Overseas Transit & Warehousing

BackgroundOur client was a sole and "captive" supplier to a large computer manufacturer with plants worldwide. During the economic slowdown, the manufacturer asked our client to ship product to a warehouse in Scotland and hold title to it until needed. Competitors were close on our client's heels to replace them as suppliers.ProblemNot only is the shipping risk now assumed by our client (who customarily ships "FOB our loading dock"), but overseas warehouse coverage is also needed for a considerable time with fluctuating values.SolutionTransit risk: until now the cost of shipping insurance "FOB our loading dock" has been borne by the buyer. Thus, our client's insurance costs have been a fraction of "primary" shipping insurance rates. However, now that our client has assumed these exposures, our Transit Policy is simply re-rated for "primary" risk coverage. Overseas warehousing: this is not a rare occurrence and major insurers can accommodate any overseas location. We added the warehouse to our Transit Policy, rated for the appropriate building construction and protections.ResultsWhile there were extra premium costs associated with our client's new demands, the insurance policies were easily reconfi gured to accommodate the needs for continued business operations with their only customer.CautionA reminder that revenue recognition issues arise with this business model.Newsletter, June 2010