RISK MANAGEMENT

&
MARINE INSURANCE
 FREIGHT INSURANCE
Insurance for indemnifying the policyholder against
loss of the freight money if the ship owner cannot
complete his contract of carriage because of
unavoidable peril
The insurance provides “reimbursement of losses”
sustained by insured due to physical loss or damage to
the consignment during transit
It should always be remembered that the losses are
reimbursable provided they fall within the “covered
losses” and are not “excluded” by the policy T&C
 WHY NEEDED?
There are some reasons that classify the reasons of
needing a freight insurance:

Reduce exposure to financial loss

General average- expedite the release of cargo
Contractual requirement
Coverage for limited carrier liability
Having more control over insuring terms
 TYPES
 LAND CARGO INSURANCE:
This provides coverage for all land transportations.
It is domestic means can be operated within the
boundaries of nation only.
Covers theft, collusion damages and other related risks.
 MARINE CARGO INSURANCE:
It is a sub-branch of marine insurance dealing with cargo
loss and is categorized into parts-
Total Loss
Average Loss
 TOTAL LOSS
Classified as:
 ACTUAL LOSS
 Occur when cargo is physically destroyed such that there is
no possibility of salvage/ recovery
 The insured cargo is damaged that it ceases to be a thing or
description insured.
 The cargo is irretrievably lost.

 CONSTRUCTIVE LOSS
 Takes place when the cargo is damaged to such an extent
that the cost of saving and repairing or reconditioning of
goods is more than value of the goods
 AVERAGE LOSS
Average means loss and damage and costs resulting there from, which
may arise through any unfortunate event during maritime transport.
 GENERAL AVERAGE
 Intentional act or damage/ losses resulting from a voluntary sacrifice of
part of ship or cargo to save the whole in an emergency.
 First each party contributes to loss proportionate to their share in total
cargo value & ship, later claim from insurer

 PARTICULAR AVERAGE
 Occurs in a course of action to prevent initial or additional harm to
them
 Party has to bear their loss individually and claim from its insurer
based on value of cargo lost/ damaged but in proportion to amount of
insurance taken
 POLICIES
 OPEN COVER CARGO POLICIES:
This policy is for the insurance holders those who opt for
coverage for various consignments
This is segmented in:
 Renewable policy- required for particular value requiring
renewal after policy expiration which covers single trip
or voyages.
 Permanent policy- drawn up for a decided time
permitting countless shipments in that period
 SPECIFIC CARGO POLICIES:
When a company approaches an insurance company or
broker for insuring a particular consignment, it falls under
this policy
This can be also termed as voyage policies as only
shipments are covered under this

 CONTINGENCY INSURANCE POLICY:

Contingent cargo covers goods in vehicles that are the legal
liability of insured's (usually freight brokers) and their
carriers.
“Contingent” means it is not primary coverage and will
only kick in if the carrier’s general cargo policy doesn’t pay
out (because of policy cancellation, insufficient limits, loss
or damage exclusions, etc.).
 INSURANCE COVERAGES
 FREIGHT AT RISK
 This provides extensive protection against damage or loss
due to external factors.
• The aspects included in •The aspects excluded from
policy policy

Damages due to Damage to cargo as result of

inappropriate packing negligence
Infestation Inherent vice
Cargo abandonment WSRCC (war, strikes, riots &
Customs rejection civil commotions)
Employees dishonesty Loss of use/ market
Failure to pay/ collect
 FREE OF PARTICULAR AVERAGE (FPA):
Also known as a Named Peril policy, lists exactly what is
covered by the policy.
Usually, theft is not covered by this policy
Covers collision, stranding, burning, sinking, train
derailment, truck overturning, and some acts of God.

SHIPMENT-BY-SHIPMENT:
Insurance coverage through the carrier who is
shipping the goods.
There may be certain exclusions such as defects in
the transportation vessel, criminal acts on the part
of the vessel’s crew, acts of God, and acts of war.
 MARINE CARGO POLICY
Globally, there are three types of cargo policy differing in
scope of cover depending on the Institute Cargo Clauses
(ICC) attached to them.
There are three basic (principal) clauses, viz., ICC-A, ICC-
B, and ICC-C.
These clauses depict the different perils i.e. causes of
loss covered under them.
All these clauses are also subject to various “exclusions”
more or less common to them all.
 SCOPE OF COVER ICC-C
 The policy covers loss or damage to the property insured on
account of the following perils:
 Fire, Explosion
 Sinking, Stranding, Grounding of the vessel
 Overturning of Land conveyance
 General Average
 Salvage Charges
 Liability under the BTBC clause of B/L

 SCOPE OF COVER ICC-A

• All risks of physical loss or damage except loss or damaged
caused by the excluded perils
SCOPE OF COVER ICC-B
• Risks covered: all perils of clause icc-c;
• Plus earthquake, volcanic eruption, lightning
• washing overboard entry of sea, lake, river water into
the ship, conveyance, or place of storage
• sling loss
 OPEN POLICY/ COVER
Marine cargo insurance that provides blanket cover
against loss or damage to all goods transported by a
specific carrier, or by a specific shipper, during a
stated period.
Under its terms, the insured is required to periodically
provide the insurer with the description, quantity, and
value of goods shipped during that period.
Also called as open cover.
 COVER NOTE
A cover note is a temporary document issued by an
insurance company that provides proof of insurance
coverage until a final insurance policy can be issued.
During this time, the insurer may continue to evaluate
the risks associated with insuring the holder of the
cover note.
The cover note will continue to serve as the insured’s
proof that he or she has purchased coverage until the
insurer issues the policy documents and certificate of
insurance or else denies issuing the policy
 K YO U… .! !
THAN