formal or hidden discounts on premiums
ity in accordance with the requirements governing for containerized cargo.
the carrier’s liability. However, if the number of
items making up the containerized cargo is stated In view of the large proportion of containerized
in the bill of lading, this is taken as the deciding trade and the pressure of competition on pre-
factor – to the cargo insurer’s advantage. The same miums, marine insurers have largely abandoned
also applies even in the case of “said to contain” all attempts to include containerization as a separ-
clauses. Under the terms of the widely applied ate risk factor in their pricing. Whether this will con-
Hague-Visby rules, the parties with an interest in tinue to be the case or whether it will be possible
the cargo and their insurers may also invoke the to restore premiums to a technically sound level as
weight-based liability equal to two special drawing a means of establishing an adequate basis for
rights, which is of greater advantage to them. profitable container cargo insurance business will
largely depend on two aspects: the loss experience
in container transport in the past and the appraisal
GENERAL AVERAGE of the problems to be expected as a result of
increasing containerization in the future. This is a
The handling and settlement of general average question that marine insurers will have to review
claims for container shipments may turn out to be again from time to time.
much more complicated than in other areas if only
because of the large number of parties with an
interest in the cargo. For practical purposes,
though not entirely acceptable in legal terms, this
is based to a large extent on a combination of
documented and assumed figures.

Not only vessel, freight, and cargo inside the con-

tainers, but also the containers themselves must
contribute to a general average. These mandatory
contributions are integral parts of all customary
covers under container, hull, and cargo policies
and are therefore generally also met by the marine
insurer.

92
 102 Capsized feeder ship with hatch lids out of place.

103 Containers floating in the waterway.

104–105 Besides damage to goods, pollution of the environ-

ment and the disposal of stranded containers are
considerable risk and cost factors.

93
ASPECTS OF ACCUMULATION

106 A classic example of accumulation.

UNKNOWN ACCUMULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
ACCUMULATION PER CONTAINER AND BY MEANS OF TRANSPORT . . . . 95
ACCUMULATION IN CONTAINER TERMINALS . . . . . . . . . . . . . . . . . . . . . . . 103
RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

All along the container transport chain, cargoes converge or are bundled
together in one way or another: on the container conveyances themselves and
in the phases of pre-storage, interim storage, and post-storage at ports, termin-
als, inland freight stations, CFSs, or merely on the premises of a forwarding
agent, land carrier, or consolidator. Such concentrations of values are exposed
to a variety of hazards and risk probabilities. These aspects are referred to in the
insurance industry as accumulation and insurers take account of them in what
they call accumulation control. Primary insurers and reinsurers in the marine
insurance sector are equally affected, albeit from different perspectives and
with different consequences.

Aspects of ACCUMULATION
07

94
 ASPECTS OF ACCUMULATION

The question of accumulation in connection with In the same way that reinsurance can be based on
container shipments has so far been approached in “any one policy/declaration/bill of lading”, the re-
a fairly undifferentiated manner, at least outwardly. insurance partnership can be based on “any one
Attention has focussed on the total loss of a large risk/bottom/vessel/conveyance” or on “any one
fully-laden container ship – which is something event/accident/occurrence” as the measure for the
that has never occurred in over 30 years of con- cession. Both versions and mixed forms involve
tainer traffic. The figures quoted in this context familiar advantages and disadvantages as regards
range from US$ 2bn to US$ 5bn. information and administration, as well as the
scope of reinsurance cessions; they limit or create
We are not in favour of encouraging an inflation a need for additional protection of the retention.
of large figures in such a serious matter without
deeper thought and have conducted several sur- In the event of a major loss, a great deal will inevit-
veys of our own. These may prove interesting for ably depend on the circumstances of the particular
all marine insurers, including those operating case concerned. Nevertheless, the nature of con-
outside the main container routes. tainer transport is such that a few general points
can be made:

UNKNOWN ACCUMULATION
ACCUMULATION PER CONTAINER AND BY
It is surprising to find that in spite of the global MEANS OF TRANSPORT
real-time communications and data network, mod-
ern policy arrangements are such that marine – “Single” accumulation per container
insurers are no longer informed as a rule when the
containerized goods they are insuring are about to Since almost any type of cargo can be container-
be loaded or have been loaded onto a conveyance. ized and transported on container ships, the value
Also, in today’s accelerated trading systems, the of the individual consignments within a container
freight documents are often issued inland, long may be considerable. Values of up to US$ 1.5m are
before the identity of the container ship or any not unrealistic for a single 20’ container when
feeder vessels is known (let alone whether the laden with such high-quality consumer goods as
container is to be stowed on or below deck). cigarettes, perfume, or electronic or optical equip-
ment.
For this reason, the individual conveyances are
hardly ever specified in declarations under open If containers are used to transport works of art,
cargo policies nowadays. antiques, or precision machines, the value can eas-
ily exceed US$ 5m. As already mentioned, this is
Bearing in mind the ever-growing capacity of mod- something terminal operators often appear to for-
ern container conveyances in conjunction with the get when calculating the sum insured for their
constant increase in the values involved – modern public liability insurance.
consumer goods, for instance – there is a clear
danger that hundreds or even thousands of con- In the case of LCL shipments, expensive cargoes
signments and bills of lading – with the associated of limited weight and size which are insured under
insurance policies or at least the declarations – different policies may easily congregate in one
will accumulate on a single journey without the container. But experience shows that the limits
insurers and reinsurers being aware of their max- mentioned above for the individual containers are
imum liability on that journey. rarely exceeded.

Whilst incomplete information on the insured – Air transport

cargo transport is in itself an obstacle to proper
underwriting, accumulation can become a veritable The above-mentioned limits do not apply to air
nightmare for insurers and reinsurers. How many freight, which is traditionally the domain of particu-
individual risks are involved and on what basis can larly high-quality goods and tight delivery sched-
retentions and reinsurance cessions be made with- ules. On the other hand, expensive individual car-
out one or both of the partners getting an unwel- goes in each container can normally be registered
come or possibly critical surprise? by the insurers in good time, thanks to the better
flow of information and the greater attention paid
by all the parties concerned.

95
 107 Marine reinsurance treaty documents.

96
 ASPECTS OF ACCUMULATION

The concentration of containers at the inland freight

centres (“hubs”) of major container operators,
forwarding agents, and consolidators does not
involve problems that are specific to containers.
In fact, the fire losses at such centres – some of
which have been substantial – have regularly
involved goods that were not or not yet container-
ized, whilst fully-laden containers and containers
that were being loaded and unloaded on the
ramps were usually pulled out of the danger zone
in good time in the course of fire-fighting.

– Road transport

In the majority of countries, road transport entails

a maximum accumulation of two 20’ containers
per truck unit.

– Rail transport

In most countries, railway trains do not usually

exceed a length of 60–80 wagons. Only the double-
decker trains criss-crossing the North American
continent reach lengths of 120–150 wagons, giving
a total of 240–300 containers. Owing to the topo-
graphical and geographical constraints involved,
these maximum lengths are unlikely to change
very much in the foreseeable future.

Experts doubt that a complete container train

would be a total loss if it derailed or crashed off a
bridge. The accident scenarios to date, particularly
those involving fires and explosions on board
moving container trains or in marshalling yards,
show that only a very limited number of adjacent
wagons are affected.

108 Uniform block stack in a packed container.

109 Fork-lift trucks loading containers.

110–111 Luxury passenger cars and motor bikes

are often transported individually.

