MARINE

HULL INSURANCE

INTRODUCTION

Marine insurance covers the loss or damage of ships, cargo, terminals, and any
transport or cargo by which property is transferred, acquired, or held between the points of origin
and final destination. Cargo insurance — discussed here — is a sub-branch of marine insurance,
though Marine also includes Onshore and Offshore exposed property, (container terminals,
ports, oil platforms, pipelines), Hull, Marine Casualty, and Marine Liability. When goods are
transported by mail or courier, shipping insurance is used instead.

Maritime insurance was the earliest well-developed kind of insurance, with origins in the
Greek and Roman maritime loan. Separate marine insurance contracts were developed
in Genoa and other Italian cities in the fourteenth century and spread to northern Europe. Premiums
varied with intuitive estimates of the variable risk from seasons and pirates.[1] Modern marine
insurance law originated in the Lex mercatoria (law merchant). In 1601, a specialized chamber of
assurance separate from the other Courts was established in England. By the end of the seventeenth
century, London's growing importance as a centre for trade was increasing demand for marine
insurance. In the late 1680s, Edward Lloyd opened a coffee house on Tower Street in London. It
soon became a popular haunt for ship owners, merchants, and ships' captains, and thereby a reliable
source of the latest shipping news.[2]

Lloyd's Coffee House was the first marine insurance market. It became the meeting place
for parties in the shipping industry wishing to insure cargoes and ships, and those willing to
underwrite such ventures. These informal beginnings led to the establishment of the insurance
market Lloyd's of London and several related shipping and insurance businesses. The participating
members of the insurance arrangement eventually formed a committee and moved to the Royal
Exchange on Cornhill as the Society of Lloyd's. The establishment of insurance companies, a
developing infrastructure of specialists (such asshipbrokers, admiralty lawyers, bankers, surveyors,
loss adjusters, general average adjusters, et al.), and the growth of the British Empire gave English
law a prominence in this area which it largely maintains and forms the basis of almost all modern
practice. Lord Mansfield, Lord Chief Justice in the mid-eighteenth century, began the merging of
law merchant and common law principles. The growth of the London insurance market led to the
standardization of policies and judicial precedent further developed marine insurance law. In 1906
the Marine Insurance Act codified the previous common law; it is both an extremely thorough and
concise piece of work. Although the title of the Act refers to marine insurance, the general
principles have been applied to all non-life insurance. In the 19th century, Lloyd's and the Institute
of London Underwriters (a grouping of London company insurers) developed between them
standardized clauses for the use of marine insurance, and these have been maintained since. These
are known as the Institute Clauses because the Institute covered the cost of their publication. Out of
marine insurance, grew non-marine insurance and reinsurance. Marine insurance traditionally
formed the majority of business underwritten at Lloyd's. Nowadays, Marine insurance is often
grouped with Aviation and Transit (cargo) risks, and in this form is known by the acronym 'MAT'.

The Marine Insurance Act includes, as a schedule, a standard policy (known as the "SG
form"), which parties were at liberty to use if they wished. Because each term in the policy had
been tested through at least two centuries of judicial precedent, the policy was extremely thorough.
However, it was also expressed in rather archaic terms. In 1991, the London market produced a
new standard policy wording known as the MAR 91 form using the Institute Clauses. The MAR
form is simply a general statement of insurance; the Institute Clauses are used to set out the detail
of the insurance cover. In practice, the policy document usually consists of the MAR form used as a
cover, with the Clauses stapled to the inside. Typically, each clause will be stamped, with the stamp
overlapping both onto the inside cover and to other clauses; this practice is used to avoid the
substitution or removal of clauses.because marine insurance is typically underwritten on a
subscription basis, the MAR form begins: We, the Underwriters, agree to bind ourselves each for
his own part and not one for another [...]. In legal terms, liability under the policy is several and
not joint, i.e., the underwriters are all liable together, but only for their share or proportion of the
risk. If one underwriter should default, the remainder are not liable to pick his share of the claim.
Typically, marine insurance is split between the vessels and the cargo. Insurance of the vessels is
generally known as "Hull and Machinery" (H&M). A more restricted form of cover is "Total Loss
Only" (TLO), generally used as a reinsurance, which only covers the total loss of the vessel and not
any partial loss. Cover may be on either a "voyage" or "time" basis. The "voyage" basis covers
transit between the ports set out in the policy; the "time" basis covers a period, typically one year,
and is more common.

A marine policy typically covered only three-quarter of the insured's liabilities towards third
parties. The typical liabilities arise in respect of collision with another ship, known as "running
down" (collision with a fixed object is a "harbour"), and wreck removal (a wreck may serve to
block a harbour, for example). In the 19th century, shipowners banded together in mutual
underwriting clubs known as Protection and Indemnity Clubs (P&I), to insure the remaining one-
quarter liability amongst themselves. These Clubs are still in existence today and have become the
model for other specialized and noncommercial marine and non-marine mutuals, for example in
relation to oil pollution and nuclear risks. Clubs work on the basis of agreeing to accept a
shipowner as a member and levying an initial "call" (premium). With the fund accumulated,
reinsurance will be purchased; however, if the loss experience is unfavourable one or more
"supplementary calls" may be made. Clubs also typically try to build up reserves, but this puts them
at odds with their mutual status.Because liability regimes vary throughout the world, insurers are
usually careful to limit or exclude American Jones Act liability.

An excess is the amount payable by the insured and is usually expressed as the first amount
falling due, up to a ceiling, in the event of a loss. An excess may or may not be applied. It may be
expressed in either monetary or percentage terms. An excess is typically used to discourage moral
hazard and to remove small claims, which are disproportionately expensive to handle. The term
"excess" signifies the "deductible" or "retention".

A co-insurance, which typically governs non-proportional treaty reinsurance, is an excess

expressed as a proportion of a claim in percentage terms and applied to the entirety of a claim. Co-
insurance is a penalty imposed on the insured by the insurance carrier for under
reporting/declaring/insuring the value of tangible property or business income. The penalty is based
on a percentage stated within the policy and the amount under reported. As an example: a vessel
actually valued at $1,000,000 has an 80% co-insurance clause but is insured for only $750,000.
Since its insured value is less than 80% of its actual value, when it suffers a loss, the insurance
payout will be subject to the under-reporting penalty, the insured will receive 750000/1000000th
(75%) of the claim made less the deductible.

These are both obsolete forms of early reinsurance. Both are technically unlawful, as not
having insurable interest, and so were unenforceable in law. Policies were typically marked P.P.I.
(Policy is Proof of Interest). Their use continued into the 1970s before they were banned by
Lloyd's, the main market, by which time, they had become nothing more than crude bets. A
"tonner" was simply a "policy" setting out the global gross tonnage loss for a year. If that loss was
reached or exceeded, the policy paid out. A "chinaman" applied the same principle but in reverse:
thus, if the limit was not reached, the policy paid out.

MARINE INSURANCE SPECIALIST POLICIES

 Newbuilding risks: This covers the risk of damage to the hull while it is under construction.
 Open Cargo or Shipper’s Interest Insurance: This policy may be purchased by a carrier,
freight broker, or shipper, as coverage for the shipper’s goods. In the event of loss or damage,
this type of insurance will pay for the true value of the shipment, rather than only the legal
amount that the carrier is liable for.
 Yacht Insurance: Insurance of pleasure craft is generally known as "yacht insurance" and
includes liability coverage. Smaller vessels such as yachts and fishing vessels are typically
underwritten on a "binding authority" or "lineslip" basis.
 War risks: General hull insurance does not cover the risks of a vessel sailing into a war zone.
A typical example is the risk to a tanker sailing in the Persian Gulf during theGulf War. The
war risks areas are established by the London-based Joint War Committee, which has recently
moved to include the Malacca Straits as a war risks area due topiracy. If an attack is classified
as a "riot" then it would be covered by war-risk insurers.
 Increased Value (IV): Increased Value cover protects the shipowner against any difference
between the insured value of the vessel and the market value of the vessel.

