Professional Documents
Culture Documents
PROJECT REPORT
ON
“MARINE INSURANCE”
SUBMITED BY
AKSHAY DATTATRAY SOLE
PROJECT GUIDE
PROF. LATIKA DAS
--------------------------------------
AKSHAY.D.SOLE
DECLARATION
CERTIFICATE
……………….
(University Examiner)
INDEX
Sr. Contents Pg. No
No.
1.1 Introduction
1.2 Objectives
1.3 Nature and scope
1.4 History
1.5 Marine insurance market
1.6 Sources of data collection
2. Marine Insurance
marine policy
7. Marine Insurance Policy and losses
1.7 Introduction
1.8 Objectives
1.9 Nature and scope
1.10 History
1.11 Marine insurance market
1.12 Sources of data collection
1.1 Introduction
Insurance connected with the risks of transportation of goods, is one of the oldest
and most important forms of insurance.
The value of goods shipped by the business firms each year cost billions of
rupees.
These goods are exposed to damage or loss from numerous perils associated
with transportation. These goods can be protected by marine insurance
contracts.
To find whether traders are aware about the marine insurance plans and
policies
Prior to the development of marine insurance, the people across the world had a system
of pooling their contributions so that if any one of them suffers loss during voyage. He
would be compensated from the pool.
Today marine insurance has assumed a vast dimension due to ever expanding trade
across the globe.
It involves large shipping companies that require protection not only for their costly fleet
against the perils of the sea, but also to the cargo being carried in each of these ships.
The value of each ship and the cargo carried therein, may be costing millions of rupees
to the owners.
a) Bottomary loan :-
Which was a transaction protecting an owner from financial loss
if his ship was destroyed. Premiums were calculated on the basis of intuition
instead of mathematical estimates.
Prior to this Act, the insurance business was conducted on the basis of
the principles of General Contract Act and English Marine Insurance Law.
Marine insurance includes two types of insurance i.e. Cargo insurance and hull
insurance.
The cargo insurance includes the goods in transit from the place insured to
the sea and from sea to the exporter.
The hull insurance is concerned with body, the machinery and technical know-
how, stores tools etc. of the ship.
Marine Insurance covers the loss or damage of ships, cargo, terminals and any
transport or property by which cargo is transferred, acquired or held between the
points of origin and final destination.
Lloyd’s was a coffee house frequented by the tradesmen, ship- owners and
others
At the coffee house they would discuss various aspects of the shipping business
including cargo and ship insurance and Ultimately it started transacting marine
insurance in a big way when the British ocean liner -
‘Titanic’ which sank in 1912, during her maiden voyage was insured by Lloyd’s who
paid an insurance claim of one million us $.
TITANIC CRASH
Marine Insurance in India
There is evidence that the marine insurance was present in some form or the other in
India since a very long time.
In earlier days travelers by sea were particularly afraid of losing their vessels and
merchandise because of piracy on the open seas.
the insurance in the current scenario, however is, much more then, what was
envisaged earlier
it is now required to protect the interest of:
the cargo
the income that the cargo would have generated would also be lost
it may also damage third party property
Third party injuries or death.
Classification of Marine Insurance
based on the facts stated earlier, marine insurance can be classified into four broader
categories i.e.:
hull insurance
cargo insurance
freight insurance and
liability insurance
TYPES OF ‘HULL’
Cargo Insurance
the ‘cargo’ policy covers the risks associated with the transshipment of goods
An ‘open policy’ can be issued which insures the goods/ cargo automatically
whenever a shipment is made.
Marine insurance is a contract under which the insurer undertakes to indemnify the
insured:
Primary Data : -
The primary data are those, which are collected afresh and the
first time and thus happen to be original in character. The primary data collected
through well-designed and structured questionnaires based on the objectives.
Secondary Data :-
Any data, which have been gathered earlier for some other purpose,
are secondary data in the hands of researcher or by someone else, especially for the
purpose of the study is known as primary data. The data collected for this project has
been taken from the both primary and secondary source.
Internet
Magazines
Publications
newspapers
Chapter 2 :-
Marine Insurance
a) Hull Insurance:
Covers physical damage to the ship or vessel. In
addition it contains a collision liability clause that covers the owner's
liability if the ship collides with another vessel or damages its cargo.
b) Cargo Insurance:
Covers the shipper of goods if the goods are damaged
or lost. The policy can be written to cover a single shipment. If regular
shipments are made, an open cargo policy can be used that insures the
goods automatically when a shipment is made. The open cargo policy
has no expiration date and remains in force till it is cancelled.
d) Freight Insurance:
Indemnifies the ship owner from the loss of earnings if
the goods are damaged or lost and are not delivered.
2.2 Insurable Property
by reason of maritime perils may insure any liability to the third party.
