Marien Insurance

M.
COM Final Accounts of Marine Insurance
CHAPTER I
1.1INTRODUCTION
A contract of marine insurance is a contract whereby the insurer undertakes to

indemnify the assured, in manner and to the extent thereby agreed, against marine losses, that
is to say, the losses incident to marine adventure.
1) A contract of marine insurance may, by its express terms, or by usage of trade, be extended
so as to protect the assured against losses on inland waters or on any land risk which may be
incidental to any sea voyage.
(2) Where a ship in course of building, or the launch of a ship, or any adventure analogous to
a marine adventure, is covered by a policy in the form of a marine policy, the provisions of
this Act, in so far as applicable, shall apply thereto; but except as by this section provided,
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M.COM Final Accounts of Marine Insurance
nothing in this Act shall alter or affect any rule of law applicable to any contract of insurance
other than a contract of marine insurance as by this Act defined. Subject to the provisions of
this Act, every lawful marine adventure may be the subject of a contract of marine insurance.
In particular there is a marine adventure where-
(a) any ship, goods or other moveable‘s are exposed to maritime perils. Such property
is in this Act referred to as ―insurable property‖;
(b) the earning or acquisition of any freight, passage money, commission, profit, or
other pecuniary benefit, or the security for any advances, loan, or disbursements, is
endangered by the exposure of insurable property to maritime perils;
(c) any liability to a third party may be incurred by the owner of, or other person
interested in or responsible for, insurable property, by reason of maritime perils.
(3) ―Maritime perils” means the perils consequent on, or incidental to, the navigation
of the sea, that is to say, perils of the seas, fire, war perils, pirates, rovers, thieves,
captures, seizures, restraints, and detainments of princes and peoples, jettisons,
barratry, and other perils, either of the like kind or which may be.
Marine insurance covers the loss or damage of ships, cargo, terminals, and any
transport or cargo by which property is transferred, acquired, or held between the points of
origin and final destination. Cargo insurance — discussed here — is a sub-branch of marine
insurance, though Marine 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 simple word
insurance would be “Protection against future loss”. Marine Insurance is another variant of
the general term ‘Insurance’ as the name suggests is provided to ships, boats and most
importantly, the cargo is carried in them.
Marine insurance is very important because through Marie Insurance, ship owner and
transporters can be sure of claiming damages epically considering the mode of transportation
used. Of the four modes of transports are roads, rail, air and water. It is the latter most which
cause lot of worry to the transporters not only because there are natural occurrences which
have the potential to harm the cargo and the vessel but also other incidents and attributes
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which could cause a huge loss in the international on one hand and marine insurance
covenants on the other.
Marine Insurance has had a hoary past tracing its origin to the 12th and early 13th century with
the Hanseatic and Lombard merchants who were very much into sea trade. They were forced
to migrate to England in the late 13th century in search of a haven for their trade. The usages
of the Lombard merchants crystallized into a universal body of practices, rules and
regulations and these rules and regulations later became part of the English Maritime Law.
The Marine Insurance Act includes, as a schedule, a standard policy (known as the "SG
form"), which parties were at liberty to use if they wished. Because each term in the policy
had been tested through at least two centuries of judicial precedent, the policy was extremely
thorough. However, it was also expressed in rather archaic terms. In 1991, the London market
produced a new standard policy wording known as the MAR 91 form using the Institute
Clauses. The MAR form is simply a general statement of insurance; the Institute Clauses are
used to set out the detail of the insurance cover. In practice, the policy document usually
consists of the MAR form used as a cover, with the Clauses stapled to the inside. Typically,
each clause will be stamped, with the stamp overlapping both onto the inside cover and to
other clauses; this practice is used to avoid the substitution or removal of clauses.because
marine insurance is typically underwritten on a subscription basis, the MAR form begins: We,
the Underwriters, agree to bind ourselves each for his own part and not one for another [...].
In legal terms, liability under the policy is several and not joint, i.e., the underwriters are all
liable together, but only for their share or proportion of the risk. If one underwriter should
default, the remainder is not liable to pick his share of the claim. Typically, marine insurance
is split between the vessels and the cargo. Insurance of the vessels is generally known as
"Hull and Machinery" (H&M). A more restricted form of cover is "Total Loss Only" (TLO),
generally used as a reinsurance, which only covers the total loss of the vessel and not any
partial loss. Cover may be on either a "voyage" or "time" basis. The "voyage" basis covers
transit between the ports set out in the policy; the "time" basis covers a period, typically one
year, and is more common
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The need to insure property against the economic consequences of its loss or damage
has become a fundamental feature of modern society. Insurance underpins key aspects of
society by providing security and protection to individuals, communities and businesses. It
facilitates trade and commerce; generates employment; provides risk sharing; encourages
innovation by allowing individuals and businesses to
engage in more risky business activities, thereby fostering higher levels of economic activity;
and mobilizes domestic savings through the collection of premiums by insurance companies
which can help build a country’s financial market.
In the context of globalization, maritime transport is the backbone of international trade with
over 80 per cent of world merchandise trade by volume being carried by sea. Marine
transport involves risks related with the “perils of the sea”. In this respect, marine insurance
is a mechanism that helps to mitigate the risks of financial loss to the property such as ship,
goods or other movables, in maritime transport. Insurance is, thus, a necessary component of
doing business on an international basis and plays an important role in the international trade.
Its purpose is to enable ship-owner, the buyer and seller of the goods to operate their
businesses, while relieving themselves, at least partly, of the burdensome financial
consequences of their property’s being lost or damaged as a result of various risks of the high
seas.
Thus, marine insurance adds the necessary element of financial security so that the risk of an
accident happening during the transport is not an inhibiting factor in the conduct of
international trade. In this sense, marine insurance is an aid to the conduct of seaborne
international trade. Therefore, developing an efficient and competitive insurance market is of
key importance for developing countries like India as they integrate into the world economy.
This paper analyses the legal aspects the marine insurance in India. In this regard, it provides
an overview and analysis of the Marine Insurance Act, 1963.
A contract or policy of marine insurance is an arrangement whereby one person

called insurer or underwriter, agrees, according to specific terms of contract, to indemnify
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another person, called assured, for the losses incurred in connection with property, such as
ship, goods or other movables, in maritime transport (See, sections 25).
Section 3 of the Marine Insurance Act, 1963, defines ‘marine insurance’ as follows:
A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify

the assured, in the manner and to the extent thereby agreed, against marine losses, that is to
say, the losses incidental to marine adventure.
“Marine adventure” includes any adventure where any insurable property is exposed to
maritime perils i.e. perils consequent to navigation of the sea. It also includes the earnings or
acquisition of any freight, passage money, commission, profit or other pecuniary benefit, or
the security for any advances, loans, or disbursements is endangered by the exposure of
insurable property to maritime perils (ibid., sections 2(e) Marine adventure also includes any
liability to a third party may be incurred by the owner of, or other person interested in or
responsible for, insurable property by reason of maritime perils.
A contract of marine insurance may, by its express terms, or by usage of trade, be extended
so as to protect the assured against losses on inland waters or on any land risk which may be
incidental to any sea voyage (ibid., Section 4[1])
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1.2HISTORY OF MARINE INSURANCE
The earliest instances of insurance are in the form of marine trade losses or carrier’s
contracts. In Rig Veda, the references are made to the concept of “Yogakshema” which is
more or less akin to the wellbeing and security of people. The oldest form of insurance is the
marine insurance. The first form of marine insurance dates back to the year 3000 BC when
Chinese merchants dispersed their shipments amongst several vessels so as to abridge the
possibility of damage to the products. The earliest account of insurance came in the form of
bottomary, a monetary payment that protects traders from debt if merchandise is lost or
damaged.
Another form of early insurance was the general average. During cargo shipments in
916 BC, a merchant would accompany his cargo to see that it was not jettisoned, or
voluntarily thrown overboard by the crewmen in times of a storm or sinkage. To guard
against this mutual interest of safety and quarreling amongst merchants, the Rhodiansinitiated
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the general average, which ideally meant that a person would be compensated through pro
rata contributions of other merchants if their goods were jettisoned during shipment.
From the 11th century to 18th century, a few additional breakthroughs occurred in
marine insurance. The first marine insurance policy was introduced in 1384 in an attempt to
cover bales of fabric traveling to Savona from Pisa, Italy. Within the next century, merchants
from Lombard began the first insurance practice in London. Lyoyd’s Association may be the
pioneer for the legally framed Marine Insurance for cargo and vessel. In the seventeenth
century insurance of ships and cargo was often underwritten by merchants who were willing
to carry part of the risk of voyage for part of the premium.
In this regard merchants met other merchants in various coffee houses around the City
of London and transacted marine insurance. One of such places, a coffee house was situated
near the River Thames and was frequented by merchants, ship owners and others having
interest in marine ventures. The coffee house was owned by Edward Lyoyd and he
encouraged such meeting of merchants, ship owners and under writers because it brought
extra business to his coffee house. Thus, the Lyoydswas started informally and took the legal
shape and declared as one of the pioneers for marine insurance. Finally, in 1688, Lloyd's of
London, named after Edward Lloyd, began the risky business of insurance underwriting and
has grown to become the largest marine insurance underwriters in the world. The Marine
Insurance Act of 1906 was then proposed and initiated in an attempt to clarify and set forth
the regulations and policy variables associated with marine insurance agreements.
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
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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 Street in 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 Cornhill as 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 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.
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1.3 MARINE INSURANCE DEFINITION
“A contract of Marine Insurance is an agreement whereby the insurer undertakes to

indemnify the assured in the manner and to the extent thereby agreed, against marine losses,
that is to say, the losses incidental to marine adventure”. It implies that a marine insurance
contract may not, as in the case of other forms of insurance place the insured in the same
pecuniary position, which he occupied before the occurrence of the loss. This can be
explained as follows:
a) Settlement on a cash basis is always preferable to an undertaking, to replace lost

ships and cargoes, is practically not feasible.
b) Settlement of a loss on actual or market value at the time of loss is generally

deemed impractical in marine insurance.
c) Cargoes are always in movement from one place to another and their value
generally appreciates as they move nearer to their destination, freight, duty and profit forming
part of the value. Thus, the value of a cargo may widely differ from country to country.
Although the Principles of Indemnity is not strictly generally applied in marine insurance, a
marine policy, such as, covering cargo can also be issued on pure indemnity basis.
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1.4 MEANING OF MARINE INSURANCE
Marine insurance is concerned with overseas trade. International trade involves

transportation of goods from one country to another country by ships. There are many
dangers during the transshipment. The persons who are importing the goods will like to
ensure the safe arrival of their goods. The shipping company wants the safety of the ship. So
marine insurance insures the coverage of all types of risks which occur during the transit.
Marine insurance may be called a contract whereby the insurer undertakes to indemnify the
insured in a manner and to the extent thereby agreed upon against marine losses.
 Marine insurance has two branches:
1. Ocean Marine Insurance.
Ocean marine insurance covers the perils of the sea whereas inland marine insurance
is related to the inland risks on the land.
2. Inland Marine Insurance.
Marine insurance is one of the oldest forms of insurance. It has developed with the
expansion of trade. It was started during the middle ages in Italy and then in England. The
sending of goods by the sea involves many perils; so it was necessary to get the goods
insured. In modern times marine insurance business is well organized and is carried on
scientific lines.
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1.5 PRINCIPLES OF MARINE INSURANCE
The principles of all types of insurance are generally the same and they have been discussed
earlier, in detail. Some of the principles related to marine insurance are given as under:
1. Utmost good faith:

