marine

1. MARINE
INSURANCE
UNDERWRTING

2. Introduction
• Oldest branch of insurance
– Cargo insurance
– Hull insurance
Cargo Insurance covers
• Export and import shipments
• coastal shipments
• shipments by inland vessels
• consignments by road, rail and air
• consignments by post

3. Who effects insurance?
• either buyer or seller
• banks, clearing agents and carriers
• depends on the terms of the contract
Types of contract
- FOB : Free on board
- FOR : Free on rail
- C & F : Cost and freight
- CIF : Cost freight and insurance

4. Process of trade
– Importer opens a letter of credit with
a bank in favour of exporter
– When goods are ready exporter hands
over title of goods and bill of
exchange to the banker
– That serves as a security against
money advanced
– further security by way of insurance
– importer may not make payment if
goods are damaged

5. Marine Insurance Act
1963
• covers both cargo and hull
• deals with basic principles,
basis valuation, basis of
settlement of loss etc.

6. Marine Policies
• policy contains details of insured,
consignment, sum insured etc.,
• clauses attached specify risk
covered, exclusions and other terms
and conditions
• for export and import policies
Institute Cargo Clauses are used
drafted by Institute of London
underwriters
• for inland transit clauses drafted
by TAC are used

7. Policy Form
• Name of the insured
• Policy number
• Sum Insured
• Premium
• Stamp duty
• Steamer or conveyance details
• Voyage or journey details
• Bill of lading details
• Interest to be insured
• Clauses attached
• Claim settling agents
• Place where claims are payable
• Place of issue of policy
• Signature of Authorised person

8. Attachments
• Clauses
• Warranties
• Important Red Slip (procedure
to preserve the right of recovery)

9. Institute Cargo clauses (C)
- Minimum cover
1. Fire or explosion
2. Vessel stranded, grounded, sunk or capsized
3. Overturning or derailment of land conveyance
4. Collision with any external object other than
water
5. Discharge of cargo at a port of distress
6. General average sacrifice
7. Jettison

10. • 8) General Average and Salvage charges incurred
to avoid loss from any clause(s) except those
excluded.
• 9) Liability under “Both to Blame collision” clause
of the bill of lading.
• 10) Charges reasonable and properly incurred to
avert/minimize an insured loss and to preserve
and pursue recovery rights.
• 11) In the event of termination of transit at a
port or place other than destination port or place
resulting from a risk covered, EXTRA CHARGES
incurred in unloading, storing and forwarding
insured cargo to destination.

11. Institute Cargo clauses (B)
– Basic cover
• Covers as per ICC (C) and
• Earthquake, volcanic eruption and
lighting
• Washing overboard
• Entry of sea lake or river water into
vessel, places of storage etc.
• Total loss of package lost overboard or
dropped

12. Extraneous risks
covered with extra premium
• Theft, pilferage and/or non-delivery
• Fresh water and rainwater damage
• Hook and/or oil damage
• Heating and sweating
• Damage by mud, acid etc.
• Breakage
• Leakage
• Bursting / tearing of bags
• Malicious Damage (Automatic cover in
ICC A)

13. Institute Cargo Clauses
(A) – All risk cover
Any damage by accidental
circumstances is covered
Risks are not specified
All risks are covered subject
exclusions

14. General Exclusions
• Loss by willful misconduct of the insured
• Ordinary leakage, loss in weight or volume, wear and tear
(trade losses)
• Loss by inherent vice or nature of goods
• Loss by delay, even though delay caused by insured risk
• Deliberate damaged by any person (called malicious damage
– covered by ICC (A) automatically. can be covered by
extra premium in other two)
• Insolvency of the vessel owner
• Damage due to inadequate packing
• War perils
• Strikes, riots and civil commotion (SRCC)
• 8 and 9 can be covered by paying additional premium

15. Duration of cover
• Time policies in other classes of insurance (one
year)
• Marine policies are issued for a specific voyage
• Duration of cover mentioned in the transit clause
• cover commences from the time goods leave the
warehouse named in the policy
• Continues in the ordinary course of transit and
terminates at
– On delivery at destination
– On delivery at any intermediate warehouse of
the insured
– On expiry of 60 days after discharge at final
port
– Can be extended
– War risk is covered only on water and NOT on
land

16. Institute Cargo Clauses
(Air)
• same as ICC (A)
• duration is limited to 30 days after
discharge at destination
• War and SRCC can be covered by
additional premium
Registered Postal sending
• No specific clauses. ICC or inland clauses
are used
• starts with the issue of registered receipt
and terminates on delivery

17. Inland Transit (Rail / Road)
Clause “C”
• Physical loss or damage by
• Fire
• Lightning
• Duration: starts from loading into
wagon/truck, continues during
ordinary course of transit and
ceases immediately on unloading

18. Inland Transit (Rail / Road)
Clause “B”
Physical loss or damage by
• Fire
• Lightning
• Breakage of bridges
• Collision or overturning of the carrying
vehicle
• Derailment
• Extraneous risks can be added by paying
additional premium

