Marine Insurance

1. Marine insurance
Marine insurance has been defined as a
contract between insurers and insured
whereby the insurer undertakes to indemnify
the insured in a manner and to the interest
thereby agreed, against marine losses incident
to marine adventure.

2. Classification of the marine insurance
• Hull Insurance: Insurance of vessel and its equipments
are included under hull insurance. There are a number of
classifications of vessels such as ocean steamers, sailing
vessels, builders, risks, fleet policies and so on.
• Cargo Insurance: It may be written under a single risk
policy or floating policies. The cargo may be of any
description, for example, wares, merchandise, property,
goods and so on.
• Freight Insurance: Freight is to be payable for the
carriage of cargoes or if the vessel is chartered, the money
to be paid for the vessel. The carrier is unable to earn
freight if the goods or property (called cargoes) are not
safely transported.

3. • Liability Insurance: The marine insurance
policy may include liability hazards such as
collision or running down. Insurance can also be
taken for the expenses involved in non-compliance
of rules and regulations without any intention to
deceive. It should be clear here that marine perils
insurance covers not only the “ocean but also the
inland perils.” The perils to be included in the
policy are clearly defined and the insurer will be
liable only for the insured perils.

4. Discuss the various types of Maritime perils that are insured
against.
Natural Perils
Un-natural or moral hazards or perils
Pirates
Rovers, thieves etc.
Enemies
Man-of-War
Capture and Seizure
Restraints and detainments by the Govt., King, Princes and people of
enemy country
Barratry
Strike, Riots and civil commotion
Jettison
Fire
Explosion
Other-Perils

5. Essential elements of marine insurance.
Features of General contract
Insurable interest
Utmost good Faith
Doctrine of indemnity
Subrogation
Warranties
Proximate cause
Assignment and nomination of the policy
Return of premium

6. Classification of marine insurance policies
There are usually five types, on the basis of which
marine policies can be issued. These are:
• Time policy: Duration of the policy cover i.e.; the
time factor is important here. The subject-matter of
insurance is normally covered for a yrear whatever
might be the number of voyages within that year. In
order to validate a claim, the loss, inter-alia, must
take palace within the period of specified twelve
months.
• Voyage policy: The important factor here is the
voyage and not the time. The policy covers a
particular voyage irrespective of the time factor. In
order to validate a claim the loss must take place
within or during the specified voyage.

7. • Mixed policy: Time and voyage policies do contain
some practical difficulties. For example, under a time
policy a vessel may be on the mid-ocean when the time
expires. There is no cover for the remaining portion of the
journey even through loss might take place during this
extended period. Similarly, under a voyage policy a cargo
owner might require some time to clear his goods etc. or to
observe some necessary port formalities at the final port of
destination and there is no guarantee that loss will not take
place during this extended time period. In order to
overcome such difficulties a new type of policy, known as
mixed policy, has been introduced. It is virtually a mixture
of both time policy and voyage policy.
• Floating policy: This type of policy is usually used for
cargo insurance. In order to save the difficulties of
merchants in effecting numbers of policies for each time of
shipment, a floating policy may be issued for a round sum
covering the numbers of anticipated shipments.

8. • Open Cover: Insurance of open covers is also
practiced in the insurance market more or less for the
same purpose as explained under floating policy.
Under the open cover system a cover, usually for
twelve months, is given to the insured indicating that
the insurers shall insure each and every shipment to
be declared by the insured, as per terms and
conditions of the cover note. It should be
remembered by the students that this is not a policy
like floating policy, and therefore, specific policies
are required to be issued against each and every
shipment.
• Building risk policy: These types of policies are
issued in respect of ships whilst in the process of
erection or building at dock-yards.

9. In What ways to marine policies differ from Fire
Accident and Life Policies?
Marine policies from Fire Accident and Life
Policies. The main difference are us follows :
• There are no express conditions in marine policies
as there are in Fire, accident and even life policies.
• The wording as basic but brought in to line with
modern recruitment by the use of recognized
institute classes.
• A marine policy is in narrative form.
Was risk are often included.

10. P-1:
A cargo consisting of 20,000 bags was insured for
Tk. 2,00,000/-. But 2,000 bags were damaged and
would realize Tk.3/- per bag. The following
expenses also incurred by the insured 1% sales
commission, Tk.50/- as survey fee and Tk.60/- as
sales expenses. You are required-
To prepare a Particular Average Statement
assuming that goods would have realized Tk.9/-per
bag in their undamaged condition and the policy is
valued.

11. P-2:
A cargo consisting of 10,000 bags was insured for Tk.80, 000.00.
But, 2,000 bags of Cargo were damaged and would realize Tk.3/-
per bag. The following expenses were also incurred by the insured :
Sales Commission – 2%
Survey fee – Tk.50/-
Sales expenses – Tk.100.00
a) Prepare a particular average statement assuming that goods would
have realized Tk.9 per bag in their undamaged condition and the
policy is valued.
b) Prepare a particular average statement assuming that the goods
would have realized Tk.7.00 per bag in their undamaged condition
and the policy is valued and
c) State what would be the extent of claim in each of the above two
cases if the policy in unvalued.

12. P-3:
A ship was caught by a cyclone in the sea. A part of the Cargo was
dropped in the sea and the ship was dragged manually to the safe
zone. The ship was however partly damaged. The partial loss and
expenditure in this connection are given below. Prepare a statement
showing General Average Loss and its adjustment to various
partners involved :
Partial loss and other expenditures: Tk.
Damage of ship 20,000.00
Dragging expenditures 30,000.00
Cargo dropped 10,000.00
Freight loss 5,000.00
Other information: Tk.
Ship (Original value) 8,00,000.00
Goods (Original value) 5,00,000.00
Freight (Original amount) 30,000.00

13. P-4:
Compute the partial loss (particular averages on cargo) from the
following :
10,000 bags of cement of Tk.300 each were insured for Tk.30,
00,000.00. 1,000 bags were damaged. Damaged bags were sold for
Tk.60/- each.
Additional information :
Sales Commission 2 percent.
Survey fee Tk.2,000.00
Selling expenses Tk.2,000
Prepare the statement of particular average along with the insurance
claims, assuming that cement could be sold for Tk.320.00 each.
Calculate the amount of insurance claim if policy is unvalued.