 Overdue insurance: This is a form of insurance now largely obsolete due to advances in
communications. It was an early form of reinsurance and was bought by an insurer when a ship
was late at arriving at her destination port and there was a risk that she might have been lost
(but, equally, might simply have been delayed). The overdue insurance of the Titanic was
famously underwritten on the doorstep of Lloyd's.
 Cargo insurance: Cargo insurance is underwritten on the Institute Cargo Clauses, with
coverage on an A, B, or C basis, A having the widest cover and C the most restricted. Valuable
cargo is known as specie. Institute Clauses also exist for the insurance of specific types of
cargo, such as frozen food, frozen meat, and particular commodities such as bulk oil, coal,
and jute. Often these insurance conditions are developed for a specific group as is the case with
the Institute Federation of Oils, Seeds and Fats Associations (FOFSA) Trades Clauses which
have been agreed with the Federation of Oils, Seeds and Fats Associations and Institute
Commodity Trades Clauses which are used for the insurance of shipments
of cocoa, coffee, cotton, fats and oils, hides and skins, metals, oil seeds, refined sugar,
and tea and have been agreed with the Federation of Commodity Associations.
SPECIALISED MARINE POLICIES

 Newbuilding risks: This covers the risk of damage to the hull while it is under construction.
 Open Cargo or Shipper’s Interest Insurance: This policy may be purchased by a carrier,
freight broker, or shipper, as coverage for the shipper’s goods. In the event of loss or damage,
this type of insurance will pay for the true value of the shipment, rather than only the legal
amount that the carrier is liable for.
 Yacht Insurance: Insurance of pleasure craft is generally known as "yacht insurance" and
includes liability coverage. Smaller vessels such as yachts and fishing vessels are typically
underwritten on a "binding authority" or "lineslip" basis.
 War risks: General hull insurance does not cover the risks of a vessel sailing into a war zone.
A typical example is the risk to a tanker sailing in the Persian Gulf during theGulf War. The
war risks areas are established by the London-based Joint War Committee, which has recently
moved to include the Malacca Straits as a war risks area due topiracy. If an attack is classified
as a "riot" then it would be covered by war-risk insurers.
 Increased Value (IV): Increased Value cover protects the shipowner against any difference
between the insured value of the vessel and the market value of the vessel.
 Overdue insurance: This is a form of insurance now largely obsolete due to advances in
communications. It was an early form of reinsurance and was bought by an insurer when a ship
was late at arriving at her destination port and there was a risk that she might have been lost
(but, equally, might simply have been delayed). The overdue insurance of the Titanic was
famously underwritten on the doorstep of Lloyd's.
 Cargo insurance: Cargo insurance is underwritten on the Institute Cargo Clauses, with
coverage on an A, B, or C basis, A having the widest cover and C the most restricted. Valuable
cargo is known as specie. Institute Clauses also exist for the insurance of specific types of
cargo, such as frozen food, frozen meat, and particular commodities such as bulk oil, coal,
and jute. Often these insurance conditions are developed for a specific group as is the case with
the Institute Federation of Oils, Seeds and Fats Associations (FOFSA) Trades Clauses which
have been agreed with the Federation of Oils.
 INTRODUCTION OF INSURACNE IN INDIA

The insurance industry of India consists of 53 insurance companies of which 24 are in life
insurance business and 29 are non-life insurers. Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers
there are six public sector insurers. In addition to these, there is sole national re-insurer, namely,
General Insurance Corporation of India (GIC Re). Other stakeholders in Indian Insurance market
include agents (individual and corporate), brokers, surveyors and third party administrators
servicing health insurance claims.
Out of 29 non-life insurance companies, five private sector insurers are registered to underwrite
policies exclusively in health, personal accident and travel insurance segments. They are Star
Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max
Bupa Health Insurance Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK
Health Insurance Company Ltd. There are two more specialised insurers belonging to public sector,
namely, Export Credit Guarantee Corporation of India for Credit Insurance and Agriculture
Insurance Company Ltd for crop insurance.

Market Size
India's life insurance sector is the biggest in the world with about 360 million policies which are
expected to increase at a Compound Annual Growth Rate (CAGR) of 12-15 per cent over the next
five years. The insurance industry plans to hike penetration levels to five per cent by 2020.
The country’s insurance market is expected to quadruple in size over the next 10 years from its
current size of US$ 60 billion. During this period, the life insurance market is slated to cross US$
160 billion.
The general insurance business in India is currently at Rs 78,000 crore (US$ 11.7 billion) premium
per annum industry and is growing at a healthy rate of 17 per cent.
The Indian insurance market is a huge business opportunity waiting to be harnessed. India currently
accounts for less than 1.5 per cent of the world’s total insurance premiums and about 2 per cent of
the world’s life insurance premiums despite being the second most populous nation. The country is
the fifteenth largest insurance market in the world in terms of premium volume, and has the
potential to grow exponentially in the coming years.
Investments
The following are some of the major investments and developments in the Indian insurance sector.
 Foreign Direct Investment in the insurance sector stood at US$ 341 million in March-
September, 2015, showing a growth of 152 per cent compared to the same period last year.
 Insurance firm AIA Group Ltd has decided to increase its stake in Tata AIA Life Insurance
Co Ltd, a joint venture owned by Tata Sons Ltd and AIA Group from 26 per cent to 49 per
cent.
 Canada-based Sun Life Financial Inc plans to increase its stake from 26 per cent to 49 per
cent in Birla Sun Life Insurance Co Ltd, a joint venture with Aditya Birla Nuvo Ltd,
through buying of shares worth Rs 1,664 crore (US$ 249 million).
 Nippon Life Insurance, Japan's second largest life insurance company, has signed definitive
agreements to invest Rs 2,265 crore (US$ 348 million) in order to increase its stake in
Reliance Life Insurance from 26 per cent to 49 per cent.
 The Central Government is planning to launch an all-in-one insurance scheme for farmers
called the Unified Package Insurance Scheme (Bhartiya Krishi Bima Yojana). The proposed
scheme will have various features like crop insurance, health cover, personal accident
insurance, live stock insurance, insurance cover for agriculture implements like tractors and
pump sets, student safety insurance and life insurance.
 Government launched a special enrolment drive, Suraksha Bandhan Drive comprising of
sale of gift cheques and launch of deposit schemes in bank branches, to facilitate enrolment
under Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti
Bima Yojana (PMJJBY).
 To increase the subscriber base and ensure wider reach, the Central Government has eased
several norms for its flagship insurance scheme Atal Pension Yojana (APY),in terms of
more options for periodical contributions, voluntary and premature exits and simplified
penalty for payment delays.
 Bennett Coleman and Co. Ltd (BCCL), the media conglomerate with multiple publications
in several languages across India, is set to buy Religare Enterprises Ltd’s entire 44 per cent
stake in life insurance joint venture Aegon Religare Life Insurance Co. Ltd. The foreign
partner Aegon is set to increase its stake in the joint venture from 26 per cent to 49 per cent,
following government’s reform measure allowing the increase in stake holding by foreign
companies in the insurance sector.
 GIC Re and 11 other non-life insurers have jointly formed the India Nuclear Insurance Pool
with a capacity of Rs 1,500 crore (US$ 226 million) and will provide the risk transfer
mechanism to the operators and suppliers under the CLND Act.
 State Bank of India has announced that BNP Paribas Cardif is keen to increase its stake in
SBI Life Insurance from 26 per cent to 36 per cent. Once the foreign joint venture partner
increases its stake to 36 per cent, SBI’s stake in SBI Life will get diluted to 64 per cent.
 Bangladesh has granted permission to the Life Insurance Corporation of India (LIC) to run
its business, making it the second foreign insurance company to operate in the country.
  Reliance Life Insurance Company (RLIC) today said it will add 20,000 agents across India
in this financial year as part of its expansion plans. It will increase their agency force by 20
per cent which now stands at 100,000.
Government Initiatives
The Government of India has taken a number of initiatives to boost the insurance industry. Some of
them are as follows:
 The Insurance Regulatory and Development Authority (IRDA) of India has formed two
committees to explore and suggest ways to promote e-commerce in the sector in order to
increase insurance penetration and bring financial inclusion.
 IRDA has formulated a draft regulation, IRDAI (Obligations of Insures to Rural and Social
Sectors) Regulations, 2015, in pursuance of the amendments brought about under section 32
B of the Insurance Laws (Amendment) Act, 2015. These regulations impose obligations on
insurers towards providing insurance cover to the rural and economically weaker sections of
the population.
 The Government of India has launched two insurance schemes as announced in Union
Budget 2015-16. The first is Pradhan Mantri Suraksha Bima Yojana (PMSBY), which is a
Personal Accident Insurance Scheme. The second is Pradhan Mantri Jeevan Jyoti Bima
Yojana (PMJJBY), which is the government’s Life Insurance Scheme. Both the schemes
offer basic insurance at minimal rates and can be easily availed of through various
government agencies and private sector outlets.
 The Uttar Pradesh government has launched a first of its kind banking and insurance
services helpline for farmers where individuals can lodge their complaints on a toll free
number.
 The select committee of the Rajya Sabha gave its approval to increase stake of foreign
investors to 49 per cent equity investment in insurance companies.
 Government of India has launched an insurance pool to the tune of Rs 1,500 crore (US$ 226
million) which is mandatory under the Civil Liability for Nuclear Damage Act (CLND) in a
bid to offset financial burden of foreign nuclear suppliers.
Road Ahead
India's insurable population is anticipated to touch 750 million in 2020, with life expectancy
reaching 74 years. Furthermore, life insurance is projected to comprise 35 per cent of total savings
by the end of this decade, as against 26 per cent in 2009-10.
The future looks promising for the life insurance industry with several changes in regulatory
framework which will lead to further change in the way the industry conducts its business and
engages with its customers.
Demographic factors such as growing middle class, young insurable population and growing
awareness of the need for protection and retirement planning will support the growth of Indian life
insurance.