The marine contract is based on utmost good faith on the part of the parties. The burden
of this principle is more on the insured than on the underwriter. The insured should give full
information about the subject to the insured. He should not withhold any information. If a
party does act in good faith, the other party is at liberty to cancel the contract.
The marine insurance policy relies on the principle of utmost good faith, which clearly
states that at the time of filling the marine insurance policy document, the applicant should
disclose the correct information. Also, the applicant would not withhold any material
information. If the applicant conceals or hides important information, the marine insurance
company has all rights to reject the policy applicant.
2. Insurable Interest:
Insurable interest means that the insured should have interest in the subject when it is to
be insured. He should be benefited by the safe arrival of commodities and he should be
prejudiced by loss or damage of goods. The insured may not have an insurable interest at the
time of acquiring a marine insurance policy, but he should have a reasonable, expectation of
acquiring such interest. The insured must have insurable interest at the time of loss or
damage, otherwise he will not be able to claim compensation.
According to this principle, it is necessary for the policyholder to have some insurable
interest in the subject for which he/she wants to buy insurance. It means, the policyholder
should be benefitted from the safe arrival of goods and should suffer losses due to damage of
goods. It might happen that the policyholder doesn’t have an insurable interest at the time of
buying a marine insurance policy, however, he should expect getting such interest in the
future. It is necessary that the policyholder must have some insurable interest in the insured
item otherwise he will not be able to get the claim settled from the insurer.
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3. Indemnity:
This principle means that the insured will be compensated only to the extent of loss
suffered. He will not be allowed to earn profit from marine insurance. The underwriter
provides to compensate the insured in cash and not to replace the cargo or the ship. The
money value of the subject-matter is decided at the time of taking up the policy. Sometimes
the value is calculated at the time of loss also.
As per this principle, the marine insurance policyholder would be compensated only to
the extent of the loss. It means, the person should not purchase marine insurance to earn
profits. In any case, the policyholder will not get more than the actual loss incurred.
4. Cause Proxima:
This is a Latin word which means the nearest or proximate cause. It helps is deciding the
actual cause of loss when a number of causes have contributed to the loss. The immediate
cause of loss should be determined to fix the responsibility of the insurer. The remote cause
for a loss is not important in determining the liability.
At the time of loss, the marine insurance policyholder would consider the nearest or
proximate cause, which would help in deciding the actual cause of loss when there would be
a series of causes which have attributed to the loss. Here, remote cause for a loss is not
required to determine the liability and therefore, if the proximate cause is insured, the marine
insurance company has to settle the claim.
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1.6 FEATURES OF MARINE INSURANCE
1) Offer & Acceptance:
It is a prerequisite to any contract. Similarly the goods under marine (transit) insurance will
be insured after the offer is accepted by the insurance company. Example: A proposal
submitted to the insurance company along with premium on 1/4/2011 but the insurance
company accepted the proposal on 15/4/2011. The risk is covered from 15/4/2011 and any
loss prior to this date will not be covered under marine insurance.
A contract of insurance becomes concluded when there is a proposal to the assured and as
insurer accepts the contract, irrespective of issue of policy. Though a contract is concluded
without issue of policy but it cannot be treated as an evidence if marine policy is not issued
with respect to the contract. The policy must specify
1. Name of the assured or of some person who effects the insurance on his behalf
2. Subject matter insured and the risk insured against
3. Voyage or term of policy or both agreed by the parties
4. Sum assured e. Name of the Insurer.
2) Payment of premium:
An owner must ensure that the premium is paid well in advance so that the risk can be
covered. If the payment is made through cheque and it is dishonored then the coverage of risk
will not exist. It is as per section 64VB of Insurance Act 1938- Payment of premium in
advance. (Details under insurance legislation Module).
3) Contract of Indemnity:
Marine insurance is contract of indemnity and the insurance company is liable only to the
extent of actual loss suffered. If there is no loss there is no liability even if there is operation
of insured peril. Example: If the property under marine (transit) insurance is insured for Rs 20
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lakhs and during transit it is damaged to the extent of Rs 10 lakhs then the insurance
company will not pay more than Rs 10 lakhs.
Marine insurance is an indemnity policy under which an insurer agrees to compensate for
losses or damages in consideration of the timely payment of premium. The contract of marine
insurance shall cover the clause for indemnity as in no case Assured shall be allowed to make
profits out of claim amount. There is a possibility of making profits by the party in the
absence of indemnity clause in the marine insurance contract.
The insurer agrees to indemnify the assured only to the extent agreed upon. Marine insurance
contract does not often includes complete indemnity due to large and varied nature of the
marine voyage.
This value may be either the insured or insurable value. If the value of the subject matter is
determined at the time of taking the policy, it is called ‘Insured Value’. When loss arises the
indemnity will be measured in the proportion that the assured sum bears to the insured value.
Transportation cost and anticipated profits are added to the original value so that in case of
loss the insured can recover not only the cost of goods or properties but a certain percentage
of profit also.
4) Utmost good faith:
The owner of goods to be transported must disclose all the relevant information to the
insurance company while insuring their goods. The marine policy shall be voidable at the
option of the insurer in the event of misrepresentation, mis-description or non-disclosure of
any material information. Example: The nature of goods must be disclosed i.e whether the
goods are hazardous in nature or not, as premium rate will be higher for hazardous goods.
The doctrine of utmost good faith is covered in section 19, 20, 21 and 22 of the Marine
Insurance Act 1963. Contracts regarding insurances are based on the principle of uberrimae
fides which means utmost good faith. If any party to the contract fails to comply with this
principle then contract can be avoided by the other party.
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The duty of the utmost good faith applies also to the insurer. He may not urge the proposer to
affect an insurance which he knows is not legal or has run off safely. The obligation of
utmost good faith and disclosure of correct facts is more on assured as compared to insurer
because he is aware of the material common in other branches of insurance are not used in
the marine insurance.The assured shall disclose all the material information which may affect
the contract in any manner. Any non-disclosure of a material fact enables the underwriter to
avoid the contract, irrespective of whether the non-disclosure was intentional or inadvertent.
The assured is expected to know every circumstance which in the ordinary course of business
ought to be known by him. He cannot rely on his own inefficiency or neglect.
5) Insurable Interest:
The marine insurance will be valid if the person is having insurable interest at the time of
loss. The insurable interest will depend upon the nature of sales contract. Example: Mr. A
sends the goods to Mr. B on FOB (Free on Board) basis which means the insurance is to be
arranged by Mr. B. And if any loss arises during transit then Mr. B is entitled to get the
compensation from the insurance company. Example: Mr. A sends the goods to Mr. B on CIF
(Cost, Insurance and Freight) basis which means the insurance is to be arranged by Mr. A.
And if any loss arises during transit then Mr. A is entitled to get the compensation from the
insurance company.
For effecting marine insurance like any other insurance, the assured must have an insurable
interest. If there is no such interest, the policy would be a wagering contract and thus it will
be void. Any person does have an insurable interest who is interested in a marine journey or
who can get affected due to the losses and damages caused in the marine journey or
adventure. The interest must subsist either at the time of effecting the insurance or at the time
of loss. Any interest which is defeasible or contingent or partial can be insured. A lender
under a bottomry bond or respondentia bond has insurable interest as well as master’s and
seamen’s wages, advance freight are insurable, a mortgagee has also insurable interest.
6) Contribution:
If a person insures his goods with two insurance companies, then in case of marine loss both
the insurance companies will pay the loss to the owner proportionately. Example; Goods
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worth Rs. 50 lakhs were insured for marine insurance with Insurance Company A and B. In
case of loss, both the insurance companies will contribute equally.
7) Period of marine Insurance:
The period of insurance in the policy is for the normal time taken for a particular transit.
Generally the period of open marine insurance will not exceed one year. It can also be issued
for the single transit and for specific period but not for more than a year.
8) Deliberate Act:
If goods are damaged or loss occurs during transit because of deliberate act of an owner then
that damage or loss will not be covered under the policy.
9) Claims:
To get the compensation under marine insurance the owner must inform the insurance
company immediately so that the insurance company can take necessary steps to determine
the loss.
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Types of Vessel:
There are many different types of ships, and the differences are mostly based upon the
type of cargo the ship transports. Most all ships have some basic things in common.
Generally the deck from which the gangway comes off is the main deck. The forward
most compartments below the main deck is the forepeak tank used for ballast. Also
forward will be found the chain locker for the anchor chain which protrudes down
into the forepeak tank. If you spot the main stack and go directly down below the
main deck you will find the engine room. Going aft from the engine room at the
center of the ship, if it only has one engine, or on both sides if it has two engines, will
be the shaft alley. On both sides of the shaft alley you will generally find tanks. What
type of tanks those are will depend on the ship. They could be fuel oil, lube oil, fresh
water and so on. On most all general cargo ships, and on any number of other ships,
going forward from the engine room to the end of number two hold will be a pipe
tunnel. In the pipe tunnel you will find steam pipes going to fuel oil tanks. Most ships
use bunker oil for fuel. Bunker oil is almost as thick as tar and needs steam to heat it
in order for it to be able to be pumped. Some will burn the fuel directly in the engines,
while others will burn it in large boilers, and the steam created runs the engines, these
are called steamships. Upon the stern of the ship you will find written the ship's
homeport, and the flag of the country in which the ship is registered. Upon the stack
you will find, in most cases, a design that identifies the shipping line that owns the
ship, If you see a red flag flying off the mast that means that the ship is taking on fuel.
The following is a rundown of the major types of commercial ships: 1). General cargo
ships (sometimes called Break bulk Carriers). These ships will mostly have four or
five holds (a hold is the cargo space in a ship), with one or, in a few cases, two holds
aft of the engine room, and four to five holds generally forward of the engine room.
They have long protruding rigging for winches by each hold. These winches are used
to load and unload the cargo. The cargo is usually packaged and moved as single
parcels, or assembled together on pallet boards. Longshoremen go down into the
holds to hook up the cargo to be lifted out. Some general cargo ships may also have
refrigerated spaces for perishable cargo. The average general cargo ship is about 500
feet long. 2). Bulk carriers. Like general cargo ships bulk carriers will have large
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hydraulic hatches covering the holds, but will not have any overhead rigging. Bulk
carriers are used for things such as grain, ore, wood chips, etc, that can be poured
down into a hold. They will load and offload at special port terminals for whatever
cargo they may carry. Sometimes the holds must be steamed cleaned by laborers
when the ship is set to carry a different cargo than the one that it unloaded. The
average bulk carrier ship is around 800 feet long. 3). Container ships. These ships are
designed to carry large steel containers that are usually 20 feet or 40 feet long, eight
feet wide and eight feet tall. These ships are loaded and off loaded by large cranes to
and from trucks. There are some that are also designed where the bow opens up and
barges are pulled in that have containers on them. Container ships are limited to ports
that have container terminals. The advantage of using containers is that all the cargo
in each container will be destine for some location away from the port taken there by
either truck or rail. This does away with the warehouses that are needed for general
cargo ships where the cargo is divided up and loaded into truck trailers or railcars.
Container ships come in many different sizes; some now are incredibly huge. 4). Auto
carriers. These are huge ships that are nothing more than floating parking garages.
They can hold between 2,000 and 4,000 vehicles. Ramps are lowered out of the side
of the ship and the vehicles are driven off. The average auto carrier is about 600 feet
long, 100 feet wide, and over 100 feet tall. 5). Tankers. These are little more than oil
drums with an engine. Though the most common tanker hauls oil, there are other
tankers that haul many different types of liquids and gases. You can spot a tanker by
the large amount of piping forward of the bridge on the main deck. The piping is for
loading and off loading the cargo. There will be no large hatch covers like there is on
general cargo ships and bulk carries, but there will be much smaller manholes at each
tank for workers who need to climb down into the holds to work. Just forward of the
bridge is the pump room, where the pumps for the ballast system will be found.
Tankers come in all sizes, with the largest ones being supertankers that are nearly a
quarter of a mile long and wider than a football field. There are few ports that
supertankers can enter and thus they are mostly loaded and off-loaded from pumping
stations off shore. 6). Fishing vessels. Most people think of fishing vessels as being
just boats, but in today's industrial world many of these vessels are as large as some
ships and, in some cases, they are converted general cargo ships. The following are
different types of fishing vessels: A. Fishing boats - These may be as long as 90 feet
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and will have refrigerated holds. B. Processors - These ships not only catch fish, but
also within them there is a factory to completely process the fish. The factory deck
will be right under the main deck and the fish come in and they are cleaned, filleted
and packaged. C. Non-fishing processors - These are a rather new type of ship that a
few multinational corporations use. All that I have seen have been converted general
cargo ships that have huge factory decks and refrigerated holds. 7) Oil industry
vessels. These are the vessels that are used by the oil industry in offshore drilling.
These include work and living barges, supply boats, and pipeline vessels. The pipeline
vessels will have huge rolls of pipe that they roll out into the water to connect the
offshore oil well with an onshore facility. 8.) Passenger ships. Today passenger ships
are mostly used as cruise ships, but there are still a few passenger ships that transport
people from port to port for the purpose of transportation, rather than sightseeing. I
have worked on only one such ship that took people from New Orleans to the Panama
Canal. Some cargo ships will also include rooms for passengers, because if a ship has
passengers, in many ports, it is allowed to dock before other ships. I have known a
few people who have used this as a cheap means to travel to different parts of the
world. 9). Ferryboats. These are still in use in places where bridges cannot be built or
are not constructed, for one reason or another. Some cross short bodies of water,
while some sail long distances, like the Alaskan ferry. Ferries come in all sizes; from
small passenger only ferries to the huge ferries the size of container ships that are
used in northern Europe. 10). Tow and tug boats. These are small vessels that
generally have two powerful engines. Towboats are used for moving barges while
tugboats are used to move ships, in most cases to dock them. 11). Barges. These are
unpowered vessels that require a towboat to move. Barges are used to transport
different cargoes of which there are three basic types: there is the sunken hold type for
such things as grain and ore, the flat top type for such things as containers and the
tanker barges for liquids and gases. There are also barges for many other purposes;
living barges, work barges, crane barges to name a few. 12). Specialized ships. There
are many ships that are constructed or converted for specialized purposes, like
dredging, exploration, offshore construction, work gang ships (these are for housing
workers in areas where there is no onshore living quarters), or for specialized cargo.
For example, banana boats that are not much more than small general cargo ships.
Banana boats are nasty damn ships, for down in their holds one may come across very
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large spiders. As a pipefitter, there are few, if any, compartments, tanks, voids,
tunnels and holds that we do not, at some time, have to work in. Along with
shipfitters, marine pipefitters will have more direct experience in all the parts of a ship
than even the seamen who sail the ship.
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1.7 WARRANTIES
A warranty is that by which the assured undertakes that some particular thing shall or
shall not be done, or that some conditions shall be fulfilled or whereby he affirms or
negatives the existence of a particular state of facts.
Warranties are the statement according to which insured person promises to do or not
to do a particular thing or to fulfill or not to fulfill a certain condition. It is not merely a
condition but statement of fact.
Warranties are more vigorously insisted upon than the conditions because the contract
comes to an end if a warranty is broken whether the warranty was material or not. In case of
condition or representation the contract comes to end only when these were material or
important. Warranties are of two types:
(1) Express Warranties
(2) Implied Warranties.
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The following types of warranties are explained below:
1. Express Warranties:
Express warranties are those warranties which are expressly included or incorporated in
the policy by reference.
2. Implied Warranties:
These are not mentioned in the policy at all but are tacitly understood by the parties to
the contract and are as fully binding as express warranties.
Warranties can also be classified as (1) Affirmative, and (2) Promissory. Affirmative
warranty is the promise which insured gives to exist or not to exist certain facts. Promissory
warranty is the promise in which insured promises that he will do or not do a certain thing up
to the period of policy. In marine insurance, implied warranties are very important. These are:
1. Seaworthiness of Ship.
2. Legality of venture.
3. Non-deviation.
All these warranties must be literally, complied with as otherwise the underwriter may
avoid all liabilities as from the date of the breach.
However, there are two exceptions to this rule when a breach of warranty does not
affect the underwriter's liability: (1) where owing to a change of circumstances the warranty
is no longer applicable. (2) Where compliance would be unlawful owing to the enactment of
subsequent law.
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1. Seaworthiness of ship:
The warranty implies that the ship should be seaworthy at the commencement of the
voyage, or if the voyage is carried out in stages at the commencement of each stage. This
warranty implies only to voyage policies, though such policies may be of ship, cargo, freight
or any other interest. There is no implied warranty of seaworthiness in time policies.
A ship is seaworthy when the ship is suitably constructed, properly equipped,

