Marine Insurance

Marine Insurance, insurance that generally applies to the risk associated with the transportation of goods. The first marine insurance company in the United States, the Insurance Company of North America, was established in 1792 and covered American clipper ships and their cargoes. Today that company still insures against perils on the high seas, but now the coverage is for oiltankers and huge cargo ships.

Over time, marine insurance has become a mixture of broad property coverages, divided between land risks (inland marine) and sea risks (ocean marine).
Inland marine insurance covers domestic risks associated with some element of transportation. It has been broadened to include perils incidental to transportation of property and now deals mostly with personal and commercial property of a mobile nature. Its most familiar form is the personal articles “floater,” which offers an opportunity to insure many valuables, such as jewelry, furs, silverware, and fine arts, in a single policy.

Ocean marine insurance is broken into three basic types: hull (involving loss or damage to the ship); cargo (involving loss or damage to cargoes); and protection and indemnity (involving liability of shipowners to others).

Hull insurance affords protection to owners of all types of ships for loss or damage to their waterborne property. Typical perils insured against are stranding, sinking, fire, and collision. The hull policy offers an unusual coverage under its collision clause, which provides liability insurance for loss or damage to the other vessel involved in a collision, as well as to its cargo.

Cargo insurance is available for shippers of goods moving by sea or air in international trade. The terms of insurance can be specific (for example, loss or damage resulting from sinking or fire) or “all risk” and can be underwritten for a single transaction (special policy) or on an open-ended contract (open cargo policy) for the international trader. The open cargo policy is the most common form used and usually covers the cargo “warehouse to warehouse,” thus including exposure to those risks that are associated with land transportation as well.

When a ship is imperiled at sea because of fire, storm, or other danger, all efforts must be made to keep the ship afloat. Such efforts often cause damage to portions of the ship or cargo. To prevent inequity, each owner assumes a share of the property damaged or lost as a result of actions taken to save the ship.

This method of apportioning losses is known as general averaging.
Protection and indemnity (called P & I) insurance protects the vessel owners against their liability for damage to cargo in their care and custody; death or injury to passengers, crew, cargo loaders, and others; damage caused to piers, docks, underwater cables, and bridges; and, more recently, damage caused by pollution.

Other forms of related coverages are included in ocean marine insurance, such as miscellaneous liability policies for owners of piers, docks, marine repair facilities, marinas, and shipyards. Policies on yachts can be underwritten by an ocean marine insurer (usually for larger pleasure craft), providing property and liability insurance in one policy. Powerboats and smaller pleasure craft are more often insured by inland marine insurers. Builder's risk insurance is available to cover damage to a ship under construction.

Common exclusions found in marine insurance policies are loss or damage resulting from strikes, riots, civil commotions, and war. These risks can be, and frequently are, insured through use of endorsements for additional premiums.

Ocean marine insurance rates and policy forms are not regulated by any government authority. Coverage can be tailored to suit the individual needs of ship and cargo owners, and rates are based on the underwriter's experience and judgment in a competitive worldwide marketplace.
Underwriters consider many factors in setting terms and rates for a risk.

Factors common to all marine policies are the underwriter's experience with a commodity or vessel, the cargo owner's or shipowner's loss history, and current competition in the industry. Important factors relating to the ship include owner management, crew experience, trade routes, ports frequented, and age and maintenance of a vessel.