Insurance education

s for insurers. AIGIEA, AIIEA, AIIEF, AILICEF, AILIEA, FLICOA, GIEAIA, GIEU and NFIFWI
cater to the employees of the insurers. In addition, there are a dozen Ombudsman offices to address
client grievances.

Insurance education[edit]

A number of institutions provide specialist education for the insurance industry, these include;

 National Insurance Academy, Pune, specialized in teaching, conducting research and providing
consulting services in the insurance sector. NIA offers a two-year PGDM program in insurance.
NIA was founded as Ministry of Finance initiative with capital support from the then public
insurance companies, both Life (LIC) and Non-Life (GIC, National, Oriental, United & New
India).
 Institute of Insurance and Risk Management, Hyderabad, was established by the regulator
IRDA. The institute offers Postgraduate diploma in Life, General Insurance, Risk Management
and Actuarial Sciences. The institute is a global learning and research center in insurance, risk
management, actuarial sciences. They provide consulting services for the financial industry.
 Amity School of Insurance Banking and Actuarial science (ASIBAS) of Amity University,
located in Noida and established in 2000, offers MBA programs in Insurance, Insurance and
Banking, and M.Sc./B.Sc. actuarial sciences to a Post Graduate Diploma in Actuarial Sciences.
 Pondicherry University is offering mba in insurance management. Pondicherry university is the
only central university which offers insurance management in India.
 Birla Institute of Management Technology is a graduate business school located in Greater
Noida, established in 1988, offers a PGDM-IBM program in insurance business management.
This program was launched in 2000 by the Centre for Insurance and Risk Management and is
accredited by the Insurance Regulatory and Development Authority. Life Office Management
Association (LOMA), USA is BIMTECH's educational partner and BIMTECH is an approved
centre for LOMA examination. The Chartered Insurance Institute (CII), UK has accorded
recognition (by way of credits) to the BIMTECH PGDM-IBM program. Their two-year PGDM
program in insurance business has been recognized as equivalent to the Associate level of
the Insurance Institute of India, Mumbai.
 National Law University, Jodhpur offers a two-year MBA and one year MS (for engineering
graduates) program in insurance.
To become an insurance advisor in India, Insurance Act, 1938 mandates that the individual has to
be "a Major with sound mind". After the advent of IRDA as insurance regulator, it has framed
various regulations, viz. training hours, examination and fees which are amended from time to time.
Since November 2011 IRDA has introduced a syllabus (IC-33) conceived and developed by CII,
London. The syllabus mainly aims to make an Insurance Agent a financial professional. Recent
Initiatives: On 09 th May 2015 NDA Government led by Shri.Narendra Modi initiated three social
Insurance Security schemes named ATAL PENSION YOJANA,PRADHAN MANTHRI JEEVAN
JYOTHI YOJANA, PRADHAN MANTHRI SURAKSHA YOJANA on a massive scale such as 8
crore people joined in these schems in just 03 weeks and still the number growing.

The insurance sector went through a full circle of phases from being unregulated to completely
regulated and then currently being partly deregulated. It is governed by a number of acts.
The Insurance Act of 1938[4] was the first legislation governing all forms of insurance to provide
strict state control over insurance business.Life insurance in India was completely nationalized on
19 January 1956, through the Life Insurance Corporation Act. All 245 insurance companies
operating then in the country were merged into one entity, the Life Insurance Corporation of India.
The General Insurance Business Act of 1972 was enacted to nationalize about 100 general
insurance companies then and subsequently merging them into four companies. All the companies
were amalgamated into National Insurance, New India Assurance, Oriental Insurance and United
India Insurance, which were headquartered in each of the four metropolitan cities.Until 1999, there
were no private insurance companies in India. The government then introduced the Insurance
Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector and
allowing private companies. Furthermore, foreign investment was also allowed and capped at 26%
holding in the Indian insurance companies.
In 2006, the Actuaries Act was passed by parliament to give the profession statutory status on par
with Chartered Accountants, Notaries, Cost & Works Accountants, Advocates, Architects and
Company Secretaries.A minimum capital of US$80 million(Rs.400 Crore) is required by legislation
to set up an insurance business.

Authorities
The primary regulator for insurance in India is the Insurance Regulatory and Development
Authority of India (IRDAI) which was established in 1999 under the government legislation called
the Insurance Regulatory and Development Authority Act, 1999.[5][6]
The industry recognises examinations conducted by IAI (for 280 actuaries), III (for 2.2 million
individual agents, 680 corporate agents, 380 brokers and 29 third-party administrators) and IIISLA
(for 8,200 surveyors and loss assessors). There are 9 licensed Web aggregators. TAC is the sole
data repository for the non-life industry. IBAI gives voice to brokers while GI Council and LI
Council are platforms for insurers. AIGIEA, AIIEA, AIIEF, AILICEF, AILIEA, FLICOA,
GIEAIA, GIEU and NFIFWI cater to the employees of the insurers. In addition, there are a dozen
Ombudsman offices to address client grievances.

IMPORTANCE OF INSURANCE IN INDIA

Insurance is the only sector which garners long term savings

Insurers are increasingly introducing innovative products to meet the specific needs of the
prospective policyholders. An evolving insurance sector is of vital importance for economic
growth. While encouraging savings habit it also provides a safety net to both enterprises and
Individuals.

Insurance Companies receive, without much default, a steady cash stream of premium or
contributions to pension plans. Various actuary studies and models enable them to predict,
relatively accurately, their expected cash outflows.

Liabilities of Insurance companies being long-term or contingent in nature, liquidity is excellent

and their investments are also long-term in nature. Since they offer more than the return on savings
in the shape of life-cover to the investors, the rate of return guaranteed in their insurance policies is
relatively low. Consequently, the need to seek high rates of returns on their investments is also low.
The risk-return trade off is heavily tilted in favour of risk.