2.4 Voyage
The ship could carry on the voyage in the specified route which is mentioned in
the policy.
2) Collision or contact of vessels, ships, boats with internal and external objects.
11) Loss caused by heating due to the closure of ventilators to prevent the entry of sea
waters.
12) Loss caused by rats i.e. a hole made in the bottom of the ship, through which sea
water enters the ship and damages the cargo.
Marine insurance apart from indemnifying the assured against the maritime
perils also includes liability of the third party incurred by the owner of the ship or
other person interested in the property assured on happening of the maritime
event.
Thus marine insurance includes:
Marine Policy
4.1 Marine Policy
4.2 Contents of marine policy
4.3 Essential elements or principal of marine
insurance
4.4 Features of a general contract
4.1 Marine Policy
The clauses are framed in relation to risk covered, risk excluded and other terms
and conditions of the insurance.
2. Policy Number
3. Sum Assured
7. Stamp duty (as per the provisions of the Indian Stamp Act 1879)
8. Voyage or Journey
9. Number or date of bill of lading or Registered Port or Air freight receipt. (as the case
may be)
2. Insurable interest
4. Indemnity
5. Subrogation
6. Contribution
7. Warranties
8. Cause proximal
A marine policy must fulfill all the essentials of a valid contract namely
2. Consideration
3. Capacity
4. Legal Purpose
Chapter 5 :-
Insurable Interest
According to Marine Insurance Act 1963, 'every person has an insurable interest
who is interested in a marine adventure'. The following persons have
insurable interest in Marine Insurance.
3. Creditor who has advanced money on a ship or cargo to the extent of his
4. Mortgager
5. Mortgagee
10. Persons contingent interest such as the buyer, though the goods may be at
seller's risk and though he may have right to reject the goods, but has paid.
11. Trustee
12. Bailee
The insured must disclose all those relevant facts to the insurer which are likely
to affect his willingness to undertake the risk.
If either party does not disclose full facts, the other party can avoid the contract at
any time.
Under this contract, the underwriter agrees to indemnify the insured against
losses by sea risk to the extent of the amount insured.
The insured can recover only the actual loss suffered and nothing more.
According to this principle after meeting the loss agreed, the insurer steps into
the shoes of the insured and becomes entitled to all rights and remedies
available to the insured against the insured property or third persons.
5.5 Principal of contribution / Double Insurance
If the subject has been insured with more than one insurer, each insurer has to
pay only the ratable proportion of loss subject to the maximum loss.
The principle supports the concept that the insured cannot recover amounts
on the same property for the same peril from more than one insurer.
b) The policies must relate to the same adventure and interest or any part thereof.
c) The sums insured must exceed the indemnity allowed by this Act
Chapter 6 :-
Express Warranties
Implied warranties
There are certain warranties which are implied in every contract of marine
insurance unless excluded expressly. These are:
The insurer is discharged from the liability as from the time of deviation.
What is a Deviation?
1. When the course of the voyage specially designated in the policy, is departed from
or
2. Where the course of the voyage was not specially designated by the policy, but the
usual & customary course is departed from or
3. Where several ports of discharge were specified by the policy, but the ship did not
process to them in the order designated by the policy or
4. Where the policy did not specify the ports of discharge but the ship (which should
have) did not proceed to them in geographical order.
3. It is caused by the barratrously conduct of the master or crew if barratry were one
of the perils insured against (or)
5. It is necessary to arrange medical or surgical aid for any person on board the ship
(or)
6. It is very necessary for the safety of the ship and subject matter insured (or)
This is an implied warranty on the part of the insured that the adventure insures
is a lawful one, and that, so far as the assured can control the matter, the
adventure shall be carried out in a lawful manner.
This warranty implies that the ship will not be used for undertaking any illegal
voyage e.g. smuggling, trading with enemy etc.
Whenever there is an express warranty that the ship shall be neutral (especially
in the case of war time adventure) there is an implied warranty that the ship
carries all the papers necessary to prove the neutrality.
According to the Marine Insurance Act, the insurer is liable for any loss
proximately caused by a peril insured against.
Insurer is not liable for any loss which is not proximately caused by a peril
insured against.
6.3 Assignment of policy
6.4 Re-insurance
In reinsurance, unless the policy provides otherwise, the original assured has
no right or interest in respect of such reinsurance.
6.5 Calculation of rates of premium
Ex: Commodities like cement sugar, etc. are easily damaged by sea water; cotton or
some chemicals may easily catch fire; liquids can get leaked and crockery and
glassware are susceptible to breakage.
3. Voyage and Mode of Transit : The name of the place from where, transit will
commence and the name of the place where it will terminate has to be stated.
Postal receipt number and date thereof is required in case of goods sent by
registered post.