97
ASPECTS OF ACCUMULATION

112 High values are also transported by road. 113 Loading of air cargo.

This is an aspect to which more attention must – Inland water transport

be paid in the future given the fact that new and
lighter materials will increasingly be used in the The capacity of the container vessels developed for
construction of containers and that the capacity of inland waterways has increased steadily to around
large container ships will continue to increase. In 500–600 TEUs for tug-barge combinations, and
theory, one hundred trains are needed in Europe to vessels with a capacity of 800 TEUs are soon to go
accommodate the entire cargo from a large con- into service.
tainer ship with 7,000 TEUs. In practice, with the
part-loads that are customary, between 40 and 45 Although these modern IWT vessels are well-
dedicated trains are needed. These have to be equipped and manned by professional crews so
assembled by the railway companies in or near the that, even on the basis of insurance loss statistics,
ports and then fed into the inland railway network. they may be considered safe conveyances, it
would be unwise to discount the possibility of a
The average time containers spend in the port area total loss of containers on an inland waterway.
– and therefore in the main accumulation area –
has fallen to only six hours. But capacity limits and
longer delays due to additional regulations on haz- – Accumulation on ocean-going vessels
ardous materials will soon make this difficult to
attain in many places, however tight the schedules The question of accumulation control is particularly
may be in the container transport sector. important for marine insurers when it comes to

98
 ASPECTS OF ACCUMULATION

114 An inland container ship: one of the safest and cheapest means of transportation but with considerable accumulation potential.

ocean transport. But does every marine under- sophisticated technology on modern container
writer in the course of his day-to-day business con- vessels.
sider the fact that growing capacity on-board has
led to ocean-going vessels regularly transporting The truth of the matter is, however, that improve-
container concentrations equivalent to those of a ments in the safety of vessels – particularly of con-
small or medium-sized container terminal? tainer ships – has paradoxically generated a new
risk potential of its very own. Since accidents have
The containers on these vessels are exposed to the become less common, many crews have no experi-
archetypal hazards of ocean travel: grounding and ence of an emergency situation and are therefore
stranding, capsizing and collision, windstorm, ice, unused to dealing with such incidents. And that is
and other natural perils, and fire and explosion. something which even training on a simulator can-
not remedy.
The analysis of shipping accidents reveals that
container ships are in this respect no different The ISM Code was designed to establish basic
from other types of ship: accidents at sea, though conditions for safe ship operations and can bring
steadily declining in number, are still primarily about further improvements in this respect, pro-
caused by human error. It is easy to attribute this vided it is implemented and applied correctly.
to the continuing reduction in manning and a lack
of training and qualification, with the result that Whatever the precautions taken, though, emer-
many crews cannot cope with the increasingly gency situations are almost always different from

99
100
 ASPECTS OF ACCUMULATION

115 Tank containers and hazardous goods should be stored in specially

designated areas.

101
ASPECTS OF ACCUMULATION

116 It is often difficult to establish the whereabouts of goods after accumulation losses.

what was practised in training courses and learned sizing because of incorrect ballasting or trimming
in theory. Although weather forecasts are more while being loaded or unloaded, or because large
detailed nowadays, the weather conditions are amounts of cargo have become dislodged at sea,
regularly misinterpreted on container ships of all or because the speed has not been adjusted in
sizes. The motion of the sea and the loads to heavy seas. These losses have so far only involved
which the vessels – and often the crews – are smaller container ships and, particularly, feeder
exposed are often assessed incorrectly. In many vessels.
cases, bad decisions on the action to be taken in
poor weather are only made worse by the pressure The accumulation values of containers, vessels,
applied by some shipping companies and charter- and terminals are difficult to determine precisely
ers to adhere to tight schedules. (thus warranting safety margins!). But why is this?

In October 1998, for example, four large container As far as the containers are concerned, the main
ships were involved in a single incident, namely a reasons are
hurricane in the Pacific. One of these vessels lost – the wide range of purchase prices because of the
no fewer than 406 containers and more than 1,000 many types of container available and the con-
of the remaining containers on deck were dam- siderable differences in price charged by different
aged or destroyed. manufacturers in different countries and
– the fluctuations in the market prices of new and
Navigation errors and the failure of the navigation used containers – and the vast differences in
instruments that are virtually standard on contain- their age and condition.
er ships nowadays such as radar equipment, plot-
ters, and anti-collision warning devices, have In terms of the containerized goods the main rea-
repeatedly been responsible for ships running sons are
aground and colliding. This results in losses not – the extremely wide variety of goods transported,
only under hull insurance but also under cargo – fluctuations in the volume of cargo and the util-
insurance if containers are destroyed or lost over- ization of available capacity from season to sea-
board. There have also been cases of vessels cap- son and market to market,

102
– fluctuations due to general market trends, and When valuing container ships, on the other hand,
– the general lack of accurate data on bulky goods, marine insurers have a reliable and readily access-
such as expensive industrial plant components, ible source in the form of the sums insured and
which occupy several slots on board but which agreed values for the various types and age classes.
usually fail to appear in statistics or lists – at least The collapse of the freight market has led to a
in TEUs. dramatic fall in ship prices too. These low prices
are used in the table below. In some future calcu-
The value of the cargo cannot realistically be docu- lations, therefore, the values should be adjusted
mented in a standard and reliable manner either upwards (or possibly even downwards) to be in
on the basis of the capacity used or on the basis line with the applicable market level for container
of the weight of the goods. Even if an average or ships.
flat-rate value could be calculated more or less
correctly, it would still need substantial correction The values in the table on page 113 speak for
in individual instances or would require the inclu- themselves. The disquieting, yet realistic prospect
sion of a sizeable safety margin since the criteria remains that a substantial proportion of the hull
mentioned above are subject to constant change. insurance for the vessel, the containers, and the
Moreover, the proportion of empty containers cargo – and possibly even the terminals as well –
(easily 10%) cannot be included in the calculation, may be covered by one and the same insurer and
as the leading container carriers are extremely that, in the event of a total loss, the sums exceed-
secretive about this for marketing reasons. ing the “per bottom” or occurrence limit of the
And economic trends can make these figures reinsurance treaties could remain within the in-
fluctuate by up to 50% within a very short space surer’s retention.
of time.

Nevertheless, a flat-rate valuation of container car- ACCUMULATION IN CONTAINER TERMINALS

goes is indispensable. The value used by Munich
Re is based on empirical values provided by aver- Determining container slot capacities at large port
age adjusters, container carriers, and leading for- and inland container terminals is a difficult task for
warding agents for the period from 1990 to the marine insurers. For strategic reasons, the termin-
present. als themselves announce very different figures,
which are sometimes at great variance with those
Taking a large number of individual reports as a published in trade journals.
basis, we calculated an average value of US$ 1,795
per tonne. This does not appear too unrealistic However, it must be assumed that individual
when considered in relation to the foreign trade terminals or terminal complexes at the larger
statistics for certain imported and exported goods. ocean ports such as Hong Kong have a maximum
It has also been found that cargo values have risen capacity of 63,500 TEUs. The figure is likely to be
significantly in relation to the weight – though not around 45,000 TEUs for ports such as Hamburg
in a straight line. and Bremerhaven and between roughly 12,000
and 16,000 TEUs for other well-known terminals
Based on the further observation that the average in major ports.
load of a 20’ container is 10 tonnes and a 40’ con-
tainer 18 tonnes, and allowing for a safety margin Depending on the individual lines of business in
of 10%, this yields an average value of roughly which the terminals specialize, there is a wide
US$ 20,000 for a 20’ container and roughly range in the numbers of connections available for
US$ 36,500 for a 40’ container – for the cargo reefers. The majority have about 200 connections,
alone! Average cargo values of almost US$ 100,000 although larger terminals may have between 600
per container have been reached on some voy- and 1,000 connections. In exceptional cases, they
ages, such as on routes between the United States may even reach 2,500 connections at peak times,
and Europe, as well as in trans-Pacific traffic. as is the case again in Hong Kong.

Compared with this method, a no more than fairly It may be useful in individual instances to deter-
reliable compilation of average or actual sums mine the capacities of inland container terminals
insured for container cargo in individual markets as well. The inland ports of Duisburg and Germers-
or trade relations would be, for obvious practical heim in Germany, for instance, have container
reasons, a difficult, if not impossible task. capacities of roughly 15,000 TEUs each!

