1. Property/Casualty
Highways
And Robbery
Crime and infrastructure problems make cargo
transport coverage challenging in Latin America.
by Kate Smith
W hen truck drivers pull
to the side of the road
in Sao Paulo, they are at
risk of hijacking. When they stop
to eat at a rest stop in Monterrey,
Erika Schoch, the regional marine
director of Latin America for Swiss Re,
said cargo lines generated approxi-
mately $1.8 billion in 2011. And as
trade increases, so too will the line’s
Mexico, they are at risk of hijacking. importance.
When they pull out of a toll booth “It’s a very important line of busi-
slowly, they are at risk of hijacking. ness nowadays in Latin America,” she
Latin America may be one of the said. “In most of the countries, marine
fastest-growing markets, but it is also is probably the third- or fourth-largest
one of the most dangerous places line on the non-life side of business.”
Key Points
for cargo transport. Given its ever-changing perils,
“If you look at our cargo theft however, it is not a line that is easily M Risky Business: Cargo transport
lines are volatile in Latin America.
maps, Latin America would have the written.
The Problem Areas: Crime
M
highest risk in the world,” said Ron “It’s very difficult to be profit-
able, but it’s also more challenging,” and infrastructure are particularly
Greene, vice president of global oper-
problematic in the region.
ations and strategy for FreightWatch Schoch said. “You have to be careful,
The Written Word: Insurers are using
M
International. “Brazil, in my opinion, you have to know the market, you
stricter policy wording to safeguard
has some of the most advanced crimi- have to really show your technical
themselves.
nals targeting cargo. It has become a skills. Those who know how to put
really big problem, costing a billion the right exclusion in the right place between the driver and the criminal.
dollars a year.” in the right policy are the ones who That is opposite of the U.S., where
As the economies of Latin America can really make money. 95-plus percent of the shipments sto-
have grown, so too has the demand “If you are not a real marine under- len are stolen while unattended.”
for inland marine coverage—particu- writer and don’t have the technical In 2001, robbery had become so
larly cargo transport cover. But in a skills, you cannot be successful in the prevalent in Mexico that insurers esti-
region riddled with risks, insurers are Latin American market.” mated one out of every three cargo
finding it difficult to stay profitable. vessels would be stolen, Schoch said.
“It has historically been one of ‘Inside’ Jobs The situation worsened to the point
the lines with the least margin in the FreightWatch International, a where some insurers refused to pro-
region, mirroring the international Texas-based logistics security ser- vide cover for ground transportation,
experience,” James Grieve, chief vices company, counts Brazil and she added.
underwriting officer and regional Mexico among the top three coun- The introduction of telematics,
manager for Latin America and the tries in the world (along with South including global positioning systems,
Caribbean for Scor Reinsurance, said Africa) for cargo theft risk. Hijacking, trailer detachment sensors and radio
of cargo lines. “Such result is driven overwhelmingly, is the most com- frequency identification devices, has
by a sad combination of low rates, a mon modus operandi. helped stabilize the problems. But
high loss burden (significant theft risk “We do see in Latin America the even today such technology is not
and poor infrastructure), high com- use of force is very common,” Greene universally required or used.
missions and cost of loss-prevention said.“Probably 90% of the time a ship- Only 14% of the 2.3 million
measures.” ment is stolen, there is interaction cargo-carrying trucks in Brazil are
BEST’S REVIEW • DECEMBER 2012 23

2. Property/Casualty
equipped with onboard technology Though the region has a reputa- on roads, and roads mean trucks,” more and create some good practices
to prevent robberies or recover tion for high incidence of cargo Vitiritti said. “Latin America is a by the customers related to their own
stolen shipments, according to crime, robbery and theft are not the huge market for road transporta- risk, probably in the early future they
Telematics Update. only risks customers face. Luis Vitiritti, tion. Some of the roads are good, will decrease their losses.”
“The vast majority of the time, a marine risk consultant for Zurich some of the roads are not so good. Insurers are safeguarding them-
the customer has felt pain from a in Brazil, said losses can be broken We have mountains, we have a lot selves by becoming more specific in
theft event before they invest in down into three categories. of people and a lot of concentra- their policy wording.
