MARINE INSURANCE

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 Definition

 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
explain;
MARINE INSURANCE

PROPERTY LIABILITY

 Marine Cargo
 Marine Hull

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

OVERSEAS TRANSIT INLAND TRANSIT

* Open Cover * Open Policy

* Specific Policies * Special Declaration
* Annual Policy

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

Contracts of Sale in Marine Overseas Transit

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

 FOB
 C&F
 CIF

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 At the end of this unit you will be able to
explain;
OVERSEAS TRANSIT CLAUSES
(These clauses define the terms and coverages in
Overseas Transit)

 Institute Cargo Clause C

 Institute Cargo Clause B
 Institute Cargo Clause A

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

INLAND TRANSIT CLAUSES

 Inland Transit Clause C

 Inland Transit Clause B
 Inland Transit Clause A

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 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 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 of

transit 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 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 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
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 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 seller
C& F : Seller pays freight, Buyer arranges insurance

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 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

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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 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 Cargo
 Overseas Transit
 Open Cover
 Specific Policies

 Inland Transit
 Open Policy
 Special Declaration Policy

 Annual Policy

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 Overseas Transit
Open 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.

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 Overseas Transit
Open 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 Transit
Open 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 Transit
Specific 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 TRANSIT
Open 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 TRANSIT
Open 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 TRANSIT
Special 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

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 INLAND TRANSIT
Annual 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
come across are;

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 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

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 OVERSEAS TRANSIT CLAUSES
INSTITUTE 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
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)
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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, 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, Covered Covered Covered
sunk or capsized.
Overturning or
derailment of land Covered Covered Covered
conveyance.

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

     
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 Coverages- Contd.
Risks I.C.C.(A) I.C.C.(B) I.C.C.(C)

Discharge of cargo at
Covered Covered Covered
port

Earthquake, Volcanic Not

Covered Covered
eruption or lightning. Covered

General Average
Covered Covered Covered
Sacrifice
Jettison Covered Covered Covered
Not
Washing Overboard Covered Covered
Covered
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 Coverages – Contd.
Risks I.C.C.(A) I.C.C.(B) I.C.C.(C)

Entry of sea, lake or

river water into the Covered Covered Not Covered
vessel
Total loss of any
package lost
overboard –
Covered Covered Not Covered
loading, or,
unloading from
vessel or craft.
Any other risk not
Not
specifically excluded Covered Not Covered
Covered
- ALL Risks
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 Exclusions – ICC A,B,C
Exclusions ICC - A,B & C
Willful Misconduct Excluded
Ordinary Leakage, Loss in Weight-Volume Excluded
Insufficient Packing Excluded
Delay Excluded
Inherent Vice Excluded
Unfitness of Aircraft-Container – Van Excluded
Nuclear Perils Excluded
War & SRCC:-Excluded, but BOTH INCLUDED on
Payment of Extra Premium
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 INLAND TRANSIT CLAUSES
 Inland Transit Clause – C

 Fire

 Lightning

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 INLAND TRANSIT CLAUSES
INLAND 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 CLAUSES
INLAND 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, C
Inland Inland
Risks
Transit-A Transit-B
Fire Covered Covered
Lightning Covered Covered
Breakage of bridges Covered Covered
Collision - carrying vehicle Covered Covered
Overturning-carrying vehicle. Covered Covered
Derailment or accident to the
Covered Covered
carrying vehicle.
Any other risk not specifically
Covered Not Covered
excluded-ALL RISKS
Inland Transit - C offers cover against loss by FIRE & LIGHTNING

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

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 Exclusions ITC A, B
Exclusions Inland Transit -
A&B
Willful Misconduct Excluded
Ordinary Leakage, Loss in Weight- Excluded
Volume
Insufficient Packing Excluded
Delay Excluded
Inherent Vice Excluded
Unfitness of Aircraft-Container – Van Excluded
Nuclear Perils Excluded
War Risks - Excluded; Strikes, Riot & Civil Commotion-
Excluded, but can be Included on Payment of Extra Premium
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