103
ASPECTS OF ACCUMULATION

There is naturally little point in considering a ter- The scenario of an aircraft crashing into a container
minal’s full container capacity when determining terminal specializing in the storage of hazardous
the accumulation risk unless the risk analysis has materials could take on much more serious pro-
shown that a total loss or at least large-scale portions. Not only would the containers and their
destruction of the terminal is conceivable on cargo be a partial or even total loss, the conse-
account of the geographical location, the topo- quential damage to the environment and the need
graphical conditions, and the anticipated hazards. to dispose of hazardous chemicals could easily
result in a loss costing tens or even hundreds of
millions of dollars.
RISKS
Generally speaking, though, marine insurers would
– Radioactive contamination not be affected by this loss scenario because of the
standard international practice of strict liability for
The standard terms and conditions of marine aircraft coupled with compulsory insurance.
insurance exclude loss or damage resulting from
accidents involving radioactive materials and from As far as accumulation at terminals is concerned,
explosions at nuclear power plants with subse- then, we are left with political risks and exceptional
quent radioactive fallout. Part of the contamination natural hazard events.
risk can be reintroduced into marine cargo policies
in special cases, covering contamination of goods – Political risks
caused by radioactive material stowed together
with the insured goods in the same container or Terminals are effectively shielded, they are protect-
conveyance. ed by special security measures, and they are nor-
mally in operation 24 hours a day. For these rea-
Industrial fallout, i.e. soot and corrosion attribut- sons, experts consider it to be virtually impossible
able to nearby power stations, industrial plants, or at least extremely improbable that a container
and dockyards, is equally unlikely to result in accu- terminal (even a medium-sized one) with all its
mulated losses at a container terminal. The goods containers and their contents could be destroyed
are safely protected inside their containers, the completely during a strike, an act of sabotage, or a
vast majority of which are closed and can be terrorist attack.
cleaned or repaired without excessive effort.
Although the risk potential is definitely present in
– Air crashes acts of war or civil war, the exclusion of “war-on-
land” covers that is still normally applied ensures
An air crash, on the other hand, may result in a that marine insurers are released from their obliga-
major loss if a large terminal is involved, although tion to indemnify. Nonetheless, this can be a high-
here too, the magnitude of loss depends on the ly problematical issue for insurers and reinsurers
type of cargo and containers concerned and is that do opt to underwrite such hazards for contain-
therefore entirely a matter of chance. ers and goods transported on land (including the
associated interim storage).
Although not a common loss event, the risk of
an aircraft crashing outside the area served by a – Natural hazards
neighbouring airport is very real, as illustrated
by the accident in Bremerhaven on 31st January Natural hazards, on the other hand, are a major
1995. Two Phantom F4 fighter jets collided during threat. Depending on their geographical location,
a training flight over the North Sea; one crashed container terminals are exposed to such risks as
into the Weser estuary and the other into a con- earthquake, storm surge and flood, volcanic erup-
tainer depot near the Bremerhaven container tion, and tsunami.
terminal.
Storm surge and flood are among the subjects that
Fortunately, the containers stored at the depot Munich Re has studied in depth. The conclusion is
were empty and the jet crashed into a repair facil- that, in spite of improved flood protection meas-
ity and not into a storage shed with fully-laden ures, a residual risk cannot be excluded for some
containers. So it was pure luck that the US$-3m parts of the container terminals in, for example,
loss was not a financial disaster. Rotterdam, Bremerhaven, and Hamburg.

117–118 Accumulation: not only the load is important.

119 Stacks of containers after a landslide (cf. next photograph).

104
105
106
107
ASPECTS OF ACCUMULATION

108
ASPECTS OF ACCUMULATION

109
110
ASPECTS OF ACCUMULATION

111
ASPECTS OF ACCUMULATION

However, the experts do agree that, as a result of The bulk of the losses involved damage to cranes,
the considerable structural alterations that have transporters, and other handling and port equip-
been made and the new polders that have been ment, some of which were not insured at the time.
built in the affected areas, the storm surges in Hol- Most of the damaged equipment had derailed or
land in 1953 and particularly in Hamburg in 1976 had been thrown over and was buckled and bent.
cannot be taken as a basis for extrapolating future One unit broke off entirely and crashed onto a ship
storm surge scenarios. They assume that, in the on the quay.
worst case, only the bottom tier of containers at
the terminals will be exposed to water and only for Volcanic eruption is included under customary all-
a few hours. This is not likely to result in the com- risks marine insurance and could similarly have
plete destruction of the containers or of the goods catastrophic effects at a terminal. With the excep-
inside them. Terminal operators and port author- tion of Naples, there are no sizeable terminals in or
ities have also given assurance that any breaks in near areas currently threatened by lava streams or
the power supply and refrigeration supply lines for ejecta. Nevertheless, volcanic eruptions, like earth-
temperature-controlled containers can be restored quakes and seaquakes, are capable of generating
within a very short time, thus also minimizing losses. sea waves of immense destructive force which
could reach the large container terminals on the
On the other hand, there are some quite sizeable coasts of Asia, for example. It is therefore perfectly
container terminals that are definitely located in correct to include terminals in the following
regions with a moderate or high earthquake risk. accumulation calculations.
This is clearly shown on Munich Re’s World Map of
Natural Hazards and the earthquake hazard maps
for specific regions.

The marine insurers’ experience has been fairly

positive in this respect, as, for instance, following
the earthquake in Kobe, Japan, on 25th January
1995. In spite of the massive damage particularly
in the port of Rocco Island and its container termin-
als, which are built on reclaimed land, and the
considerable liquefaction effects, the loss to the
marine insurance industry remained relatively low.
Most of the containers with expensive cargo
remained intact or were only slightly damaged.
The stacks were generally stable, but one row of
empty containers collapsed. Despite the immense
destruction on the island and in metropolitan
Kobe, the power supply for the roughly 240 reefers
was restored so quickly that major losses were
averted.

All the same, it would be dangerous to draw gen-

eral conclusions from this individual case. The
earthquake happened at a time of the year when
the volume of goods in the port is generally small
and the temperatures low. These factors in particu-
lar helped to keep the losses down. An identical
earthquake in the summer would have caused
much greater damage.

112
 ASPECTS OF ACCUMULATION

Low High Average

total loss, the sums exceeding the “per bottom” or occurrence limit of the reinsurance treaties could
1 Single container/truck
40’ (or 2 x 20’) container and cargo approx. US$ 5,000 5,000,000 37,500
Truck/chassis approx. US$ 25,000 250,000 125,000
Total approx. US$ 30,000 5,250,000 162,500

2 Container trains
a) Europe
80 containers (40’) with cargo approx. US$ 3,000,000
80 wagons/chassis approx. US$ 10,000,000
2 locomotives approx. US$ 3,500,000
Total approx. US$ 16,500,000

b) USA
300 containers (48’–53’) with cargo approx. US$ 30,000,000
150 wagons/chassis approx. US$ 37,500,000
6 locomotives approx. US$ 10,500,000

remain within the insurer’s retention.

Total approx. US$ 78,000,000

3 Inland waterway container ships/

tug-and-barge combinations
a) Units with 200 TEUs
Containers and cargo approx. US$ 4,000,000
Vessel/barge approx. US$ 2,500,000
Total approx. US$ 6,500,000

b) Units with 800 TEUs

Containers and cargo approx. US$ 16,000,000
Vessel/barge approx. US$ 9,000,000

substantial proportion of the hull insurance for the vessel, the containers, and the cargo – and possibly
Total approx. US$ 25,000,000

even the terminals as well – may be covered by one and the same insurer and that, in the event of a
The values in this table speak for themselves. The disquieting, yet realistic prospect remains that a
4 Ocean-going container ships
a) Feeders ships (500 TEUs)
Container and cargo approx. US$ 10,000,000
Vessel with equipment approx. US$ 12,500,000
Total approx. US$ 22,500,000

b) Panamax (4,400 TEUs) (Europe-Asia)

Containers and cargo approx. US$ 100,000,000
Vessel with equipment approx. US$ 70,000,000
Total approx. US$ 170,000,000

c) Jumbo (6,800 TEUs) (Europe-Asia)

Containers and cargo approx. US$ 150,000,000
Vessel with equipment approx. US$ 80,000,000
Total approx. US$ 230,000,000

5 Container terminals (40,000 TEUs)

Terminal with equipment, buildings, etc. approx. US$ 550,000,000
Full and empty containers approx. US$ 1,000,000,000
Total approx. US$ 1,550,000,000

plus ships being loaded and unloaded approx. US$ 900,000,000

(miscellaneous feeders, all-container
and jumbo ships, including on-board
cargo)
Total approx. US$ 2,450,000,000

113
PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

120 Forces acting on containers loaded on deck.

114
 PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

PRACTICAL EXPERIENCE WITH

08
LOSSES AND CLAIMS

It is widely agreed that containerization has in many respects

improved the risk of transporting goods, resulting in better claims
statistics for marine insurers. In many countries, it is also firm
evidence of the success achieved by insurers in their loss preven-
tion efforts.