officered and manned, sufficiently fuelled and provisioned, documented and capable of
withstanding the ordinary strain and stress of the voyage. The seaworthiness will be clearer
from the following points:
1. The standard to judge the seaworthiness is not fixed. It is a relative term and may vary
with any particular vessel at different periods of the same voyage. A ship may be
perfectly seaworthy for Trans-ocean voyage.
A ship may be suitable for summer but may not be suitable for winter. There may be
different standard for different ocean, for different cargo, for different destination and
so on.
2. Seaworthiness does not depend merely on the condition of the ship, but it includes the
suitability and adequacy of her equipment, adequacy and experience of the officers
and crew.
3. At the commencement of journey, the ship must be capable of withstanding the

ordinary strain and stress of the sea.
4. Seaworthiness also includes "Cargo-Worthiness". It means the ship must be

reasonably fit and suitable to carry the kind of cargo insured. It should be noted that
the warranty of seaworthiness does not apply to cargo. It applies to the vessel only.
There is no warranty that the cargo should be seaworthy.
It cannot be expected from the cargo-owner to be well-versed in the matter of shipping

and overseas trade. So, it is admitted in seaworthiness clause that the cargo would be
seaworthy of the vessel and would not be raised as defense to any claim for loss by insured
perils. It should be noted that the ship should be seaworthy at the port of commencement of
voyage or at the different stages if voyage is to be completed in stages.
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2. Legality of Venture:
This warranty implies that the adventure insured shall be lawful and that so far as the
assured can control the matter it shall be carried out in a lawful manner of the country.
Violation of foreign laws does not necessarily involve breach of the warranty. There is no
implied warranty as to the nationality of a ship.
The implied warranty of legality applies total policies, voyage or time. Marine
policies cannot be applied to protect illegal voyages or adventure. The assured can have no
right to claim a loss if the venture was illegal. The example of illegal venture may be trading
with an enemy, violating national laws, smuggling, breach of blockade and similar ventures
prohibited by law.
Illegality must not be confused with the illegal conduct of the third party e.g.,
barratry, theft, pirates, rovers. The waiver of this warranty is not permitted as it is against
public policy.
3. Other Implied Warranties:
There are other warranties which must be complied in marine insurance.
(a) No Change in Voyage:
When the destination of voyage is changed intentionally after the beginning of the risk,
this is called change in voyage.
In absence of any warranty contrary to this one, the insurer quits his responsibility at the
time of change in voyage. The time of change of voyage is determined when there is
determination or intention to change the voyage.
(b) No Delay in Voyage :
This warranty applies only to voyage policies. There should not be delay in starting of
voyage and laziness or delay during the course of journey. This is implied condition that
venture must start within the reasonable time.
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Moreover, the insured venture must be dispatched within the reasonable time. If this
warranty is not complied, the insurer may avoid the contract in absence of any legal
reason.
(c) Non deviation:
The liability of the insurer ends in deviation of journey. Deviation means removal from
the common route or given path. When the ship deviates from the fixed passage without
any legal reason, the insurer quits his responsibility.
This would be immaterial that the ship returned to her original route before loss. The
insurer can quit his responsibility only when there is actual deviation and not mere
intention to deviation.
There are following exceptions of delay and deviation warranties:
 Deviation or delay is authorized according to a particular warranty of the policy.
 When the delay or deviation was beyond the reasonable approach of the master or
crew.
 The deviation or delay is exempted for the safety of ship or insured matter or human
lives.
 Deviation or delay was due to barratry.
1.7.1 WARRANTIES IN MARINE INSURANCE :
Warranty in Contract Law:
The term ‘warranty’ in its most traditional non-insurance sense is understood as a