As a combined result of all this, investments of insurance companies have been largely in bonds
floated by GOI, PSUs, state governments, local bodies, corporate bodies and mortgages of long
term nature.

Generates Long term funds for infrastructure and strong positive correlation between
development of capital markets and insurance/pension sector

For GDP to grow at 8 to 10%, qualitative improvement in infrastructure is essential. Estimates of

funds required for development of infrastructure vary widely. An investment of 6,19,600 crore is
anticipated in the next 5 years. Tenure of funding required for infrastructure normally ranges from
10 to 20 years. The insurance industry also provides crucial financial intermediary services,
transferring funds from the insured to capital investment, critical for continued economic expansion
and growth, simultaneously generating long-term funds for infrastructure development.
In fact infrastructure investments are ideal for asset-liability matching for life insurance companies
given their long term liability profile. According to preliminary estimates published by the Reserve
Bank of India, contribution of insurance funds to financial savings was 14.2 per cent in 2005-06,
viz., 2.4 per cent of the GDP at current market prices. Development of the insurance sector is thus
necessary to support continued economic transformation. Social security and pension reforms too
benefit from a mature insurance industry.

The insurance sector in India, which was opened up to private participation in the year 1999, has
completed over seven years in a liberalized environment. With an average annual growth of 37 per
cent in the first year premium in the life segment and 15.72 per cent growth in the nonlife segment,
together with the largest number of life insurance policies in force, the potential of the Indian
insurance industry is still large.

Life insurance penetration in India was less than 1 per cent till 1990-91. During the 1990s, it was
between 1 and 2 per cent and from 2001 it was over 2 per cent. In 2005 it had increased to 2.53 per
cent.

Spread of financial services in rural areas and amongst socially less privileged

IRDA Regulations provide certain minimum business to be done

- in rural areas
- in the socially weaker sections

Life Insurance offices are spread over nearly 1400 centres. Presence of representative in every
tehsil – deeper penetration in rural areas.

Insurance agents numbering over 6.24 lakhs in rural areas.

Policies sold in rural areas (2004-05) - No. of policies - 55 lakhs, Sum assured 46,000 crores.
Social security - No. of lives covered 2003-04 17.4 lakhs 2004-05 42.1 lakhs

Insurance has evolved as a process of safeguarding the interest of people from loss and uncertainty.
It may be described as a social device to reduce or eliminate risk of loss to life and property.

Insurance contributes a lot to the general economic growth of the society by provides stability to
the functioning of process. The insurance industries develop financial institutions and reduce
uncertainties by improving financial resources.
1. Provide safety and security:
Insurance provide financial support and reduce uncertainties in business and human life. It provides
safety and security against particular event. There is always a fear of sudden loss. Insurance
provides a cover against any sudden loss. For example, in case of life insurance financial assistance
is provided to the family of the insured on his death. In case of other insurance security is provided
against the loss due to fire, marine, accidents etc.

2. Generates financial resources:

Insurance generate funds by collecting premium. These funds are invested in government securities
and stock. These funds are gainfully employed in industrial development of a country for
generating more funds and utilised for the economic development of the country. Employment
opportunities are increased by big investments leading to capital formation.

3. Life insurance encourages savings:

Insurance does not only protect against risks and uncertainties, but also provides an investment
channel too. Life insurance enables systematic savings due to payment of regular premium. Life
insurance provides a mode of investment. It develops a habit of saving money by paying premium.
The insured get the lump sum amount at the maturity of the contract. Thus life insurance
encourages savings.

4. Promotes economic growth:

Insurance generates significant impact on the economy by mobilizing domestic savings. Insurance
turn accumulated capital into productive investments. Insurance enables to mitigate loss, financial
stability and promotes trade and commerce activities those results into economic growth and
development. Thus, insurance plays a crucial role in sustainable growth of an economy.

5. Medical support:
A medical insurance considered essential in managing risk in health. Anyone can be a victim of
critical illness unexpectedly. And rising medical expense is of great concern. Medical Insurance is
one of the insurance policies that cater for different type of health risks. The insured gets a medical
support in case of medical insurance policy.

6. Spreading of risk:
Insurance facilitates spreading of risk from the insured to the insurer. The basic principle of
insurance is to spread risk among a large number of people. A large number of persons get
insurance policies and pay premium to the insurer. Whenever a loss occurs, it is compensated out of
funds of the insurer.
7. Source of collecting funds:
Large funds are collected by the way of premium. These funds are utilised in the industrial
development of a country, which accelerates the economic growth. Employment opportunities are
increased by such big investments. Thus, insurance has become an important source of capital
formation.

The economic development of India was dominated by socialist –influenced policies, stateowner
sector, and red tape and extensive regulations, collectively known as ‘License Raj’. The Indian
economic development got a boost through its Economic reforms in 1991 and again through its
renewal in the 2000. Insurance serves a number of valuable economic functions that are largely
distinct from other types of financial intermediaries. Insurance contribution materially to economic
growth by improving the investment climate and promoting a more efficient mix of activities then
would be undertaken, in the absence of risk management instrument. Insurance sector in India is
one of the most booming sectors of the economy and is growing at the rate of 15-20 percent per
annum. In India, insurance is a flourishing industry, with several national and international players
competing with each others and growing at rapid rates. Indian insurance companies offer a
comprehensive range of insurance plans, a range that is growing as the economy matures and the
wealth of the middle classes increases. Due to the growing demand for insurance, more and more
companies are now emerging in the Indian insurance sector. The economy of India is the eleventh
largest in the world by nominal GDP and the forth largest by Purchasing Power Parity (PPP).
KEYWORDS: License Raj, Economic reform, financial intermediaries, Investment climate, Risk
management instrument, Comprehensive range, Nominal GDP, PP.
For economic development investments are necessary. Investments are made out of savings. Life
Insurance Company is a major instrument for the mobilization of savings of people, particularly
from the middle and lower group. All good life insurance companies have huge funds accumulated
through the payments of small amounts of premium of individuals. These funds are invested in
ways that contribute substantially for the economic development of the countries in which they do
business The system of insurance provides numerous direct and indirect benefits to the individuals
and his family as well as to industry and commerce and to the community and the nation as a
whole. Present day organization of industry, commerce and trade depend entirely on insurance for
their operation, banks, and financial institutions lend money to industrial and commercial
undertakings only on the basis of the collateral security of insurance.

SCOPE OF THE INSURANCE IN INDIA

Insurance is a nice-looking option for investment but most people are not aware of its advantages as
an investment option. Remember that foremost and first, insurance is about risk cover and
protection. By buying life insurance, you buy peace of mind. Insurance also serves as an excellent
tax saving mechanism. The Government of India has provided tax incentives to life insurance
products in order to facilitate the flow of funds into productive assets
.
The insurance sector has opened up for private insurance companies with the enactment of IRDA
Act, 1999. A large number of companies are competing under both general and life Insurance. The
FDI cap/equity in this sector is 26% and the proposals have to be cleared by Insurance Regulatory
and Development Authority (IRDA) established to protect the interest of holder of Insurance policy
and act as a regulator and facilitator in the industry.

Some of the major players in this sector are LIC, Max New York Life Insurance, Bajaj Allianz,
ICICI Prudential, HDFC Standard Life, Metlife Insurance, Birla Sun Life Insurance, etc
various types of instruments and policies are coming up in the market to attract more clients. Most
of the population of India is not insured, hence there is a lot of scope in this sector and a number of
companies are planning to enter the sector.