MECHANICAL DAMAGE AND TRANSIT LOADS . . . . . . . . . . . . . . . . . . 116

DAMAGE DUE TO MOISTURE AND CONDENSATION . . . . . . . . . . . . . 120
BIOTIC DAMAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
THE HUMAN FACTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
LOSS PREVENTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

115
 PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

As far as the transport of containerized goods is sent an enormous area that is exposed to the force
concerned, risk exposure and claims experience of the wind. This – together with the motion of the
focus on four main areas. sea and a correspondingly violent rolling move-
ment of the vessel, which may also be caused by
sudden grounding – exposes the upper tiers of a
MECHANICAL DAMAGE AND TRANSIT LOADS heavily laden container ship to enormous trans-
verse acceleration forces and makes them sway
Even in normal traffic, containers and the goods distances of 20 to 30 metres – and that possibly
inside them are exposed to considerable accelera- more than 100,000 times in the course of a single
tion and braking forces, which can amount to sev- voyage!
eral times the dead weight of the goods, particular-
ly when the going is really tough. This constant rolling movement, which may inten-
sify during the sea passage, depending on the
However important good stowage, firm lashings, weather the vessel encounters, causes violent
and appropriate packaging of the goods in the con- changes in pressure and loads on the deck and
tainer may be, there are a number of recurrent hatch structures bearing the containers, as well as
causes of damage which cannot be prevented even on all the intermediate supports, the container
if containers are loaded in a professional manner. lashing points, and of course on all elements of the
lashing system. The parallelograms of forces are
Under the pressure of economic demands, ship- constantly changed by this movement and there
builders are continually increasing the numbers of have been numerous instances of individual con-
containers that can be carried on deck. In the early tainers, upright stacks, and even complete contain-
years this applied to roughly one-third of the con- er blocks being lost overboard. If this happens out-
tainers. The rate has now risen to around 50% and side the harbour, it is difficult to salvage them and
even more on some ships, with containers stacked the containers are usually lost completely – together
in six tiers. For reasons of stability only empty con- with their contents. When containers are lost over-
tainers may be stacked on the top tiers of some board they tend to remain afloat for several days,
ships. Even then, all the tiers taken together repre- thereby posing a danger to shipping. In the event

121 Comparison of bow cross-sections of 2nd and 3rd generation container ships. 122 Bow damage as a consequence of frame failure: buckled frame.

3rd generation

2nd generation

10 m W.L.

116
 PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

of a collision with another vessel, the damage is below as well. Or the container may simply drop
generally indemnified by the P&I Club of the vessel because of a material fracture or an accidental
on which they were originally carried and possibly opening of the spreader. There have also been
under the container liability insurance mentioned instances of crane operators trying to lift two adja-
above. cent but unconnected 20’ containers as if they
were a single 40’ container.
Seas slamming against containers carried on deck
can cause similarly heavy losses. Since the outer Sometimes these incidents produce nothing more
tiers on many vessels are virtually an extension of than dislodged cargo, sometimes they result in the
the ship’s side, they create a particularly large tar- complete destruction of the goods and a construct-
get for breakers, especially along the bows and ive total loss of the container.
shoulder of the foreship. Seas breaking on deck
with tonnes of what is known as “green water”
can easily smash the container walls and destroy
their contents – even if the rigid outer frame of the
container remains securely lashed on deck. The
severity and number of such losses could increase
as a result of the trend away from flared bows
(which push the water to the sides and keep the
foreship “dry”) towards slimmer and faster bows
with less overhang (over which breakers can roll
more easily).

Containers occasionally “crash” when being loaded

or unloaded at terminals or handled at storage
areas. Such mishaps may be due to a container
not being unlocked properly so that the crane or
straddle carrier lifts up one side of the container

123 Bow damage as a consequence of frame failure: distorted deck in foreship.

117
124 Container drop test with a 40’
container of a total mass of 35.56 t.
In this test vertical accelerations up
to 250 G in the middle of the side
walls were calculated.

118
PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

119
PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

Stowage practices in train marshalling yards have containers are not absolutely water tight, this will
improved considerably and customers now receive certainly have a lasting effect on the cargo and
quite detailed advice from container carriers. Con- lead to a loss that has to be indemnified.
sequently there has been a significant decline in
the number of losses due to impact. But when they
do happen, they involve forces of up to four times BIOTIC DAMAGE
the weight of the cargo, so that poorly blocked and
bolted goods are torn out of their anchorage and Incidents involving delicate and therefore mostly
possibly hurled through the end wall or door side expensive goods continue to occur quite regularly.
of the container. Containers are not usually de- They may be “contaminated” by other goods in
signed to withstand impacts exceeding twice the the container, the remains of previous cargoes,
acceleration of gravity G (= 9.81 m/s2). fresh paint, or by the residue from gases or chem-
icals that have been applied for pest-control pur-
poses. Another cause of such damage, if not dis-
DAMAGE DUE TO MOISTURE AND covered in good time, is insect infestation.
CONDENSATION

Since the transportation of containerized goods is THE HUMAN FACTOR

usually covered at all-risk terms and conditions,
cargo insurers soon find themselves being called A container is an independent and to some extent
on to indemnify damage due to moisture and con- supplementary closed receptacle and as such it
densation. This is by far the main cause of losses impedes unauthorized access to the goods inside.
in container traffic. The security standards applied by large container
consortia and the operators of container terminals
Containers are like scaled-down versions of a have improved considerably over the past few
ship’s hold and are therefore subject to the same years. These include gate controls for containers
microclimatic conditions as those found on a con- and goods, access controls for personnel, lighting,
ventional vessel. In the course of a long voyage, fencing, and surveillance at terminals, and even
they pass through different climate zones with dif- stricter measures to prevent access by the ship’s
ferent temperatures (possibly visiting four contin- crews.
ents on the way and encountering different sea-
sons and rain and dry periods!). Condensation According to the long-term statistics, theft and
may form, leaving considerable quantities of water robbery account for 20–25% of losses involving
on the cargo or on the roof, walls, and doors conventional cargo. Theft and robbery losses
inside the container. This can amount to as much involving cargo carried in containers, on the other
as 50–70 litres in a 20’ container. How much water hand, have been steadily declining. Nevertheless,
actually accumulates depends on the temperature in spite of their lead seals and locks, containers
difference, the moisture content of the remaining can still be broken into with relative ease on the
air and the goods in the container, the packaging door side and, in the case of some designs, from
materials, and the residual moisture in pallets or below when mounted on trailers or chassis.
the wooden container floor. This will damage not
only the goods but also the containers themselves. The risk of theft and robbery increases dispropor-
tionately outside the major port terminals and
Water damage due to the ingress of seawater also particularly during extended pre-carriage and
comes into this category. This may be caused by on-carriage. This applies even more, of course,
minor leaks in the top and side walls, loose adhe- to LCL containers with conventional pre-carriage
sive or material sealing the joint between the side and on-carriage.
walls and the frame, and most particularly by rub-
ber door seals that are brittle or damaged. In many Containers do not normally bear any outward indi-
cases, leaks are due to misplaced spreader corner cation of the nature of their contents. However, the
locks piercing holes in the top or by the fork arms computer-based management and documentation
of a fork-lift truck missing the fork pockets at the of container shipments makes it possible for crim-
bottom of the container and piercing the sidewall. inal organizations and even individuals to gain
Containers stowed on deck, particularly those at access to the cargo manifest and other electronic-
the forward end of the ship are continuously ally transmitted transport documents. This has
exposed to spray from breaking seawater. If the resulted in a new form of theft, namely the hijacking

120
of entire containers. The on-carriage is simply
redirected to a place where the container is quickly
and secretly unloaded. It is not uncommon for
drivers to work hand in hand with (computer) per-
sonnel at the terminals in such cases. Losses run-
ning into millions can easily arise when containers
with cigarettes, spirits, cosmetics, or computer
hardware are hijacked and then stripped of their
cargo.

A new form of fraud has also developed with the

growth of containerization. When opening a seem-
ingly correctly sealed container, the consignee
finds nothing but earth, scrap, or things that are of
absolutely no value to him. The weight is the same
as that specified in the documents but the “cargo”
itself bears absolutely no relation to what has been
ordered. The central question here is whether the
goods declared and covered by the insurance ever
existed. An interesting study on this subject has
been published by the International Maritime
Bureau in London.