term of the contract, the breach of which entitles the aggrieved party to damages, but not a
right to treat the contract as void. Accordingly, the aggrieved party is still under an obligation
to perform the contract despite the fact the contract is breached by the other party. The term
‘warranty’ is also used to refer to certain guarantees given by a retailer under a sale contract.
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For example, in a contract for sale of a car, the seller might agree to replace parts found to be
defective within a period of one year. This kind of guarantee called a warranty is binding on
the part of the seller since it forms part of the sale contract.
Warranty in Insurance Law:
Unlike general contract law, the use of the term ‘warranty’ is rather qualified in
Insurance Law. The term is, occasionally, used in some exclusion clauses that intend to limit
the liability of the insurer under the policy. For instance, in a clause which is worded
“warranted free from seizure and capture”, the warranty means that the insurer is not liable
for the perils of capture and seizure.
However, the word ‘warranty’, in a technical sense, is used to refer to a certain term
of the insurance contract, breach of which has particular legal consequences. With a
warranty, one party of the insurance contract, the assured, undertakes certain obligations that
need to be fulfilled within a certain time frame and the liability of the insurer, under the
insurance contract, depends on the assured’s compliance with those obligations. In this
respect, warranties are used by the insurer as a shield against liability.
Warranties are quite commonly used in marine insurance policies and The Marine
Insurance Act (MIA), 1963 has provided the legal framework therefore. Warranties also
appear in all types of non-marine insurance policies. Generally speaking, the rules laid down
by the MIA 1963 for marine insurance warranties could also be applied for non-marine
insurance warranties. However, there are certain differences that exist between marine and
non-marine warranties.
First, the implied warranties that have been incorporated in marine insurance policies
by MIA 1963 do not exist in non-marine policies. The main reason for this distinction is that
non-marine insurance lacks the element of maritime adventure. Accordingly, in non-marine
insurance policies warranties must be formulated by express wording.
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Secondly, in marine insurance it is a statutory rule that an express warranty must be

incorporated in the policy by words of reference appearing in the policy itself. This does not,
however, appear to be the general rule in non-marine insurance where it is sufficient for an
insurer to obtain the signature of the proposer to a declaration in the proposal form which
says that “This proposal is to serve as the basis of the contract”, whereupon the warranty is an
effective term of the contract, even though not expressly stated in the policy.
Finally, it has been observed that courts have a tendency to construe non-marine
insurance warranties narrowly so that the scope of the undertaking is restricted. But in marine
insurance, despite the applicability of similar interpretation rules, courts are reluctant to
interpret warranties in favor of the assured. One possible reason behind this could be the fact
that marine insurance market is a place where the demand side is made up of professional
people like ship-owners, cargo-owners, consignees, consignors, charterers etc. and they are
expected to have a certain amount of knowledge regarding rules and practices which are
followed both in domestic and international trade and commerce.
1.7.2 CLASSIFICATION OF MARINE INSURANCE WARRANTIES:
A marine warranty is defined by S 35 (1) of the MIA 1963 as follows:
“……….. A promissory warranty, that is to say, a warranty by which the assured undertakes
that some particular thing shall or shall not be done, or that some condition shall be fulfilled,
or whereby he affirms or negatives the existence of a particular state of facts”.
It is clear from this definition that the MIA 1963 has regarded all maritime warranties as
“promissory”. The phrase “promissory warranty” is a collective expression for all marine
warranties and they are categorized according to different criteria.
(1) Classification of promissory warranties according to the time of undertaking:
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Certain warranties relate in time to the circumstances of the risk. For instance, a warranty
whereby “the assured declares that the ship-managers have a certain citizenship”, is a
warranty of this type. In cases where such a warranty is breached, the insurer never comes on
risk and, accordingly, the premium is refundable due to total failure of consideration.
Some warranties undertake that a given state of affairs would be satisfied or avoided at
some time after inception of the risk. This kind of warranty is referred to as a “warranty as to
future events”. A navigation warranty which requires the insured vessel not to navigate in
certain seas during the currency of the policy is a warranty of this type. By virtue of S 35 (3)
of the MIA 1963, the breach of such a warranty does not prevent the risk from running and
leaves untouched any right that has already vested in the assured at the time of the breach.
An assured with a warranty might undertake that a given state of affairs would not only
exist at the inception of the risk but exist during its continuation as well. Warranties of this
type are called “continuing warranties”. The implied “warranty of legality” that requires the
insured adventure to be a lawful one and be carried out in a lawful manner is a good example
of a “continuing warranty”. There could be other warranties which mandate the stowing of
cargo in the holds in a given manner so that they don’t shift during voyage. This type of
warranty is especially of relevance in respect of cargo stored on the deck of the ship.
(2) Classification of promissory warranties according to the nature of the undertaking:
Depending on the nature of the undertaking, warranties may be divided into “affirmative
warranties” and “warranties that need to be satisfied by a positive or negative act”. The
‘affirmative warranty’ affirms or negatives the existence of a particular state of facts, like the
warranty whereby the assured warrants that the flag of the insured vessel has always been
Indian. The implied “warranty of sea-worthiness”, which requires the insured vessel to be sea
worthy at the commencement of a voyage is an example of a warranty of this type.
In cases where the assured affirms or negatives the existence of a certain fact with a
warranty, and the affirmation or negation is proven to be inaccurate, the insurer never comes
on risk.
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(3) Classification of promissory warranties according to their structure:
According to their structure, warranties could be express or implied. In fact, this is the
classification on which the warranties regime in the MIA 1963 is based. Express warranties
appear in the policy or are incorporated therein through reference to them or through
endorsement. Under the “doctrine of freedom of contract”, the number and extent of express
warranties depend upon the mutual agreement between the assured and the insurer.
Implied warranties, on the other hand, are incorporated in certain marine insurance
policies by the provisions of the MIA 1963 and, accordingly, their number and scope are
determined by the Act.
Express Warranties and the necessity for their inclusion in Marine Insurance policies
Section 37 (1) of the MIA 1963 provides that no conventional or technical wording is
required for the formulation of an express warranty. An express warranty could be written
with any kind of wording, provided that the parties’ common intention is to give the status of
warranty to the condition/clause in question. The words “warranty” or “warranted” are,
therefore, not essential to formulate an express warranty.
To determine whether there was a common intention to incorporate an express warranty in

the policy is not an easy task. In the case of HIH Casualty & General Insurance Ltd. New
Hampshire Insurance Co. and Others (2000), the Court of Appeals, London declared that a
term is a warranty:
(a) If it goes to the root of the contract;
(b) If it is descriptive of the risk or bears materially on the risk of loss; and
(c) If damages would be an inadequate or unsatisfactory remedy for the breach.
Despite the fact no specific format is necessary to lay down an express warranty, S
37(2) of the MIA 1963 requires a warranty to be included in or written upon the policy or
contained in some document incorporated by reference in the policy. Necessity for inclusion
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of an express warranty is unique to marine insurance and has no application in non-marine

insurance. A warranty may be written in any part of the policy document, either at the top or
bottom, or transversely on the margin, or on the back. An express warranty does not exclude
an implied warranty, unless inconsistent therewith, vide S 37(3) of the MIA 1963.
The parties to a marine insurance contract are given a wide range of discretion, not
only to lay down an express warranty on any matter but also to determine its scope, range and
reach. The express warranties that find a special mention in the MIA 1963 are warranties of
good and beneficial safety, nationality and neutrality. Some of the other express warranties
that find frequent inclusion are:
(i) Warranties as to geographical limits
(ii) Warranty as to stowage and salvage services
(iii) Warranties as to cargo carried
(iv) Survey warranties.
(v) Premium warranties.
Implied Warranties and the purpose they serve implied warranties do not appear in the
policy but are tacitly understood by the parties to the contract. They are implied by law from
the circumstances in which the bargain was brought about.
Implied warranties are exclusive to marine insurance. They are not found in non-marine
insurance. The rationale for this lies in the unique nature of maritime adventure. When a
vessel is engaged in maritime adventure, apart from the ship-owner, numerous other interests
as such as the crew members, freight, consignees of cargo, consignors, charterers, if any etc.
are exposed to maritime perils; however neither the assured nor the insurer is in a position to
exactly ascertain the condition of the insured vessel when she is on voyage on high seas
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despite radio contact between the master and crew of the vessel and the ship-owners. In order
to balance the conflicting interests of the contracting parties and minimize the pitfalls of the
maritime adventure, marine insurance law has imposed certain implied warranties in marine
insurance policies.
There are four warranties implied by the MIA 1963:
(i) Warranty of sea worthiness – S 41 (1), (3), and (4);
(ii) Warranty of port worthiness – S 41 (2);
(iii) Warranty of cargo worthiness – S 42 (2);
(iv) Warranty of legality – S 43.
Warranty of sea worthiness:
The doctrine of sea worthiness was formulated and developed with a view to protect
the interests that are exposed to a maritime adventure from the possible hazards of the
adventure. Initially, a provision in respect of sea worthiness was inserted into the charter
parties of vessels in order to warn merchants who loaded cargo into the holds of the vessel.
This provision, however, did not impose any obligation on the ship-owner or charterer of the
ship to ensure the sea worthiness of the vessel both at the commencement of the voyage and
during the course of the voyage and the merchants who ventured into the sea with their cargo
had no recourse against the ship-owner or the charterers of the ship should the vessel meet
with disaster primarily because it was not sea worthy.
It was in the 17th century that the merchants were afforded a right of indemnity,
solely upon proof of the vessels’ unseaworthiness, independent of any fault or negligence on
the part of the owner or master. With the enactment of The Marine Insurance Act, 1960 in the
UK and subsequently The Marine Insurance Act, 1963 in India seaworthiness of the vessel
acquired legal rigor.
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Section 41 (4) of the MIA 1963 provides that “A ship is deemed to be sea worthy
when she is reasonably fit in all respects to encounter the ordinary perils of the sea adventure
insured”.
Seaworthiness has been further interpreted to mean “ability to withstand ordinary