Life insurance is a financial cover for a contingency linked with human life, like death, disability,
accident, retirement etc. It provides a definite amount of money in case the life insured dies during
the term of the policy or becomes disabled on account of an accident.138
When a human life is lost or a person is disabled permanently or temporarily there is loss of income
to the household. So everyone who has a family to support and is an income earner needs life
insurance. The idea underlying the concept of life insurance is that ‘when your family members or
dependants depend on you financially: you need to secure their future’. Having your life insured is
akin to promising your family that they won’t ever face a financial problem, whether you are there
or not because your responsibilities do not end with you. It means buying life insurance is like
buying peace of mind for lifetime

Thus, the significance of having a life insurance lies in the “peace of mind” that it brings along.
Apart from this it promotes savings, assist the family in odd situations, gives tax benefits and
facilitates easy loans thereby securing the future of insured. But in order to have 138
http://www.pnbmetlife.com/downloads/policyholderhandbook.pdf. Accessed on 14/10/13 at 8:30
P.M. 58 a financially secured future, you have to pay the insurer a “life insurance premium”, which
is either a regular annual payment or onetime payment as the case may be.

There are several types of insurance plans for specific needs. One of the categories is “traditional
insurance plans” such as term insurance, endowment and many back up plans. Such plans offer
multiple benefits in terms of life cover and returns, providing security and safety to insured. The
other category is market – linked plans, also known as ULIPS. These plans provide both protection
and savings combined with flexibility to the covered person. As these products are linked to capital
markets, they may have the potential to deliver better returns than tradition plans
Life Insurance is the most popular form of Insurance as it transfers the financial risks associated
with your death to an insurance company. General Insurance like fire, marine, property, vehicle etc.
transfer the risk associated with your property to an insurance company so that you don’t have to
pay out of pocket for any property damage covered under the terms of the insurance policy. The
central point of difference between the two is that life insurance is a non-indemnity policy and the
event insured is certain.

At present, life insurance enjoys maximum scope because the life is the most important property of
the society or an individual. Each and every person requires the insurance. This insurance provides
protection to the family at the premature death or gives adequate amount at the old age when
earning capacities are reduced. The insurance is not only a protection but is a sort of investment as
a certain sum is returnable to the insured at the death or at the expiry of a period.

To understand life insurance we have to first understand the scheme of insurance. Insurance is a co-
operative device to spread the loss caused by a particular risk over a number of persons who are
exposed to it and who agree to insure themselves against the risk.4 Under the plan of insurance, a
large number of people associate themselves to share different types of risks attached to human life
and property. The aim of all types of insurance is to make provision against such risks. In other
words, it is a provision which a prudent man makes against inevitable contingencies, loss or
misfortune.5 In this way, life insurance is a social device to share the risk of loss of life.

The whole idea of insurance has developed on the fact that human life is full of uncertainties and
the life of a person itself is very uncertain. Eventualities do cast their shadows, and therefore one
has to equip oneself with possible means so as to face the unforeseen. It is well said that “Life is
full of risks. For property, there are fire risks, for shipment of goods, there are perils of sea, for
human life, there is the risk of death or disability and so on and so forth”.

Life insurance is a husband’s privilege, a wife’s right and a child’s claim.2 The scheme of life
insurance provides an assurance that if such an event happens, the person or his dependents would
get financial assistance to bear the loss

It has been aptly said that life insurance offers the safest and surest means of establishing a
socialistic pattern, perhaps not without a lot of sweat but certainly without blood and tears. It
stabilizes the economic security of the policy holder and at the same time contributes its might to
promotion of industry by providing the necessary capital and supports various social security
measures
 HULL INSURANCE

An insurancepolicy that provides coverage for the physical integrity of a ship. That is, hull marin
e insurance coversthe ship's hull, life boats, railings and so forth. This contrasts with cargo marin
e insurance, which covers goodsmoved onto or off of a ship. As with all insurance, one must pay
a premium to receive the coverage.
Ship-owners’ and steamer companies, whether big or small are verymuch concerned and aware about the
security of their ongoing vessels,fishing vessels sailing vessels trawlers, barges etc. from the perils at seawhich are
increasing at a high rate day by day. The nature of sea, ease ofconnectivity and lack of true
control- creates an environment wheremishaps happen at a very faster rate. As such any discussion of Businessat
Sea is made it !uickly becomes a discussion of security

The securiti"ation of #cean $oing %essels is a serious issue to tacklewith, in a process of

building a self-reliant country, where the technologyto restrict and eradicate the mishaps at sea
will be one of its most valuableasset, due to which high value of monetary losses are incurred by
acountry every year, thus reducing its $&'. (n shorts the main ob)ectivesof this *ull (nsurance are

The policy covers loss/damage to the property insured due to:-

• Fire or explosion; stranding sinking etc.

• Overturning derailment (of land conveyance).

• Collision.

• General average sacrifices salvage charges.

COVERAGE OF HULL INSURANCE
Property damage to an aircraft a business entity owns or operates is excluded under the Insurance
Services Office, Inc. (ISO), commercial general liability (CGL) policy by way of the damage to
property exclusion, which precludes coverage for property damage (PD) to property in the insured's
care, custody, or control (CCC). Thus, many aircraft insurance policies include physical damage or
"hull" coverage. Hull coverage may also be written as a separate policy. Coverage may apply on a
named perils or an open perils/all risks basis. Hull coverage is typically subdivided to address
aircraft while in motion and while not in motion.

Hull coverage is usually subject to a deductible, which varies depending on insurer, the type of
aircraft, and its age. Exclusions applicable to hull coverage include conversion or embezzlement,
wear and tear, mechanical breakdown, electrical failure, and damage to turbine engines caused by
excessive heat from operation or shutdown of the engine. Hull coverage is normally written on a
valued basis, with the value of the aircraft determined at policy inception and the amount listed in
the declarations. If the aircraft incurs a total loss, the insurer pays the scheduled value less the
applicable deductible. If the aircraft incurs a partial loss, the insurer generally will pay no more
than the scheduled value.

NEW INDIA ASSURANCE MARINE HULL POLICY

Highlights
Covers any loss or damage to ships, tankers, bulk carriers, smaller vessels, fishing boats and sailing
vessels.

What is covered?
 All types of Oceangoing vessels
 All type of Coastal/Inland vessels
 Yard and pleasure Crafts
 Port Crafts
 Shipbuilding- construction of vessel
 Ship Repairers' Liabilities
 Charterers Liabilities
 Breaches of warranties / voyage cover
 Freight- at -Risks insurance for voyages
 Dredgers
 Fishing vessels / Trawlers
 Sailing Vessels
 Jetties ( with or without cranes ), fixed pontoons/Pontoons Jetties, wharves etc.
 Shipbreaking
Scope of Insurance Cover:
All risks relating to Vessels, Floating Dry Docks, Jetties and Shipowners' Interests including Hull
& Machinery (H&M), Freight, Disbursements, Increased Value, Premium Reducing, Excess
Liabilities, Protection and Indemnity (P&I) Liabilities, Charterers' Liabilities, Charterers' Freight,
Charterers' Hire and/or Disbursments, General Average Disbursments, Ship Repairers' Liabilities,
Shipbuilding Risks, Shipbreaking Risks and other allied interests of whatsoever nature required to
be insured in India.

