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Marine Insurance

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Hull Underwriting Factors …

Hull Underwriting Factors
Figure out what hull & machinery insurance are all about!

Published in: Education, Business

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  • 1. By Sofia Naznim
  • 2. Process of evaluating the risk that the ship owner's might face in the marine activity. They decide how much coverage the client should receive, how much they should pay for it, or whether even to accept the risk and insure them. Underwriting involves measuring risk exposure and determining the premium that needs to be charged to insure that risk. The function of the underwriter is to protect the company's book of business from risks that they feel will make a loss and issue insurance policies at a premium that is commensurate with the exposure presented by a risk. SNH ©
  • 3. To protect the shipowner’s investment in the ship. It is basically a property insurance which covers the ship itself, the machinery and equipment. The owner will be protected for losses caused by loss of or damage to the ship and its equipment. SNH ©
  • 4. The volumeof premiumsreceived must be sufficient to pay for repairs Cost of repairs have been affectedby inflation whether vesselis new or old The rate must provide a fund for total loss and liabilities Sound quotation can only be given with the assistanceof detailedpast records To evaluateand asses the risk that the ship owner might face SNH ©
  • 5. SNH ©
  • 6. BULK CARRIER OIL TANKER REFIGERATED CARGO CARRYING VESSEL LIVESTOCK CARRIER SNH ©
  • 7. LNG CARRIER CAR CARRIER CONTAINER CARRIER HEAVY LIFT CARRIER SNH ©
  • 8. Carrying raw dry cargoes in huge cavernous holds, such as coal, iron ore, grain, sulphur, scrap metal Bulkers range from about 25,000 Deadweight tons (handy size) through the medium size (Panamax) vessels of about 75,000 DWT, to the giant (cape size) vessels of up to 200,000 DWT SNH ©
  • 9. SNH ©
  • 10. The crude carrier - carries crude oil The clean products tanker - carries the refined products, such as petrol, gasoline, aviation fuel, kerosene and paraffin. SNH ©
  • 11. Refrigerated Cargo Carrying Vessels (Reefers) are purpose built to carry fruit, meat and other food products across the sea in a fresh and clean manner SNH ©
  • 12. The carriage of live animals around the world is performed by specialist vessels, designed (or adapted) to transport large numbers of cattle and sheep in secure but humane conditions. This transport of live animals requires experienced and specialized operators. The dangers of disease, rejection, injury and death to and from the animals is particularly high, coupled with the current activities of animal rights activists. SNH ©
  • 13. SNH ©
  • 14. The LNG carrier (Liquefied Natural Gas) and it's cousin the LPG carrier (Liquefied Petroleum Gas) are products of the late twentieth century. LNG and LPG are the preferred fuel types of certain countries for their industrial power needs. In its natural state, LNG is a gas, so to transport it, it needs to be kept as a liquefied state by reducing the temperature down to a temperature of approximately MINUS 160 degrees C. Obviously, the carriage of a potentially explosive substance - kept at very low temperatures in an unstable liquefied state - presents a very dangerous cargo, yet it is for this very fact, that LNG Carriers have about the best safety record of all maritime vessels. Only the best officers and crews are employed on these vessels, and the vessels themselves are maintained meticulously, and renewed frequently. SNH ©
  • 15. The car carrier or more correctly the P.C.C. (Pure Car carrier) or P.C./T.C. (Pure car/truck carrier), could never be described as a beauty of the seas, yet in it's rectangular design, is purpose built to carry large numbersof cars. SNH ©
  • 16. SNH ©
  • 17. These vessels are built for speed, and can reach upwardsof 28 knots, moving cargoes around the world. Globally storing and returning empty boxes has become an industry in itself Through-transport or inter-modal transport,means that these containers can be offloaded from a ship, and rapidly loaded onto trains or onto container Lorries for onward transport to the place of delivery. Recently, this has led to serious security concerns SNH ©
  • 18.  Built to load, carry and discharge large, unusual shaped cargoes (or even smaller vessels) that will simply not fit inside the holds of conventional vessels.  Shaped quite unlike any other cargo vessels, heavy lift vessel are designed to cope with unusually large cargos that will not fit inside normal, conventional vessels. SNH ©
  • 19. The majority of vessel are only designed for craning the cargos on board or rolling them onto the side of the vessel, but a few heavy lift vessels can be ballasted down, so that cargoes (often on pontoons) can be floated on. The vessel is then raised, lifting the cargo, (now resting on the deck of the heavy lift vessel), out of the water, ready for ocean transit, often to the other side of the world. These specialist vessels are often used in the oil industry for the carriage of jack up rigs. Other unusual cargoes can include power plants, desalination units, generators and yachts. In 2003, heavy lift vessels were used to carry away the cut up sections of the TRICOLOR when she was removed from the bottom of the Dover Straits. SNH ©