stress of wind, waves and other weather conditions which the vessel might normally be
expected to encounter during her voyage”.
Another definition of the term has been given by Channel J, who said that “to be
seaworthy a vessel must have that degree of fitness which an ordinary, careful and prudent
owner would require his vessel to have at the commencement of her voyage, having regard to
all the probable circumstances of it”.
The required standard of seaworthiness is not absolute, in the sense that it is ‘relative’, among
other things, the state of knowledge and standards prevailing at the material time and varies
according to the voyage undertaken and the class of the ship. Therefore, the term
“seaworthiness” also expands in terms of what it stands for over time to reflect the evolving
changes in the technology, standards of ship construction and regular overhaul and carrying
out maintenance repairs.
The main categories for which the term “seaworthiness” is applicable to are:
i) Structure and other technical equipment of the vessel – the hull, machinery and
other mechanical, electrical and electronic equipment, hatches, pipes and pumps,
tackle and steering mechanism, temporary defects etc.
ii) Design and construction of the vessel – compliance with the requirements of
statutes, and rules of classification societies.
iii) Latent defect in hull and machinery.
iv) Navigational equipment/aids.
v) Certificates and documents necessary for the protection of the vessel and cargo.
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vi) Sufficiency of fuel, provisions and medicines.
vii) Efficiency/Competence of the crew.
viii) Stowage and loading.
ix) Pilot.
Warranty of port-worthiness:
Where a voyage policy attaches ‘at and from’ the place named in the policy, S 41 (2)
of the MIA 1963 requires that the vessel while in port must be reasonably fit to encounter the
ordinary perils of the port. The term ‘port-worthiness’ does not appear either in S 41 (2) or
anywhere in the MIA 1963. It is a term of recent origin. The degree of fitness required to
encounter the ordinary perils of the port may vary with according to different factors:
(1) The class of vessel in question can be quite crucial in determining the degree of
fitness required. In this sense, while a cargo ship can be considered as port worthy for a
specific port. A passenger boat may not.
(2) The degree of fitness may vary from port to port. A lower degree of fitness may be
required for a port that is located in a bay than a port that is open to waves and tides of an
ocean. A vessel which is port worthy for a certain port during summer season may not be port
worthy during winter season. Tides which vary with the moon’s quarters may affect the
navigability of a water basin and therefore impact the port worthiness of a vessel.
Whether a ship has to be always fit to endure the ordinary perils of the port
throughout the period of her stay while ‘at’ port, is an issue that has never been fully
answered. As the implied warranty of sea worthiness is applicable only at the commencement
of the voyage, it could be said the implied warranty of port worthiness should, likewise, apply
at commencement of the risk.
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Warranty of cargo worthiness:
Section 42 (2) of the MIA 1963 defines “cargo worthiness” as the vessel being
reasonably fit to carry the goods and other movables to their destination. In terms of this
definition, the main factor that has to be taken into account is whether the vessel is in a fit
state of repair to receive the cargo contracted for carriage. Not all vessels are fitted out to
carry cargo of every description. For instance, if the cargo is frozen meat then the
refrigerating machines, holds etc. must be in proper order, hygienically maintained, efficient
and fit to receive and carry that particular cargo.
A bulk carries which is fit to carry, say food grains may not be fit to carry liquid cargo
like edible oil or mineral ore. A plain reading of the warranty indicates that it will be
construed in the light of the technical efficiency of the ship, both in design and equipment
installed. The voyage undertaken is another factor that is extremely important in determining
whether the vessel is cargo worthy or not. While a vessel carrying one type of cargo around
the harbor may be perfectly cargo worthy for the voyage, the same vessel carrying the same
cargo on an ocean voyage may not be cargo worthy.
Warranty of legality:
Section 41 of the MIA 1963 regulates the legality of the adventure as an implied
warranty. Not only the subject matter insured (for example, ship, cargo, freight) not be tainted
with illegality but the adventure must be lawful and be performed lawfully, so far as the
assured can control the matter. In non-marine insurance legality is ensured by public policy.
For instance, if a machine in a factory has been put to some unlawful use, the insured is
precluded from claiming indemnity by public policy. Can the doctrine of public policy be
invoked for marine insurance as well? There are practical difficulties in marine insurance in
applying the doctrine because of the element of maritime adventure which affects both the
assured and the insurer.
If S 43 of the MIA 1963 had not created a continuing warranty status, illegality which
might arise during the performance of the maritime adventure insured would not have
affected the validity of the policy at the inception and the insurer may be obliged to admit a
34
claim. It is S 43 which now provides some sort of protection to the insurer. From the
assured’s angle, if illegality that might arise during the performance of the adventure had not
been regulated through a warranty, public policy in some cases would have invalidated such
insurances from inception.
In such a case, the assured would stand to lose his insurance cover if the illegal act
beyond his control had been committed by one or more of his employees. Now in view of S
43 of the MIA 1963 the assured is not likely to be prejudiced if any illegal act beyond the
assured’s control be committed by his employees during the performance of the adventure.
Considering the overarching role marine insurance plays in both domestic and
international trade and commerce, the need for reform in marine insurance law cannot be
over emphasized. The breath taking speed with which ship and navigation technology is
changing in recent years, the need for a thorough revision of marine insurance law cannot be
held up for long. Perhaps the powers that be at the Center and the IRDA will look into the
matter.
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1.8 IMPORTANCE OF MARINE INSURANCE
In the commercial age of today marine insurance has become most important insurance in the
field of insurance. The importance of marine insurance is describe below in detail.
1. Importance of marine insurance for the individual:
A person has to import goods from another country which is located on the other side of
sea for his business. While carrying goods from other side of sea businessman may have
to face dacoits or goods may be damaged because of sinking of ship into the water. So
businessman has to experience economic loss. By the result of loss person may be
discouraged to engage in business. But when one insures his/her property in marine
insurance does not have to face with economic problem because marine insurance
provides compensation to the insured against the loss of property.
The technology is developing evermore, but the transport still remains a risky business.
The risk could be managed by choosing a reliable logistics service provider, an
appropriate transport packaging, as well as purchasing a cargo insurance.
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The different types of transport show different kinds of losses and damages.
Nevertheless, the cargo handling operations have proven to be the riskiest part of the
carriage In this regard it is important to note, that the small groupage-freight shipments
need to go through more transshipments in different warehouses before they reach their
destination.
While the truck drivers are resting at specialized truck parking or while the containers are
waiting for loading at the port terminals, the goods are vulnerable to actions of well-
organized bands of thieves. Unfortunately, such occurrences happen not only in less
economically developed countries but also in Western Europe. The costly goods e.g.
computers and home appliances are the most attractive objects, but the thieves are also
happy to leave with less pricey items, even food products.
The vehicles and vessels remain vulnerable to the elements. While the containerships get
bigger and more reliable, there are still approximately 1600 containers lost at sea per
year, 64% of which due to severe weather conditions. (source - World Shipping
Council).
The marine insurance remains an irreplaceable tool for controlling these perils regardless
whether your business ventures are local or international. If you buy your marine
insurance under Institute cargo clauses A your goods will be covered against all risks
except for those explicitly excluded.
2. Importance of marine insurance for ship owner:
Expensive ship may be destroyed due to different types of risks on the marine venture.
Ship owner may have to experience with larger amounts of loss due to the destruction of
the ship. Marine insurance provides compensation of loss to the ship owner. So, marine
insurance is important insurance for ship-owner.
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3. Importance of marine insurance for freight:
Freight insurance is also included under the marine insurance. Freight refers to the
revenue that a cargo ship earns or the money which is paid to the ship owner for
transportation of goods from one part to another. If businessman does not pay freight of
his goods to the shipowner, ship owner may have to experience economic loss. If such
types of loss occurs insurance company indemnifies the shipowner to marine insurance.
So marine insurance is very important for the freight.
4. Importance of marine insurance for cargo owner:
A businessman wants to be secured for his goods. Especially countries which are located
on the other side of sea, businessman may have to use marine venture. Marine insurance
keeps them away from worry and fear or all responsibility of cargo owner is transferred
to the hand of insurance company that provides compensation to the cargo owner if loss
occurs.
5. Importance of marine insurance for the government:
International trade has been increased due to the marine insurance. As international trade
increases government also can receive economic profit. Government increases revenue
by including extra income tax. So marine insurance is important for the government also.
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1.9SPECIAL FEATURES OF MARINERISKS
By their very nature ships are rarely stationary but more mobile and ambulatory and
therefore management is delegated. Ships operate in domestic waters, international waters
and environments that are frequently turbulent and hostile and in weather conditions that are
most unpredictable. Apart from ocean currents, ships have to navigate through heavy weather
and encounter storm, tempest, cyclone, hurricane, sea quakes and other hazards, not to
mention fire and mutiny by ship’s crew members and attack by pirates and rovers and aquatic
creatures like monstrous whales.
As a rule, when the insurance sector turns its attention to accumulation losses,
property insurance takes centre stage. Major natural catastrophes in recent years have
heightened risk managers’ awareness of the fact that extremely high losses can accumulate
here in the worst case. In the special line of marine insurance, on the other hand, the problem
of accumulation continues to receive far too little attention. Quite a risk, considering that this
39
sector is taking up an increasing proportion of insurers’ portfolios.
The reasons are various: Transport capacities by sea, land and air are increasing throughout
the world and both port logistics and speed of trans-shipment are keeping pace with this
development. This results in higher value concentrations and consequently higher insured
values. Offshore energy is also gaining in importance. The Gulf of Mexico alone has around
4,000 oil platforms. Even a moderately severe hurricane could lead to enormous losses there.
However, there are already enough sophisticated, state-of-the-art modelling tools for offshore
energy risks to ensure that accumulation risks are adequately assessed. With these tools,
leading providers of offshore energy capacity can successfully control their accumulated
liability commitments.
Considered in isolation, marine exposure should not pose any great problem for the
majority of property-casualty insurers. Despite this, companies operating predominantly in
property insurance should not neglect supposedly less highly exposed lines of business such
as marine insurance, for the problem of accumulation can intensify existing negative trends in
the property sector or jeopardise tightly calculated profitability margins. The extreme case of
a multi-line accumulated loss can even escalate into a threat to a company’s continued
existence.
Unlike the stationary risks encountered in property insurance, marine risks are normally
mobile. Nevertheless, goods can easily remain in one place for a longer period of time (up to
60 days according to the Institute Cargo Clauses (ICC) and sometimes considerably longer);
major fluctuations in insured values and accumulations at the storage locations are
consequently characteristic features of cargo business. It is often claimed that potential loss
accumulations cannot be determined in advance because it is impossible to say exactly when
any given number of risks will aggregate in a certain place. The loss accumulation scenarios,
risk models and vulnerability curves which have proved their value in property insurance are
therefore unlikely to yield satisfactory results when determining the probable maximum loss
in marine business.
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Even when they are in ports they are subject to risks that cannot usually be directly
controlled by either the ship management nor the officers or crew of the ship. Hence marine
insurance both cargo and hull is a class of business quite complex to underwrite. Marine
Insurance covers are availed of by even those who consign their goods and commodities by
other means of transport such as railway trains and trucks which carry the cargo for reward.
What is most essential for marine insurance is that there has to be in place a contract of
carriage. The writing of marine insurance is rigorously regulated by a plethora of laws and
regulations, some domestic and quite some international, to wit:
1. The Insurance Act, 1938
2. The Marine Insurance Act, 1963
3. Carriage of Goods by Sea Act, 1925
4. Carriage by Air Act, 1988
5. Carriage by Road Act, 2007
6. Multimodal Transportation of Goods Act, 1993
7. Railways Act, 1989
8. Institute Time Clauses (Hulls)
9. Institute Voyage Clauses (Hulls)
10. Institute Cargo Clauses
11. The Stamp Act, 1899
12. York-Antwerp Rules and
13. Hague Visby Rules.
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The word “Institute” refers to the “Institute of London Underwriters” who draft rules, clauses
and conditions that are adopted universally by insurance companies of all nations. In
addition, every sea-faring nation has its own set of legal rules and regulations to ensure the
safety of its coastal waters, ports and harbors.
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1.10 SHIPPING OPERATIONS
Shipping operations are classified under three broad groups like:
(i) Liner or Break-bulk Operations –