Perils / Risks
(A) The policy covers perils of the seas, rivers, lakes or other navigable waters loss/damage to
the property insured caused by:
 Fire, explosion
 Stranding, sinking etc.
 Overturning, derailment ( of land conveyance )
 Violent theft by persons outside the vessel.
 Collision
 General average sacrifice, sacrifice, salvage charges
 Jettisons
 Piracy
 Breakdown of or accident to nuclear installations or reactors
 Contact with aircraft or similar objects, or objects falling therefrom, land conveyance , dock
or harbour equipment or installation.
 Earthquake volcanic eruption or lightning.
 Crew Negligence.
Exclusions
The policy does not cover loss/ damage due to :
 Deliberate damage/destruction of the vessel by wrongful act of any person
 Use of any weapon of war employing atomic / nuclear fission and or fusion.
 Radioactive Contamination, Chemical, Biochemical, Biological, Electromagnetic Weapons.
 Insolvency or financial default of the vessel owner /operators /charterers
 War / civil war, Strike, Riot or Civil Commotion
 Any terrorist or person/s acting with political motive
(B) COMPREHENSIVE PORT PACKAGE POLICIES:
Cover can be purchased by :-
  Port Authorities
 Port / Terminal operators
 Private Jetty Owners
Scope of Comprehensive covers :-
 Physical Damage
 Third Party Liability
 Business Interruption
 Terrorism
 Wreck Removal
 - H & M Cover for Vessels
Exclusions :-
 Confiscation, requisition, detention
 Blocking of sewers, drains
 Wear & Tear, deterioration
 Error in design, workmanship
 Mechanical / Electrical Breakdown
(C) Oil & Energy Risk Insurnace Policies:
 Cover can be purchased by - Oil and Energy Industries.
 Scope of Comprehensive covers -
 Offshore / Onshore constructions / Erections ( Builders Risks )
 Production / Operation Cover - Well head platform/ process platform.
 Exploratory Drilling (Offshore - Jack Up Rigs, Drilling Rigs, Semi Submersibles etc.
Onshore- Fixed Land rigs, Mobile Land Rigs, Work-over Land rigs)
 Seismic Survey
 Single Buoy Mooring ( SBM )
 Under water pipeline / Cable Insurance
Claim Intimation and Steps to be Taken by Owners:
In the event of casualty likely to give rise to a claim
 Immediate notice to policy issuing office.
 Giving brief details as to name of vessel, place of occurrence, date & time of casualty,
circumstances leading to incident.
 Seek appointment of surveyor to inspect and assess loss.
 In case of theft please notify police.
 In case of fire assistance of fire brigade to extinguish fire.
 Appointment of adjuster in case of Oceangoing Vessels where necessary.
  All steps to minimise loss as prudent uninsured.

Documents Essential:
 Certified copy of note of protest by master
 Marine casualty form issued by M.M.D.
 Insured's report on occurrence.
 Survey Report
 Original Repair Bill, cash memo, Invoices
 Weather Report by Meteorological Dept.
 Affidavits filed by rescue vessels
 Certificate of survey for inland vessels
 Registry certificate
 Free board certificate
 Loadline certificate (where applicable )
 Status / copies of Mandatory certificates
 Notarized statements of master and chief engineer of the vessel.
 Log Book extracts (Engine & Deck )
 Crew list with details of competency certificates.
 Copy of Claim bill with supporting documents.
Why New India for the lead mandate?
 Superior Financial Strength - Indian Premium / Overseas Premium / Profit / Net Worth etc.
 M/s. A.M. Best (Europe) have conferred "A" Excellent Rating based on Superior Credit
Position.
 New India has Largest Retention Capacity and Deductible Buy-Back in Indian Hull Market
 Overwhelming Global Presence vis-a-vis Other PSUs / Our London Office can help Liaise
with Brokers & Re-insurers in Placement and Servicing.
 Leader in Non-Life Insurance.
 More Experience of Mega-Policies useful for New India and Placements / Proves High
Level of Market Confidence in our Security and Services.
 Better Day-to-Day Liaisoning with our Head Office being in Mumbai.
 Overseas Operation in 23 Countries.
 SCOPE OF THE POLICY

This policy covers all risks of accidental physical loss of or damage to the Insured Vessel
occurring within the policy period, together with third party liabilities, costs and expenses,
on the terms, conditions, restrictions and exclusions set out below.

1.1.1 Physical loss of or damage cover

subject to the provisions and exclusions of this policy, this policy covers all risks of
accidental physical loss of or damage to:
A/ The insured
Vessel
The Insured Vessel includes the hull, the propulsion and power generation machinery,
equipment, navigation instruments, apparatus, fixture and fittings, installations and
annexes.
The Insured Vessel also includes all stores, provisions, bunkers owned by the Assured
in so far as not sepa- rately insured.
B/ Leased
equipment
This insurance covers all parts, equipment, navigation instruments, apparatus,
installations and annexes, fixture and fittings of the Insured Vessel not owned by the
Assured, but which are both installed on the Insured Vessel and for which the Insured
has contractual liability under a leasing contract or a hire contract.
c/ parts taken off
the vessel
This policy covers parts temporarily taken off the Insured Vessel for a maximum period of
sixty (60) days from the time they have been taken off unless prior notice is given by
the Assured and subject to amended terms and conditions and/or additional premium
as may be required by Insurers.

pollution Hazard clause — subject to the provisions and exclusions of this policy, this
policy covers accidental physical loss of or damage to the Insured Vessel and leased
equipment, even if caused by the decision of a governmental authority, to prevent or
mitigate either a pollution hazard or damage to the environment arising from a risk
insured against.
 The indemnity payable by the Insurers per accident under this Article 1.1.1 shall not
exceed the Agreed Value of the Insured Vessel.

THS collision liability or contact with fixed or floating objects

subject to the provisions and exclusions of this policy, this policy covers third party
liabilities incurred:
a) By the Insured Vessel as a consequence of her collision with a seagoing vessel or
inland craft, or contact with a fixed or floating object or structure;
b) In respect of damage caused by the hawsers, anchors, chains or annexes of the
Insured Vessel while atta- ched to the Insured Vessel or being handled or used in
connection with the operation of the Insured Vessel.
The indemnity payable by the Insurers per accident under this Article 1.1.2 shall not
exceed the Agreed Value of the Insured Vessel.

Cover for salvage, general average, sue and labour, legal costs
subject to the provisions and exclusions of this policy, this policy covers the Insured
Vessel’s contribution to:
a) General
Average;
b) salvage and salvage
charges;
c) sue and labour expenses reasonably incurred to prevent loss of or damage to the
Insured Vessel caused by an insured risk peril or to minimize a loss which would be
recoverable under this policy;
d) Legal costs incurred in respect of above items a), b), c) and in respect of insured
third party liability.
In the paragraph above, legal costs shall mean only such costs as are incurred with Insurers’
prior agreement.
Risks excluded
General exclusions

A/ This policy excludes loss, damage, third p arty liabilities or expenses

in respect of or caused by:

1°) The failure of the Assured to comply at the inception of and throughout the period
of this insurance with all statutory requirements of the insured Vessel’s Flag state
relating to construction, adaptation, condition, fitment, equipment, operation and
manning of the insured Vessel;

2°) Any personal act or omission of the Assured or his onshore senior officers to whom
he has delegated decision-making authority in connection with the insured Vessel,
committed with the intent to cause such damage, or recklessly and with knowledge
that such damage would probably result;

3°) inherent vice or wear and tear;

4°) Removal, destruction, marking or lighting of the wreck of the insured Vessel and
leased equipment and of any cargo or other property on board of the insured Vessel;

5°) Any seizure or arrest of the insured Vessel, including but not limited to any seizure or
arrest related to any security or other financial guarantee;

6°) Blockade running, smuggling, unlawful, prohibited or clandestine trade;

7°) confiscation, sequestration and requisition.

B/ This policy excludes any liability, costs and expenses:

1°) in respect of loss of or damage or loss of use, delay to any other vessel, inland craft,
fixed or floating object or structure or to any other property caused otherwise than
by collision or contact with the insured Vessel.

2°) For any pollution or contamination or threat thereof arising from the escape or
release of pollutant substances from the insured Vessel. This exclusion shall not
extend to the liability of the insured Vessel for the pollution or contamination
sustained by other vessel, craft, object (or any cargoes thereon) with which the
insured Vessel is in collision or contact.
consequently, in no case shall this insurance cover “special compensation” payable
to a salvor under article 14 of the international convention on salvage 1989, to the
extent specified in paragraph 4 of that article or under a scOpic clause or under
any other provision similar in substance or in effect;

This exclusion shall not extend to any sum the Assured shall pay in respect of
salvage remuneration where the skill and efforts of the salvors in preventing or
minimising damage to the environment have been taken into account (as referred to
in article 13 paragraph 1 (b) of the international convention on salvage 1989);

3°) For damage to the environment or Wildlife;

4°) in respect of cargo carried on board the insured Vessel;

5°) For any contractual obligations of the Assured including but not limited to crew
liability and passenger liability;

6°) in respect of loss of life or personal injury.