4. Cover Required : The risk against which cover requires should be fully described.
5. Name of the vessel : The correct name of the vessel is necessary, to know
the details of the age, tonnage classification (tanker, bulk carrier, container
ships, fishing fleet, war vessels) ownership etc.
• If the vessel used for the voyage is tramp vessel i.e. a vessel which does
not follow a fixed schedule and carries cargoes whenever available. The
vessels have to be approved by GIC and if not approved, then will attract a very
high premium.
While there is no tariff rate on premium and insurers can charge any rate
depending upon the nature of goods , the distance, the mode of trans-shipment,
type of package, the voyage route and the past claims experience. Extended
covers like SRCC ( Strikes, Riots and Civil Commotion) and war risks are
governed by special regulations and the premium collected is credited to the
Central Government.
Shipping vessels are listed according to their age and draught weight. Full
details of every shipping vessel built anywhere in the world is available in 'Lloyds
Register' (issued by Lloyds of London). Minimum standards are fixed. Any vessel
falling short of these standards will attract loading premium.
a. Assignment Clause: This clause makes it clear that the marine policy is assignable
Where the assured has parted with or lost his interest in the subject matter
insured, any subsequent assignment is inoperative.
The assignee who has acquired the beneficial interest in the policy is entitled to
see thereon in his own name.
b. Transit Clause or Warehouse to Warehouse Clause :
Transit clause provides with respect to goods, for the risk to attach 'from the
loading thereof aboard the said ship' and for the insurance to continue until the
goods are discharged and safely landed at the port of discharge.
Through this clause, the policy does provide otherwise (that means permits
deviation) and the event is held covered.
The liberty to 'touch and stay' at any port or place whatsoever does not authorize
the ship to depart from the course of her voyage from the port of departure
to the port of destination.
e. Inchmaree Clause or Negligence Clause
This clause extend the underwriter liability to cover risks of a kind, which are not
included within the ordinary meaning of maritime perils.
It provides for the insurance to cover loss or damage to hull or machinery directly
caused by:
iv. Negligence of repairs provided such repairs are not assured hereunder
It provides that if the insured vessel collide with another vessel, the underwriter
agree to pay three quarters of the amount of damage to which the assured
becomes liable.
g. Sue and Labor Clause :
This clause provides that liability shall not be exceeding the proportion that the
amount insured bears to the value of the vessels.
In absence of this provision, underwriters would be liable for the full amount of
sue and labor charges even when there was under insurance.
h. Reinsurance Clause :
There are various reasons why an underwriter may deem it prudent to reinsure
part or all of a risk for which he has accepted liability.
• E.g. He may find that his commitment on any one vessel or in any locality have
become too burdensome.
• Declarations under open covers or floating policies and acceptances by his agents in
other markets give him an accumulated liability considerably in excess of his usual
retention
• He may have accepted a line on 'all-risks’ terms and then desire to reinsure in
respect to total loss only.
i. Memorandum Clause :
j. Continuation Clause :
This clause refers that the vessel shall continue to be covered even after the
completion of voyage under the policy at a pro rata premium to her port of
destination.
The term 'perils of the sea' refers to fortuitous accidents and casualties of the
sea. It does not include ordinary action of the winds and waves.
L. Warrior Clause :
In this clause, either party to the contract may take such steps, or incur such
expenses, as are contemplated under the sue and labor clause, to minimize a
loss without prejudice in the light of the assured on the one hand and the
underwriter on the other
This clause provides that the insurance is against all risks of loss or damage to
the subject matter insures and the claims are payable irrespective of percentage
of loss.
n. General Average Clause :
The general average clause refer to the losses that must be partly borne by
someone other than the owner of the goods that were damaged or lost.
Ex: Suppose that a certain cargo of lumber wrapped in a large bundle is stored on deck.
To lighten the ship during heavy storm that is threatening the safety of the voyage, the
captain orders the limber worth Rs.50000 to be jettisoned. The action of the captain is
successful in saving the ship and all other interests. Such a sacrifice is termed as
general average, and the interests that were saved would be required to share a pro-
rata part of the loss. Thus is the ship and freight interests were valued at Rs.1000000
and other cargo interests at Rs.950000, the ship owner would pay one half (100/200) of
the value of the lumber. The other cargo interests would share 95/200 of the loss and
the owner of the lumber would bear 5/200 of the loss
All marine policies provide coverage for general average claims that may be
made against the insured.
This clause means that the arrangement in case of General Average Claim which
may arise under the policy, the average settlement made in foreign country will
be adopted as the basis for settlement.
p. Free of Capture and Seizure (FCS) :
1. Bottomry Bond
It is repayable after a certain agreed number of days after the arrival of the
ship as specified in the bond.
If the vessel is lost before the arrival at destination, the lender losses his
money.