Cases of classic misdirection or non-delivery of

125 Containers jammed together because the connections were not
complete containers are rare. The computerized unlocked prior to unloading.
monitoring of container in logistics systems is far
too thorough and tightly meshed. All the same,
every terminal can cite cases in which they have
had to search for containers that have been misdir-
ected or deposited in the wrong place.

126–127 Damage due to pollution, moisture, and freezing in containers.

121
PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

128 Loss prevention – (almost) unlimited possibilities!

As a rule, this kind of slip-up does not immediately LOSS PREVENTION

result in an insurance claim. It would be a different
matter, though, if computer systems were down Many publications are now available on loss pre-
for days on end because of a breakdown in the vention in the field of container transport. The
power supply or as a result of problems encoun- standards in loading and transporting containers
tered in migrating data from one computer system have improved considerably – thanks to the expert-
to another, or a virus in a central computer at a ter- ise that has been built up in the inland transport
minal or operation centre, or a natural disaster. sector and the advice provided by container car-
Insurers could then find themselves having to pay riers, forwarding agents, and consolidators. Marine
claims for goods disappearing – not only under insurers and their associations have also con-
marine policies but also under marine consequen- tributed to this development in many countries –
tial loss policies with a broad scope of cover. in their own best interests.

122
 PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

Nevertheless, an analysis of container-related – Whether the container is loaded by the cargo

claims shows that the simple basic rules are still owner or the forwarding agent, it must be in a
not always observed in what then turn out to be flawless state of repair to be worth the money.
costly individual cases. There is absolutely no need for even relatively
old containers to be out of shape or dented. The
– The first rule is to choose a good container corner fittings and interior lashing points must
carrier – to whom recourse can be taken if neces- be in good condition and the doors must close
sary – and the right type of container for the tightly. The much-cited light incidence test inside
cargo involved. Although containers are basically the container with closed doors is all too com-
standardized, there are many different types for monly omitted before loading commences.
every conceivable purpose. They come in many
different sizes and can be tailor-made for individ-
ual cargoes (see Chapter 02).

123
PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

129 Bales of wool.

124
 130 Well stowed container.

131 One way of securing the load.

132 Bagged goods protected against

condensation by means of
separation paper.

133 Partially loaded container.

125
PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

– The entire container, and not only the floor,

134 Lead seals.
should be strong enough to carry the intended
cargo. It should be clean, without any trace of
odours or residue from past cargoes, and should
be free of nails and other old fastening material.

– Although it offers additional protection, the con-

tainer is not a form of packaging but a transport
receptacle! Because of the different stresses
encountered on the various legs, the cargo must
be protected by transportation packaging that is
suitable for the whole journey. Even if it is not
stated in the booking or in the terms of ship-
ment, it is quite possible that the goods will have
to be unloaded temporarily in the course of
transportation – during a customs inspection, for
instance. So the only way to ensure real protec-
tion is to use proper seaworthy packaging. 136 Wire seals are difficult to open.

– The goods should not only be packed properly.

They should also be stowed correctly so that
they can withstand the considerable accelerating
forces that occur on the journey. In cases of
doubt, expert advice should be sought from the
carrier, forwarding agent, or other specialists.

– The cargo must be distributed as evenly as pos-

sible in terms of its weight and area. If different
types of goods are loaded together, they must be
compatible. Different types of packaging (e.g.
bags and drums and crates) must be separated.
Sharp-edged sides or corners should be shielded
and delicate cargo cushioned. To prevent the
cargo from slipping, it can be blocked or lashed
down, and any free spaces in the container must
be filled with old pallets, cardboard, or other
material. Since extreme temperature fluctuations
can never be entirely excluded, goods that are
susceptible to moisture and corrosion must be
protected against water, condensation, and damp
air. In many cases, losses could have been pre-
vented by using a ventilated container.

Time after time it is the simple basic rules and not

specialist know-how that decide the fate of con-
tainerized goods – and consequently the results
of the cargo insurer’s portfolio!

138 Plastic seals may be a problem.

126
 PRACTICAL EXPERIENCE WITH LOSSES AND CLAIMS

135 Sheet-metal-seals.

137 Typical container seals.

139 Such a classic padlock cannot be “cracked” easily 140 Seal numbers make identification easier and also reveal
with a bolt cutter. that a container has been opened and the seal replaced.

127
RISKS OF CONTAINER TRAFFIC IN THE FUTURE

09
RISKS OF CONTAINER TRAFFIC IN THE FUTURE

In spite of regional crises, world trade and the associated transport volumes are
constantly growing. Greater demand in many parts of the world from consumers
with a rising standard of living and the increasing division of labour in the world
economy (the key word being “globalization”) both generate an increase in trans-
port movements. The proportion of containerized ocean shipping will increase even
faster as more and more people populate the coastal regions of our earth. Con-
tainerization will also spread in the inland trade sector, releasing immense reserves
and generating a potential for rationalization and thus creating further benefits
especially in Russia, China and other parts of Asia, South America, and Africa. At
the same time, competition will increase, and with it the pressure on all concerned –
including all the different areas of the container transport system as well – to go
closer and closer to the limits of what is technically feasible.

128
141 Typical inland waterway ship with container load.

129
RISKS OF CONTAINER TRAFFIC IN THE FUTURE

The plans for four or five gigantic ocean container Such vessels will only be profitable if transship-
terminals (“mega-hubs”) are already far advanced. ment at the hubs is optimized even further. They
Located at geographically strategic points, these will require docks that permit a new and much
terminals will be fed by the parts of the world with faster generation of gantry cranes with tandem or
the largest cargo volumes and will no doubt be in triple spreaders to work the ships from both sides.
a position to disregard all restrictions on the size It is possible that – at least in the initial phase –
and draught of the planned jumbo container ships. marine insurers will again be confronted with the
This leaves planning engineers, dockyards, and mechanical transshipment losses that had osten-
classification societies with plenty of food for sibly been overcome with the advent of container-
thought. There are already ideas for vessels with a ization.
capacity of 12,000 to 15,000 TEUs, for which
today’s 5,000-TEU ships will effectively act as feed- Today, containerized goods are transported on
ers. ships with a capacity of around 7,000 TEUs. And
that is as much as marine insurers know. In these
These vessels will be wide and fast, with twin days of information technology and real-time
engines – another new challenge for hull insurers. data transfer, it is remarkable that – because of the
If they are carefully designed and prudently oper- pressure of global competition – container carriers
ated, there is basically no reason to question the provide them with less and less risk-related infor-
safety of such container ships. The sums insured mation. Consequently, it is important to bear in
for the hulls will be lower than those of today’s mind the following: any information that is of rele-
passenger liners, so that the insurance market will vance to the aspect of safety will also be of greater
be able to handle them without any difficulty. relevance to the aspect of legal liability in the
future.
The risk of accumulation in terms of both cargo
insurance and P&I, however, will become much At present, in an environment of free competition
more evident when container capacity is again and with the partitioning of their spheres, neither
doubled in this way. An even higher percentage of the owners of the many small consignments nor
containers will be exposed to wind and weather. In the cargo insurers, the hull insurers, the liability
spite of the vessels’ increased width, more losses insurers, or the container insurers appear to have
will have to be expected as a result of green water enough influence to improve the flow of informa-
damaging containers stowed on deck and fires tion and become involved in decisions relating to
(which are difficult to control on board). the development of containerization in the future.

CONTAINER SHIP FLEET

4,000
3,500
TEUs overall in thousands

3,000
2,500
2,000 Ships of 4,000 TEUs and above
3,000 TEUs to 3,999 TEUs
1,500
2,000 TEUs to 2,999 TEUs
1,000
1,000 TEUs to 1,999 TEUs
500 500 TEUs to 999 TEUs
0 100 TEUs to 499 TEUs
1980 1983 1986 1989 1992 1995 1998

130
 RISKS OF CONTAINER TRAFFIC IN THE FUTURE

Withdrawal and abstention from marine insurance

business are not satisfactory alternatives either.
The question is whether marine insurers could be
integrated in the electronic handling of container
traffic.

Without this integration, the basic operating condi-

tions for individual marine insurers and their part-
ners in the background have temporarily eased in
some areas as a result of containerization but on
no account can they guarantee profitable business
in the future even if the premiums begin to rise
again.

Containers are a fact of life for the younger gener-

ation of marine insurers. It will be a challenging
task for this time-honoured branch of insurance
to provide the support that is needed to cope with
the emerging trends in container transport and to
make sure that their mighty impact is shared fairly
between insurers and reinsurers. Munich Re will
continue to be a reliable partner in this process.