19. Inland Transit (Rail / Road)
Clause “A”
• All risks except the exclusions
• Exclusions same as the ICC clauses

20. Duration for A and B
• starts from loading into
wagon/truck, continues during
ordinary course of transit and
ceases immediately on unloading at
a place named in the policy.
• - on expiry of 7 days after arrival
at final destination in case of
rail/road

21. • TIME LIMITS AS PER TRANSIT CLAUSES OF
VARIOUS CARGO CLAUSES
• • ICC A, B AND C 60 DAYS
• • ICC AIR CARGO 30 DAYS
• • INLAND TRANSIT 7 DAYS
• • WAR CLAUSES (SEA) WATERBORNE
• • WAR CLAUSES (AIR) ON DISCHARGE
• • STRIKE CLUASE (SEA) 60 DAYS
• • STRIKE CLAUSE (AIR) 30 DAYS
• • SRCC 7 DAYS
• • COMMODITY TRADE 60 DAYS
• • COAL 60 DAYS
• • JUTE 15 DAYS
• • NATURAL RUBBER 30 DAYS
• • TIMBER 60 DAYS
• • BULK OIL 60 DAYS

22. Rating and Underwriting
• No proposal forms – only a declaration to be
filled by the insured
Information required
• Name and address of Insured
• Full description of goods
• Method of packing
• Voyage and mode of transit
• Commencement of transit and termination
• Cover required
• Name of the steamer

23. Premium rate depends
on
– Nature of commodity
– Method of packing
– The vessel
– Type of insurance cover
– Non - tariff

24. TYPES OF POLICIES
OPEN POLICY
• also known as floating policy
• Normally issued for inland transits
• Issued for a period of time (one year) to cover all
shipments for an estimated sum insured
• Declarations are made to cover each transit and SI gets
reduced
• If SI gets exhausted, new policy is issued or SI
enhanced
• If the period is over with a balance in SI proportionate
premium is refunded
• On receipt of each declaration a certificate is issued
(Unstamped)
• Advantages:
– automatic and continuous cover
– Clerical labour is reduced
– Saving in stamp duty

25. OPEN COVER
• for export and import in large scale
• a permanent form of insurance
protection
• issued for 12 months and can renewed
• describes voyage, cargo and cover
• only an agreement is issued in the
beginning
• certificates or specific policies are
issued for each declaration(stamped)
• no limit of number or value of shipments

26. Important features of
Open policy and Open cover
• Limit per bottom (limit of SI per
shipment)
• Basis of valuation
– Cost + freight + incidental exp. + insurance + profit
• Location clause
– limits the liability at any one time or place
– Normally same as limit per bottom or twice
• Rate and terms – as agreed in the open policy /
cover
• Declaration clause
– binding the insured to declare all the shipments
• Cancellation clause
– terms of cancellation of policy or cover

27. • Certificate
– issued for each declaration
• Endorsements
– When there is a change in original policy
– change may in SI, interest, premium or
conditions
– to be attached to the original policy

28. Comparison of Open
Policy and Open cover
OPENPOLICY OPEN COVER
Stamped document Unstamped document
Legallyenforceable Legallynot enforceable unless backed by
astamped policy
Fixed suminsured No suminsured
WitheachdeclarationSI gets reduced Eachdeclaration has aseparate SI
WhenSI gets exhausted, policyhas to
replaced
Policyexpires onlyonexpiryof the
period
Certificates are not stamped Certificates are stamped

29. SPECIAL DECLARATION
POLICY
• Floating policy for an SI exceeds 2
crores
• Declaration of transits are made at
agreed interval of time
• Adjustment is made at the end of the
year
• SI based on the previous year’s turn
over
• Proposal form is used
• Turn over discount can be given on slab
basis and loss ratio

30. SPECIAL STORAGE
RISKS INSURANCE
• in conjunction with open policy or
special declaration policy
• to cover goods lying in carrier’s
place after termination of cover
• cover terminates with delivery
taken by the consignee or payment
is received by the consignor
whichever is earlier

31. ANNUAL POLICY
• issued for 12 months
• to covers goods of the Insured
which are not under any contract
of sale
• in transit by road/rail
• cover as per inland transit clause
• proposal form is used
• special rating is applied

32. “DUTY” INSURANCE
• Customs duty may be included in
the SI of any policy
• or a separate policy can be taken
• claim under this policy is payable
only if claim under cargo policy is
payable
• policy cannot be effected after
arrival of vessel at destination

33. INCREASED VALUE
INSURANCE
• to cover the increase in market value of
the cargo at destination port over the
CIF and duty value
• policy cannot be effected after arrival
of vessel at destination
• claim under this policy is payable only if
claim under cargo policy is payable
• These two policies are issued only on
imports

34. TARIFF POLICIES
• Package policies formulated by TAC
• to cover transit and storage risks
in the transit of tea, coffee,
cardamom and rubber
• cover starts from the time tea is
plucked and continues till delivered
to the buyers in India or abroad.