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MARINE INSURANCEMARINE INSURANCE

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DefinitionDefinition

Marine Insurance covers the loss or damage of ships, cargo, and any transport or property by which cargo is transferred, acquired, or held between the points of origin and final destination.

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At the end of this session you will be able to At the end of this session you will be able to explain;explain;

MARINE INSURANCEMARINE INSURANCE

PROPERTYPROPERTY LIABILITY LIABILITY

Marine CargoMarine Cargo Marine HullMarine Hull

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MARINE CARGOMARINE CARGO

OVERSEAS TRANSITOVERSEAS TRANSIT INLAND TRANSITINLAND TRANSIT

* Open Cover* Open Cover * Open Policy* Open Policy

* Specific Policies* Specific Policies * Special Declaration* Special Declaration

* Annual Policy* Annual Policy

At the end of this unit you will be able to At the end of this unit you will be able to explain;explain;

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At the end of this unit you will be able to At the end of this unit you will be able to explain;explain;

Contracts of Sale in Marine Overseas Transit Contracts of Sale in Marine Overseas Transit (Insurable interest in Marine Overseas Cargo is based on the (Insurable interest in Marine Overseas Cargo is based on the contract of sale)contract of sale)

FOBFOB C & FC & F CIFCIF

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At the end of this unit you will be able to At the end of this unit you will be able to explain;explain;

OVERSEAS TRANSIT CLAUSESOVERSEAS TRANSIT CLAUSES

(These clauses define the terms and coverages in (These clauses define the terms and coverages in Overseas Transit)Overseas Transit)

Institute Cargo Clause CInstitute Cargo Clause C Institute Cargo Clause BInstitute Cargo Clause B Institute Cargo Clause AInstitute Cargo Clause A

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At the end of this unit you will be able to At the end of this unit you will be able to explain;explain;

INLAND TRANSIT CLAUSESINLAND TRANSIT CLAUSES

Inland Transit Clause CInland Transit Clause C Inland Transit Clause BInland Transit Clause B Inland Transit Clause AInland Transit Clause A

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Why is Marine Insurance important?Why is Marine Insurance important?

The cargo can be damaged on exposure to a wide variety of risks

Marine insurance relieves the traders of their financial exposure from physical loss or damage to their goods while in transit

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Types of Marine Insurance

Marine insurance can be broadly classified as either property or liability insurance

i) PROPERTY Cargo Hull

ii) LIABILITY

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Marine Cargo InsuranceMarine Cargo Insurance

It provides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea or air.

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Though the name may indicate that the policy covers the transit of goods only by waterways, it is not so

Marine Cargo Insurance includes all forms oftransit of goods – By Road, Railways, Water & Air

Marine Cargo Insurance intends to protect the insured against the risk of loss or damage to the goods in transit

It is also called transit insurance

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Insurable interestInsurable interest

A ship carrying cargo starts from India to Japan, on the way due to bad weather condition the ship meets with an accident and sinks. Who has insurable interest in the goods?

The Sellers, the buyer or the transporter?

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Insurable InterestInsurable Interest

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Usually it is the seller’s responsibility for any loss or damage suffered by the goods until their ownership passes to the buyer

This applies to the normal sales within the country but not to export sales

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Who can buy a Marine Insurance Who can buy a Marine Insurance policy??policy??

Contract of sale : Legal contract for exchange of goods, services or property to be exchanged from seller to buyer for an agreed upon value

The contract of sale determines who buys the policy

The most common contracts of sale, also called Incoterms (International Commercial Terms), are :

FOB (Free on Board) C & F (Cost & Freight) CIF (Cost, Insurance & Freight)

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Contract of SaleContract of Sale FOB (Free on Board):

Seller is bound to load the goods onto the carrying vessel, he does not need to arrange insurance.