CONTAINER FLEET GROWTH

4,000 20

3,500 18
16
3,000
TEUs in thousands

14
Growth in %

2,500 12
2,000 10

1,500 8
6
1,000
4
500 Fleet in TEUs
2
Growth in %
0 0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998

131
RISKS OF CONTAINER TRAFFIC IN THE FUTURE

142 Repair docks that can accommodate jumbo container ships are few and far between,
with the result that tugging expenses are often high in the event of a loss.

143 High-speed container catamarans are still at the planning stage.

132
133
RISKS OF CONTAINER TRAFFIC IN THE FUTURE

134
144 There have been numerous studies dealing with faster
and more efficient container trans-shipment systems.

145 Fully automatic container handling and

transportation system for terminals.

135
RISKS OF CONTAINER TRAFFIC IN THE FUTURE

136
137
GLOSSARY OF CONTAINER TERMINOLOGY

10
GLOSSARY of container terminology

A
Adjusting loading wall Sheet lining which allows Bonded goods Dutiable goods upon which duty
dunnage bars to be fitted into the container at any has not been paid, i.e. goods in transit or ware-
point. housed pending customs clearance.

ADR The European agreement concerning the Box A term for a container.
international carriage of dangerous goods by road.
Stands for Accord européen relatif au transport Bridge fitting A fitting piece (with integrated turn-
international des marchandises dangereuses par screw) to keep top sides of adjacent containers
route. together. Part of the lashing equipment.

Ambient temperature The temperature of a sub- BSI British Standards Institute.

stance surrounding a body. Thus the ambient
temperature of a container holding a refrigerated Bulk freight container Any container which by its
cargo would be the temperature of the air to which own peculiar design, i.e. roof loading hatches and
it is exposed outside. door or front wall discharge hatch, will allow bulk
handling of commodities.
Anti nose-dive leg A support provided at the front
end of a container chassis used to support that end Bulkhead Athwartships separation dividing a ship
during loading operations, i.e. for when the initial into watertight sections (known as holds). Some-
weight of the cargo or FLT is at the front and times also used to denote the front wall, i.e. oppos-
beyond the point of balance. ite to the doors of a container.

ASA American Standards Association.

C
Axle loading The total downward pressure exerted CA Controlled atmosphere
by a vehicle through any given axle. This may then
be transmitted through two or four wheels. Car pallet A flat tray with corner posts for transport-
ing cars on container ships.

B Cattle container A partly open container equipped

Blade One of the extremely thin wide forks on a with rails, boxes, and cribs for livestock transporta-
fork lift used for sliding beneath loads which are tion.
not on pallets. Also known as chisel fork.

138
 GLOSSARY OF CONTAINER TERMINOLOGY

A– D
Celcure A trade name for a copper-chrome-arsenite Container part load A consignment which neither
solution, used to treat timber against wood-boring occupies the full capacity of a container nor equals
insects. the maximum payload and will, therefore, allow
the inclusion of other part loads.
Cell guides The guidance system enabling contain-
ers to be lowered into and lifted from the hold of Container pool An agreement between various
the vessel. The holds have vertical guides into transport carriers and/or container leasing compa-
which the containers are lowered to form secure nies concerning the exchange of containers.
stacks restrained at all four corners.
Controlled atmosphere Sometimes used in add-
Centre of gravity The point at which a load will ition to temperature control to prolong the storage
balance or is in equilibrium. life of fruit.

CFS Container freight station. Corner fitting The cast top and bottom of each
container corner post used for handling and secur-
Chisel fork See Blade. ing a container.

Clip-on unit A portable refrigeration unit designed Corrugated container A container with corrugated
to clip on to insulated containers which normally walls and ends for added strength.
rely on a central refrigeration system for their cold
air supply. Cryogenic Using a freezing mixture for refriger-
ation.
Closed container A container that can only be
packed through one or more doors in the end or CTO Combined transport operator.
side walls.
Cushion tyre A solid rubber tyre made of fairly soft
Collapsible container A container with walls that rubber or composition.
are hinged (at the front and back ends in collapsible
flat racks) or removable so that its effective volume CWE Cleared without examination (at customs).
may be reduced for transporting in an empty con-
dition.
D
Combined transport operator A forwarder render- Damage protection plan A method defined in
ing combined traffic and operating as carrier (see contracts for insuring leasing containers against
MTO). damages.

Container freight station Where parcels of cargo Data plate A plate affixed to a container giving
are grouped and packed into containers. Also details of gross and tare weights and external
known as containerbase, consolidation depot, or dimensions.
depot.
Demurrage Compensation payable to a container
Container head Sometimes used to mean the end or truck owner for the detention of his equipment
opposite to the doors. Also known as container beyond a certain time limit.
front or bulkhead.
Depot See Container Freight Station.
Container load A consignment which fully occu-
pies the internal capacity of a container or reaches Dispatch bays The point from which containers are
the maximum payload for that particular unit. physically loaded or unloaded.

139
GLOSSARY OF CONTAINER TERMINOLOGY

Devanning A term sometimes used for the process Dunnage bag See Inflatable dunnage.
of unpacking a container.

Dew point The temperature at which condensation E

forms. When air comes in contact with a surface Emptying Unpacking goods from containers.
that is at or below its dew point temperature, con-
densation will form on that surface.
F
Dock leveller A device to span the difference in FCL Full container load.
level between the loading bank and the container
floor. It also bridges the gap between the bank and FCR Forwarder’s certificate of receipt.
the container.
Feeder ship A container vessel used in short-sea
Document holder May be located on the container trade to serve ports at which deep-sea container
door or front wall and sealed. Contains the cus- ships do not call.
toms certificate of container approval.
FEU Forty-foot equivalent unit.
Dolly A set of wheels set under the front of a con-
tainer to provide support when the motive unit is Flashpoint The temperature at which a liquid pro-
disconnected. duces enough vapour to form an inflammable mix-
ture with air.
Door-to-door The through-transport of a container
and its contents from consignor to consignee. Flat rack A flat platform container.

Down-rated The amount by which the lifting cap- Floor loading The static and dynamic loads im-
acity of a fork lift is reduced as a result of fitting posed on the floor by the payload and the wheels
attachments. of handling equipment.

Down time The period during which equipment or FLT Fork-lift truck.
a piece of machinery is not operating or producing.
Footprint The area of the tyre measured in square
DPP Damage protection plan. inches which actually comes into contact with the
surface on which it is operating under a given
Dricon A chemical for the treatment of timber load. For the purposes of container-floor design,
against wood-boring insects. the footprint of a pneumatic and cushion tyre is
estimated at 22 square inches.
Dry-bulk container A container especially built for
carrying grain, powder, sand and other free-flow- Fork pocket One of the recesses sometimes
ing solids in bulk. provided in the sides of the container bottom for
the entry of the forks of fork-lift trucks.
Dry freight Any dry cargo not requiring controlled
temperature protection. Forwarder’s certificate of receipt The forwarding
agent’s through-documents for goods, negotiable
Dry ice Solid CO2 (carbon dioxide). worldwide.

DTI Department of Trade and Industry. Four-way pallet A pallet so constructed that the
forks of a FLT may enter from any side.
Dunnage A material (usually disposable) used to
secure cargo or protect it from chafe. Also in some Free lift The distance the forks of a FLT can rise
instances for fabricating temporary floors to allow without the overall collapsed height of the mast
spillage to drain away. increasing.

140
 GLOSSARY OF CONTAINER TERMINOLOGY

D–I
Full container load. Usually loaded by the shipper Half-tilt container A container with the larger part
for one consignee. of its sides, or sides and roof, covered by tarpaulin
or similar material.
Full-tilt container A container with the full sides
and roof, maybe also the ends, covered by tar- Hard-top container A closed container with a roof
paulin, drop sides notwithstanding. that opens or lifts off.

Fully-loaded weight and capacity A container Header bar A beam or bar (usually above the end
ideally loaded to its fullest capacity of weight and doors of an open-top container) which may be
volume. swung to one side or removed to improve access.

