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MARINE INSURANCE1Life InsuranceGeneral InsuranceFire InsuranceMarine InsuranceAuto InsuranceCrop Insurance2Definition (Cargo, hull, air way, truck, rail)Marine Insurance covers the loss or damage of ships, cargo, and any transport or property by which cargo is transferred, acquired, or held between the points of origin and final destination.

3Why is Marine Insurance important?The cargo can be damaged on exposure to a wide variety of risks

Marine insurance relieves the traders of their financial exposure from physical loss or damage to their goods while in transit

4Marine Cargo InsuranceIt provides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea or air.

5Though the name may indicate that the policy covers the transit of goods only by waterways, it is not so

Marine Cargo Insurance includes all forms oftransit of goods By Road, Railways, Water & Air

Marine Cargo Insurance intends to protect the insured against the risk of loss or damage to the goods in transit

It is also called transit insurance (Overseas Inland).

6Two PartiesInsurer (Insurance Company)Insuree/Insured (Entity purchasing insurance policy)7Insurable interestA ship carrying cargo starts from India to Japan, on the way due to bad weather condition the ship meets with an accident and sinks. Who has insurable interest in the goods?

The Sellers, the buyer or the transporter?

8Insurable Interest

9Usually it is the sellers responsibility for any loss or damage suffered by the goods until their ownership passes to the buyer

This applies to the normal sales within the country but not to export sales

10Who can buy a Marine Insurance policy??Contract of sale : Legal contract for exchange of goods, services or property to be exchanged from seller to buyer for an agreed upon value

The contract of sale determines who buys the policy

The most common contracts of sale, also called Incoterms (International Commercial Terms), are :FOB (Free on Board)C & F (Cost & Freight)CIF (Cost, Insurance & Freight)

11Contract of SaleFOB (Free on Board):Seller is bound to load the goods onto the carrying vessel, he does not need to arrange insurance. FOB : Buyer Pays freight, Buyer arranges insuranceC&F (Cost and Freight):Same as FOB. The only difference is that the freight should be paid by the sellerC& F : Seller pays freight, Buyer arranges insurance12Contract of saleCIF (Cost Insurance Freight):The seller is bound to provide insurance covering the whole voyage up to the final destination CIF : Seller pays freight and seller arranges the insurance

13In marine cargo insurance, the person having insurable interest at the time of loss can only recover

Marine cargo policies are freely assignable. Unlike other policies, there is no need to take insurance companys consent for transferring policy to new buyer

14Marine policies are Valued Policies

The sum insured is negotiated between the insured and the insurer

i.e., the value is agreed upon and claims are settled on the basis of proportion to the agreed value and not on the market value or reinstatement value basis

15Marine Cargo InsuranceProvides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea or airConsignments by rail, road etcExport & import shipments Coastal shipments Shipments by inland vessels or country craft

16Marine Cargo insurance provides;

(1) Coverage of goods during Overseas Transit (2) Coverage for goods Inland Transit

Marine insurance cover starts right from the moment the goods leave the point of start and remain continuously in force during transit and until the goods reach the destination.Marine Insurance(Risk Coverage, Period, Number of Voyage, Insurable Interest)

17Types of Marine CargoOverseas TransitOpen CoverSpecific Policies

Inland TransitOpen PolicySpecial Declaration PolicyAnnual Policy18Overseas TransitOpen coverLarge Export/ Import oriented Industries usually prefer Open cover agreement, as they have to make numerous regular shipments who would otherwise find it very inconvenient to obtain insurance cover separately for each and every shipment.

19Overseas TransitOpen CoverA marine cargo open cover policy is an agreement between a merchant and an insurance company to insure all goods in transit within the agreement, until either party cancels the agreement

20Overseas TransitOpen cover-FeaturesAn Agreement is made for a specific period, generally 12months

Rates, Terms & Conditions are agreed to in advance by both the parties

Premium is paid in advance for the projected exports to be made

Details of all shipments should be declared by the insured

Agreement ceases on expiry of period or when sum insured gets exhausted whichever occurs first.

21Overseas TransitSpecific PolicesSpecific Policies:This agreement or policy is usually issued for one time transit of cargo

Covers only particular consignment.Insurance on case to case basis.To be arranged before commencement of transit

22INLAND TRANSITOpen PolicyA manufacturer who in a year has many consignments for transportation, can take an open policy for the entire year instead of individual policy.Open Policy is commonly used for dispatches within the country by rail, road, air, inlandwaterways and registered post parcels. It is also known as the floating policy.