FOB : Buyer Pays freight, Buyer arranges insuranceFOB : Buyer Pays freight, Buyer arranges insurance C&F (Cost and Freight):

Same as FOB. The only difference is that the freight should be paid by the seller

C& F : Seller pays freight, Buyer arranges insuranceC& F : Seller pays freight, Buyer arranges insurance

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Contract of saleContract of sale

CIF (Cost – Insurance – Freight):

The seller is bound to provide insurance covering the whole voyage up to the final destination

CIF : Seller pays freight and seller arranges the CIF : Seller pays freight and seller arranges the insuranceinsurance

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In marine cargo insurance, the person having insurable interest at the time of loss can only recover

Marine cargo policies are freely assignable. Unlike other policies, there is no need to take insurance company’s consent for transferring policy to new buyer

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Marine policies are Valued Policies

The sum insured is negotiated between the insured and the insurer

i.e., the value is agreed upon and claims are settled on the basis of proportion to the agreed value and not on the market value or reinstatement value basis

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Marine Cargo InsuranceMarine Cargo Insurance

Provides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea or air

Consignments by rail, road etc Export & import shipments Coastal shipments Shipments by inland vessels or country craft

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Marine Cargo insurance provides;

(1) Coverage of goods during Overseas Transit (2) Coverage for goods Inland Transit

Marine insurance cover starts right from the moment the goods leave the point of start and remain continuously in force during transit and until the goods reach the destination.

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Types of Marine CargoTypes of Marine Cargo

Overseas TransitOverseas Transit Open CoverOpen Cover Specific PoliciesSpecific Policies

Inland TransitInland Transit Open PolicyOpen Policy Special Declaration PolicySpecial Declaration Policy Annual PolicyAnnual Policy

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Large Export/ Import oriented Industries usually prefer Open cover agreement, as they have to make numerous regular shipments who would otherwise find it very inconvenient to obtain insurance cover separately for each and every shipment.

Overseas TransitOverseas TransitOpen coverOpen cover

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Overseas TransitOverseas TransitOpen CoverOpen Cover

A marine cargo open cover policy is an agreement between a merchant and an insurance company to insure all goods in transit within the agreement, until either party cancels the agreement

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Overseas TransitOverseas TransitOpen cover-FeaturesOpen cover-Features

An Agreement is made for a specific period, generally 12months

Rates, Terms & Conditions are agreed to in advance by both the parties

Premium is paid in advance for the projected exports to be made

Details of all shipments should be declared by the insured

Agreement ceases on expiry of period or when sum insured gets exhausted whichever occurs first.

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Overseas TransitOverseas TransitSpecific PolicesSpecific Polices

Specific Policies:

This agreement or policy is usually issued for one time transit of cargo

Covers only particular consignment. Insurance on case to case basis. To be arranged before commencement of

transit

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INLAND TRANSITINLAND TRANSITOpen PolicyOpen Policy

A manufacturer who in a year has many consignments for transportation, can take an open policy for the entire year instead of individual policy.

Open Policy is commonly used for dispatches within the country by rail, road, air, inland

waterways and registered post parcels. It is also known as the floating policy.

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INLAND TRANSITINLAND TRANSITOpen PolicyOpen Policy

The policy term is one year Policy issued for a substantial sum insured

based on the projected value of dispatches Declarations are made for each dispatch Policy ceases on expiry of policy term or when

sum insured gets exhausted whichever occurs first

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INLAND TRANSITINLAND TRANSITSpecial Declaration PolicySpecial Declaration Policy

Special Declaration Policy is a Special Declaration Policy is a Form of Open policy for those with large turnover and frequent dispatches by inland transit via Rail, Road, Air, Inland waterways and post parcels

Minimum estimated dispatches for an year should not be less than 2 crores

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INLAND TRANSITINLAND TRANSITAnnual PolicyAnnual Policy

Annual Policy:

This policy covers transit of goods from plant/ warehouse of origin to the buyer’s plant/ warehouse.

