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Marine cargo insurance underwriters explained

In today's fiercely competitive market environment securing shipment of goods with appropriate insurance coverage is critical in mitigating the risk of physical loss or damages within a supply chain. Ships operate in a difficult environment, and cargo may be lost or damaged during domestic and international transit. However, ocean carriers are well protected under the law against responsibility for loss or damage to cargo that might arise during the transit of goods.

There are inherent risks in the shipment of goods; many of these risks can be alleviated through best practices, including selecting qualified partners, and proper packing, but not all. Cargo insurance is necessary for the transit risks that cannot be fully eliminated, such as rough handling, collision, overturn, theft, non-delivery, jettison, General Average, and natural disasters name a few. Cargo interests (exporters, importers, etc.) routinely purchase cargo insurance covering all such risks. Cargo insurance thus protects a company's financial interests against physical loss or damages due to many external factors. Marine cargo insurance may be obtained on an open policy basis. It is a continuous contract of insurance, which automatically covers all goods in transit at the risk of the assured (insured) as long as the policy remains in force, that is, from the date of attachment of the policy until canceled by the assured/insured or the assurer/insurer.

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A particular cargo policy covers one single shipment of goods and must be consulted and issued before each separate shipment is made. Cargo insurance policies cover the assured against many risks. Older policies might have had a clause that would read, for example, as follows: "This insurance is against the perils of the seas, fire, assailing thieves, jettisons, barratry of the Master and mariners and all other like perils, losses or misfortunes that have or shall come to the hurt, detriment or damage of the property insured hereunder or any part thereof except as otherwise provided for herein".

Of the perils insured against by far, the most important is "the perils of the seas," which refer to fortuitous losses arising through the extraordinary action of the elements at sea. It is often referred to as "heavy weather" or "stress of weather." Perils of the seas also include accidents in the navigation or marine causalities, such as sinking, stranding, collision, striking of rocks and icebergs. Most cargo insurance policies, however, are underwritten on an "all-risk." basis. This means that the insured is covered for all risk of loss or damage except for those risks that are specifically excluded in the policy such as loss or damage due to willful destruction by the insured, or the inherent vice of the goods.

Marine cargo insurance is a vital part of international trade. The transportation of goods by sea is inherently risky, and marine insurance is a vital tool to manage that risk. A cargo insurance underwriter will determine whether an applicant for cargo insurance (typically an exporter or an importer) should be approved for cargo insurance under what terms of average (loss). Underwriters evaluate insurance applications and determine coverage amounts and premiums.

As an underwriter, one needs to understand and evaluate many factors to appraise each risk. Some of these factors are:
  1. The desired average (loss) clauses: The assured may choose average clauses ranging from the most limited to the most comprehensive coverage. The choice of average clauses has a substantial effect on premium rates.

  2. The destination or origin: The geographical, physical, or political conditions at the port of origin and destination create differences in the risks involved.

  3. The ocean carrier: You will need to evaluate the integrity of the vessel(s) to be used, looking to the vessel's age, classification society, among other factors.

  4. The shipping routes: No two shipping routes present identical risks.

  5. The time for shipping: Greater damage may be sustained by goods shipped across the North Atlantic in winter than in summer, and rainwater damage is more prevalent in the monsoon season than in the dry season.

  6. The packing used: Packing, whether by container, pallet or otherwise, can vary considerably, with resulting variance in premium rates.

  7. The shipping practices: Newcomers to foreign trade may not have experienced traffic personnel. Even experienced shippers vary greatly in their shipping practices.

  8. The assured: The underwriter's experience with the assured is a valuable guide to determining whether to accept the risk and under what terms. For example, an adverse loss ratio requires careful consideration by the underwriter as to whether the risk should be accepted.


The American Institute of Marine Underwriters (AIMU) offers various professional courses in underwriting and related areas, as well as general information about the field.
There are numerous insurance companies in the tri-state area that underwrite cargo insurance. These include:
  1. Travelers: Has an extensive product portfolio of marine and non-marine coverages for operations, including marine services suppliers, marine transportation and construction, ocean cargo, and luxury yacht owners.
  2. Chubb: Delivers tailored insurance solutions and sophisticated risk management services to address the unique needs of shippers, manufacturers, vessel owners and builders, and marine facility owners, from multinational manufacturers and logistics providers
  3. The Hartford: Covers Boat Builder or Broker, a Ship Repairer, Terminal Operator, a Wharfinger or Stevedore and more.
  4. Aetna: Is the brand name used for products and services provided by one or more of the Aetna group of subsidiary companies, including Aetna Life Insurance Company and its affiliates (Aetna).

Related articles
  1. General Average & The York Antwerp Rules
    The law of General Average is a principle of maritime law whereby all stakeholders in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency. It is a unique maritime concept. One of the most ancient aspects of shipping is the general average. When an intentional sacrifice of property is made on board a ship to avoid a common peril, the law of general average requires all of the parties to the maritime adventure that benefited by the intentional sacrifice to contribute money on a pro-rata basis.

  2. P&I Clubs guideline
    The P&I Clubs are correctly called Protection and Indemnity Associations and number around 20 worldwide, with the majority being the United Kingdom-based. The shipowner in taking out insurance with a particular association becomes a member of that Club. The Clubs are mutual, which means that all costs involved in providing cover or paying out a claim to anyone member are shared by all members. It can be achieved by setting a rating or premium for the Owner, known as an "advance call," and is based on the Owner's history and exposure to risk.

  3. Marine cargo insurance underwriters
    Ships operate in a difficult environment, and cargo may be lost or damaged during domestic and international transit. However, ocean carriers are well protected under the law against responsibility for loss or damage to cargo that might arise during the transportation of goods.

