ZCSPC-DME-MEP 011 Republic of the Philippines

ZAMBOANGA CITY STATE POLYTECHNIC COLLEGE

R.T. Lim Boulevard, Baliwasan, Zamboanga City
Fax No. /Tel Nos.: 991-7470
DEPARTMENT OF MARITIME EDUCATIOn

MARINE INSURANCE
Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport by which
the property is transferred, acquired, or held between the points of origin and the final destination.
Cargo insurance is the sub-branch of marine insurance, though Marine insurance also includes
Onshore and Offshore exposed property, (container terminals, ports, oil platforms, pipelines), Hull,
Marine Casualty, and Marine Liability. When goods are transported by mail or courier, shipping
insurance is used instead.

Marine insurance was the earliest well-developed kind of insurance, with origins in the Greek and
Roman marine loan. it was the oldest risk hedging instruments our ancestors used to mitigate risk in
medieval times were sea/marine (Mutuum) loans, commenda contract, and bill of
exchanges[1].Separate marine insurance contracts were developed in Genoa and other Italian cities
in the fourteenth century and spread to northern Europe. Premiums varied with intuitive estimates of
the variable risk from seasons and pirates.[2] Modern marine insurance law originated in the Lex
mercatoria (law merchant). In 1601, a specialized chamber of assurance separate from the other
Courts was established in England. By the end of the seventeenth century, London's growing
importance as a centre for trade was increasing demand for marine insurance. In the late 1680s,
Edward Lloyd opened a coffee house on Tower Streetin London. It soon became a popular haunt for
ship owners, merchants, and ships' captains, and thereby a reliable source of the latest shipping
news.[3]
Lloyd's Coffee House was the first marine insurance market. It became the meeting place for parties
in the shipping industry wishing to insure cargoes and ships, and those willing to underwrite such
ventures. These informal beginnings led to the establishment of the insurance market Lloyd's of
London and several related shipping and insurance businesses. The participating members of the
insurance arrangement eventually formed a committee and moved to the Royal
Exchange on Cornhillas the Society of Lloyd's. The establishment of insurance companies, a
developing infrastructure of specialists (such as shipbrokers, admiralty lawyers, bankers, surveyors,
loss adjusters, general average adjusters, et al.), and the growth of the British Empire gave English
law a prominence in this area which it largely maintains and forms the basis of almost all modern
practice. Lord Mansfield, Lord Chief Justice in the mid-eighteenth century, began the merging of law
merchant and common law principles. The growth of the London insurance market led to the
standardization of policies and judicial precedent further developed marine insurance law. In 1906
the Marine Insurance Act codified the previous common law; it is both an extremely though and
concise piece of work. Although the title of the Act refers to marine insurance, the general principles
have been applied to all non-life insurance. In the 19th century, Lloyd's and the Institute of London
Underwriters (a grouping of London company insurers) developed between them standardized
clauses for the use of marine insurance, and these have been maintained since. These are known
as the Institute Clauses because the Institute covered the cost of their publication. Out of marine
insurance, grew non-marine insurance and reinsurance. Marine insurance traditionally formed the
ZCSPC-DME-MEP 011 Republic of the Philippines
ZAMBOANGA CITY STATE POLYTECHNIC COLLEGE
R.T. Lim Boulevard, Baliwasan, Zamboanga City
Fax No. /Tel Nos.: 991-7470
DEPARTMENT OF MARITIME EDUCATIOn

majority of business underwritten at Lloyd's. Nowadays, Marine insurance is often grouped with
Aviation and Transit (cargo) risks, and in this form is known by the acronym 'MAT'.
It is common for marine insurance agencies to compete with the offerings provided by local insurers.
These specialist agencies often fill market gaps by providing cover for hard-to-place or obscure
marine insurance risks that would otherwise be difficult or impossible to find insurance cover for.
These agencies can become quite large and eventually become market makers. They operate best
when their day to day management is independent of the insurers who provide them with the capital
to underwrite risks on their behalf.
ZCSPC-DME-MEP 011 Republic of the Philippines
ZAMBOANGA CITY STATE POLYTECHNIC COLLEGE
R.T. Lim Boulevard, Baliwasan, Zamboanga City
Fax No. /Tel Nos.: 991-7470
DEPARTMENT OF MARITIME EDUCATIOn

CONTRACT IN MARINE
INSURANCE
Marine insurance has been defined as a contractbetween the insurer and insured whereby
the insurer undertakes to indemnify the insured in a manner and to the interest thereby agreed,
against marine losses incident to marine adventure.

9 Elements of Marine Insurance

1. Features of General Contract,

2. Insurable Interest,
3. Utmost Good Faith,
4. The doctrine of Indemnity,
5. Subrogation,
6. Warranties,
7. Proximate cause,
8. Assignment and nomination of the policy, and
9. Return of premium.