security,” said Greene, whose com- “A third of losses could be from tion in the main cities. There are “We enhanced the quality of the
pany provides real-time monitoring robbery, a third could be from dam- huge cities, a lot of cargo concen- wording, making the contract more
of shipments. “They’ve had a ship- ages and a third could be from acci- tration and a lot of terminals. specific related to security, and then
ment stolen or two before they dents,” he said. “There are a lot of cargo concen- these rules and wording clauses
react and invest.” Losses from damages are not trations and ports and terminals that change from a recommendation to
Thieves, particularly those in unique to Latin America and often need to improve. It means in Latin an obligation,” Vitiritti said. “It means
Brazil, are finding ways to circum- can be addressed simply with packag- America we need investments in that if, for example, you would like to
vent technology.The use of GPS jam- ing solutions. these. Infrastructure is a huge topic carry electronics [worth] more than
mers, though not yet widespread, is Accidents, however, are of particu- and a huge need also.” $500k in Latin America, you must
on the rise. lar concern in the region, as 60% of have an electronic device tracking
“Unfortunately, robbers these cargo is transported via highway. Moving Targets the truck, an electronic device track-
days are very sophisticated,” Schoch “The original problem is the lack One of the biggest challenges of ing the cargo, not only as a recom-
said. “As soon as there is a new loss- of a network of regularly dredged riv- cargo coverage, experts say, is that mendation but as an obligation to
prevention measure, they learn from ers, as well as the lack of develop- the product is always moving, which follow the contract.
it. There is a phrase in Latin America ment and maintenance of a railroad means underwriters need to under- “Then if the customer faces a loss,
that is very famous: ‘You make the network,” Grieve said. stand all of the risks the product will the customer needs to prove they
law, and I’ll see how to go against it.’” “Given this situation, roads are face on its journey. had that solution as it was written
In order to keep a step ahead, naturally saturated and transited by “It’s a very dynamic market, which in black and white in the contract
insurers must stay abreast of robbery vehicles exceeding the weights fore- makes it very interesting,” Schoch in order to receive that money back.
trends and adjust their underwrit- seen at the time of the construction said. “But if you don’t have the knowl- This is the main way here. We are
ing accordingly. For example, half of of the roads, which contributes to edge, it can also be very dangerous reinforcing these contracts better
all cargo crime in Brazil takes place the deterioration. We shouldn’t forget to be there. So day by day you have than in the past.
in Sao Paulo state, according to esti- that the latter is the most expensive to improve all your loss prevention “So I think, as a Latin America con-
mates from Cargo Transporters Union transportation while the former two measures.” sultant, that we are even better than
of the Sao Paulo State, and Greene are cheaper, which also erodes the Clients are a critical ingredient in the U.S. and Europe at dealing with
said certain Sao Paulo highways aver- region’s competitive position.” that formula. these types of things. In the U.S., I’m
age nearly one hijacking per week. The infrastructure in Latin America “The challenge is to find the good not seeing insurance contracts with
has not kept pace with the rapid apples,” Vitiritti said. “A good cus- as specific rules as we have here.
Road Work growth. The roads are congested, par- tomer is one that knows their risks, But if you look at statistics in the U.S.
According to FreightWatch data, ticularly in the urban areas that serve knows how to handle the risk and related to robbery, it’s huge. Super
Monterrey had the highest volume as both the origin and destination knows how to minimize or even huge. So insurers in the U.S. have
of cargo theft in Mexico in the first of most transported products, and eliminate part of the risk.” now opened their eyes and in the
two quarters of 2012, and its state, many of the roads are ill-equipped to Vitiritti’s focus at Zurich is on future probably will try to learn from
Nuevo Leon, had a country-high 105 handle the volume of cargo they are understanding a customer’s risks and our expertise how to handle high-risk
hijackings. now seeing. making recommendations as to how cargo in complex situations.” BR
Underwriters can use such In the past two years, imports in a client can minimize those risks in
information to determine whether Brazil increased by an average of 23% order to prevent losses. Learn More
to require route planning, armed while exports grew by 8%, accord- “We are not analyzing only the
escorts or convoys in their policy ing to World Bank data. In Mexico, customer’s behavior in terms of cargo Zurich Insurance Group Ltd.
A.M. Best Company # 86976
wording. Another common theft the region’s second-largest economy handling, but also where is the com-
Distribution: Multichannel
prevention measure is the use of behind Brazil, imports were up 16.5% plexity of their transportation, how
Swiss Reinsurance
unmarked trucks. and exports 17% over the same period. they handle the management of con- A.M. Best Company # 85009
“In Mexico, the trucks are white, The growing import/export tracts, how they handle problems, Distribution: Direct
so you cannot distinguish them,” markets have strained the region’s how they control packaging and Scor S.E.
Schoch said. “They don’t say Pana- roadways. “Accidents on the road loading/unloading the product from A.M. Best Company # 86155
sonic, ‘I have TVs here.’ But the rob- are extremely important when you vessels, how they track the cargo. Distribution: Direct and reinsurance brokers
bers know there is something they are talking about Latin America “We know 70% of losses are For ratings and other financial strength information
visit www.ambest.com.
are interested in.” because 60% of our voyages are caused by human error. So if we think
24 BEST’S REVIEW • DECEMBER 2012 BEST’S REVIEW • DECEMBER 2012 25