Misappropriation risk for food & agri companies

04 September 2018

Insurers say misappropriation; we say theft. Whatever you want to call it, how can you stop cargo going missing and how well do insurers cover your exposure?

Food and agri companies import and export huge volumes of product around the world. A lot of it passes through centralised transport hubs and third parties look after it for most of the journey.

The old adage says that possession is nine tenths of the law but, in reality, the third parties who transport and warehouse your goods don’t own them. But when they’re handling such large quantities of valuable products, how do you make sure they’re not misappropriated?


The day-to-day reality is that due diligence is often lacking in the transport and storage arrangements that food and agri businesses have. Contracts aren’t as well constructed as they should be and information regarding cargoes lacks detail.

Similarly, cargo information security is too lax and technology, external auditing and surveillance measures aren’t always used to best effect. Thus, where third parties want to misappropriate goods, there’s a lot of opportunity for them to do so.


But such events are not one-off heists. Hundreds of thousands of barrels of olive oil don’t get stolen in the dead of night.

Thieves don’t make off with hundreds of tonnes of coffee beans in a single scam. It happens over weeks, months and even years. It’s then almost impossible to track misappropriated products and pinpoint exactly when things started to go awry.

And timing is potentially a massive issue for food and agri companies that find someone has been helping themselves to their supplies.


At the beginning of 2017 London market carriers introduced a new misappropriation clause. It states that policyholders must notify underwriters within 45 days of becoming aware ofa loss. And herein lies the problem. If a company can’t identify a loss within 45 days, then the insurance won’t respond.

Given that companies only discover many misappropriation events months after they first began, this is a clause that rightly concerns both insured and their brokers. But food and agri companies must also look as carefully at their own risk management processes as they do at the wording on their insurance policies. Preventing a loss is always better than having to make a claim – even if it is covered. There is, therefore, a need for businesses to review how they manage their third-party distribution and storage contracts, processes and practices. They simply can’t leave the store door open and hope someone won’t be stuffing their own pockets.


  • Improve the due diligence and management of cargo
  • Watch out for 45-day notification periods on misappropriation cover – it may not be long enough.

For further information please contact Abigail Geraghty, Cargo Account Handler on +44 (0)20 7466 6468