The proposer may approach the insurer directly or through an agent or broker.
Generally, the proposal is made through brokers because they are well known of the
insurance practices. The broker prepares a slip where material information is recorded.
This slip is presented to the insurer who will signify his acceptance by initialing the slip
and indicating the sum they are prepared to- accept. The risk may commence from the
date of acceptance or from at any other date which is mutually agreed.

Sometimes, the insurer asks additional information from the broker.

When the additional information called closing slip has been accepted by the insurer he may
issue a policy.
Before issuing the policy, the open cover is issued to the insured, which becomes inoperative as
soon as the policy is issued. The document containing the term of the contract is called policy.
The assured cannot legally make any claim over the underwriter if the loss occurs before a final
policy is issued. The ‘open cover’ or ‘slip’ is not legally binding on the insurers.
In practice, however, the insurer pays the number of claims even before the issue of policies.
Insurers in marine insurance generally called ‘underwriters’.
ZCSPC-DME-MEP 011 Republic of the Philippines
ZAMBOANGA CITY STATE POLYTECHNIC COLLEGE
R.T. Lim Boulevard, Baliwasan, Zamboanga City
Fax No. /Tel Nos.: 991-7470
DEPARTMENT OF MARITIME EDUCATIOn

VOYAGE POLICY
Definition of Voyage Policy

A voyage policy, also known as marine cargo insurance, is a marine insurance

policy that covers unforeseen risks on the cargo on a ship on a particular voyage. It is
thus not time-based, like most insurance policies. When the insured voyage ends, so
does the policy. It does not cover the ship itself, but only the specified cargo on it.

BREAKING DOWN Voyage Policy

A voyage policy covers unforeseen risks. Because it does not provide cover against
preventable risks, in order for a voyage policy to be valid, the vessel transporting the
cargo must be in good condition and capable of making the journey, and the vessel's
crew must be competent. Voyage policies will generally cover against accidental
damages and collisions as well as natural disasters. Losses due to delays can be
covered as well. Voyage policies usually exclude losses caused by willful misconduct,
ordinary leakage, ordinary wear and tear, improper or inadequate packaging and labor
strikes. Acts of war and terrorist activity will also usually be excluded. The policyholder
may need to purchase additional insurance to cover the cargo during the entire
transport process, because voyage policies usually exclude losses that occur during
loading and unloading of the cargo onto and off the ship.

The policy will be in place for the duration of the specified voyage, irrespective of the
time it takes (for example, if there are unanticipated delays en route, coverage remains
in place until the voyage ends.) This allows for factors such as inclement weather at
sea, or unavailability of docking at the destination port.

Importance of Voyage Policies

Voyage policies are particularly important for exporters to insure their goods before they
reach their destination seaport. Because each policy is specific to a particular cargo and
voyage, all details of which need to be recorded in the policy contract, voyage policies
tend to be more useful for small or more infrequent exporters. Large exporters with
frequent cargo journeys would prefer open covermarine insurance, which is time-based
and covers all cargo shipped by a company during the period of cover.
ZCSPC-DME-MEP 011 Republic of the Philippines
ZAMBOANGA CITY STATE POLYTECHNIC COLLEGE
R.T. Lim Boulevard, Baliwasan, Zamboanga City
Fax No. /Tel Nos.: 991-7470
DEPARTMENT OF MARITIME EDUCATIOn

TIME POLICY
The policy which is issued for a fixed period of time is known as time policy. A
marine insurance policy is valid for a specified time period generally valid for a
year. All the marine perils during that period are insured. This type of policy is
suitable for full insurance. The policy is generally taken for one year although
it may be for less than one year. But there is no restriction to make this type of
policy for less than one year. This policy is more commonly used for hull
insurance than for the cargo insurance. The ship is insured for a fixed period
irrespective of voyages. The policy is generally issued for one year. For
example, a period of time from 12 March 2015 to 11th December 2015. This
policy is effective for this period.
ZCSPC-DME-MEP 011 Republic of the Philippines
ZAMBOANGA CITY STATE POLYTECHNIC COLLEGE
R.T. Lim Boulevard, Baliwasan, Zamboanga City
Fax No. /Tel Nos.: 991-7470
DEPARTMENT OF MARITIME EDUCATIOn

MIXED POLICY
The joint form of voyage policy and time policy is called mixed policy. In this
policy, the elements of voyage policy and of time policy are combined. The
reference is made certain period after completion of the voyage. The meaning
of the mixed policy is that a new policy takes birth from the combination of the
fundamental things of time and the place policy. Generally, this policy is used
for ship insurance. For example, a mixed policy is a policy which states the
ship should reach from 1st December 2015, from Paris to October 2015 in
New York. Policy expires whichever is met first.