Since the financial crisis of 2008, counter-party risk has changed dramatically.  That has, thankfully, resulted in shorter charter chains,  a move to better counter-party risk management and a continued move towards charterers with a strong track record.

That said, the shipping market continues to have an excess of capacity, particularly in dry bulk, with rates remaining low.  Container rates remain very low although pockets of the market such as livestock, gas and niche operators can still find a balance between supply and demand.

Whilst owners can manage their counter-party risk for short term charters, longer term contracts remain a risk and, once the contract is entered in to, there is a rarely a right to cancel without defaulting.

Charterer’s Default Insurance covers owners for their losses in the event of  their charterer defaulting due to liquidation during the period on charter.  The cover responds to the net loss of profits for the balance of the period on charter and assists owners with managing their exposures as they seek to replace the charter with a new contract.

In a falling market, the losses are exacerbated of course, leaving owners with little immediate redress against the bankrupt charterer.  With the cover in place, cash flow as well as balance sheets are protected.

Contact us for full details of the cover available, the extend of protection and limits on [email protected] or through your usual Latitude broker.

After we published this Blog, one of our clients, Nepa Projects in Hong Kong, was interviewed for a maritime news site – listen to what Capt. Pappu Sastry has to say about counter-party risk here.