DEPARTEMENT OF MARKETING MANAGEMENT

COURSE TITLE: RISK MANAGEMENT

ASSIGNMENT ON: MARINE INSURANCE

GROUP MEMBERS ID NO

HENOCK MULUGETA 74669R

HENOK AGERNEH 74664R

EYOSIAS

KATIM

EMAN

SUBMITTED TO : DATE : 13/8/2021

pg. 1
Contents
SECTION 1: INTRODUCTION.........................................................................................................................3
SECTION 2: The various types of sales contracts:........................................................................................4
SECTION 3: Scope of Marine insurance.......................................................................................................4
SECTION 4: Importance or significance of marine insurance.......................................................................6
SECTION 5: Types of Marine Insurance policies...........................................................................................7
SECTION 6: Different features of a Marine Insurance Policy.......................................................................9
SECTION 7: Documents for Marine Insurance Claim.................................................................................10
SECTION 8: Principles of Marine Insurance:..............................................................................................11
SECTION 9: Marine Policy Conditions........................................................................................................12

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SECTION 1: INTRODUCTION
What is Marine Insurance?
Marine Insurance is a type of insurance that covers cargo losses or damage caused
to ships, cargo vessels, terminals, and any transport in which goods are transferred
or acquired between different points of origin and their destination. Providing
protection against transport-related losses, this voyage policy provides a haven for
shipping companies and couriers because it protects them from costly potential
losses while transporting goods by water.
Despite following laws and safety regulations, transporters can’t control natural
occurrences that might disrupt the cargo or vessel. Things like weather hazards,
encounters with pirates, and cross border conflicts are very common in water
transportation and the damages associated with these situations can cause a
significant financial hardship for ship owners. This is where a marine insurance
policy comes to the rescue, protecting the interests of shipping corporations and
transporters by providing them with insurance coverage needed to defend against
possible losses.
Another great feature of marine insurance is that transporters can choose coverage
options applicable to their specific trade. Coverage requirements can differ, so
shipping businesses can choose an insurance plan that is customized. Different
policies are available to provide coverage according to the size of the ship and
routes taken. It also refers to where the insurer compensates the insured when the
latter suffers from financial loss from marine perils against the premium paid by
the insured to the insurer. It covers the loss of ship or the vessel as well as the
goods or cargos which are being transported by land, air, or water. Marine
Insurance is the oldest form of Insurance; it originated in 1347 in the form of
Bottomry and was legally regulated in 1369. Under bottomry policy the ship is
protected from financial loss of his ship was destroyed. It had its origin in Roman
and Greek Time and was developed in England in late 1600’s when England
became an important port of Trade. Lloyd’s Coffee House in England was where
the standardization of clauses of took place and laid the foundation of Maritime
Insurance Market and giving it a legal identity. With globalization and
liberalization in today’s time and movement of goods across nations, the
importance of Marine Insurance has increased manifold. It provides protection to
the various members and intermediaries involved in export and import of goods.

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A contract of marine insurance may, by its express terms, or by usage of trade, be
extended to protect the assured against losses on inland waters or on any land risk,
which may be incidental to any sea voyage.
They are various types of sale of contract between the buyer and the seller in case
of trade. It depends on the nature of the sale contract, who is responsible for the
purchasing the Insurance contract.

SECTION 2: The various types of sales contracts:

Free on Board (F.O.B): It refers to when the seller of the goods is responsible for
the goods till, they are boarded on the vessel on seller’s port and thereafter the
responsibility lies with the buyer for shipping the goods to his place. The buyer
will be the insured here.
Cost Insurance and Freight (C.I.F): In this the invoice generated by the buyer
includes freight charges i.e. shipping goods to the buyer’s port as well as insurance
cost for goods in transit. The seller here does not have responsibility to transport
goods from buyer’s country port to the buyer’s address. The seller will be the
insured here.
Cost and Freight (C.F): In this, the invoice includes freight charges and no
insurance cost. The Marine Insurance is purchased by the buyer in this case.
Free on Rail (F.O.R): This is similar as free on board, but the difference is that it
is applicable for internal trade only and not international trade.