FWC Fully-loaded weight and capacity. Heated container A container built with insulated
walls, doors, floor, and roof, fitted or capable of
being fitted with a heating appliance which is
G capable of raising and maintaining the tempera-
G factor Indicates the constant multiplying factors ture inside the container at a required level.
when considering the effects of acceleration on
mass, e.g. a force of 6 G in relation to a 2-ton load House-to-house See Door-to-door.
would be equivalent to 12 tons.
House-to-pier A container packed inland but
Genoa corner fitting A container corner fitting unpacked at the pier of the destination port.
made to ISO recommended design and used by
the lifting apparatus to grip the container by inter- Humidity See Relative humidity.
locking. Sometimes called corner casting.
Hygroscopic substance A substance which is cap-
GRP Glass-reinforced plastic. able, under the right conditions, of absorbing
water vapour from the surrounding atmosphere.
Grabomatic A FLT attachment that will grip and lift Such a substance will continue to absorb moisture
drums, two at a time, by the top rims. until the vapour pressure of the absorbed water
is equal to that of the water vapour in the air. It is
Gross vehicle weight The combined total weight of then said to be in equilibrium. The equilibrium
a vehicle and its container inclusive of the prime moisture content of the substance is dependent on
mover. both its temperature and the relative humidity and
temperature of the surrounding air. If the moisture
Gross weight The total weight of a container, i. e. content is above the equilibrium value, the sub-
the container, its payload, and any loose internal stance will give up water until equilibrium condi-
fittings. tions are reached.

Groupage Service providing facilities for small

consignments to be consolidated and transported I
in a container. IICL Institute of International Container Lessors,
New York.
Groupage depot An area where container contents
can be consolidated or disseminated. IMO International Maritime Organisation.

GVW Gross vehicle weight. Inflatable dunnage Flexible bags positioned within
the stow and inflated so that movement of cargo
might be prevented.
H
Half-height container A container, open-top with Inlet A collapsible inlet made of rubber or synthetic
or without soft or hard cover, between 4’ and 4’3” materials, used in containers for the transport of
high. liquids or free-flowing solids.

141
GLOSSARY OF CONTAINER TERMINOLOGY

Insulated container A container with the walls, LPG Liquid propane gas.
roof, floor, and doors insulated to reduce the effect
of external temperature on the cargo.
M
Insulated tank container A container frame holding MT “Empty” (container).
one or more thermally insulated tanks for liquids.
MTO Multimodal Transport Operator.
Interface The point at which two systems meet, i.e.
road transport and terminal – terminal and ship. Methyl bromide A fumigant used to kill infestation
in various commodities. May on occasion be used
International Maritime Organization Not all coun- to fumigate the container. An odourless and poten-
tries are signatories to this organization, but most tially dangerous poison.
of the major maritime nations are. It is the vehicle
through which dangerous goods and other regula- Module A volume described in multiples of similar
tions can become internationally acceptable. measurements to that of the container. Altering a
module can, under some circumstances, improve
ISO International Standards Organization. the utilization of a container.

Multimodal Transport Operator A forwarder

J rendering combined traffic and operating as a
Joinable container A container whose dimensions carrier (see CTO).
and specifications are fixed so as to permit the
loading of the containers onto a container flat so Multi-tank container A container frame enclosing
that the whole unit can be handled as one ISO two or more separate tanks for liquids.
container.

N
L NVO(C)C Non-vessel operating (container) carrier.
Lancashire flat A type of flat with headboard at
one end. Net weight The difference between the gross
weight and the tare weight of the container. Also
Land bridge A descriptive term for an overland known as payload.
transit coming between two ocean passages during
a container’s journey from starting point to destin- Non-vessel operating (container) carrier
ation. 1) NVOCCs operate as carriers and should be evalu-
ated by applying the same service, price, and
Latticed-sided An open or closed container with at delivery standards.
least one side consisting of elements with open- 2) US definition: NVOCC means a common carrier
ings between them. that does not operate the vessel by which ocean
transportation is provided and is a shipper in its
LCL Less-than-full container load. relationship with the Ocean Common Carrier.

Less-than-full container load A container which is

filled with consignments of cargo for more than O
one consignee or from more than one shipper. One-way lease The lease of a container for the
forward voyage only, the container being returned
Liquid propane gas A type of fuel for mechanical to lessor at or near destination.
handling equipment.
OOG Out-of-gauge cargo.
Lo-lo Load on-load off. Describes ocean transport
as distinct from ro-ro.

142
 GLOSSARY OF CONTAINER TERMINOLOGY

I–R
Open container A container with sides and/or ends Plain flat container Container base and corner
of bars, grills, mesh or entirely open, with or posts, loose stanchions or runners for sides and
without roof. ends notwithstanding.

Open-sided container Doors, shutters, or tarpaulin Plain van container Another name for a general
allowing one or both sides to open up completely. purpose container.

Open-top container A container with a tarpaulin Polarstream The name of a liquid nitrogen refriger-
roof or solid removable roof that can be loaded ation system.
and unloaded from above.
Polyurethane Insulation which can be in “block”,
Open-topped reefer An open-topped container that “poured”, or “frothed” form. Made up of minute
is temporarily protected by a removable insulated cells containing freon gas.
cover.
Portainer (crane) A port (vessel) container gantry
Open-wall container A container without one or crane.
more side or end walls but having at least a base,
end structures, and a top frame with corner fittings. Protection and indemnity insurance Liability cover
taken out by the shipping company owner. P&I
Out-of-gauge cargo Exceptionally large items such Clubs are mutual insurance societies.
as plant or project parts.
Protim salts For the treatment of timber against
Overheight cargo Cargo loaded into an open-top wood-boring insects.
container so that the level of the cargo rises above
the normal level of the roof struts. This type of
stowage can be accepted by operators under Q
certain conditions. Quoin A shaped timber wedge used to secure bar-
rels against movement.

P
P&I Protection and indemnity insurance R
Railtainer crane A railway container gantry crane.
Payload Cargo weight on which freight is paid.
Rating The maximum permissible combined
Pier-to-house The transport of containers packed weight of the freight container and its contents.
at the port of loading and unpacked at an inland
destination. Reachstacker A large fork-lift truck with extended
lifting and reaching capabilities.
Pier-to-pier The transport of containers packed at
the port of loading and unpacked at the port of Reefer An insulated container with provision for
destination. controlling the air temperature within the container.
Short for refrigerated container.
Piggy-back Hauling trailer-mounted containers on
railway flat cars. Sometimes known as TOFC (trail- Relative humidity The ratio (expressed as a per-
er on flat car). centage) of the amount of moisture in the air to
that in saturated air at the same temperature.
Pillow tanks Collapsible inlets for the transport
of liquids, free-flowing solids, etc., in containers. Rolling The side-to-side rocking movement of a
ship.

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S–W
Ro-ro Roll on-roll off. A type of ship that can take Stacking cone A fitting piece between two contain-
containers while still on trailers and other rolling ers (at each corner).
stock.
Steel container Usually has a ribbed configuration
S or a double-skin design if used without secondary
Scissor lift A platform device, usually power oper- posts.
ated, which can lift a load from the ground, or any
intermediate level, to container floor height. Straddle carrier A truck capable of lifting a con-
tainer within its own framework.
Sheathing Materials forming the outside of the
roof, sides, ends and doors. These act as restraints Stripping A term sometimes used for unpacking a
to help prevent the main frame from racking. container.

Shrink foil wrapping Heat treatment that shrinks Stuffing A term sometimes used for packing a con-
an envelope of polythene or similar substance tainer.
around several units, thus binding them into a sin-
gle whole. May be used to secure items in small
presentation packs or to secure packages on a T
pallet. Also known as shrink wrapping. Tank container A container especially built for
transporting liquids and gases in bulk.
Side-door container A closed container with a rear
door and at least one side door. Tare weight The weight of a container without its
cargo.
Side loader A lift truck with the lifting equipment
operating to one side – for handling containers. TCM An international convention governing
container shipments and standard uniform con-
Skeletal trailer A trailer constructed specifically for tracts for combined carriage. Stands for Conven-
the safe carriage of ISO containers. tion sur le Transport International Combine de
Marchandises.
Skids Battens fitted beneath stillages, boxes, or
packages to raise them clear of the floor and allow Terminal The area where containers are stacked
easy access for fork-lift trucks, slings, or other ready to be loaded into the vessel or are stacked
handling equipment. immediately after discharge from the vessel.

