Maritime Insurance

Ilona Linkola

Tero Tammisto

Sampo Järvinen

Maritime Insurance

• General part
• Hull & Machinery insurance
• P&I Club

General part

• Marine insurance is the oldest known form or type of insurance

• It’s purpose is to have the lender (the financier) to have a low credit risk

General part

• Parties to the insurance contract:

  • Assured party

  • Underwriter

    • Underwriting agents

    • P&I Clubs

    • Insurance companies

  • Broker

General part

• Utmost good faith

• Actual total loss <-> Constructive total loss

• General average <-> Average

  • Average adjuster

General part

• Four broad categories:

  • Cargo insurance

    • ​Cargo insurance caters specifically to the cargo of the ship and also pertains to the belongings of a ship’s voyagers.

  • Hull insurance

    • ​Hull insurance mainly caters to the torso and hull of the vessel along with all the articles and pieces of furniture in the ship.

  • Liability insurance

    • ​Liability insurance is that type of marine insurance where compensation is sought to be provided to any liability occurring on account of a ship crashing or colliding and on account of any other induced attacks

  • Freight insurance
    • ​Freight insurance offers and provides protection to merchant vessels’ corporations which stand a chance of losing money in the form of freight in case the cargo is lost due to the ship meeting with an accident. This type of marine insurance solves the problem of companies losing money because of a few unprecedented events and accidents occurring.

General part

• ​More specialist policies:

  • Voyage policy

  • Time policy

  • Mixed policy

  • Open / Un-valued policy

  • Valued policy

  • Port risk policy

  • Wager policy

  • Floating policy

General part

• ​Marine financiers insurance policies:

  • MII

  • MAPP

  • MRI

General part

• Cover issues in insurance policies:

  • Warranties

  • Underwriting security and cut-through clauses

  • Fleet policies

Hull & Machinery Insurance

• H&M insurance is property damage insurance that covers vessels and their machinery

• a vessel is exposed to many dangers and risks at sea during its voyage, and H&M insurance is meant to indemnify the insured for such losses

• if the vessel is lost or suffers damage which would be economically unfeasible to repair > right to total compensation

• H&M insurance also covers the construction risks while the vessel is under construction

Hull & Machinery Insurance

• H&M insurance typically covers loss of or damage to the vessel caused by
  • perils of the seas
  • fire, explosion
  • violent theft by persons outside the vessel
  • jettison
  • piracy
  • breakdown of or accident to nuclear installations
  • contact with aircraft or similar objects, or with land conveyance, dock or harbour

Hull & Machinery Insurance

• Additional covered perils: Inchmaree Clauses
  • accidents in loading or discharging or shifting cargo or fuel
  • bursting of boilers, breakage of shafts or any latent defect in the machinery or hull
  • negligence of Master Officers or Pilots
  • negligence of repairers or charterers (unless they are the insured)
  • barratry of Master Officers or Crew
     
  • Due diligence requirement: the loss cannot have resulted from lack of due diligence by the insured, owners or managers

Hull & Machinery Insurance

• Collision liability
  • Provides indemnification to the insured for 3/4ths of any sum paid by him to others by reason of his liability for damages caused by a collision by the insured vessel with another vessel
  • Damages for which an indemnity is payable under collision liability include:
    • loss of or damage to the other vessel or its property
    • delay to or loss of use of the other vessel or its property
    • general average of or salvage of the other vessel or its property
    • + legal costs

Protection and indemnity insurance 

• Third Party Liability insurance for the shipowner, operator or charterer.

• An insurance for open-ended risks that traditional insurers are reluctant to insure.

• Typically includes:

  • A carrier's third-party risks for damage caused to cargo during carriage

  • Personal injuries

  • Risks of environmental damage such as oil spills and pollution

  • Collision

  • Wreck removal

  • Fines

  • Stowaways

• Direct connection to the operation of the vessel

P&I Clubs 

• Mutual insurance associations providing risk pooling, information and representation
• Reports only to its members (not to shareholders)
• Members traditionally shipowners, operators or charterers
  • Recently also freight forwarders and warehouse operators
• “Calls”
• Rules of the club

P&I Clubs 

P&I Clubs - Underwriting 

• Aim: To underwrite good business which contributes to the mutual benefit of the membership
  • Evaluates and underwrites risk
  • Sets the rates and terms for the risk
  • Main factors when assessing risk
    • Physical Risk
    • Type of vessel
    • Types of operations
    • Age of Vessel
    • Class
    • Flag – Home or Flag of Convenience '
    • Crew – Nationality/Qualifications
    • Owner/Manager/Charterer
    • Loss Record – Adverse claims record
    • Previous Insurers
    • Size of fleet
    • Extent of cover being sought

P&I Clubs 

The following are the major exceptions to P&I coverage:

• The member did not have sufficient other insurancies
• The member took insufficient steps to limit its liability
• Moral hazard
• Willfull misconduct