Marine Cargo Insurance

The commercial shipping industry transports some 90% of the world's cargo. The industry is complex and has many unique risks. It is no surprise that the history of insurance starts with the development of marine policies, that Lloyds of London was the first marine insurance market and that the Marine Insurance Act 1906 still sets out the basis of modern insurance policies.

Why insure?

Cargo passes through a complex transport chain with complex risks attached: from accidental damage to theft, from act of God to political and social risks. Often a loss is not caused by the person transporting the goods. Carriers generally, therefore, limit or avoid any liability for losses. This can have a substantial impact on a company's bottom line should a whole shipment be lost.

Marine Cargo Insurance – the basics

Marine cargo insurance covers the loss, damage or theft of commodities during transit. Policies are available for specific shipments or on an open basis – whereby all shipments that meet the agreed criteria are covered during the term of the policy. Cargo sent by sea is usually insured under one of the following standard clauses.

Institute Cargo Clauses “C”

Cover under this Clause is limited to major perils only such as fire or capsizing. The main types of expenses are covered such as salvage and costs for minimising loss.

Institute Cargo Clauses “B”

This clause widens the cover available to include additional perils such as lightning and washing overboard.

Institute Cargo Clauses “A”

ICC-A provides “all risks” cover and covers loss or damage not otherwise excluded. Standard exclusions include war risks, unsuitable packaging and inherent defects in the goods.

Extensions to Cover

War risks are excluded from any policy as a matter of course. Policyholders can opt, however, to “buy back” cover at an additional premium. The standard Institute War Clauses and Institute Strike Clauses are then added to the policy. Policies can also be extended to cover road and air risks.

Unique Feature of Marine Insurance

Marine insurance has some features that are not found in other types of insurance. The policy is freely assignable and changes ownership alongside other transfers of the goods – it is sufficient that someone has an insurable interest at the time of a loss. Marine policies can also be extended to cover General Average. General Average applies where a ship's master voluntarily jettisons a cargo to save the voyage. All parties involved in the venture make a contribution to the resulting costs.