The transport of industrial/commercial shipments on regular or semi-regular
services/routes. Container and RO/RO (roll on or roll off ferry) operations have
largely replaced traditional break bulk shipping.
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(ii) Bulk Cargo Operations –

Where a whole ship is consigned for a single voyage (or series of voyages) to the
carriage of a single bulk cargo such as iron ore, crude oil, coal or grains. A bulk
cargo may be for a one shipper or a number of shippers and the cargo may be
bought or sold during the voyage.
(iii) Specialist Marine Operations-

Such as support vessels for offshore and onshore and other operations, salvaging,
dredging, towage, coastal patrolling, piloting, fire-fighting and others.
In the last three decades ship architecture and construction technology have gone
through a major transformation, thanks to automation leading to enhanced GRT and DWT.
Natural gas has largely replaced coal and diesel as fuel in ships thereby reducing pollution of
the environment. Containerization, multi-modular transportation, automation in engine room
operations and a high degree of computerization and digitalization of functions which were
hitherto done manually, use of the state-of-the-art instruments and mechanisms for ship to
shore wireless communication, totally automated cranes with booms which can turn around
360 degrees for loading and unloading operations and others have been installed which have
made navigation of voyages of massive ships through very deep waters effortless and smooth,
apart from reducing the number of crew members on board the ships.
Vessels like bulk cargo carriers, super tankers and crude carriers such as VLCCs and ULCCs
with DWT over one million tons have as few as 15 to 25 members. All these features
combined with a high degree of volatility and mobility in commercial shipping operations
makes underwriting of marine insurance a highly skilled job. It is imperative for the
underwriter whether he writes cargo or hull to be fully conversant with the hazards of
navigation through the major oceans, seas and other water bodies and fully skilled and
understands the geography and climatology and constituents of the risks posed by high seas
and oceans. In particular he/she has to be well conversant with the following factors:
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1. Commercial:
Routes, ships, nature of cargo carried; port conditions and facilities for loading and
unloading cargo; facilities for billeting the crew; facilities for carrying out minor repairs to
ships; import-export practices and documentation; functions of excise and customs duty
personnel and others.
2. Technical:
Ship’s architecture and design; equipment like wireless and fire-fighting instruments
provided; quality of construction of ships especially the engine room and lay out of the holds
where cargo is stacked; billets for the crew members; flag the ship flies; tonnage both GRT
and DWT of the ship and her classification; law of the sea; nature of cargo the ship is
designed to carry; packing of cargo and how it is stowed in the holds; damage from other
cargo due to contact or contamination; galley and how it is fitted for making meals for the
crew members; emergency medicines etc.
3. Human:
A ship is a miniature world where people of many nations, speaking different tongues
and from varied cultures and traditions come together, live together and work together. Hence
camaraderie among the members of the crew is very essential. Selection of crew members,
how they are trained and supervised; ability to work together (particularly with crew of
different nationalities speaking different tongues); social factors of shipboard life; the
“culture” of marine life, habits and approach of seafarers.
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1.11TYPESOFMARINEINSURANCE
a) Special Declaration Policy:
This is a form of floating policy issued to clients whose annual estimated dispatches (i.e.
turnover) by rail / road / inland waterways exceed Rs 2 crores. Declaration of dispatches shall
be made at periodical intervals and premium is adjusted on expiry of the policy based on the
total declared amount. When the policy is issued sum insured should be based on previous
year’s turnover or in case of fresh proposals, on a fair estimate of annual dispatches. A
discount in the rates of premium based on turnover amount (e.g. exceeding Rs.5 crores etc.)
on a slab basis and loss ratio is applicable.
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b) Special Storage Risks Insurance:
This insurance is granted in conjunction with an open policy or a special declaration policy.
The purpose of this policy is to cover goods lying at the Railway premises or carrier’s god
owns after termination of transit cover under open or special declaration policies but pending
clearance by the consignees. The cover terminates when delivery is taken by the consignee or
payment is received by the consignor, whichever is earlier.
c) Annual Policy:
This policy, issued for 12 months, covers goods belonging to the insured, which are not under
contract of sale, and which are in transit by rail / road from specified depots / processing units
to other specified depots / processing units.
d) Duty:
Insurance Cargo imported into India is subject to payment of Customs Duty, as per the
Customs Act. This duty can be included in the value of the cargo insured under a Marine
Cargo Policy, or a separate policy can be issued in which case the Duty Insurance Clause is
incorporated in the policy. Warranty provides that the claim under the Duty Policy would be
payable only if the claim under the cargo policy is payable.
e) Increased Value:
Insurance may be ‘goods at destination port’ on the date of landing if it is higher than the CIF
and Duty value of the cargo.
PROCEDURE OF CLAIM SETTLEMENT:
As the risk converges are different for import/export and inland (with in India) consignments,
the procedure of claim settlement is explained separately.
For Import/Export consignments Claims Documents Claims under marine policies have to be
supported by certain documents which vary according to the type of loss as also the
circumstances of the claim and the mode of carriage. The documents required for any claim
are as under:
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a) Intimation to the Insurance Company:
As soon as the loss is discovered then it is the duty of the policyholder to inform the
Insurance Company to enable it to assess the loss.
b) Policy:
The original policy or certificate of insurance is to be submitted to the company. This

