LECTURER: MRS JOANA

BOTCHWAY

GRADUATE ASSISTANT: MICHAEL

DZIKUNU

Thursday, September 17, 2009

Michael 1
 COURSE OUTLINE
1 GENERAL INTRODUCTION TO
MARINE INSURANCE.

1.1 Risk and maritime transport

activities.
1.2 Risk management options.

1.3 Historical Development of

Marine Insurance
1.4 Scope of Marine Insurance

Thursday, September 17, 2009

Michael 2
2. MARINE INSURANCE MARKETS
AND PRACTITIONERS

2.1 Marine insurance

markets and others.

2.2 Insurance associations.

Thursday, September 17, 2009

Michael 3
 3. MARINE INSURANCE PRINCIPLES

3.1 Insurable interest

3.2 Utmost good faith
3.3 Indemnity
3.4 Proximate cause
3.5 Subrogation

Thursday, September 17, 2009

Michael 4
4 EFFECTING MARINE INSURANCE

4.1 Role of Brokers

4.2 Market Procedures

4.3 Marine Polices

Thursday, September 17, 2009

Michael 5
5 MARINE LOSSES

5.1 Total Loss

5.2 Partial Loss

4 MARINE LIABILITY INSURANCE

6.1 History of protection and
indemnity clubs.
6.2 Cover provided

6.3 Underwriting principles

Thursday, September 17, 2009
Michael 6
TEXTBOOKS
Introduction to risk management and insurance
by Mark Dorfman.
Marine insurance – principles and basic practise
by R H Brown.
Marine insurance volume II by R H Brown.
Marine insurance – principles and basic practise
by Mishra.
REFERENCES:
Marine insurance Act (1906)
ICS notes
Internet

Thursday, September 17, 2009

Michael 7
GENERAL INTRODUCTION TO MARINE
INSURANCE.

1.1 Risk and maritime transport

activities.

Thursday, September 17, 2009

Michael 8
PERIL: Is the cause of the Loss e.g.
stranding, sinking, collision, and extra
ordinary heavy weather, which are referred
to as perils of the sea. We can mention
Fire, Piracy / barratry, thieves, Jettison
which are also known as perils on the
sea.
Thursday, September 17, 2009
Michael 9
 PURE RISK & SPECULATIVE RISK.
(or static and dynamic risks)
Not insurable
Insurable Some insured by
derivatives
Securities
RISK PROFIT EQUATION. The higher the risk the
higher the profit
Thursday, September 17, 2009
Michael 10
WHAT RISKS ARE ASSOCIATED WITH
SHIPPING.
Risks in shipping may be classified into
five categories:
Technical risks – those that attach to the
ship herself and its equipment on board.
 Financial risks - These are usually
imposed by method of financing projects
particularly acquisitions, ratio of equity
capital to borrowed funds (capital
gearing). High ratio attaches risks to
future cash flows in that cost of capital
have to be met whether or not profits are
being made.
In periods of depression where profits are
low excessive pressure on cash flow
create liquidity
Thursday, September 17, 2009
Michael
problems for companies. 11
Commercial risks - Relate to trading activities of ship and
occur in connection with economic developments which
affect ship operations. Usually in the form of market
conditions (quotas) or operating conditions.
Major commercial risks in shipping are freight rate volatility,
competition, and port delays.
Political risks - Relate to rules of the game which comprise
either international or national standards for operating the
ship compliance with which more often than not has cost
implications. 
Political risks may also be viewed in the context of countries
engaged in world trade. Outbreak of war or presence of
warlike conditions puts vessel at risk even when flying
neutral flags.
Liability risks – This relates to claims from third parties which
may arise out of:
(1) contractual relationships such as cargo owners, crew
members. In this losses a limit of liability may apply
depending on the terms or rules governing the carriage
contract.
(2) non contractual relations (tortuous acts) as collision for
which owner of offending
Thursday, September 17, 2009
Michael
ship becomes liable, contact with
12
fixed or floating objects, damage to shore installations and
RISK MANAGEMENT
IS THE LOGICAL DEVELOPMENT AND CARRYING OUT OF A
PLAN TO DEAL WITH POTENTIAL LOSSES WITH THE
PURPOSE OF MANAGING AN ORGANIZATION’S EXPOSURE
TO LOSS AND PROTECT ITS ASSETS BY OFFSETTING RISK
EVENTS OR MITIGATING THEIR EFFECTS.

THE RISK MANAGEMENT PROCESS.

