Basics of Marine Insurance

Marine Insurance, like any other Insurance can be defined as protection against future loss. There are various types of insurances applicable for ships and vessels and importantly for the cargo carried in them. There is also insurance for all 3rd party liabitites on a "mutual basis" available in the shipping sector.

Marine Insurance is important for Ship Owners and Charterers as the risks covered by the insurance is huge and without external cover it is impossible for any vessel owner or operator to absorb the loss.

Another important aspect of having marine insurance is that a Ship Owner/ Charterer can choose the insurance plan as per the size of his ship, the routes that are taken by his ship to transport the cargo and many such minor points which could go a great length in affecting the ship Owner/ Charterer majorly. Also, since there are various plans and policies which indicate about covering not just the cargo but also the vessel, the transporter can choose and avail of the best policy that suits his business the best.

However, Marine Insurance can be tricky with relation to the type of cover and what exactly is included in the policy. It is important for Ship Owners/Charterers to be aware of these policies and protocols are followed as a "prudent uninsured". Any risk covered as per the rules and policy of the Insurer cannot be breached if the insured is interested in a recovery for the loss.

The most important aspect of any type of Marine Insurance is that the vessel is Seaworthy. Seaworthiness is a very broad aspect of shipping and insuring of a vessel to be seaworthy at all times is reflective of due diligence of a prudent vessel Owner or Charterer.

Apart from Seaworthiness, it is important the vessel whilst trading complies with performace standards and only takes the routes that are acceptable by international standards and protocol. Deviation can be a major reason for prejudicing a cover if proven.

As an example and to further elaborate - It is very important that a ship’s captain follows a rigid protocol in terms of the route taken and the time taken for the cargo and the vessel to reach the intended port of destination. Because if there is any discrepancy or violation in terms of the route taken, i.e. if the captain varies or digresses in his route from the one originally intended as a part of the ship’s course, then even if there is any mishap occurring to the vessel or the cargo, the insurance claim will be rejected completely without any possibility of the claim being reimbursed to the claimant at some future date after a few tough negotiations.

Therefore it becomes very important that a ship’s captain takes due consideration about the prescribed routes so as to avoid a failed insurance contract because of an unplanned loss due to the deviation in the route. This would bring about not just caution on the part of the captain but would also reduce the possibility of losing important insurance claims because of inadvertence and negligence.

The recent and famous Costa Concordia case may have its cover prejudiced due to this reason though the matter is far from discussing liablity issues.

Marine insurance is a safe haven for shipping corporations, Ship Owners, charterers and cargo owners because it helps to reduce the aspect of financial loss due to loss of important cargo and crew. Also, it helps to bring about to the transporting companies and to the receiving parties, the duty, dedication and the straightforwardness of the insurance companies.

Credits
Capt. Anshuman Singh - Admiralty Manager, Fichte & Co. Legal Consultancy