C/ This policy excludes:

1 °) The cost of replacing or repairing any latent defect. This exclusion shall not extend
to the cost of re- pairing physical loss of or damage to the insured Vessel caused by
such latent defect;

2°) physical loss of or damage to the insured Vessel as a result of cargo being carried,
 with the knowledge of the Assured, in breach of either current regulations or
recognised trade practices;

3°) costs, expenses or any commercial losses whatsoever arising from the normal
trading activity or operation of the insured Vessel;

4°) Loss of income including revenue, earnings, freight, charter or hire, loss arising
from immobilisation of or delay to the insured Vessel;

5°) Loss, costs, expenses and/or delay in any way arising from or related to health
measures, disinfection or quarantine;

6°) Fines, penalties, punitive or exemplary damages.

1.2.2 Radioactive contamination, chemical, biological and

electromagnetic weapons exclusion

in no case shall this policy cover loss, damage, liability, costs or expenses directly or
indirectly caused by or contributed to by or arising from:

– ionising radiations from or contamination by radioactivity from any nuclear fuel or

from any nuclear waste or from the combustion of nuclear fuel;

– The radioactive, toxic, explosive or other hazardous or contaminating properties of any

nuclear installation, reactor or other nuclear assembly or nuclear component thereof;

– Any weapon or device employing atomic or nuclear fission and/or fusion or other like
reaction or radioac- tive force or matter;

– The radioactive, toxic, explosive or other hazardous or contaminating properties of

any radioactive matter. The exclusion in this sub-clause does not extend to radioactive
isotopes, other than nuclear fuel, when such isotopes are being prepared, carried,
stored, or used for commercial, agricultural, medical, scientific or other similar
peaceful purposes;

– Any chemical, biological, bio-chemical, or electromagnetic weapons or device used in

 any act of war, civil war, revolution, rebellion, insurrection or civil strife arising there
from or any hostile act by or against a belligerent power or any act of terrorism.
War Exclusions

Unless otherwise agreed in writing by insurers, in no case shall this policy cover loss,
damage, liability, costs or expenses caused by:

1°) War, civil war, revolution, rebellion, insurrection and civil strife resulting there
from;

2°) Torpedoes, mines and all weapons of war whether derelict or not;

3°) capture, taking at sea, arrest, seizure, restraint or detainment by any government
or other authority;

4°) confiscation or expropriation by any government or other authority;

5°) Riots, civil commotions, strikes, lockouts and other similar labour disturbances;

6°) piracy;

7°) malicious acts or vandalism in each case of a political motive or related to war;

8°) Acts of sabotage or terrorism in each case of a political motive or related to war.

Definition of the Agreed Value

The Agreed Value is the value of the Insured Vessel agreed between the Assured and
Insurers at the time of inception of the contract for the amount specified in the particular
conditions.

The Agreed Value of the Insured Vessel shall be conclusive as between the Assured and
the Insurers, save in the case of fraud.

This Agreed Value includes jointly the Insured Vessel and leased equipment, if any, in
accordance with Article
Insurers total limit of liability

The total limit of liability of the Insurers for all covers granted under this policy is limited
per accident to an aggregate total of three times the Agreed Value.

Time and place of the insurance

Period of insurance
This policy provides cover for a period of twelve months from the date and time of
inception specified in the
Particular Conditions or for any other period which may be
agreed by Insurers.
Continuation of insurance
If, at the expiry of this policy the Insured Vessel
is either:
– on a voyage and suffers physical damage caused by an
insured risk;
Navigation and mooring

The Insured Vessel is covered under this policy whether in use, moored, laid up, under repair,
whether floating, onshore or in dry dock.

Towage, salvage and transhipment

subject to prior agreement of the Insurers, who are entitled to require appropriate
precautionary measures to be taken and/or amended terms and conditions and/or
additional premium as a condition of coverage, the Insured Vessel remains covered under
this policy when she is in tow or when effecting towage or transhipment outside her normal
commercial operations.

Prior agreement of the Insurers is not required when the vessel is in need of assistance or is
rendering salvage services to any vessel requesting such services or is in tow in any port, in
the roads, in rivers or canals.

Insurers are liable for physical loss of or damage to the Insured Vessel arising during
salvage operations but may claim from the Assured any sums the Assured has recovered for
such loss or damage from salvors or any other third party.
Lay up

Unless otherwise specifically agreed by Insurers with the additional clause “Lay up” there
shall be no return of premium for lay up.

Navigating limits

Except with the prior agreement of the Insurers who are entitled to require appropriate
precautionary measures to be taken, and/or amended terms and conditions, and/or
additional premium as a condition of coverage, there is no cover under this policy whilst the
Insured Vessel is sailing, moored or laid up within the areas defined below, except when the
Insured Vessel is obliged to enter by force majeure or to render salvage services to another
vessel in distress:
GENERAL PROvISIONS

Duties of the Assured

The Assured undertakes to comply with the following duties when applicable. Any failure to
comply with any of these duties shall entitle the insurers to cancel this policy by fourteen (14)
days notice in writing.

Classification of the vessel

A/ The Assured
undertakes:
a) That the Insured Vessel shall be classed with a Classification society agreed by the
Insurers at inception and shall be maintained in class throughout the entire duration of this
policy and any extension thereof Any change of Classification society is subject to prior
written agreement of the Insurers.
b) To comply with any recommendations, requirements or restrictions imposed by the
Classification society which relate to the seaworthiness of the Insured Vessel by the dates
required by that society.
B/ After setting out his reasons, the Leading Insurer on this policy shall be entitled to obtain a
written authoriza- tion from the Assured or from his duly authorized representative and, with
that authorization, shall be entitled to request from the Vessel’s Classification society to
consult the vessel’s classification file.

ISM Certification
The Assured undertakes at the inception and throughout the entire duration of this policy and
any extension thereof:
A/ That the Insured Vessel holds a valid safety management Certificate as required by
the International Convention for the safety of Life at sea (sOLAs) 1974 as amended and
any modification thereof, esta- blishing the International safety management Code (Ism
Code); and

B/ That the owner of the Insured Vessel or any other organisation or person assuming
responsibility for the ope- ration of the Insured Vessel on behalf of the owner holds a valid
Document of Compliance, as required by the International Convention for the safety of Life
at sea (sOLAs) 1974 as amended and any modification thereof, establishing the
International safety management Code (Ism Code).
ISPS Certification
The Assured undertakes at the inception and throughout the entire duration of this policy and
any extension thereof that he or the party assuming responsibility for operation of the Insured
Vessel shall hold a valid Interna- tional ship security Certificate in respect of the Insured Vessel
as required by the International Convention for the safety of Life at sea (sOLAs) 1974 as
amended and any modification thereof.

Sanctions
in addition to the right of cancellation set out at Article 2.1 above, in the event of breach
by the Assured of any of the duties set out in Article 2.1, the insurers shall not be liable for
any loss, damage, liability or expense as from the date of the breach whether such loss,
damage, liability or expense is attributable to the breach or not.

Disclosure

Disclosure of risks on concluding the contract of insurance

The Assured must disclose, on concluding
this policy:
Where the Assured proves that misrepresentation or non disclosure at the time of
concluding this policy was made in good faith, the Insurers shall be liable to pay a
proportionately reduced indemnity, calculated in proportion to the premium that was paid
as compared to the premium that should have been paid had the correct information been
disclosed, unless the Insurers can prove that if they had known of the true facts not
disclosed or misrepresented they would not, in any event, have agreed to underwrite this
policy. In the latter case the Insurers shall be entitled to declare this policy shall be null and
void from inception, as if the policy had never existed.

Any fraudulent misrepresentation or non-disclosure by the Assured which adversely

affects the Insurers’ as- sessment of the risk shall entitle the Insurers to declare this policy null
and void from inception, as if the policy had never existed.