  • 20. Deadweight Tonnage •Expressesthe number of tons of 2,240 pounds that a vessel cantransport of cargo, stores, and bunker fuel. It is the difference betweenthe number of tons of water a vessel displaces"light" and the number of tons it displaces when submergedtothe "load line." •Deadweight tonnage is usedinterchangeably with deadweight carrying capacity. A vessel's capacity for weight cargois less thanits total deadweight tonnage. Cargo Tonnage •Is either "weight"or "measurement."The weight ton inthe UnitedStates andinBritishcountries is the Englishlong or gross tonof 2,240 pounds. In France and other countries having the metric systemaweight tonis 2,204.6 pounds. •A "measurement"tonis usually 40 cubic feet, but in some instances alarger number of cubic feet is taken for a ton. Most oceanpackage freight is taken at weight or measurement (W/M) ship's option. SNH ©
  • 21. Gross Tonnage •Applies tovessels, not tocargo. It is determinedby dividing by 100 the contents, incubic feet, of the vessel's closed-inspaces. A vessel tonis 100 cubic feet. The register of avessel statesbothgross and net tonnage. Net Tonnage •Vessel's gross tonnage minus deductions of space occupiedby accommodations for crew, by machinery, for navigation, by the engine roomand fuel. A vessel's net tonnage expressesthe space available for the accommodation of passengers andthe stowage of cargo. •A tonof cargo inmost instances occupies lessthan 100 cubic feet;hence the vessel's cargotonnage may exceedits net tonnage, and, indeed, the tonnage of cargocarriedis usually greater thanthe gross tonnage. SNH ©
  • 22. Displacement • Vessel is the weight,in tons of 2,240 pounds, of the vessel and its contents.Displacement "light"is the weightof the vessel without stores, bunkerfuel, or cargo. Displacement "loaded"is the weightof the vessel plus cargo,fuel, and stores. SNH ©
  • 23. Iceberg Other reasons such as narrow straits, weather (typhoon, monsoon region), piracy SNH ©
  • 24. In order to be registered, an ocean-going ship must be certified to be of a particular type and size and be maintained to certain minimum standards. While most states (national governments) do not insist that ships be "classed," without a "class" category there would be considerable difficulties in operating a ship, as "class" is a requirement of most insurance companies and shippers using the vessel. It also reflectson the risk and safety management aspects of the vessel, date of last survey to maintain classification and seaworthinessof vessel SNH ©
  • 25. The flag state of a commercial vessel is the state under whose laws the vessel is registered or licensed. The flag state has the authority and responsibility to enforce regulations over vessels registered under its flag, including those relating to inspection, certification, and issuance of safety and pollution prevention documents. SNH ©
  • 26. Masts can be the home of antennas, navigation lights, radar transponders, fog signals, and similar devices often required by law. Ground tackle includes equipment such as mooring winches, windlasses, and anchors. Anchors are used to moor ships in shallow water. They are connected to the ship by a rope or chain. On larger vessels, the chain runs through a hawsepipe. Cargo equipment such as cranes and cargo booms are used to load and unload cargo and ship's stores. Safety equipment such as lifeboats, liferafts, and survival suits are carried aboard many vessels for emergency use. SNH ©
  • 27. A high level of repair costs due to high loss ratio, will indicate that premiums may need to be increased and vice versa This premium assessment will be based particular to the vessel type and its trade The insurers will pay the ship owner for the cost of repairs to the ship after the damage has been surveyed and tenders from repair yards submitted The ship owner will, however, have an agreed amount referred to as the “deductible” which has to be paid by him before a claim against his insurance policy is submitted For example, if the deductible is RM 100,000 and a claim for repairs is RM 300,000, the insurers will compensate the owner for RM 200,000 SNH ©
  • 28. An older vessel poses a higher risk than the newer one The older the vessel, the higher the risks. This is due to:- Higher repair cost Higher maintenance costs SNH ©
  • 29. This may lead to an additional premiumby the underwriter The majority of marine underwriters requirea marine survey once every two years and when a vessel has reached 10 years of age SNH ©
  • 30. 1.28% 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0-4 yrs 5-9 yrs 10-14 yrs 15-19 yrs 20-24 yrs 25 yrs + % of World Fleet Bulkers Tankers Other ships Total Source: LMIU for Joint Hull Committee SNH ©