document establishes the claimant’s title and also serves as an evidence of the subject matter
being actually insured.
c) Bill of Lading:
Bill of Lading is a document which serves as evidence that the goods were actually shipped.
It also gives the particulars of cargo.
d) Invoice:
An invoice evidences the terms of sale. It also contains complete description of the goods,
prices, etc. The invoice enables the insurers to see that the insured value of the cargo is not
unreasonably in excess of its cost, and that there is no gross overvaluation. The original
invoice (or a copy thereof) is required in support of claim.
e) Survey Report:
Survey report shows the cause and extent of loss, and is absolutely necessary for the
settlement of claim. The findings of the surveyors relate to the nature and extent of loss or
damage, particulars of the sound values and damaged values, etc. It is normally issued with
the remarks “without prejudice,” i.e. without prejudice to the question of liability under the
policy.
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f) Debit Note:
The claimant is expected to send a debit note showing the amount claimed by him in respect
of the loss or damage. This is sometimes referred to as a claim bill.
g) Copy of Protest:
If the loss or damage to cargo has been caused by a peril of the sea, the master of the vessel
usually makes a protest on arrival at destination before a Notary Public. Through this protest,
he informs that he is not responsible for the loss or damage. Insurers sometimes require to see
the copy of the protest to satisfy themselves about the actual cause of the loss.
h) Letter of Subrogation:
This is a legal document (supplied by insurers) which transfers the rights of the claimant
against a third party to the insurers. On payment of claim, the insurers may wish to pursue
recovery from a carrier or other third party who, in their opinion, is responsible for the loss.
The authority to do so is derived from this document. It is required to be duly stamped. Some
of the other documents required in support of particular average claims are Ship survey report
lost overboard certificate if cargo is lost during loading and unloading operation, short
landing certificate etc.
i) Bill of entry:
The other important document is bill of entry issued by the customs authorities showing
therein the amount of duty paid, the date of arrival of the steamer, etc., account sales showing
the proceeds of the sale of the goods if they have been disposed of; repairs or replacements
bills in case of damages or breakage; and copies of correspondence exchanged between the
carriers and the claimants for compensation in case of liability resting on the carriers.
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1.13 KINDS OF MARINE INSURANCE POLICIES
1. Voyage Policy:
It covers the risk from the port of departure up to the port of destination. The policy ends
when the ship reaches the port of arrival. This type of policy is purchased generally for cargo.
The risk coverage starts when the ship leaves the port of departure.
2. Time Policy:
This policy is issued for a particular period. All the marine perils during that period are
insured. This type of policy is suitable for full insurance. The ship is insured for a fixed
period irrespective of voyages. The policy is generally issued for one year.
Time policies may sometimes be issued for more than a year or they may be extended beyond
a year to enable a ship to complete a voyage. In India, a time policy is not issued for more
than a year.
3. Mixed Policy:
This policy is a mixture of time and voyage policies. A ship may be insured during a
particular voyage for a period, e.g., a ship may be insured between Bombay and London for
one year. These policies are issued to ships operating on a particular route.
4. Valued Policy:
Under this policy the value of the policy is decided at the time of contract. The value is
written on the face of the policy. In case of loss, the agreed amount will be paid. There is no
dispute later on for determining the value of compensation. The value of goods includes cost,
freight, insurance charges, some margin of profit and other incidental expenses. The ships are
insured in this manner.
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5. Unvalued Policy:
When the value of insurance policy is not decided at the time of taking up a policy, it is called
unvalued policy. The amount of loss is ascertained when a loss occurs. At the time of loss or
damage the value of the subject-matter is determined. In finding out the value of goods,
freight, insurance charges and some margin of profit is allowed to the policy in common use.
6. Floating Policy:
When a person ships goods regularly in a particular geographical area, he will have to
purchase a marine policy every time. It involves a lot of time and formalities. He purchases a
policy for a lump sum amount without mentioning the value of goods and name of the ship
etc.
When he sends the goods, a declaration is made about the particulars of goods and the name
of the ship. The insurer will make an entry in the policy and the amount of policy will be
reduced to that extent. This policy is called an open or a floating policy.
The declaration by the insured is a must. When the total amount of policy is reduced, it is
called ‘fully declared’ or ‘run off. The underwriter will inform the insured who will take
another policy. The premium is called on the basis of declarations made.
7. Block Policy:
Sometimes a policy is issued to cover both land and sea risks. If the goods are sent by rail or
by truck to the departure, then it will involve risk on land also. One single policy can be
issued to cover risks from the point of dispatch to the point of ultimate arrival. This policy is
called a Block Policy.
8. Wager Policy:
This is a policy held by a person who does not have any insurable interest in the subject
insured. He simply bets or gambles with the underwriter. The policy is not enforced by law.
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But still underwriters claim under this policy. The wager policy is also called ‘Honour
Policy’ or ‘Policies Proof of Interest’ (P.P.I.).
9. Composite Policy:
A policy may be undertaken by more than one underwriter. The obligation of each
underwriter is distinctly fixed. This is called a composite policy.
10. Fleet Policy:
A policy may be taken up for one ship or for the whole fleet. If it is taken for each ship, it is
called a single vessel policy. When a company purchases one policy for all its ships, it is
called a fleet policy. The insured has an advantage of covering even old ships at an average
rate of premium. This policy is generally a time policy.
11. Port Policy:
It covers the risks when a ship is anchored in a port.
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CHAPTER II
2.1 RESEARCHMETHODOLOGY
The Methodology adopted in the present study consists of the following stages:-
 DATA TOOLS:-
This is an important aspect in formulating the objective of research process where the data is
collected via two processes:-
1) Primary sources-
Where the data is collected primarily by interviewing and personal observation
and is original in nature and accurate to the considerable extent.
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2) Secondary sources-
Where the data is obtained from some published and printed sources such as
newspaper, magazines, and websites and so on.
The reason for selecting this mode of research for this type is that it’s a probably quickest and
most economical way for research to find possible hypothesis. As it is a secondary research,
all the data is selected after rigorous analysis of articles from newspapers, magazines and
internet. So the data has been collected through questionnaire method applied on various
policy holders and some of the data is collected by referring many articles, magazines and
internet.
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Evolution of Legal Framework for Marine Insurance
Insurance law in India had its origins in British law with the establishment of a British
firm, the Oriental Life Insurance Company in 1818 in Calcutta, followed by the Bombay Life
Assurance Company in 1823, the Madras Equitable Life Insurance Society in 1829 and the
Oriental Life Assurance Company in 1874. The first general insurance company Triton
Insurance Company Ltd. was promoted in 1850 by British nationals in Calcutta. The first
general insurance company established by an Indian was Indian Mercantile Insurance
Company Ltd. in Bombay in 1907. The first legislation in India to regulate the life insurance
business was in 1912 with the passing of the Indian Life Assurance Companies Act, 1912.
Other classes of non-life insurance business were left out of the scope of the Act of 1912, as
such non-life insurance was still in rudimentary form and regulating them was not considered
necessary. Eventually, with the growth of fire, accident and marine insurance, the need was
felt to bring such kinds of insurance within the purview of the regulations. While there were a
number of attempts to introduce such legislation over the years, law on non-life insurance
was finally enacted in 1938 with the passing of the Insurance Act, 1938.
The general insurance business was nationalized in 1973, through the introduction of the
General Insurance Business (Nationalisation) Act, 1972. Under the provisions of the GIC
Act, the shares of the existing Indian general insurance companies and undertakings of other
existing insurers were transferred to the General Insurance Corporation (“GIC”) to secure the
development of the general insurance business in India and for the regulation and control of
such business. The GIC was established by the Central Government in accordance with the
provisions of the Companies Act, 1956 in November 1972 and it commenced business on
January 1, 1973. Prior to 1973, there were a hundred and seven companies, including foreign
companies, offering general insurance in India. These companies were amalgamated and
grouped into four subsidiary companies of GIC viz. the National Insurance Company Ltd.,
the New India Assurance Company Ltd., the Oriental Insurance Company Ltd., and the
United India Assurance Company Ltd. GIC undertakes mainly re-insurance business apart
from aviation insurance. The bulk of the general insurance business of fire, marine, motor
and miscellaneous insurance business is under taken by the four subsidiaries
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From 1991 onwards, the Indian Government introduced various reforms in the financial
sector paving the way for the liberalization of the Indian economy. Consequently, in 1993,
the Government of India set up an eight-member committee chaired by Mr. R. N. Malhotra,
to review the prevailing structure of regulation and supervision of the insurance sector. The
Committee submitted its report in January 1994. Two of the key recommendations of the
Committee included the privatization of the insurance sector by permitting the entry of
private players to enter the business of life and general insurance and the establishment of an
Insurance Regulatory Authority. Subsequently, the recommendations of the Malhotra
Committee were implemented by the Indian government by allowing private investments in
the insurance sector and establishing a regulatory body through the enactment of the
Insurance Regulatory and Development Act, 1999 with the aim “to provide for the
establishment of an Authority, to protect the interests of the policy holders, to regulate,
promote and ensure orderly growth of the insurance industry and to amend the Insurance Act,
1938, the Life Insurance Corporation Act, 1956 and the General Insurance Business
(Nationalization) Act, 1972″.
At present, the principal legislation regulating the insurance business in India is the Insurance
Act, 1938, as amended over the years, and regulates both life insurance and general
insurance. General insurance has been defined to include “fire insurance business”, “marine
insurance business” and “miscellaneous insurance business”. Some other existing legislations
in the field are – the Life Insurance Corporation Act, 1956, the Marine Insurance Act, 1963,
the General Insurance Business (GIB) (Nationalization) Act, 1972 and the Insurance
Regulatory and Development Authority (IRDA) Act, 1999. The provisions of the Indian
Contract Act, 1872 are applicable to the contracts of marine insurance. Similarly, the
provisions of the Companies Act, 1956 are applicable to the companies carrying on insurance
business.
Marine insurance business is mostly international and subject to law and international
regulations in every stage of operations. It is governed by the Marine Insurance Act, 1963, in
India and guided by the various clauses formulated by the Institute of London Underwriters
(ILU) and the International Commercial Terms, known as ‘Incoterms’ developed by ICC
(International Chamber of Commerce).
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Marine Insurance Act, 1963, is designed to regulate the transaction of marine insurance
businesses of hull, cargo and freight. They have also, in addition, to fulfill the provisions of
section 64VB of the Insurance Act 1938 on payment of premium in advance of risk
commencement (See.Sections 64VB(1) and 64VB(5) of the Insurance Act 1938). The
voyages undertaken are subjected to specific Institute of London Underwriters (ILU) clauses,
defining inception and termination of insurance covers, and the perils insured against.
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2.2OBJECTIVES OF STUDYING MARINE INSURANCE
The main objectives of the study are to evaluate need and importance of marine insurance
products, to search the reasons behind hesitation of people toward purchasing of various
marine insurance, to judge the satisfaction level of customer of marine insurance companies
belongs to public and private sector, and try to know about driving factors and hurdles in the
growth way of Indian marine insurance industry.
This study would also reveal that how the marine insurance companies are struggling to
satisfy the need of customers belongs to different social background and income level, by
maintaining administrative, legal, and cultural forces.
Following are the objectives of the study:
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1. Try to judge and create Awareness about need of marine insurance.

2. To judge trust towards marine insurance and marine insurers, among people.
3. Recognize the ways to solve issues between insurers and customers.
4. Evaluate the contribution of this industry towards economic growth.
5. Try to find out the ways to make marine insurance products and services more
attractive and simplify.
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2.3HYPOTHESIS
A hypothesis is a tentative statement about the relationship between two or more

variables. A hypothesis is a specific and testable prediction about what you expect to
happen in your study. These are the hypothesis that gives direction to research work.
These are the milestone of research work. The speed of research work depends upon
hypothesis to a large extent. After analyzing and reviewing the literature of various marine
insurance companies (specifically related to marine insurance industry), following
Hypothesis has been designed:
1. Increasing awareness & literacy Level is fueling the growth of marine

insurance sector.
2. Increasing health care cost pushing demand of health care and marine
insurance.
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3. Marine insurance must be a part of life of everybody who has a business

related to sea or ocean, or even have business near sea side.
4. Public company’s product are more attractive because of their competitive
pricing and public trust.
5. Services regarding marine insurance products, provided by private insurer are
comparatively prompt & better then public insurers.
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2.4SIGNIFICANCE OF MARINE INSURANCE
The importance of marine insurance has increased more than ever before in this age of
globalization it facilitates global trade, ensures economic property, improves quality of life
etc.
The following points highlight the significance of marine insurance:
1. Marine insurance facilitates global trade:
The volume of trade through the sea have tremendously increased, and so has the risk
of loss at the sea. Therefore, marine insurance plays significant role in facilitating the global
trade by minimizing the risk thereof.
2. Marine insurance ensures economic property:
The volume of marine insurance business is an indicator of the economic prosperity

of a country. There is a close link between a sound marine insurance market and industrial
development.
3. Marine insurance provides peace of mind:
Marine insurance provides peace of mind to the businessmen by meeting their

