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Marine underwriting
This document provides an overview of marine insurance underwriting. It discusses the different types of cargo insurance policies like open, floating, declaration policies. It explains the various cargo clauses like ICC A, B, C that provide different levels of coverage. It also describes the rating and underwriting process, exclusions, duration of cover and important policy details like endorsements and certificates.
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Marine underwriting
- 1.
- 2. Introduction • Oldest branchof 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 • policycontains 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 • Nameof 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) GeneralAverage 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 withextra 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 • Lossby 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 Aand 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 LIMITSAS 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 OPENPOLICY • 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 • forexport 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 Openpolicy 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 – issuedfor 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 Policyand 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 • Floatingpolicy 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 • issuedfor 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 • Customsduty 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 • tocover 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 • Packagepolicies 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.