SECTION 3: Scope of Marine insurance

Marine Insurance covers the following:
1. Cargo insurance: The word cargo refers to goods and merchandise which are in
transit by sea, road, rail, or air. While in transit, there is risk of goods (raw
materials, finished goods, equipment’s, wares) being damaged and thus the need
for marine cargo insurance to indemnify the shippers against the financial loss
caused due to damage to the cargo. It includes:
Inland Transport by country craft

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Import and export of goods by ocean through all type of vessels
Consignments by air, rail, or road
Goods send by Post
Trans shipments
The coverage provided under this policy is defined by the Institute of London
Underwriters and are standardized in the international market into three clauses
which are:

Clause A: All risk Institute Cargo

Clause B: Basic Cover Institute Cargo
Clause C: Fire and Lightening Institute Cargo It has coverage of loss or damage
caused by war, strikes, riots, capture, fire, storms, earthquake, accident, lightening
and any other which is specified in the policy

2. Hull marine insurance: In this type of marine insurance, the subject matter is
the vessel and its equipment. The insurer compensates the insured in case the latter
suffers financial loss due to damage or destruction of the vessel or its equipment. It
covers various types of vessels such as jetties, trawlers, sailing vessels, dredgers,
and port crafts, ocean steamers, offshore vessels and even ship builders and
repairers. The policy covers risk caused due to fire, collision, sinking, overturning,
crew negligence, earthquake, floods, piracy, and violent thefts. It does not cover
risks due to radioactive damage, war, terrorist’s activities, deliberate damage, and
insolvency of the ship owner.
3. Freight insurance: It provides protection to vessel owner in case of non-
payment of freight charges due to loss of the cargo. The freight charges are paid to
ship owners for transporting the goods and merchandise safely. In case of payment
of freight charges on delivery, the vessel owner faces the risk in the event cargo is
damaged. Thus, here the vessel owner has insurable interest and purchases freight
insurance to cover the risk. It is done on a time basis; certain freight amount of
freight is insured for a 12-month period.

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4. Liability insurance: It is an insurance policy provided to the insured to cover
his liabilities against the third-party contingent to marine accidents or adventures.
It will cover accidental loss of property of the third person as well as the fatal or
non-fatal injury to the third party. It can be of two forms:
Cross Liabilities: Where both the vessels are to be blamed for the accident and are
required to pay each other for the damages caused by them to the other.
Single Liabilities: It is only a liability on the part of the vessel under lesser
damages to that with the greater.

SECTION 4: Importance or significance of marine

insurance.

1. Marine insurance facilitates global trade

The volume of trade through the sea have tremendously increased, and so has the
risk of loss at the sea. Therefore, marine insurance plays significant role in
facilitating the global trade by minimizing the risk thereof.

2. Marine insurance ensures economic property

The volume of marine insurance business is an indicator of the economic
prosperity of a country. There is a close link between a sound marine insurance
market and industrial development.
3. Marine insurance provides peace of mind
Marine insurance provides peace of mind to the businessmen by meeting their
financial losses from marine risks. It helps to reduce tension and fear, and takes
away anxiety from the businessmen and managers who are in the international
business. As a result, they are able to operate their business without any tension,
fear, anxiety.

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4. Marine insurance improves quality of life
Marine insurance helps control losses that may arise from the marine risks.
Therefore, people are encouraged to engage more in international business. This
means more investments, more jobs, more production, more income and more
consumption of goods and services which help to improve the people's quality of
life.
5. Marine insurance provides social benefits
Marine insurance helps businessmen to recover funds from a loss. This keeps the
business going, jobs are not lost, and goods and services continue to be sold. The
social benefit of this are that people do not lose their jobs and their sources of
income are intact. This contributes to the unhindered growth of the national
economy.

SECTION 5: Types of Marine Insurance policies

The various types of marine Insurance policies being offered by the Insurance
Companies and some of them are explained below:
1. Voyage policy: It refers to policy issued for a specific passage from departure
location to the destination location. It is applicable where subject matter is the
cargo. Here, the risk arises when the ship leaves the departure port and covers the
cargo even when it is located at intermediate places. Ex. A voyage policy from
Bombay port to Hong Kong port.
2. Time policy: As the name implies, the subject matter is covered for a specific
period which is usually one year. In the case where time must be extended more
than one year, a Continuation clause is to be added in the contract. It is applicable
in case of hull insurance where the vessel is insured while it is navigating, or it is
being constructed. The vessel can follow any course it wants. They are standard
clauses with respect to freight and premium which are added on to this policy. Ex.
A time policy from 1st Jan 2016 to 1st Jan,2017.
3. Mixed policy: It is hybrid of Voyage and Time policy where the insurance
policy covers risk during a particular voyage for a specified time. It is more
applicable in case of cargos.
4. Unvalued policy: It refers to that policy where the value of the subject matter is
not mentioned in the contract. The compensation is paid after ascertaining the

