The hidden costs of shipping turmoil for cargo cover
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Shipping routes blocked or rerouted are only the start – for cargo owners, the real pressure lies in hidden accumulations, thin recovery options and policies built for calmer seas than today’s
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A LARGE Australian dairy company recently discovered it would only be able to supply some of its products to the market for about another four weeks. Not because of anything wrong with the products, its farms or its workforce. The problem was plastic – specifically, the petrochemical inputs that go into packaging. These were caught up in the cascading effects of a shipping crisis that has escalated far beyond anything the industry has seen in recent years.
For Dan Morrison and his colleagues at NTI, the real story behind the current global shipping disruption lies in its ripple effects: Australian cargo owners are facing a web of
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Rising cost of shipping a container
26 Feb
“If your goods are being driven across a 50-degree desert in a solid steel container, you’ve got to really make sure they’re properly protected”
Dan Morrison,
NTI
hidden exposures, from transshipment decisions and heat-stressed containers to recovery disputes and policy limits that no longer match where their goods actually accumulate. The same forces are reshaping freight costs, war and strikes cover, and landside logistics in ways that leave brokers and their clients potentially exposed unless they review routes, limits and recovery strategies.
The picture is more layered than most brokers realise, and the insurance implications are not always where people expect to find them.
The transshipment problem Australia doesn’t trade heavily with the Gulf region directly. While that might make it seem like the cargo side of the fallout is somebody else’s problem, Morrison is quick to point out that Dubai is a very big transshipment port.
That means the disruption is far more relevant to Australian exporters and importers than a simple map of trade routes would suggest. And when shipping lines can’t safely complete a voyage, the consequences land on cargo owners in ways that standard policies don’t always anticipate.
Morrison describes a mechanism called ‘notification of end of voyage’ that’s become a real issue for customers. A shipping line with a contractual obligation to deliver cargo from, say, Melbourne to Dubai can instead drop that cargo in India or Singapore and declare its obligations fulfilled. “Then it’s back on to you to get your goods somewhere else,” he says.
The costs add up with this kind of mid-journey rerouting. Shipping companies impose surcharges on affected shipments to cover the costs of discharging goods at the ‘wrong’ port. For temperature-controlled goods, it can mean plugging refrigerated containers into infrastructure that wasn’t expecting them, at ports that don’t have the capacity to handle a sudden influx.
Getting goods to the intended destination may also involve unforeseen conditions that cost more or add risk. Morrison points to the practical consequences of goods now being transported by truck from the Red Sea across Saudi Arabia to reach the UAE. “If your goods are being driven across a 50-degree desert in a solid steel container, you’ve got to really make sure they’re properly protected.”
The problem isn’t only heat. It’s accumulation. Multiple containers arriving at a port that wasn’t the intended destination creates backlogs, handling delays and questions about whether coverage limits set for a normal journey remain adequate for an abnormal one.
From a recoveries perspective, the disruption adds another layer of complexity that cargo owners may not anticipate. Tye Joyce, marine recoveries team manager at NTI, says the main change is not simply the geopolitical event itself but what it does across the transport chain. “Where shipping routes are affected by conflict or instability, we tend to see delays, rerouting, shifting operational priorities and slower
responsiveness from carriers and logistics providers,” he says. “That can make it harder to identify where in the chain a loss occurred, who had custody of the cargo at the relevant time, and what documentation is available to support recovery prospects.”
For cargo owners, that means the practical recovery risk can increase even where the legal framework itself hasn’t changed.
The fertiliser risk Australia imports large volumes of fertiliser despite producing some domestically, and bulk urea shipments have become significantly more complicated to secure and insure. Morrison says NTI has been working through policies for multimillion-dollar bulk fertiliser imports, reflecting efforts by buyers to stockpile and lock in supply before the situation worsens.
The agricultural calendar means timing is everything. “If it isn’t available, do some of the primary producers miss a season or produce lower-quality goods?” Morrison says. “That kind of flow-on effect becomes a multiyear, longer-term impact.”
Joyce adds that industries such as agriculture and petrochemicals carry particular exposure precisely because delays themselves can materially affect the condition, usability or value of the cargo. “The longer cargo spends in transit, in storage or waiting at congested ports, the greater the scope for deterioration, contamination, handling damage or disputes over whether the loss arose from delay, physical damage, inherent vice or some other cause,” he says. “Those distinctions are important in recoveries because they often determine whether there is a viable path against a responsible party or whether the loss ultimately sits with the cargo owner.”