  4. Hull & Machinery underwriters
    A hull and machinery underwriter provides insurance coverage for boats, ships, and other naval assets. It gives protection to shipowners against the hull, machinery, and onboard equipment damages in the event of any perils encountered while on the water, including collision with another vessel, natural obstacles, and other structures as well as storms and other natural disasters.

  5. Procedure for insurance claim
    A ship is insured against various risks by the Owner taking out different insurance policies. However, for many reasons, insurance claims often being denied by marine insurance providers. So that a shipowner can prosecute a claim accurately and successfully, the Master needs to send full details and documentation relating to any accidents or incidents resulting in damage to the ship, property, cargo, or personal injury. Nautical Institute publication, "The Mariner's Role in Collecting Evidence," is a good source of guidance to shipmasters.

  6. The role of a insurance broker
    Marine insurance brokers play a significant role in helping companies and individuals procure marine cargo insurance, hull and machinery insurance, P and I cover, and other forms of insurance as the case may be. They can canvas the worldwide marine insurance market. The goal is to assist in getting the best terms of insurance cover at the most competitive premium rates.

  7. Marine salvage procedures
    Marine salvage contracts fall into two main categories. First, those which enable salvage services to be rendered on the basis that the compensation to be paid to the salvors will be determined after the completion of the services. It can be done by settlement or if the parties cannot agree, then by a court or by an arbitrator

  8. Role of a freight forwarder
    A freight forwarder, forwarder, or forwarding agent, is a person or a business entity that organizes shipments for individuals or corporations to get the goods from the point of origin to the desired market or from a producer directly to the customer or a distribution center. A freight forwarder dispatches shipments via a common carrier and books or otherwise arranges space for those shipments on behalf of shippers.

  9. How a Non-Vessel Operating Common Carrier ( NVOCC) differs from a freight forwarder?
    A NVOCC (Non-vessel Operating Common Carrier) is "a common carrier that holds itself out to the public to provide ocean transportation, issues its bills of lading or equivalent documents, but does not operate the vessels that transport cargo." An NVOCC is a carrier. It enters into a contract of carriage with the cargo shipper. It undertakes responsibility for the carriage like a shipowner that owns a vessel. However, the NVOCC is a carrier that does not own or operate the vessel used to perform the carriage.

  10. P & I Insurance cover and Members of IG club
    At the heart of P and I is the concept of "mutuality." Shipowners form a nonprofit association to protect and indemnify one another against third party liabilities. Unlike commercial insurance, the insured ship owners, meaning the "members" of the Club, are both the insurer and the insured. Each P and I Club is controlled by its members.

  11. Role of shipbrokers
    London and New York have always been viewed as major shipbroking centers. In recent years, many U.S. ship brokerage firms have relocated to offices in Stamford and Greenwich, Connecticut, and nearby communities. Of course, there is a large shipbroking presence in Singapore, Hamburg, as well as other cities.

  12. Sale & purchase brokers
    Sale and Purchase Brokers (S and P Brokers) are highly specialized shipbrokers. Their clients are typically ship owners. S and P Brokers serve as intermediaries in the business of selling and buying ships. They assist in the sale and purchase of second-hand tonnage and newbuilding. Their compensation is normally in the form of a commission.

  13. Ship agency services
    A ship's agent works on the front lines, and there might involve an unlimited number of issues in port. The agent must work towards solving these problems. An agent needs to learn a lot fast about ships and cargo.

  14. Role of a ship management company
    Ship management companies are located in the world's maritime centers. Many companies manage large fleets on behalf of numerous ship owners. Many of the larger management companies also own vessels. Essentially, the decision to outsource a ship management function is a financially driven one. In most cases, outsourcing of ship management services means that the shipowner can conduct business at a reduced cost, primarily due to the reduction of in-house staff and resources.

  15. Ship finance considerations
    Ship finance is somewhat different from other asset-based lendings such as real estate finance. After all, shipping business earnings can be quite volatile and, therefore, less predictable. Additionally, the collateralized asset (the ship) is extremely mobile. The traditional method for ship finance was private resources.

  16. Ship recycling industry
    Scrapping ships (also known as ship breaking or ship demolition) is a dangerous and controversial part of the shipping business. Ships have a life span of 20 – 30 years – sometimes a little more -sometimes a little less. Ships wear out, and there may be a lack of spare parts. After a while, they no longer make sense economically. The shipowner needs to make a decision – continue to repair or scrap.

  17. Ship registry procedure
    To trade internationally, a ship must have a nationality. Without being registered under certain flag states, a ship cannot enter the geographic limit of another state. Once registered, a ship becomes subject to the laws of a registering nation. Registration makes the ship entitled to military protection, and therefore it is an extension of that nation anywhere in the world.

  18. Maritime security concerns
    Maritime security issues affect the way ship owners, charterers, cargo interests, ports and terminals, and their insurers do business. There is the added expense to deal with. There has also been an increase in the number of international conventions and domestic legislation geared towards furthering maritime security.

  19. How maritime law works in the United States?
    Maritime law used to apply only to American waters within the ebb and flow of the tide. However, it now covers any waters navigable within the United States for interstate or foreign commerce. Admiralty jurisdiction also includes some maritime matters not involving interstate commerce, for example, recreational boating.

  20. The Master’s Responsibility during Salvage Operation
    Request for Salvage - The Master shall normally request salvage after consultation with the Company. However, he has complete authority to seek salvage assistance without reference to the Company if he considers this necessary.

  21. Requirement of towing arrangement in oil tankers, readyness, & training onboard
    All Oil, Chemical and Gas Tankers above 20000 DWT, constructed on or after 1st July, 2002, are equipped with an “Emergency Towing Arrangement (E.T.A.) both Forward And aft to provide the ship with a rapidly deployed towage capacity in an emergency.

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