Marine Insurance: Minimising Risks
Mr Amit Agarwal,
Director
Ideal Insurance Brokers Pvt Ltd.

Marine insurance is the oldest form of Insurance and closely related to the development of trade in the world. It was essentially developed to cover the uncertainty associated with sea voyage. It is basically a contract between the Insured and the Insurer where in the Insurer agrees to indemnify the insured if the items covered are faced with any uncertainty subject to the warranties and exclusions in the policy.

It goes without saying that maritime transportation has shared the biggest proportion of fulfilling of this worldwide demand/supply of crude oil and petroleum products. But transportation of oil and gas by the Sea is involved with many risks and hazards, which give rise to destructive consequences such as loss of goods, loss of life, injuries and environmental damaging such as spillage of oil and gas and also pollution.

This whole business falls very expensive, therefore in order to avoid any loss because of such events and happenings, in the interest of the corporation and the transporter, it is always beneficial to have a back-up like a marine insurance.

Marine insurance is the oldest form of Insurance and closely related to the development of trade in the world. It was essentially developed to cover the uncertainty associated with sea voyage. It is basically a contract between the Insured and the Insurer where in the Insurer agrees to indemnify the insured if the items covered are faced with any uncertainty subject to the warranties and exclusions in the policy.

Since there are various plans and policies which indicate about covering not just the cargo but also the vessel, the transporter can choose and avail of the best policy that suits his business the best.

Marine Insurance or now popularly known as Transit Insurance is destination specific. Marine Policies are agreed valued policies ie the sum insured is fixed on the basis of the agreement of insured and insurer. It is a freely assignable policy ie at the time of loss whoever has the insurable interest on the items is the beneficiary of the insurance policy.

The policy has to be in place before the start of transit.

As far as the insurance processing goes there are three essential things that need to be present for transit insurance to be effected:
  • Buyer
  • Seller
  • Third Party Transporter
Two types of policies
  • Open Marine - Annual Policy for regular, frequent and multiple transits during a period. Here the insured takes a policy for a sum insured for say 1 crore and covers a number of transits and to various places as mentioned in the policy. Declarations for each and every transit coming within the purview of the policy as to be submitted to the Insurance Company. The policy lapses if the sum insured is exhausted on or before the expiry of the policy period. As such open policy has a unique feature of enhancement of sum insured ie midterm increment of sum insured as per the policy rate during the tenure of the policy.
    In order to issue the open policy an important point that needs to be kept in mind is the PSL ie per sending or limit per conveyance. This is the maximum amount of cargo that can be sent in a single mode of conveyance.
  • Specific Marine - One time policy for single risk. Destination Specific. Covers individual shipments. The sum insured and destination is fixed and it cannot be enhanced in the middle of the transit. The policy expires as soon as the material reaches the destination. The policy period is 90 days from the date of submission of premium. The premium has to be submitted before transit starts.
Coverages
covers loss or damage to the subject matter insured reasonably attributable to/caused by:
1. Fire or explosion
2. Earthquake, volcanic eruption or lightening
3. Vessel being stranded, grounded, sunk or capsized
4. Overturning or derailment of the land conveyance
5. Collision or contact of vessel with external object other than water
6. Discharge of cargo at port of distress
7. General average
8. Jettison
9. General Average and Salvage charges
10. Both to Blame clause
11. Entry of sea or lake water into vessel craft hold conveyance container lift van or place of storage.
12. Washing overboard
13. Total loss of any package lost overboard or dropped whilst loading /unloading
Exclusions
There are certain conditions that are not covered under the policy. Some of thestandard exclusions are as follows:
  • Loss damage or expense attributable to wilful misconduct of the Assured
  • Ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject-matter insured
  • Loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject- matter insured
  • Loss damage or expense caused by inherent vice or nature of the subjectmatter insured
  • Loss damage or expense proximately caused by delay, even though the delay be caused by a risk insured against
  • Loss damage or expense arising from insolvency or financial default of the owners managers charterers or operators of the vessel
  • Loss damage or expense arising from the use of any weapon of war employing atomic or nuclear fission and/or fusion or
  • Other like reaction or radioactive force or matter.
  • Un sea-worthiness of vessel or craft,
  • Unfitness of vessel craft conveyance container or liftvan for the safe carriage of the subject-matter insured
  • War civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power
  • Capture seizure arrest restraint or detainment (piracy excepted), and the consequences thereof or any attempt thereat derelict mines torpedoes bombs or other derelict weapons of war
  • Caused by strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions caused by any terrorist or any person acting from a political motive
Add-on Covers
  • SRCC - Strike, Riot and Civil commotion
  • War - only for export and import policies
  • Intermediate Storage - To cover intentional and voluntary storage during Transit.
  • Concealed damage clause - to cover any loss or damage discovered on opening containers, cases and/or packaging after reaching the destination. This extension is usually available for 15 or 30 days after the arrival of goods at destination.
  • Label clause - Where loss or damage affects labels and/or capsules and/or wrappers, the Insurer agrees to pay the cost of new labels and/or capsules and/or wrappers any associated labor cost.
  • Shut out cargo clause - In the event of the Insured's interest being "shut-out" from the vessel declared, this Contract extends to cover the Interest whilst waiting on the wharf, quay or pier or transfer to and whilst at another wharf, quay or pier, continues until delivered to the final destination.
  • Container Clause - Containers that are transported at the Insured's risk can be covered
Potential Buyers:
  • Logistics Operators
  • Importers
  • Traders
  • Manufacturers
  • Exporters
  • Infrastructure Projects