The long tail and at times complex supply chains are what make agricultural transit risks particularly hard to price and insure. They require an insurance provider who has the skills and expertise to deliver the best outcome for the customer. There’s no single loss event to point to. There’s a slow compression of options, compounding over time, that may sit largely outside the scope of a standard cargo policy.
What insurance costs are actually doing Morrison’s view diverges sharply from the media narrative that insurance premiums have exploded and exacerbated the shipping stoppage.
Yes, war risk premiums on ships have risen, and for very large tankers the additional cost of a single strait transit can run to six or seven figures. But that’s vessel insurance, not cargo insurance, and Morrison is clear about the distinction. “Particularly for cargo lanes, their ships are typically worth far more than a container of cargo, and the vessels are much more exposed,” he says.
For cargo owners, premium movements have been relatively modest. This is partly because premiums are calculated as a percentage of declared cargo value, and because inflation-driven value increases tend to be offset by reduced shipment volumes. If you’re shipping 10% less but each shipment is worth 10% more, the net premium impact may be close to zero.*
“Longer transit times, more hand-offs, shifting responsibilities and slower communication all increase the likelihood of disputes around where damage occurred and who is responsible”
Tye Joyce,
NTI
Joyce says the flow-on effect from higher costs goes beyond pricing itself. When freight costs rise and timelines come under pressure, operators are often moving quickly, reprioritising cargo, altering routes or relying more heavily on subcontracted handling and storage arrangements. “In recoveries, that can create more factual complexity and more points of dispute if something goes wrong,” he says. “It also increases the likelihood that parties take a firmer position on liability, particularly where commercial pressure is already high and margins are thinning.”
War and strikes cover: still available, but the geography has shifted The most complex area Morrison deals with involves war and strikes coverage, the section of a cargo policy that applies specifically to damage to cargo caused by those risks. It’s also the most misunderstood.
Before the Iran strikes, many cargo insurers had already introduced the option to cancel or remove this cover for the Gulf of Aden and the Red Sea in response to the Houthi disruptions. Morrison pushes back firmly on the narrative that cover has become unavailable. “It’s almost always been available. It’s just who is prepared to provide the cover and how much and how to have it reinstated can be challenging when many brokers and customers aren’t accustomed to dealing with it,” he says.
War and strikes cover in a cargo policy can be cancelled with seven days’ notice and reinstated at an additional cost. Whether an insurance provider will do so varies by cargo type, vessel and destination. Some domestic providers are not prepared to offer reinstatement at all right now. International specialist markets remain more active. It requires a conversation on the specific situation and need, not a standard renewal form.
There’s a structural feature of cargo insurance that Morrison says is poorly understood and matters a great deal now. Unlike motor or property insurance, which covers a fixed asset for 365 days, cargo cover starts and stops with each individual voyage. That means changes in war risk conditions apply to new shipments as they begin, not to goods already in transit. Cargo owners have a window to respond and adjust, but only if they know to act quickly. His message to brokers? “Get on the phone to us or drop us an email straight away, and we can manage most of those situations. We just need to communicate about it.”
Joyce adds that when cargo is moving through higher-risk corridors, recovery claims can become more complex very quickly once a loss occurs. “If there is uncertainty around whether a loss is connected to conflict, delay, rerouting or downstream handling, recovery pathways can become more contested,” he says. “In that environment, early evidence collection and a clear understanding of the contractual chain are critical.”
The policy limit mismatch Of all the practical risks Morrison identifies, the one he returns to most urgently is the mismatch between declared policy limits and actual exposure when disruption causes unexpected accumulation.
When goods pile up at unintended ports and multiple containers end up somewhere they weren’t supposed to be, a cargo owner whose limits were set for normal conditions can find themselves badly underinsured. “We don’t want to have a customer who’s three-quarters covered or 90% covered,” Morrison says. “They can work with their broker – just let us know and we may be able to update policy limits.”
Adjusting limits is administratively straightforward. What requires more thought is understanding how far the changed logistics environment has shifted the assumptions embedded in the original policy. For example, a route that was direct is now indirect. A journey that took three weeks now takes five or more. Goods packed for one set of conditions are travelling through another. None of that gets flagged automatically.
NTI’s risk engineering team works with customers on exactly this kind of review, assessing how changes in routing, handling, transit time and climate exposure affect the adequacy of existing cover. It’s less about the war risk exclusions and more about whether the existing structure of the policy still fits what’s actually happening to the goods.
