| Large amounts of international trade and many limits | | | | Likely Marine Impact |
| and sums insured for Marine insurance contracts are | | | | (where exposed to foreign currency or overseas |
| negotiated in a currency other than Australian Dollars | | | | supply) |
| (A$). | | | | Hulls - revaluations may be desirable as machinery |
| Fluctuating rates of exchange between currencies are | | | | parts cost increase. |
| common with most entities exposed to this area | | | | Cargo - Limits of liability may need review and a |
| implementing forms of hedging or risk management | | | | watch put on turnover and sendings to ensure a |
| to reduce the likely impact on their business. | | | | blowout in figures does not give the insured a |
| Where rapid and significant variances occur together, | | | | surprise at time of adjustment. |
| the best laid hedging and risk management plans may | | | | Liability Limits - may need review. |
| not be sufficient to completely eliminate impact on a | | | | Claims Impact |
| business. | | | | Claims requiring payment in foreign currency will need |
| This bulletin highlights some of the exchange rate | | | | conversion from A$ with resultant monitory impact |
| issues which may impact Marine insurance covers. | | | | to the claims record of the insured. The replacement |
| Currency and Trade | | | | of components and parts sourced from overseas |
| The currency of the United States of America (US$) | | | | may attract inflationary influences due to exchange |
| is recognised as the international currency of trade, | | | | rate fluctuation. |
| shipping and to a lesser extent,aviation. Some other | | | | Insurer CapacityInsurer per risk capacities will often |
| currencies, notably the Euro have a showing in trade | | | | be established on an annual basis following renewal of |
| contracts however, the US$ is predominant. | | | | treaty reinsurance. Rapid and significant variations in |
| Sale and purchase agreements will often impose the | | | | exchange rates can lead to short term capacity |
| trade currency of choice as US$ which eventually | | | | constraints on risks with large limits or sums insured in |
| leads most non-USA domiciled traders, sellers or | | | | foreign currency. |
| buyers into a foreign currency transaction and | | | | Where rapid and significant exchange rate variations |
| exposure to exchange rate fluctuation. | | | | occur, care should be taken to accurately assess and |
| Business plans, projects and actual transactions which | | | | react to any adverse impact on insurance coverage. |
| establish profit or transaction margins on an expected | | | | Disclaimer: This bulletin is for information purposes |
| exchange rate level can be eroded or extinguished | | | | only and is not legal advice. |
| where rapid exchange rate fluctuation occurs. | | | | |