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Sum Insured will represent the maximum value of risk that may encounter during transit

In case of more than one transit, sum insured would be sum total of the aggregate maximum estimated value at risk in transit at any given point of time

Rating would depend on:- Distance involved- Single carrying limit- Turnover

No declarations are required

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Some of the perils the cargo may Some of the perils the cargo may come across are;come across are;

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Cargo ClausesCargo Clauses Institute Cargo Clauses are standard terms and conditions which

are used internationally

Drafted by the Institute of London Underwriters & are internationally accepted

Cargo insurance is usually provided by means of ICC - A, B or C, plus War Clauses and Strikes Clauses

These clauses define the Terms of Cover for Export-Import Cargo

Marine Cargo Policy is NOT complete unless the related Clause is attached to it

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OVERSEAS TRANSIT CLAUSESINSTITUTE CARGO CLAUSE( C )

Fire or Explosion Vessel or craft being stranded, sunk, grounded or capsized

(Overturn) Overturning or derailment of land conveyance (Rail/lorry) Collision or contact of vessel/craft or conveyance with

any external objects, other than water Mishap at the time of discharge of cargo at Port of distress General Average (When the entire venture is in danger, in When the entire venture is in danger, in

order to save the Ship and Cargo, certain sacrifices are made order to save the Ship and Cargo, certain sacrifices are made and/or certain expenses are incurred)and/or certain expenses are incurred)

Jettison (Throwing of cargo from above board the ship to save Throwing of cargo from above board the ship to save the vessel and/or other cargo)the vessel and/or other cargo)

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OVERSEAS TRANSIT CLAUSES INSTITUTE CARGO CLAUSE ( B )

ICC C + Earthquake, volcanic eruption, lightning. Washing overboard (can be due to sea water/wind/bad weather)

Entry of sea, lake or river water into vessel, craft, hold, conveyance, container, lift van or place of storage

Total loss of any package lost overboard or dropped whilst loading on to, or unloading from vessel or craft

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OVERSEAS TRANSIT CLAUSES INSTITUTE CARGO CLAUSE ( A )

All Risk Cover Except the specific exclusions

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Coverages – ICC A, B, CCoverages – ICC A, B, C

RisksRisks I.C.C.(A)I.C.C.(A) I.C.C.(B)I.C.C.(B) I.C.C.(C)I.C.C.(C)

Fire or explosionFire or explosion CoveredCovered CoveredCovered CoveredCovered

Vessel or craft being Vessel or craft being Stranded, grounded, Stranded, grounded, sunk or capsized.sunk or capsized.

CoveredCovered CoveredCovered CoveredCovered

Overturning or Overturning or derailment of land derailment of land conveyance.conveyance.

CoveredCovered CoveredCovered CoveredCovered

Collision or contacts of Collision or contacts of vessel with any external vessel with any external object other than water.object other than water.

CoveredCovered CoveredCovered CoveredCovered

        

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Coverages- Contd.Coverages- Contd.

RisksRisks I.C.C.(A)I.C.C.(A) I.C.C.(B)I.C.C.(B) I.C.C.(C)I.C.C.(C)

Discharge of cargo at Discharge of cargo at portport CoveredCovered CoveredCovered CoveredCovered

Earthquake, Volcanic Earthquake, Volcanic eruption or lightning.eruption or lightning. CoveredCovered CoveredCovered Not Not

CoveredCovered

General Average General Average SacrificeSacrifice CoveredCovered CoveredCovered CoveredCovered

JettisonJettison CoveredCovered CoveredCovered CoveredCovered

Washing OverboardWashing Overboard CoveredCovered CoveredCovered Not Not CoveredCovered

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Coverages – Contd.Coverages – Contd.

RisksRisks I.C.C.(A)I.C.C.(A) I.C.C.(B)I.C.C.(B) I.C.C.(C)I.C.C.(C)

Entry of sea, lake or Entry of sea, lake or river water into the river water into the vesselvessel

CoveredCovered CoveredCovered Not CoveredNot Covered

Total loss of any Total loss of any package lost package lost overboard – loading, overboard – loading, or, unloading from or, unloading from vessel or craft.vessel or craft.

