Marine Insurance is insurance aimed at protecting everything associated with shipping on local and international waterways. That includes insuring the ships themselves, the cargo, the shipping terminals, and all of the infrastructure involved in shipping property from origin to destination.
Cargo insurance is considered to be a part of marine insurance and is fairly detailed itself because of all of the logistics and possible risks involved in transporting cargo.
Marine Insurance can actually be traced all the way back to the ancient Romans with historians finding evidence of a maritime loan which was payable should a vessel not return to port. Risks to vessels at that time ranged from weather scuttling the ship, to pirates, to mechanical issues on the ship and even mutiny! In modern times, some of these issues are less likely but entirely possible. In modern times, maritime insurance developed in England where laws were developed to guide maritime insurance including the 1906 Maritime Insurance Act.
Maritime insurance covers a number of problems and accidents that can involve a ship. Maritime Insurance includes various types of collision damage such as collision with other ships, collision within harbors involving damage to infrastructure, collision with natural hazards like reefs and wreck removal. The wreck removal protection is particularly important because after an incident in a harbor, often the wreck needs to be removed immediately so normal shipping can continue.
Most maritime insurance policies only cover 75% of the insured parties liabilities in these circumstances, so many ships are required to purchase additional insurance to cover the remaining 25%.
Two important terms in maritime insurance are “total loss” and “constructive total loss”. Total loss refers to an incident where damages or repair costs exceed the value of the property. For example when a ship is involved in the collision and it is less expensive to buy a new ship rather than repair it. A constructive total loss refers to a situation where the repair cost and the salvage cost combined equal or exceed the value. The terms rely on the ship still being available to ascertain damages. In some situations the ship may have completely sunk.
There are additional specialist policies available under the maritime umbrella.
Increased Value insurance will add additional coverage to protect against the loss of ships which are worth more now than they were originally.
War Risk Insurance is more expensive and covers ships entering into territories that the Joint War Committee consider involved in a war. An example of this would be ships that enter the Persian Gulf during the Iraq War.
New Building Insurance covers damage to the hull while the ship is being constructed. If there is an accident in the shipyard that severely damages the hull this extension to normal maritime insurance will be required.
Cargo Insurance is available at a number of different levels, classified as A, B or C cargo coverage. C is the most limited and A is the most comprehensive. Additionally special clauses are required for certain kinds of cargo, like oil, coal, frozen food and meat. There are additional risks involved in transporting that kind of cargo and as a result, higher premiums.