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value of the loss, where the method to determine the loss is already pre decided
and mentioned in the contract. The value so determined after loss is known as
Insurable value or valuable. This policy is also known as open policy.
5. Valued policy: It is reverse of the unvalued policy, here the worth of the subject
matter is ascertained and thus the value of loss to be indemnified is pre decided
between the insured and the insurer while making the contract and it does not
change. The value here is refer as insured value or agreed value and it may not be
the actual value to be indemnified.
6. Floating policy: This policy is useful for those who have frequent cargos to
transport or are involved in large scale trade activities. In this policy only the
general terms and policy coverage amount are specified and other details such as
ship name can be subsequently declared. The declaration is made when the order is
dispatched on the vessel. The sum insured is based on previous year turnover or by
estimating annual turnover in case of new proposal.
7. Single vessel policy: This policy is for one ship only. A company may have
separate policy for each of its ship.
8. Fleet or single policy: Here one policy covers fleet of ship; it is preferred by
shipping companies owning multiple ships.
9. Named policy: This policy is specific in nature where the name of the vessel
and the claim amount is clearly stated.
10. Special declaration policy: This policy is issued to those organizations which
have a large annual turnover i.e., 3 crores or more. The coverage amount shall be
on the previous year turnover.
11. Annual policy: As the name suggests it is a policy having duration for one
year and cover goods belonging to the insured or held in trust by him.
12. Wager Policy: A wager policy is one where there are no fixed terms of
reimbursements mentioned. If the insurance company finds the damages worth the
claim, then the reimbursements are provided. Else, there is no compensation
offered. Also, it has to be noted that a wager policy is not a written insurance
policy and as such is not valid in a court of law.
13. Block Policy: Sometimes, a policy is issued to cover both land and sea risks.
If the goods are sent by rail or by truck to the departure, then it will involve risk on
land also.

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SECTION 6: Different features of a Marine Insurance

Policy

Insurance policies are well-defined contracts and marine insurance has strict policy
requirements. Insurer requirements should always be followed because minor
discrepancies or any violations can lead to rejected claims. Policy providers follow
narrow guidelines when reimbursing claims, and a simple deviation to the route
might result in a loss of coverage for an expensive claim. It’s important to
understand the features and requirements of your policy to ensure you have
coverage.
Open Policy – an inland marine insurance policy provides coverage for inland
movement of a consignment for a specific duration of time, usually up to one year.
This policy is applicable for shipping companies with numerous transactions per
year as it offers continuous coverage during the active policy period. Inland marine
insurance, in the context of extended coverage for marine insurance, covers goods
shipped by land, such as after the goods have arrived ashore and are being shipped
to a storage facility.
Comprehensive Protection – provides more expansive coverage against different
types of loss or damage, protecting the value of your merchandise against total loss
of goods, partial loss of goods, and other related expenses while your cargo is still
in transit.
Customization – for businesses with varying needs, obtaining customized marine
insurance is generally recommended. You can choose your policy coverage limits
as well as policy options that would be useful to your business and your specific
needs.
Mark up Value – known as markup in the marine industry, this type of policy
allows a portion of your profit to be included in the insured value.
A marine insurance policy provides comprehensive protection, though keep in
mind that there are coverage exclusions that need to be considered. Insurance
companies will not cover your claim if:
It is caused by willful negligence

pg. 9
It is caused by improper packaging
There is contamination because of radioactive rays
It is caused by strike, riot, or civil commotion
Other exclusions may apply, another reason to review your coverage close

