Special Drawing Rights (SDRs) are a form of international currency created and managed by the International Monetary Fund (IMF). In shipping, SDRs are often used as a unit of account for contracts, particularly those involving international trade. SDRs are considered to be a stable and predictable currency, which makes them an attractive option for parties looking to avoid exchange rate fluctuations and other financial risks.
When it comes to shipping, there are a variety of risks that can impact the safe and timely delivery of goods. These risks include everything from natural disasters and mechanical failures to theft and piracy. While carriers typically take steps to mitigate these risks, such as implementing safety protocols and securing cargo, it may still be worth investigating extra insurance to protect against unforeseen events. Because the shipping lines, and also airlines, always have limited compensation rights in their terms and conditions. Not giving attention to these limited compensations can lead to damages that are not compensated for.
One of the key advantages of SDR-based insurance is that it provides a consistent and transparent valuation for cargo. This can help to avoid disputes over the value of goods in the event of damage or loss, as the SDR value will be clearly defined in the insurance policy. Additionally, SDR-based insurance may offer greater stability than traditional insurance policies, which are often priced in national currencies that can fluctuate in value.
Another benefit of SDR-based insurance is that it can help to mitigate the impact of currency fluctuations on the cost of insurance. Because SDRs are a stable and widely recognized currency, insurers may be willing to offer more competitive rates than they would for policies denominated in less stable currencies.
Of course, there are also potential drawbacks to SDR-based insurance that should be considered. For one, it may be more difficult to find insurers that offer this type of coverage, as it is less commonly used than traditional insurance policies. Additionally, the use of SDRs may introduce additional complexity into the claims process, as parties may need to navigate international currency regulations and procedures.
Ultimately, the decision to investigate extra insurance for shipping will depend on a variety of factors, including the value of the cargo, the risks involved in the shipment, and the financial resources of the parties involved.
However, for those looking for a stable and predictable form of coverage, SDR-based insurance may be a worthwhile option to consider.
Are you struggling with the value of your goods vs. the potential compensations that you are entiteld to? Heavy Cargo Logistics B.V. can assist and advice you, please contact us!