CoveredCovered CoveredCovered Not CoveredNot Covered

Any other risk not Any other risk not specifically specifically excluded - ALL Risksexcluded - ALL Risks

CoveredCovered Not Not CoveredCovered Not CoveredNot Covered

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Exclusions – ICC A,B,CExclusions – ICC A,B,C

ExclusionsExclusions ICC - A,B & CICC - A,B & C

Willful MisconductWillful Misconduct ExcludedExcluded

Ordinary Leakage, Loss in Weight-VolumeOrdinary Leakage, Loss in Weight-Volume ExcludedExcluded

Insufficient PackingInsufficient Packing ExcludedExcluded

DelayDelay ExcludedExcluded

Inherent ViceInherent Vice ExcludedExcluded

Unfitness of Aircraft-Container – VanUnfitness of Aircraft-Container – Van ExcludedExcluded

Nuclear PerilsNuclear Perils ExcludedExcluded

War & SRCC:War & SRCC:--ExcludedExcluded, but , but BOTH INCLUDED on BOTH INCLUDED on Payment of Extra PremiumPayment of Extra Premium

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INLAND TRANSIT CLAUSESINLAND TRANSIT CLAUSES

Inland Transit Clause – CInland Transit Clause – C

FireFire

LightningLightning

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INLAND TRANSIT CLAUSESINLAND TRANSIT CLAUSES

INLAND TRANSIT CLAUSE – BINLAND TRANSIT CLAUSE – B Fire Lightning Breakage of bridges Collision with/ by carrying vehicle Overturning of the carrying vehicle Derailment or accidents of like nature

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INLAND TRANSIT CLAUSESINLAND TRANSIT CLAUSES

INLAND TRANSIT CLAUSE – AINLAND TRANSIT CLAUSE – A All risks with the following EXCLUSIONS

Willful misconduct Ordinary losses Defective packing Inherent vice War perils Strikes etc. perils

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Coverages ITC A, B, CCoverages ITC A, B, C

RisksRisks Inland Inland Transit-ATransit-A

Inland Inland Transit-BTransit-B

FireFire CoveredCovered CoveredCovered

LightningLightning CoveredCovered CoveredCovered

Breakage of bridgesBreakage of bridges CoveredCovered CoveredCovered

Collision - carrying vehicleCollision - carrying vehicle CoveredCovered CoveredCovered

Overturning-carrying vehicle.Overturning-carrying vehicle. CoveredCovered CoveredCovered

Derailment or accident to the Derailment or accident to the carrying vehicle.carrying vehicle. CoveredCovered CoveredCovered

Any other risk not specifically Any other risk not specifically excluded-ALL RISKSexcluded-ALL RISKS CoveredCovered Not CoveredNot Covered

Inland Transit - C Inland Transit - C offers cover against loss by FIRE & LIGHTNINGoffers cover against loss by FIRE & LIGHTNING

ADD-On: Theft, Pilferage & Non-Delivery (TPND) with Extra PremiumADD-On: Theft, Pilferage & Non-Delivery (TPND) with Extra Premium

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Exclusions ITC A, BExclusions ITC A, BExclusionsExclusions Inland Transit - Inland Transit -

A&BA&B

Willful MisconductWillful Misconduct ExcludedExcluded

Ordinary Leakage, Loss in Weight-Ordinary Leakage, Loss in Weight-VolumeVolume

ExcludedExcluded

Insufficient PackingInsufficient Packing ExcludedExcluded

DelayDelay ExcludedExcluded

Inherent ViceInherent Vice ExcludedExcluded

Unfitness of Aircraft-Container – VanUnfitness of Aircraft-Container – Van ExcludedExcluded

Nuclear PerilsNuclear Perils ExcludedExcluded

War Risks - Excluded; War Risks - Excluded; Strikes, Riot & Civil CommotionStrikes, Riot & Civil Commotion--ExcludedExcluded, but can be , but can be Included on Payment of Extra PremiumIncluded on Payment of Extra Premium