A contract of Marine Insurance is a contract whereby the Insurer undertakes to indemnify the assured against losses incident to Marine Cargo adventure. There are a number of different policies available and it would depend upon the nature and frequency of shipments as to which was most suitable for you and your business.
Cover is continuous for all shipments/transits within the agreed scope of the policy. A ‘minimum and deposit is calculated and charged at inception based upon the estimated sendings provided by the client. On expiry of the policy, the actual sending’s are declared premium is adjusted accordingly. The advantages of an annual policy include reduced administration, which can result in cheaper premiums and cover is tailor made for the client with no requirement to declare prior to shipment unless goods are outside the agreed parameters.
OPEN COVER POLICIES
Open cover policies are permanent policies without a renewal date and are reviewed on their anniversary date. This type of policy offers permanent cover and there is no minimum premium to be paid, however, the administration is greatly increased and there would be monthly debiting and calculation of premium. Again the insured must also notify the insurers if there are any changes or the sum insured exceeds the maximum policy limit.
This type of policy is more suited to those businesses that rarely import or export and issued for one particular shipment. The premium is paid in full as and when cover is required however, there is no automatic cover and the insured is wholly responsible for ensuring that the goods are covered prior to shipment. Often this type of policy will have a higher level of premium.
STOCK THROUGHPUT POLICIES
A Stock Throughput Policy is a combination of marine transit, all risks policy and a stock policy and is intended to provide continuation and consistency of cover. Like Marine policies they are tailored to the Insured’s specific business requirements and ensures there are no gaps in cover and little change in cover conditions. The administration is also greatly reduced.
In order to provide a quotation, Underwriters would require an estimated value of goods sent to and from each territory and the maximum limit for any one consignment. Underwriters would also consider the type of cargo being carried, how it is packed, the voyage being undertaken and the method of transport.
They would also need to know the terms of sale; Ex Works, Free on Board (FOB) or Cost, Insurance and Freight (CIF). Ex Works policies provide cover for the goods for the entire journey once they leave the sellers premises.
Free on Board policies are utilised where the seller is responsible for the goods until they are ‘over the ships rails’ where responsibility then shifts to the buyer. Cost, Insurance and Freight policies are used when goods are sold on a CIF basis and the seller needs to arrange full insurance on a ‘warehouse to warehouse’ basis.
In cargo Insurance there is a choice of clauses applicable. Institute Cargo Clause A covers ‘all risks’, Clause B covers only a range of specified perils including fire, explosion, stranded or sunk vessel, collision, forsaking of cargo at a location other its destination in the event of an emergency, washing overboard and entry of seawater. Clause C is narrower still and does not insured the last two eventualities.
There are over 150 other Institute Clauses and many of these are tailored to meet the needs of specific trades. A full list of clauses can be found in your policy documentation.
As with any insurance policy there are exclusions and we have highlighted some of these below for you. A full list of exclusions will be noted on your schedule.
- Insufficient or unsuitable packing.
- Inherent Vice of the subject matter.
- Ordinary leakage, loss in weight or wear and tear.
- Loss, damage or expense caused by delay.
- Wilful misconduct of the assured.
- Financial default of the owners, managers or charterers of the vessel.
- Atomic, nuclear or radioactive force.
- Unseaworthiness of the vessel.
War, Strikes, riots, civil commotions and terrorism are also specifically excluded although cover is subsequently added back in by the inclusion of the Institute War & Strikes Clauses in the policy.
INSTITUTE WAR CLAUSES
- Provides cover for loss or damage caused by:
- War, civil war or hostile act by a belligerent power.
- Capture, seizure, arrest or detainment arising from the above.
- Derelict mines, torpedoes, bombs or other derelict weapons of war.
- General average and salvage charges. Whilst cargo is waterborne or airborne only.
INSTITUTE STRIKES CLAUSES
- Provides cover for loss or damage caused by:
- Strikers, locked out workmen, labour disturbances, riots or civil commotion.
- Any terrorist or person acting from a political motive.
- Terrorism cover is only provided ‘in the normal course of transit’.