Risk management activities occur before, during and
after losses.
Step 1. Identify and measure potential loss
exposures.
Step 2. Choose the most efficient methods of
controlling and financing loss
exposures and implementing
them.
Step 3. Monitor outcomes
Thursday, September 17, 2009
Michael 13
 potential loss
exposures
To logically measure loss
exposures it is ideal to consider
Loss in its four distinct dimensions.

3. Direct property loss

4.Consequential losses
5.Liability losses
6. Losses caused by death, disability
or unplanned retirement of key
people.
Thursday, September 17, 2009
Michael 14
 Step 2. Loss Control and Risk
Financing
(a) LOSS CONTROL:
Loss control activities are designed to
mitigate loss cost and include:
Risk avoidance,
loss prevention and
loss reduction.

Thursday, September 17, 2009

Michael 15
(b) RISK FINANCING.
It determines when and by whom loss costs are
borne. This includes the following alternatives.

Risk assumption. Self-insurance

Financed risk retention

Risk transfer Non-insurance

Insurance.

Thursday, September 17, 2009

Michael 16
TERMINOLOGIES
INSURER: The party agreeing to pay for the
loss(es)
INSURED: The party whose loss causes the
insurer to make a claims payment.
PREMIUM: The payment the insurer receives.
POLICY: The insurance contract
EXPOSURE TO LOSS: The insured’s possibility
of loss.

Thursday, September 17, 2009

Michael 17
Step 3. Monitor
Outcomes
 Regular review of plans in line with assets
to ensure the plans meet current needs.

Thursday, September 17, 2009

Michael 18
 RISK MANAGEMENT TOOLS

 RISK TRANFER RISK AVOIDANCE

(INSURANCE)

RISK ASSUMPTION LOSS PREVENTION

Low FREQUENCY OF OCCURENCE High

Thursday, September 17, 2009
Michael 19
questions
Research and write short notes on Marine
Insurance Company Markets and associations
in:
1. North America
2. South America
3. Africa
4. Europe (excluding the U.K)
5. Asia and Australia.
Quote your sources.

Thursday, September 17, 2009

Michael 20
Scope Of Marine Insurance
Insurance of property – Hull and Machinery;
Cargo; freight
Kinds of policies contracts available
Time, Voyage, Building, laid up in port, dry
docking
 Insurance
Thursday, September 17,of third party policy (P& I) Clubs.
2009
Michael 21
2. MARINE INSURANCE
MARKETS AND
PRACTITIONERS
2.1 MARINE INSURANCE MARKETS.

3.Lloyd’s Market
4.London Company market
5.Markets outside London e.g
Liverpool Market, Belfast, Manchester, Dublin,
Glasgow, and Bristol.
Other Maritime Centres. E.g Oslo,
copenhagan, etc.
Thursday, September 17, 2009
Michael 22
 2.2 Marine Insurance Market
Practitioners.
1. Brokers.
2. Underwritters
3. Propossers
4. Lloyd’s Agents
5. Marine Insurance Company Agents.

2.3 INSURANCE ASSOCIATIONS

8. The British Insurance brokers’ associations (CIB &
LIBA)

10. Institute of London Underwriters.

Thursday, September 17, 2009

Michael 23
PRINCIPLES OF INSURANCE
INSURABLE INTEREST

The two broad classifications are:

a) Cargo Interests.

c) Hull Interests.

e) Incidental Interests.
Thursday, September 17, 2009
Michael 24
CARGO INTERESTS.
1. Ownership
2. Shipping costs
3. Insurance Charges (MIA 1906 sec 13)
4. Anticipated Profit
5. Partial ownership (MIA 1906 sec 8)
6. Defeasible interest( sec 7)
7. Contingent interest (sec 7)
8. Bottomry and respondentia (sec 10)
9. Forwarding expenses
10. Commission
11. Liability interest.
12. Cargo Specie.
Thursday, September 17, 2009
Michael 25
HULL INTERESTS
1. Ownership
2. Partial ownership
3. Insurance Charges
4. Charterer’s Interest
5. Charterer’s Freight
6. Freight
7. Disbursements
8. Mortgagee’s interest (MIA 1906 Sect, 14)
9. Contractual Liability (covered by P&I)
10. Third party liability
11. P&I Interest
Thursday, September 17, 2009
Michael 26
INCIDENTAL INTERESTS
1. Master’s and seamen’s wages (MIA 1906
Sect, 11)
2. Reinsurace.

Some terms of importance:

 Double insurance
 Co-insurance
 Underinsurance
 Assignment of policy/interest

Thursday, September 17, 2009

Michael 27