SECTION 7: Documents for Marine Insurance Claim

In case of loss to the insured for the subject matter covered under the Marine
Insurance Policy, the insured should inform the Insurance Company of the mishap
at the earliest. Then Insurance Company will send officials to do the survey to look
into the mishap and estimate the loss suffered by the insured. The insured must
submit certain documents while filing the Marine Insurance claim. These are as
follows:
1. The original copy of the Insurance Policy Certificate: It is issued by the
Insurance Company which mentions the details of the subject matter covered under
policy, policy period and insured’s details
2. Survey Report: It contains the observation of the surveyor regarding the cause
of the event and the extent of the loss suffered by the insured in terms of goods
damaged.
3. Invoice: It shows the terms of sale, shipment details and the value of the cargo
for which claim is submitted to the Insurance Company.
4. Bill of Lading: is a document which contains the details of the shipment- where
the cargo is going, name of the vessel, amount of cargo, how it is to be handled and
billed. It acts as a receipt issued by the carrier to the consignor.
5. Claim Bill: It contains the details of the claim amount made by the insured for
the loss suffered by him.
6. Copy of Protest: In case the loss is by perils of sea, then the owner of the
vessel goes in front of the public authorities at the destination port to inform them
about the loss suffered and protests that he was not responsible for the loss. The
copy of the same is to be submitted to the insurer.

pg. 10
 7. Letter of Subrogation: This letter given by the insured authorizes the
Insurance Company the right to make claim from a third party that may be
responsible for the damage caused.
8. Bill of Entry: It is a formal document issued by the custom officials that
specifies the account sales of the cargo and the custom duty paid by the importer or
the exporter.
9. Dock Receipt: It mentions the condition of the cargo while it is loaded and
unloaded during the shipment.

SECTION 8: Principles of Marine Insurance:

Principle of Utmost Good Faith

The marine insurance policy rely on the principle of utmost good faith, which
clearly shows that when filling the marine insurance policy document, the holder
should give proper details. Also, the applicant would not withhold any material
details. If the applicant conceals or hides essential information, the marine
insurance company has every right to ignore the policy application. 
Principle of Insurable Interest
As per the principal, it is essential for the policyholder to have some insurable
interest in the subject for which he/she wants to buy insurance. It means, the
policyholder should get advantage from the safe arrival of goods and should suffer
losses due to damage of goods. It might happen that the policyholder does not have
an insurable interest during purchasing a marine insurance policy, however, he
should expect to have such interest in the future. It is essential that the policyholder
must have some insurable interest in the insured item otherwise he will not be able
to get the claim from the insurer. 
Principle of Indemnity
According to the principle, the marine insurance policyholder would be
compensated only to the extent of the loss. It means, the person should not buy
marine insurance to get profits. In any case, the policyholder will not get more than
the actual loss happened. 

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Principle of Cause Proxima
At the time of loss, the marine insurance policyholder would consider the
proximate or nearest cause, which would assist in analyzing the genuine cause of
loss when there would be a series of causes that have contributed to the loss. Here,
a remote cause for a loss is not needed to analyze the liability, and therefore, if the
proximate cause is insured, the marine insurance company has to fix the claim. 
Principle of Loss Minimization
Just because someone has a marine insurance policy, it does not mean the person
can act irresponsibly. It is important for the policyholder to take all the essential
steps to curtail and minimize the losses. The policyholder should not behave
irresponsibly during an accident just because the property is covered under marine
insurance. Marine insurance is an aspect that helps with relieving the dangers of
monetary misfortune to the property, for example, merchandise, ship, or other
movables, in the oceanic vehicle, on the installment of premium by the insured to
the insurance provider. So buy marine cargo insurance for protecting yourself from
such mishaps. 

SECTION 9: Marine Policy Conditions

The Marine Insurance Act 1906 provides the framework on which marine
insurance is based and the policy document is formulated on the base of marine
policy conditions. Based upon this framework, the insurers are obliged to issue
their policies.
• Insurance Cargo Clauses (ICC) (C): The clause provides major casualty coverage
during the land transit and tend to be used for cargoes that are not easily damaged,
e.g., scrap steel, coal, etc. Subject to the policy exclusions and warranties the ©
covers loss or damage to the subject matter insured reasonably attributable to
o Fire or explosion o Grounding, sinking
o Overturning or derailment o Collision or contact of vessel
o Discharge of cargo at point of distress
• Insurance Cargo Clause (B): Subject to the policy exclusions and warranties, the
(B) clauses provide all the cover under (C) and cover loss of damage to the subject
matter insured reasonably attributable to:

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o Earthquake, volcanic eruption or lightning o Water damage by entry of sea/
water (excluding rainwater), o Total loss of package lost overboard
• Institute cargo Clause (A): Subject to the policy exclusions and warranties, the
clause “A” provides the widest of all three covers and generally summed up as ‘all
risk’ of loss or damage to the subject matter insured.

pg. 13