Sling Endless rope, wire, or strap used for lifting Thermal conductivity The quantity of heat (e.g. in
cargo. British Thermal Units [BTU]) transferred through
one inch of material per square foot of surface, per
Sno flo A trade name for a liquid CO2 refrigeration hour, per degree Fahrenheit. Generally referred to
system. in terms of K-Factor, which is determined by the
equation: Inch K factor = sq. ft., hour, °F.
Soft-top container A container with a removable
waterproof “tilt”. Also known as a top-loader or TEU Twenty-foot equivalent unit.
open-top.
Tilt Canvas or other waterproof material used to
Solo-tank container A tank for liquids enclosed in cover or protect the interior of an open-top or
container frame. open-sided container.

Special container A container specially designed

and built for carrying a special cargo.

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 GLOSSARY OF CONTAINER TERMINOLOGY

TIR A road transport operating agreement reached

by European governments and the USA for the
international movement of goods by road. Gener-
ally permits sealed loads to cross national frontiers
without inspection or tariff penalties. Stands for
Transports internationaux par la route.

Twist lock A fitting piece between two containers

with locking device (handle).

Two-way pallet A pallet constructed in such a way

that the forks of a FLT may gain access from two
sides only.

Tyne One of the forks of a FLT.

U
Unit load A number of individual packages bond-
ed, palletized or strapped together to form a single
unit for more efficient handling by mechanical
equipment.

Ullage The “deficiency” of a liquid, i.e. the space

not filled in a drum, tank, tank hold, tank container,
etc. Usually the “gap” between the surface of a
liquid and the top of the tank, etc.

V
Vanning An American term sometimes used for
packing a container.

Ventilated container A container with openings in

the side and/or end walls to allow the ingress of
outside air when the doors are shut.

W
Waste cube When cargo does not completely fill or
fit the interior of the container due to bad packing,
awkward shapes, weight limitations, or lack of
cargo.

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GLOSSARY OF CONTAINER TERMINOLOGY

Picture credits
Photo no. Source Photo no. Source

Cover Corbis (Container) & Oliver Rheindorf, Hamburg, 91 Hans-Jürgen Zeyse, Hamburg, Germany
Germany 92 Hapag Lloyd AG, Hamburg, Germany
1 Germanischer Lloyd, Hamburg, Germany 93 Corbis, Hamburg, Germany
2–4 CSX Lines, Charlotte, NC/USA 94–96 Oliver Rheindorf, Hamburg, Germany
5 Corbis, Hamburg, Germany 97 Hamburger Hafen- und Lagerhaus-
6 Tony Stone, O. Rheindorf, Hapag Lloyd AG, S. Aktiengesellschaft, Hamburg, Germany
Reintsema, (all in Hamburg, Germany) 98 P & O Nedlloyd, Hamburg, Germany
7 S. Reintsema, Hamburg, Germany 99 Oliver Rheindorf, Hamburg, Germany
8 Hapag Lloyd AG, Hamburg, Germany 100, 101 Germanischer Lloyd, Hamburg, Germany
9–11 Germanischer Lloyd, Hamburg, Germany 102–105 Marine Claims Handling Agencies GmbH,
12–15 Hapag Lloyd AG, Hamburg, Germany Hamburg, Germany
16 Hamburger Hafen- und Lagerhaus- 106 Oliver Rheindorf, Hamburg, Germany
Aktiengesellschaft, Hamburg, Germany 107 Munich Re archives
17, 18 Germanischer Lloyd, Hamburg, Germany 108 Hapag Lloyd AG, Hamburg, Germany
19–21 Hapag Lloyd AG, Hamburg, Germany 109 Hamburger Hafen- und Lagerhaus-
22–32 Oliver Rheindorf, Hamburg, Germany Aktiengesellschaft, Hamburg, Germany
33 Germanischer Lloyd, Hamburg, Germany 110 Hapag Lloyd AG, Hamburg, Germany
34 Oliver Rheindorf, Hamburg, Germany 111 Hamburger Hafen- und Lagerhaus-
35, 36 Germanischer Lloyd, Hamburg, Germany Aktiengesellschaft, Hamburg, Germany
37 Hapag Lloyd AG, Hamburg, Germany 112 Oliver Rheindorf, Hamburg, Germany
38–41 Germanischer Lloyd, Hamburg, Germany 113 Lufthansa Cargo AG, Frankfurt/Main, Germany
42,43 Zeller Associates GmbH/CPD, Hamburg, Germany 114 Hapag Lloyd AG, Hamburg, Germany
44 Zeller Associates GmbH/S. Reintsema, Hamburg, 115 Oliver Rheindorf, Hamburg, Germany
Germany 116 dpa, Hamburg, Germany
45–47 Germanischer Lloyd, Hamburg, Germany 117 Hapag Lloyd AG, Hamburg, Germany
48 Zeller Associates GmbH/S. Reintsema, Hamburg, 118 Alexander Gow, Inc., Seattle/Washington, USA
Germany 119 Reuters, Berlin, Germany
49–55 Germanischer Lloyd, Hamburg, Germany 120 Zeller Associates GmbH, Hamburg, Germany
56 Hapag Lloyd AG, Hamburg, Germany 121–124 Germanischer Lloyd, Hamburg, Germany
57 Lufthansa Cargo AG, Frankfurt/Main, Germany 125 Zeller Associates GmbH, Hamburg, Germany
58 Germanischer Lloyd, Hamburg, Germany 126, 127 Marine Claims Handling Agencies GmbH,
59 Hapag Lloyd AG, Hamburg, Germany Hamburg, Germany
60 Aviaexport, Moscow, Russia 128 Hapag Lloyd AG, Hamburg, Germany; Munich Re
61–64 Hamburger Hafen- und Lagerhaus- archives; Oliver Rheindorf, Hamburg, Germany;
Aktiengesellschaft, Hamburg, Germany Germanischer Lloyd, Hamburg, Germany; Zeller
65 ATS Hamburg Versicherungsmakler GmbH, Associates GmbH/S. Reintsema, Hamburg,
Germany Germany; Pressestelle Zoll, Hamburg, Germany
66 Hapag Lloyd AG, Hamburg, Germany 129 Book “Container Stowage”
67 Oliver Rheindorf, Hamburg, Germany 130, 131 Munich Re archives/Strauch
68 Munich Re archives 132–140 Oliver Rheindorf, Hamburg, Germany
69, 70 Eurogate GmbH & Co. KGaA, KG, Hamburg, 141 Hapag Lloyd AG, Hamburg, Germany
Germany 142 Zeller Associates GmbH/S. Reintsema, Hamburg,
71 Bilderberg, Hamburg, Germany Germany
72–77 Germanischer Lloyd, Hamburg, Germany 143 Germanischer Lloyd, Hamburg, Germany
78, 79 Munich Re archives 144 HDW/Noell Cransystems; Germanischer Lloyd,
80 Germanischer Lloyd, Hamburg, Germany Hamburg, Germany
81, 82 Munich Re archives 145 Germanischer Lloyd, Hamburg, Germany
83 Alexander Gow, Inc., Seattle/Washington, USA
84 Munich Re archives
85 Ian Bowman, Kent/United Kingdom
86, 87 Germanischer Lloyd, Hamburg, Germany
88 Reuters, Berlin, Germany Pages Source
89, 90 Marine Claims Handling Agencies GmbH,
Hamburg, Germany 108, 110 E. W. Mast/MR Archives

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 GLOSSARY OF CONTAINER TERMINOLOGY

© 2002
Münchener Rückversicherungs-Gesellschaft
Central Division: Corporate Communications
Königinstrasse 107
80802 München
Germany

[Link]

Responsible for content:

Operational Division: CUGC 1.3

In conjunction with Zeller Associates GmbH, Hamburg

We would like to thank the following for their kind support in the
production of this publication:

EUROGATE GmbH & Co. KgaA, Hamburg

Germanischer Lloyd, Hamburg
Hamburger Hafen- und Lagerhaus-Aktiengesellschaft, Hamburg
Hapag Lloyd AG, Hamburg
Fa. Wilhelm Kelle, Hamburg
Lufthansa Cargo AG, Frankfurt/Cologne
MCH Marine Claims Handling Agencies GmbH, Hamburg
Reederei Jürgen Ohle, Drochtersen
Securitas Gesellschaft für Seeverpackungen m.b.H., Hamburg

Order number: 302-02657

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