1

MARINE INSURANCE

2

Life Insurance General Insurance

Fire Insurance Marine Insurance Auto Insurance Crop Insurance

3

DEFINITION (CARGO, HULL, AIR WAY, TRUCK, RAIL)

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.

4

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

5

MARINE CARGO INSURANCE

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

6

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 (Overseas – Inland).

7

Two Parties Insurer (Insurance Company) Insuree/Insured (Entity purchasing insurance

policy)

8

INSURABLE 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?

9

INSURABLE INTEREST

10

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

11

WHO CAN BUY A MARINE INSURANCE 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)

12

CONTRACT 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 insurance

C&F (Cost and Freight):Same as FOB. The only difference is that the freight should be paid by the sellerC& F : Seller pays freight, Buyer arranges insurance

13

CONTRACT 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 insurance

14

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

15

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

16

MARINE 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

17

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.

Marine Insurance(Risk Coverage, Period, Number of Voyage, Insurable Interest)

18

TYPES OF MARINE CARGO

Overseas TransitOpen CoverSpecific Policies

Inland TransitOpen PolicySpecial Declaration PolicyAnnual Policy

19

OVERSEAS TRANSITOPEN COVER

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.

20

OVERSEAS TRANSITOPEN 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

21

OVERSEAS TRANSITOPEN 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.

22

OVERSEAS TRANSITSPECIFIC 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

23

INLAND TRANSITOPEN 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, inlandwaterways and registered post parcels.

It is also known as the floating policy.

24

INLAND TRANSITOPEN 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

25

INLAND TRANSITSPECIAL DECLARATION POLICY 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

26

INLAND TRANSITANNUAL POLICY

Annual Policy:

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

27

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

28

SOME OF THE PERILS THE CARGO MAY COME ACROSS ARE;

29

TYPES OF PERILS

SEA PERILS (Act of God – natural calamities etc.)

EXTRANEOUS PERILS (Faults with loading, Breakage, Leakage)

WAR PERILS (War, Rebellion etc.) STRIKE PERILS (Strike, Lockout etc.)

30

LOSSES FROM THE PERILS

TOTAL LOSS Actual Total Loss ((Total Damage +Repair Cost)

=> Total Property Value) Constructive Total Loss ((Total

loss+Repair+Salvage)=> Total Property Value PARTIAL LOSS (AVERAGE)

General Average Particular Average

31

CARGO 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

32

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

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

33

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

34

OVERSEAS TRANSIT CLAUSES INSTITUTE CARGO CLAUSE ( A )

All Risk Cover Except the specific exclusions

35

COVERAGES – ICC A, B, C

Risks I.C.C.(A) I.C.C.(B) I.C.C.(C)

Fire or explosion Covered Covered Covered

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

Covered Covered Covered

Overturning or derailment of land conveyance.

Covered Covered Covered

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

Covered Covered Covered

     

36

COVERAGES- CONTD.

Risks I.C.C.(A) I.C.C.(B) I.C.C.(C)

Discharge of cargo at port

Covered Covered Covered

Earthquake, Volcanic eruption or lightning.

Covered Covered Not Covered

General Average Sacrifice Covered Covered Covered

Jettison Covered Covered Covered

Washing Overboard Covered CoveredNot

Covered

37

COVERAGES – CONTD.

Risks I.C.C.(A) I.C.C.(B) I.C.C.(C)

Entry of sea, lake or river water into the vessel

Covered Covered Not Covered

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

Covered Covered Not Covered

Any other risk not specifically excluded - ALL Risks

Covered Not Covered

Not Covered

38

CORRESPONDENCE BETWEEN ICC & COVERAGES

ICC C – Free of Particular Average ICC B - With Particular Average ICC A - All Risks