23INLAND TRANSITOpen PolicyThe policy term is one yearPolicy issued for a substantial sum insured based on the projected value of dispatchesDeclarations are made for each dispatchPolicy ceases on expiry of policy term or when sum insured gets exhausted whichever occurs first

24INLAND TRANSITSpecial Declaration PolicySpecial Declaration Policy is a Form of Open policy for those with large turnover and frequent dispatches by inland transit via Rail, Road, Air, Inland waterways and post parcels

Minimum estimated dispatches for an year should not be less than 2 crores

25INLAND TRANSITAnnual PolicyAnnual Policy:

This policy covers transit of goods from plant/ warehouse of origin to the buyers plant/ warehouse.

26Sum Insured will represent the maximum value of risk that may encounter during transit

In case of more than one transit, sum insured would be sum total of the aggregate maximum estimated value at risk in transit at any given point of time

Rating would depend on:- Distance involved- Single carrying limit- Turnover

No declarations are required

27Some of the perils the cargo may come across are;

28Types of PerilsSEA PERILS (Act of God natural calamities etc.)EXTRANEOUS PERILS (Faults with loading, Breakage, Leakage)WAR PERILS (War, Rebellion etc.)STRIKE PERILS (Strike, Lockout etc.)29Losses from the perilsTOTAL LOSSActual Total Loss ((Total Damage +Repair Cost) => Total Property Value)Constructive Total Loss ((Total loss+Repair+Salvage)=> Total Property ValuePARTIAL LOSS (AVERAGE)General Average Particular Average30Cargo ClausesInstitute Cargo Clauses are standard terms and conditions which are used internationally

Drafted by the Institute of London Underwriters & are internationally accepted

Cargo insurance is usually provided by means of ICC - A, B or C, plus War Clauses and Strikes Clauses

These clauses define the Terms of Cover for Export-Import Cargo

Marine Cargo Policy is NOT complete unless the related Clause is attached to it

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OVERSEAS TRANSIT CLAUSESINSTITUTE CARGO CLAUSE( C )

Fire or ExplosionVessel or craft being stranded, sunk, grounded or capsized (Overturn)Overturning or derailment of land conveyance (Rail/lorry)Collision or contact of vessel/craft or conveyance withany external objects, other than waterMishap at the time of discharge of cargo at Port of distressGeneral Average (When the entire venture is in danger, in order to save the Ship and Cargo, certain sacrifices are made and/or certain expenses are incurred)Jettison (Throwing of cargo from above board the ship to save the vessel and/or other cargo)

32OVERSEAS TRANSIT CLAUSES INSTITUTE CARGO CLAUSE ( B )ICC C +Earthquake, volcanic eruption, lightning.Washing overboard (can be due to sea water/wind/bad weather)Entry of sea, lake or river water into vessel, craft, hold, conveyance, container, lift van or place of storageTotal loss of any package lost overboard or dropped whilst loading on to, or unloading from vessel or craft

33OVERSEAS TRANSIT CLAUSES INSTITUTE CARGO CLAUSE ( A )All Risk Cover Except the specific exclusions

34Coverages ICC A, B, CRisksI.C.C.(A)I.C.C.(B)I.C.C.(C)Fire or explosionCoveredCoveredCoveredVessel or craft being Stranded, grounded, sunk or capsized.CoveredCoveredCoveredOverturning or derailment of land conveyance.CoveredCoveredCoveredCollision or contacts of vessel with any external object other than water.CoveredCoveredCovered35Coverages- Contd.RisksI.C.C.(A)I.C.C.(B)I.C.C.(C)Discharge of cargo at portCoveredCoveredCoveredEarthquake, Volcanic eruption or lightning.CoveredCoveredNot CoveredGeneral Average SacrificeCoveredCoveredCoveredJettisonCoveredCoveredCoveredWashing OverboardCoveredCoveredNot Covered36Coverages Contd.RisksI.C.C.(A)I.C.C.(B)I.C.C.(C)Entry of sea, lake or river water into the vesselCoveredCoveredNot CoveredTotal loss of any package lost overboard loading, or, unloading from vessel or craft.CoveredCoveredNot CoveredAny other risk not specifically excluded - ALL RisksCoveredNot CoveredNot Covered37Correspondence between ICC & CoveragesICC C Free of Particular AverageICC B - With Particular AverageICC A - All Risks38