  • 31. A P&I (Protection and Indemnity) club will keep records for each individual ship entered with the club These records are normally based on the last five insurance years and provide an accurate record of all payments made by the member SNH ©
  • 32. The amount of premiums paid in by the member The amount of money paid out for market reinsurance The amount of money paid back to the owner as compensation Other costs and the amount estimated for claims not settled SNH ©
  • 33. The loss ratio will therefore only be one of the elements that form the basis of the annual renewal process, where the P&I premiums for the coming year are fixed A high level of claims, and hence a high loss ratio, will indicate that premiums may need to be increased and vice versa, but other risk measures are also used to establish the revised premium level Premiums should be adequate to ensure that a member contributes equally according to mutual principles This implies that, in the long term, a profitable, or as a minimum, a break- even premium level has to be set for the member SNH ©
  • 34.  These are some of the developments spanning nearly 100 years that have enabled underwriters to gain experience and to apply that experience to each new succeeding stage in the evolution of shipping.  Past experience of underwriter provides guide to the rating of the hull insurance.  The underwriter’s experience with the Assured is a valuable guide in determining whether the rate is adequate or excessive.  An adverse loss ratio indicates the need for careful reconsideration of risk factors; it does not necessarily indicate that the rate should be revised. SNH ©
  • 35. SNH ©
  • 36. A careful study of the features of any risk should indicate its quality. Good ownership is reflected in good seaworthy craft, maintained in good order and properly managed SNH ©
  • 37. The most important. The physical condition of a vessel is only discoverable through competent survey. Most large trading vessels are registered with one of the international registers such as Lloyd’s Register of Shipping, The American Bureau of Shipping and Germanischer Lloyd. For smaller vessels, it would be in an underwriter’s interest to arrange to have surveys completed before making any decision about going on risk. SNH ©
  • 38. Inspect a cargo vessel, to check for proper seaworthiness and safety equipment Some sea routes take cargo ships into dangerous areas that are open to modern piracy, or may have harsh weather conditions SNH ©
  • 39. Past claims history will give a clear indicationof good or bad management Prior claims informationshould be comprehensive to ensure that a correctpicture is obtained and a proper assessmentis made SNH ©
  • 40. Analysis of insurance requirements/risk management Liaison with insurers/insurance brokers Obtaining optimum recovery Settling liabilities advantageously SNH ©
  • 41. Loss damage liability or expense covered by the Institute Time Clauses-Hulls 1/10/83 (including 4/4ths Collision Clause) or which would be recoverable there under but for Clause 12. Any claim for any sum recoverable under any other insurance on the Vessel or which would be recoverable under such insurance but for the existence of this insurance. Any claim for expenses arisingfrom delay except such expenses as would be recoverable in principle in English law and practice under the York-Antwerp Rules 1974. SNH ©
  • 42. This insurance may be cancelled by either the Underwriters or the Assuredgiving 7 days notice Whether or not suchnotice of cancellationhas been giventhis insurance shall terminate automatically In the event either of cancellationby notice or of automatic terminationof this insurance by reasonof the operationof this Clause 5, or of the sale of the Vessel, proratanet return of premiumshall be payable tothe Assured SNH ©
  • 43. No claim arising from a peril insuredagainst shall be payable under this insurance unless the aggregate of all such claims arising out of each separate accident or occurrence Claims for damage by heavy weather occurring during a single sea passage between two successive ports shall be treatedas being due to one accident SNH ©
  • 44. Excluding any interestcomprisedtherein, recoveriesagainstany claimwhich is subject to the above deductibleshall be creditedto the Underwritersin full to the extentof the sum by which the aggregateof the claimunreduced by any recoveriesexceedsthe above deductible Interestcomprised in recoveriesshall be apportioned betweenthe Assured and the Underwriters,taking into account the sums paid by the Underwriters and the dates when such payments weremade SNH ©
  • 45. War civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power Capture seizure arrest restraint or detainment, and the consequences thereof or any attempt threat Derelict mines torpedoes bombs or other derelict weapons of war Strikers, locked-out workmen, or persons taking part in labor disturbances, riots or civil commotions Any terrorist or any person acting maliciously or from a political motive Confiscation or expropriation SNH ©
  • 46.  SNH ©