The premium shall not be refunded in case of fraud by

the Assured.
2.2.2 Disclosure during the period of cover

The Assured must disclose to the Insurers within fourteen (14) days from the date on which the
Assured became aware of it any change in the facts and circumstances disclosed or
represented on concluding this policy or in the subject-matter insured that leads to a
substantial alteration of the risk.

a) When such declaration is made the following

shall apply:

Where the alteration in the risk has not been caused by the Assured, this policy shall
remain in full force and effect, provided the Assured pays an additional premium
corresponding to the alteration in risk, as agreed by the Insurers.

Where the alteration in the risk has been caused by the Assured, the Insurers shall be
entitled to either:

– Terminate this policy by notice in writing within fourteen (14) days from the date on
which they became aware of the change (in which case the premium shall not be
refunded), or

– Require the payment of an additional premium corresponding to the alteration in

risk, as fixed by the
Insurers.

b) When such declaration of the Assured is not made within 14 days the
following shall apply:

Where the Assured proves his good faith, the Insurers shall be liable to pay a
proportionately reduced indemnity, calculated in proportion to the premium that was
paid as compared to the premium that should have been paid had the correct
information been disclosed, unless the Insurers can prove that if they
 had known of the true facts not disclosed or misrepresented they would not, in any event,
have agreed to underwrite this policy. In the latter case the Insurers shall be entitled to
terminate the contract at time of the alteration of the risk.

Where the Assured does not prove his good faith, the contract is automatically terminated
at time of the alteration of the risk.

c) The Assured must disclose to the Insurers any new marine mortgage registered in respect
of the Insured Vessel during the currency of this policy. Any failure to comply with this
obligation shall entitle the Insurers to declare the insurance contract null and void from
inception as if the policy had never existed.

Premiums

The Assured must pay the premium to the Insurers on the terms and at the time and place agreed
in the Particular
Conditions.

Premium payment provisions

A/ Unless otherwise agreed, premium is payable thirty (30) days after the date of inception of this
policy. If this policy is taken out for twelve months, the Assured may – if agreed by the Insurers
before inception – pay the premium in four quarterly instalments, as follows:

– 30 days after
inception;

– 3 months after
inception;

– 6 months after
inception;

– 9 months after
inception.
 B/ Premium for the whole period of cover is due in case of actual total loss or constructive total
loss recoverable under this policy. If actual total loss or constructive total loss is not so
recoverable, premium is due in propor- tion to the period on risk until total loss or notice of
abandonment has been declared to Insurers, but subject always to a minimum payment of a
three-month premium.

c/ Any taxes, fees and duties on premium shall be payable by the Assured. such amounts are
payable in full in all cases, when due, and without any deduction.

Sanctions for non-payment of premium

A/ if the Assured fails to pay the premium or any of the instalments of premium by the due
date the insurers shall be entitled to choose either to suspend the cover under this policy or
to require its cancellation.

such suspension or cancellation will only take effect upon the Insurers giving fourteen (14)
days notice in writing sent to the Assured’s latest address known to the Insurers as endorsed
on this policy.

In case of suspension, the policy shall be automatically reinstated at 00.00 hours GmT on
the day after the payment of the overdue premium.

insurers shall have no liability whatsoever under this policy during the period when cover
is suspended, but shall retain during that period their full rights against the Assured as to
performance of the Assured’s duties set out in this policy. in particular, insurers shall retain
their right to receive payment of premium in full.

B/ The suspension or cancellation of this policy for non-payment of the premium (in full or in
part) shall have no effect as against any third parties acting in good faith and who are
beneficiaries under this policy by virtue of any transfer or assignment of rights which has
taken place prior to issuance by the Insurers of such notice of suspension or cancellation, but
only where such transfer or assignment of rights has been endorsed on this policy.
Set off of premium and indemnities for claims

Any outstanding premium or instalment of premium due under this policy shall be set off against
any claim to be paid due to an accident covered under this policy.

Preservation of recovery rights

– Preserve all rights of recovery against

third parties;

– Notify the Insurers as soon as he is aware of any terms and conditions which either
exclude or limit the
Assured’s rights against shipyards.
In the latter case Insurers shall be entitled to require an additional premium and/or
deductible. Notwithstanding the above, the Insurers shall agree to be bound by any
partial or total waivers of rights of
recovery by the Assured against third parties, when such waivers arise from the standard
general contractual conditions of the said third parties.

If the Assured fails to comply with the duties set out above the Insurers shall be entitled to pay
a proportionately reduced indemnity, unless the Insurers agree to the contrary.

Preventive and mitigation measures

The Assured must take all reasonable care to ensure the safety of the Insured Vessel and must
take all reasonable measures to safeguard the Insured Vessel from an insured risk or to
minimise the consequences of such a risk.

In case of failure to comply with these duties, Insurers may intervene and take such measures
as they deem ne- cessary. Any such intervention shall be entirely without prejudice to, and
without admission of, Insurer’s liability for both the consequence of such intervention and
liability under this policy.

Where the Assured has failed to comply with his duties under this Article 2.5 the insurers
shall be entitled to proportionately reduce the indemnity otherwise payable under this
policy.
Avoidance, cancellation or termination of the policy

in addition to other terms and conditions set out in

this policy:

A/ Any insurance taken out after an accident involving the insured Vessel shall be void
from inception if it is proved that news of the accident had in any way reached the
head office or operational offices of the Assured or of the insurers, even unbeknown to
them, unless the Assured can prove his good faith.

B/ Where any insurer’s authorization to underwrite insurance risks is revoked by the

authorities, the liability of such insurer under this policy will cease in accordance with
articles L 326-12 and R 326-1 of the code des Assurances.

c/ The policy may be cancelled by mutual agreement before expiry of the period of
insurance. in these circumstances the Assured shall be entitled to a proportionate return
of premium. However the minimum premium payable in such circumstances shall never
be less than half the premium due for the full period of insurance.

D/ if the insured Vessel is sold or chartered on a bareboat basis, or if more than 50% of
the shares in the insured Vessel or in the registered owning company are sold, this
policy will terminate automatically on the date of the delivery of the vessel under sale or
bareboat charter, or on the transfer date of the shares, unless the insurers agree in
writing to the contrary. However, if the vessel is chartered other than on a bareboat
basis, this policy will continue in full force and effect.

e/ except with prior agreement of the insurers, this policy will terminate automatically
where there is any change:

– Of technical managing company as from the date of transfer of the insured Vessel to
the new manage- ment company;

– in flag as from the date of such change in flag.

in case of cancellation or termination of this policy under clauses D and e above the
Assured shall be entitled to a proportionate return Of premium.
FINDINGS

Whether the provision on the definition of ship grounding provided in the Interpretation of Hull
Insurance Clause for Coastal and Inland Navigation Vessel will bind the insured.

The Interpretation of Hull Insurance Clause for Coastal and Inland Navigation Vessel is not an
administrative rule andis not intended to be a rule of universal application

The Interpretation of Hull Insurance Clause for Coastal and Inland Navigation Vessel is not a
component of an insurance contract and it shall not be binding on the insured.

Whether the claim can be rejected on the basis that the cause of ship grounding is an
independent incident.

CONCLUSION

The Interpretation of Hull Insurance Clause for Coastal and Inland Navigation Vessel is neither
an administrative rule nor a component of the insurance contract; therefore, it shall not be
binding on the insured. The insurer may not determine a ship grounding incident in accordance
with the definition of grounding in Interpretation of Hull Insurance Clause for Coastal and
Inland Navigation Vessel, instead, it shall interpret the grounding in accordance with common
sense. The reason why ship grounding is within the scope of the coverage of Hull Insurance
Clause for Coastal and Inland Navigation Vessel is because that ship grounding is insured as an
independent cause and its definition and cause are not limited. Ship grounding accident cannot
be denied by insurance company for the reason that the cause of the ship grounding is not an
independent incident. Any loss arising out of ship grounding shall be covered in the scope of
compensation.