Marine insurance provides protection for your domestic and international cargo whilst in transit from the point of origin to the destination.
Marine insurance covers cargo loss and/or cargo damage resulting from an accident during transportation – these incidents may include storms, fires, explosions, collisions or other perils of the sea (grounding, standing, sinking, overturning or capsizing). In some locations, war, strikes, piracy, hijacking or weather conditions (i.e. cyclones, hurricane or ice damage) may also be covered.
Whether by sea, road, rail, or air there is no one size fits all when it comes to marine and freight cargo insurance policies. Premiums can be high if the vessel is operating in a high-risk area (or has claim history). Insurance policies can be very complex, listing conditions, deductibles, and exclusions in their documentation.
TYPES OF MARINE INSURANCE
Cargo Owners, Importers and Exporters
Businesses that engage in domestic and international trade should always consider marine insurance to ensure the safe and timely delivery of cargo. Marine insurance provides financial protection against unforeseen events and disruptions.
Freight Insurance
This covers the loss of freight revenue due to damage to cargo or ship, as well as protection against non-delivery or late delivery of goods.
War Risk
This type of coverage protects against losses caused by acts of war, such as hostilities, strikes, riots, or terrorist attacks. It is often excluded from standard marine insurance policies and requires separate (or add-on) policies.
Charterers
On a larger scale, charterers who lease or charter vessels for the transportation of goods should obtain marine insurance to cover their liabilities and protect their interests during the charter period. Depending on the terms of the charter agreement and contract, charterers may be responsible for certain risks and liabilities, which marine insurance can help mitigate.
Benefits
Marine insurance is designed to help safeguard cargo on board shipping vessels whilst in transit, either domestically or internationally. By transferring the risk of cargo loss or damage to an insurance company, businesses can better manage their financial exposure and impact. This allows you to focus more on the core operations of your business without worrying about the potential financial impact of unforeseen events. Marine insurance policies can be tailored to meet the specific needs from different types and value of your cargo to shipping operations.
Considerations
Different types of cargo have varying levels of risk and may require specialised coverage. Consider the nature, value, implications to vessel and crew and susceptibility to damage or loss of the goods you are transporting. Whether you’re shipping goods by sea, air, or land, this can impact the type of coverage required. Marine insurance typically covers sea transportation but can often be extended to cover other modes as well. Be aware of any exclusions or limitations in the policy, such as specific perils or types of damage that may not be covered. For example, “General Average” is a principle of maritime law that essentially establishes that all sea cargo stakeholders (owner, shipper, etc.) evenly share any damage or losses that may occur because of voluntary sacrifice of part of the vessel or cargo to save the whole in an emergency. A small-scale example of this could be when a ship is in a storm and the crew needed to jettison some cargo to avoid sinking. Crew might need to throw certain goods overboard. Afterwards, the ship owner – plus everyone who also had cargo onboard – would be responsible for covering that shipper’s loss — (not just the unlucky owner whose possessions were thrown overboard). On a large scale (and in modern times), it can mean that cargo owners must share in the cost of huge salvage efforts – think of the vessel that run aground in the Suez Canal in 2021 (blocking the canal for six days), or the collapse of the Baltimore Bridge recently.
Costs
The cost of marine insurance varies depending on the value of the goods being shipped, the level of cover required, the mode of transport (sea, air, road, rail), the length of the journey, the route taken, prevailing weather or war risk conditions and the insurance company policies (including if previous claims have been made). Generally, marine insurance premiums are calculated based on a percentage of the cargo’s declared value – typically 0.1% to 2% (or more).
Carefully considering what type of marine insurance you require, plays a crucial role in mitigating risks and provides valuable protection for businesses involved in the movement of goods by sea.
Discuss your cargo requirements with NMT Shipping – we can assess your specific needs and provide you with a detailed quote based on your circumstances.