Joyce points to a related issue on the recoveries side. Even where a recovery action is available, cargo owners frequently carry broader commercial losses that sit outside the core damaged goods component. “For example, delays, storage, administrative disruption or uninsured costs,” he says. “Inflation magnifies the significance of those losses. It also means that when recoveries are not straightforward, the financial gap between what has been lost commercially and what can realistically be recovered may become more pronounced.”
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Published 18 May 2026
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The real financial pressure isn’t coming from cargo insurance. It’s coming from freight costs. Fuel surcharges applied by shipping lines had already added around 20% to standard freight rates before the Iran strikes. With oil prices now at levels not seen in years, those surcharges will go further.
“Supply chain costs come from fuel surcharges, or what they call bunker fuel,” Morrison says.
With the Strait of Hormuz effectively closed, vessels have rerouted to the Cape of Good Hope, adding 3,500–4,000 nautical miles and significant extra bunker fuel consumption to every voyage. Because marine fuel is a global commodity, the extra cost flows through to every trade lane, not just those near the Gulf, and carriers are passing that cost on. Some shippers impose extra charges by cargo type, some by route or distance and some by a mix of these. These extra surcharge rates can change quickly, and with each shipper imposing different criteria and conditions, the situation becomes very complicated, very quickly. A general ballpark index for how much it costs to ship a container is provided by the World Container Index.
The pressure on landside logistics While international shipping disruption dominates the conversation, Australian cargo owners are also absorbing significant pressure from the landside logistics chain, and the two are compounding each other.
Trucking companies were already under strain from fuel costs before oil prices surged. NTI is a major insurance provider for trucks in Australia, and Morrison says the sector has been under close watch for some time. There has been a rise in insolvencies across transport and logistics over the past six to 12 months, a trend that predates the current crisis but is being sharpened by it.*
Operators have been adapting by running larger vehicles less frequently, shifting to night driving to reduce fuel burn and traffic exposure, and monitoring toll-road usage data to track where freight task volumes are changing. When a trucking company goes under, or when a driver turns up to a scheduled pickup and can’t start the vehicle because the fuel tank was emptied overnight, the disruption flows downstream directly to the cargo owner.
Electric vehicles are not a near-term answer for the long-haul freight task in Australia. The distances and infrastructure requirements make that a longer horizon.
Last-mile urban delivery may electrify sooner, but diesel dependency in freight means fuel price risk remains a central exposure for anyone moving goods across this country.
Act before the claim, not after Joyce offers a pointed summary of what disruption does to recovery prospects. “Disruption tends to magnify ordinary recovery challenges,” he says. “Longer transit times, more hand-offs, shifting responsibilities and slower communication all increase the likelihood of disputes around where damage occurred and who is responsible.” Contract structures involving multiple parties, offshore operators or layered subcontracting can make that even harder.
“Cargo owners should be responding with earlier escalation, tighter evidence preservation and a clear understanding of who bears responsibility at each point in the transport chain,” Joyce adds. “In a disrupted market, recovery prospects often turn as much on document quality and timing as they do on the underlying merits of the claim.”
NTI’s marine recoveries capability is focused precisely on this kind of early, disciplined response. “With a dedicated marine recoveries team, we are able to focus on securing supporting material and narrowing liability against the correct party, which typically becomes more difficult as time progresses,” Joyce says.
Morrison’s message to brokers and cargo owners runs along the same lines: don’t wait for a claim to surface before reviewing exposures. For example, the dairy company with four weeks of packaging got lucky in the sense that someone noticed in time. Not every business will have that warning.
“We help our customers deliver to their customers as best we can,” Morrison says. That means reviewing limits against current values, checking war and strikes cover positions on new shipments, understanding how changed routes affect the conditions goods travel through, and communicating with NTI the moment anything changes from the expected plan. For Australian cargo owners who built their insurance programs around a more stable world, the gap between what their policy assumed and what is actually happening to their goods may be larger than they think.
*Example only. Outcomes vary and are subject to policy terms, conditions and underwriting criteria.
2026 NTI Limited ABN 84 000 746 109 AFSL 237246. This article contains general information only and does not take into account your objectives, financial situation or needs. Policy terms, conditions, exclusions, limits and underwriting criteria apply. National Transport Insurance is administered on behalf of the insurers by its manager NTI Limited ABN 84 000 746 109 AFSL 237246.
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