2. Respondentia Bond :
The loan is to be repaid within a certain period after the arrival of the cargo at the
destination as specified in the Respondentia Bond.
If the cargo is lost on its way, the lender losses his money.
This is a policy in which the limits of the risk are determined by place of
particular voyage e.g. Chennai to Singapore , Chennai to London
Such policies are always used for goods insurance, sometimes for freight
insurance but only rarely nowadays for hull insurance.
2. Time Policy :
This policy is designed to give cover for some specified period of
time say for example noon of 1st January 2009 to noon of 1st January 2012
It is a policy which covers the risk during a particular voyage for a specified
period. Example A ship may be insured for voyages between Chennai to London
for a period of one year.
4. Valued Policy :
This policy specifies agreed value of the subject matter insured,
which is not necessarily the actual value. This agreed value is also known as
insured value.
Once agreed these values cannot be changed and remains binding on the
parties.
5. Unvalued Policy/ Open Policy :
In case of unvalued policy, the value of the
subject matter insured is not specified at the time of effecting insurance.
It is taken for a specified amount and the insurable value is ascertained at the
time of loss.
The insurer is liable to pay only up to actual loss incurred to the policy amount.
6. Floating Policy :
A floating policy describes the insurance in general terms,
leaving the name of the ship or ships to be defined by subsequent declarations.
Declaration must be made in the order of shipment unless the policy provides
otherwise.
It must comprise all the consignments within the terms of the policy and the
values must be stated honestly.
Errors and omissions however, may be rectified even after the loss has
occurred, if made in good faith.
When the total amount declared exhausts for which the policy has been issued,
it is said to be 'run off' or 'fully declared'.
The assured may then arrange for a new policy to be issued to succeed the
one about to lapse, otherwise the cover terminates when the policy is fully
declared.
7. Wagering Policy/ PPI Policy :
This policy is issued without there being any
insurable interest or policy bearing evidence that the insured is willing to
dispense with any proof of interest
Under Section 4 of the Marine Insurance Act, such policies are void in Law but
such policies continue to be common.
In the case of very large vessel, the period may extend over several years.
An open cover policy is an agreement between the assured and his underwriter
under which the former agrees to declare and the latter to accept, all shipments
coming within the scope of the open general cover during some stipulated period
of time.
10. Duty Policy :
In case of CIF contracts, the exporter would have arranged for
insurance only up to CIF value. Customs duty payable if any is the responsibility
of the importer and they can separately obtain custom duty policy on
'standalone basis'.
a. The insurer is liable for any loss proximately caused by a peril insured against
b. The insurer is not liable for any loss attributable to the willful misconduct of the
assured but unless the policy otherwise provides, he is liable for any loss proximately
caused by a peril insured against even though the loss would not have happened but for
the misconduct or negligence of the Master or Crew of the Ship.
c. Unless the policy otherwise provides, the insurer is not liable for ordinary wear and
tear, ordinary leakage and breakage, inherent vice or nature of subject matter insured or
for any loss proximately caused by rat or vermin or any injury to machinery not caused
by maritime perils.
7.3 Types of marine losses
3. When the ship concerned in the adventure is missing, and after the lapse of a
reasonable time period, still no news of it is received.
In the case of Actual Total Loss, the insurer has to pay either the insured amount
or the actual loss whichever is less but the cause of the loss must be one of the
perils insured against.
Constructive total loss is said to have occurred :
2. In the case of damage of goods, where cost of repairing the damage and
forwarding the goods to their destination would exceed their value.
Notice of Abandonment :
Partial Loss :
Any loss other than total loss is Partial Loss and may be classified into:
b) Money paid to pirates for the purpose of saving the ship and cargo.
c) Expenses incurred due to outside help taken in making the vessel reach its
destination.
The liability of General Average extends to the owner of the ship, the cargo and
the freight.
7.5 York Antwerp Rules
The association for reform and codification of the law of nature meet at Antwerp
in 1877, where code of rules were adapted and known as 'York Antwerp Rules'.
The rules were further revised in 1890 and 1924.
These rules deal only with certain specific method relating to General
Average Loss and further provided that in case of matters not included in the
rules, that should be dealt with according to the law and practice of the court of
destination.
7.6 Claim Documents
Conclusion
8.1 Limitation of the study
8.2 Conclusion
8.3 Bibliography
8.1 Limitation of the study
Most of the data is collected from secondary source due to lack of time.
The data is not 100% accurate
There is possibility of bias
Non availability of required data to analyze the performance.
The short span of the time provided also one of limitations.
8.2 Conclusion
Today marine insurance has assumed a vast dimension due to ever expanding
trade across the globe.
A marine policy fulfills all the essentials of a valid contract namely Offer and
Acceptance, Consideration, Capacity, Legal Purpose.