financial losses from marine risks. It helps to reduce tension and fear, and takes away anxiety
from the businessmen and managers who are in the international business. As a result, they
are able to operate their business without any tension, fear, anxiety.
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4. Marine insurance improves quality of life:
Marine insurance helps control losses that may arise from the marine risks. As a
consequence, people are encouraged to engage more in international business. This means
more investments, more jobs, more production, more income and more consumption of goods
and services which help to improve the people's quality of life.
5. Marine insurance provides social benefits:
Marine insurance helps businessmen to recover funds from a loss. This keeps the
business going, jobs are not lost, and goods and services continue to be sold. The social
benefit of this are that people do not lose their jobs and their sources of income are intact.
This contributes to the unhindered growth of the national economy.
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2.5SELECTION OF THE RESEARCH TOPIC
Marine insurance is vital branch of general insurance and falls under traditional business.
Compared with other types of business – both traditional and non-traditional, marine
premium constitutes a major segment of the total premium agglomerated from the four public
sector companies. Being an important component of business activity, the topic Marine
Insurance was chosen as it will contribute to the understanding of problems related to inland
transit insurance policies. In addition to identifying problems the study is intended to lead to
identification of solutions to the problems.
An effort will also be made to suggest strategies for further growth. For example, the study
area, Virudhunagar District is situated in Tamilnadu State – a Southern State in Indian sub-
continent. Of course, nothing prevents the researcher, to take up the whole Tamilnadu State
as the study area to investigate the marketing of marine insurance. But, the predominant idea
behind the research is to investigate the problem in an area with industries possessing high
business and industrialpotential. Generally, the awareness of industrialists, traders and other
public in India, in the field of marine insurance is lower compared to that in western
countries. In the business map of Virudhunagar District, there are a spate of industrial and
trading firms which deal in goods like cotton, safety matches, explosives, fireworks, paper,
edible oil and a host of other commodities, which are transported mainly through Rail, Road
and Air Transport.
So, it is found that the district is an appropriate study area to investigate the insurance
awareness of the target population, which is a significant factor in the marketing of marine
inland cargo transit insurance. No other district in Tamilnadu, is endowed with such a unique
concentration of industrial and commercial firms dealing in myriad goods. Virudhunagar
District is a well-known region for small, medium and large scale industries manufacturing
industrial goods and marketing trading goods.
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CHAPTER III
LITERATUREREVIEW
Let's start by describing the two basic sections of a typical boat or yacht insurance policy:
physical damage and liability. The physical damage section covers accidental loss or damage
to the boat and its machinery. This not only covers the hull and the engines, but also the sails,
personal property, and other equipment on board that are required to operate the boat.
The liability section, sometimes referred to as Protection & Indemnity, covers your legal
obligations to third parties. This legal liability can arise from bodily injury or loss of life, or
65
damage to someone else's property, as a result of the ownership or operation of your boat.
Liability coverage also helps pay for your legal defense if you are sued for an occurrence that
may be covered under your boat insurance policy.
Physical damage coverage generally pays for repairs to your boat that are necessary as a
result of damage caused by a wide range of perils. The best policies provide "all risk"
coverage, which means that if the cause of loss is not specifically excluded, it is covered.
Typical causes of loss that are covered include: weather-related perils such as wind, rain, hail,
lightning and wave action; fire; loss or damage caused by theft or vandalism; and collisions
with docks, submerged or floating objects or other boats.
When comparing physical damage coverage, the most significant difference that can be found
among boat or yacht insurance policies is whether the coverage is based upon "Agreed
Value" or "Actual Cash Value" (ACV) loss settlement. Agreed value policies normally pay
the amount shown on the policy if the boat is considered to be a total loss. Under such a
policy, damage resulting from a partial loss is generally paid for on a replacement cost (new
for old) basis, less your deductible; that is, physical depreciation will not be factored into
determining the value of the lost or damaged items. However, some items that are subject to
higher amounts of normal wear and tear, such as canvas, sails, trailers and some machinery,
may be subject to allowance for depreciation in the event of a covered loss.
An Actual Cash Value policy provides less coverage than an Agreed Value policy, but
generally at a lower cost. An ACV policy provides coverage up to the current market value of
the vessel in the event of a total loss, taking into account depreciation and potentially other
factors. Payments made for partial losses are usually reduced based upon physical
depreciation of the lost or damaged items, and the policy deductible is also applied.
Your insurance professional can help you determine which type of policy is right for you.
You should verify that your policy has an adequate limit of coverage for Medical Payments.
Medical Payment coverage will pay for first aid treatment, ambulance, hospital and other
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costs that result from someone being injured on your boat, even if you are not legally
responsible.
Since liability insurance is not mandatory, there are many insurer operating without liability
coverage. Uninsured coverage is designed to compensate you for injuries sustained aboard
that are caused by an operator who has no liability insurance.
Now that we've described some of the key elements of insurance policies, we hope that you
are in a better position to ask the right questions when buying marine insurance. It is also
wise to work with a company that thoroughly understands insurance. This is important not
just at the time that you apply for insurance, but also in the unfortunate event that you have a
claim. Chubb Recreational Marine Insurance has the expertise to help you at every step along
the way.
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CHAPTER IV
4.1 DATAANALYSISOFMARINEINSURANCE
While doing survey, some selective questions were asked to various policy holders within
an area, many of them responded with same set of answers and suggestions. The response to
questions was good and it also showed that policy holders have good knowledge of insurance
and policies they hold.
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The following are some questions which one should keep in mind before buying marine
insurance:
 How much coverage do the policy holder need?
Ans–Before purchasing the insurance, it is indispensable to know ‘how’ much coverage

one should opt for. It’s disheartening to find out that you don’t have sufficient protection
during the time of need. You can analyse your business and make the correct choice when
it comes to opting for the coverage.
 Physical damages: what kind of losses are covered?
Ans – The best marine insurance policies offer ‘all risk’ coverage, which mean that if the
cause of the loss is not specifically excluded, then it will be covered under the policy.
Some of the typical causes of losses which are covered under the policy are wind,
earthquake, rain, hail, fire, loss or damage by theft, vandalism, submerged, or floating
objects, etc.
 Loss Settlement – Agreed Value vs. actual cash value?
Ans – when comparing the physical damage cover, the most important factor that should
be considered is whether the coverage is based upon “agreed value” or “actual cash
value” loss settlement.
Agreed value policies usually cover the amount showed on the insurance policy if there is
a loss. Under such policy, the payout would be made after deducting depreciation.
The actual cash value policy offers coverage up to the current market value of the vessel
at the time of total loss, after taking into account depreciation and deductible.
In case of actual cash value policy, though, the coverage is less than the agreed value
policy is usually available at a low price.
While an agreed value policy comprehensive coverage, an actual cash value policy is apt
for those who are looking for the economical alternative.
 What’s not in the coverage?
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Ans – A section of marine insurance policy lists exclusions as well. Your business
doesn’t have coverage for those events or incidents which fall under the exclusion head.
When you know your exclusions, you have a better understanding of your liabilities. You
know your insurance policy won’t cover losses or damages stemming from these
activates. With this information, it is feasible to make better decisions to secure your
business from all sorts of losses or damages.
 What are coverage limits?
Ans – Like other types of insurance policies, marine insurance policies also come with
limits, which are caps on the amount of coverage you will get. Once you exceed the
coverage limit, the insurer would not settle the remaining expenses. If you don’t buy
enough insurance, you are under-insured, and you would have to pay a substantial amount
from your pocket at the time of claim.
 Will the company charge you if you surrender the policy?
Ans – The insurance company charges a part of surrender value if you wish to surrender
the policy. It reduces your surrender value and you are left with a lower amount. Before
buying a policy, you should ask about the surrender charge and make your decision
accordingly. In general, it is always a smart decision to avoid buying a policy which
charges a surrender fee at the time of surrendering the policy.
 Does the policy have other benefits?
Ans – Every life insurance policy provides a life cover; what matters is the added benefits
you get if you choose a specific plan from a particular insurer. You should contact the
company and ask about the features it provides which you will get. It can include Top Up
facility to increase your sum assured, riders to customize your Insurance policy and other
bonuses to increase your overall savings. While choosing among different policies, go for
a policy with the most benefits.
70
 When will you have to pay the premium?
Ans – After you have determined how much you can afford to pay as a premium, you
must ask when you have to pay the premium: monthly, quarterly, half-yearly or annually.
For some people who don’t have a regular source of income, paying the premium
monthly can be difficult, and for that, they will prefer a policy which doesn't have a
monthly premium paying rule. If the period of paying the premium affects you, it must be
something you should ask about before buying the Insurance Policy.
Marine insurance deals with goods when these are being moved from one place to another
by approved mode of transportation. The goods can be moved within the country and outside
the country. The risks are involved in any type of transportation and to cover these risks
marine (transit) insurance is developed. The risk coverage depends upon the nature of goods
and packing and to cover the risks the price is to be paid which is known as premium. The
consignment can be single or multiple and accordingly the marine insurance policy i.e. single
transit or open cover or open policy is issued by the insurance company. The risk coverage is
defined by Institute of London Underwriters under the various clause ICC (A), (B), (C) and
the same is acceptable to all throughout the world. Similarly the clauses for inland transit
have been defined as ITC (A), (B), (C).
In marine insurance, the claim ratio of both the PSU insurers as well as the private
insurers stands at 75% against the total claims ratio of 75%. While, the claims ratio of the
private insurers has gone down from 86% in FY16, the PSU insurers have taken a hit of 12%
in FY 17. Marine insurance segment holds a 2% market share in non-life segment in FY18
and witnessed a de-growth of 1%.
71
The collision of an oil tanker and an LPG carrier near Ennore port near Chennai in January
2017 led to a major oil spill. The assessment of actual loss incurred due to this accident is still
pending and this is likely to impact the ratio in this segment adversely.
With the government initiatives such as:
 ‘Project UNNATI- for improvement in the operations of major ports.

 Investments for infrastructure development under the costal berth scheme of the
sagarmala programme
 Port Modernization
 Revival of Ganga watercourse
 Establishment of 6 multi-modal freight terminals, etc.
The conditions and business of our ports and inland transit is improving and this is
expected to bring down the claims ration. The PSU insurers need to bring in prudent
underwriting practices to keep their claims under control.
72
CHAPTER V
CONCLUSION
The study area is with high potentiality for the marketing of inland transit insurance marine
policies. The four public sector general insurance companies in the study area with their thick
infrastructure facilities and network of branches enjoyed a monopoly status in spite of the
competition among themselves on the basis of their service quality. As per the opinion of the
policyholders, those companies served them well with their development officers and other
marketing forces both in pre and after sales services. Similarly the opinion survey with the
policyholders also brings to the fore that all the four public sector general insurance
companies served them well in regard to dissemination of product knowledge, issue of
policies, after sales service before and after claim even though a slight discontent is reported
by minority.
73
At the same time we cannot underestimate the role of private general insurance companies in
the study area. Though, thin infrastructure and grazing only the creamy layers of the market
for inland transit policies are their major weaknesses in materializing the market for transit
policies, enthusiastic attitude of their dynamic marketing force, their adoption of hi- tech
online mechanism towards claim settlement, competing with innovative products in marine
transit insurance with low rate of premium etc., may make it as a challenge to the four public
sector insurers in the study area. Not having network of branches is a big hurdle for the
private insurers in rendering pre and after sales service in marketing transit policies.
Yet there is a good scope for tapping potential market to the four public sector general
insurance companies, since the potential policyholders for marine policies are in amazing
quantum in the study area. At the same time they have to cope up with the competitive
environment from private players. The concluding exposure on the study is that though the
cultivator (public sector insurers) can venture in a fertile and arable land (vast potential
market) to achieve bumper crop; it is not a cake-walk. They have to share the same land with
another mighty competitive cultivator (private players) in future in the right perspective
74
WEBLIOGRAPHY:
 http://www.accountingnotes.net/final-accounts/final-accounts-of-general-insurance-
companies-accounting/13085
 http://www.yourarticlelibrary.com/accounting/accounting-for-insurance-company/general-
insurance/general-insurance-meaning-and-preparation-of-final-accounts/68951
 https://en.wikipedia.org/wiki/Marine_insurance
 https://edurev.in/studytube/Final-Accounts-of-General-Insurance-Companies-
Adva/91039c84-5db8-4509-aa0b-fc839bee8070_t
 http://mastermindsindia.com/9.%20INSURANCE%20COMPANY%20ACCOUNTS.
pdf
 https://www.sapling.com/7333516/disadvantages-insurance
 http://shodhganga.inflibnet.ac.in/bitstream/10603/125191/9/09_chapter%204
75
BIBLIOGRAPHY:
 Warranties In Marine Insurance - BarisSoyer

 Marine Insurance: Its Principles and Practice - Frederick Templeman
 Banking and Insurance: Principles & Practices - Neelam C. Gulati
76

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M.

COM Final Accounts of Marine Insurance

A contract of marine insurance is a contract whereby the insurer undertakes to

A contract or policy of marine insurance is an arrangement whereby one person

A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify

1.2HISTORY OF MARINE INSURANCE

1.3 MARINE INSURANCE DEFINITION

“A contract of Marine Insurance is an agreement whereby the insurer undertakes to

a) Settlement on a cash basis is always preferable to an undertaking, to replace lost

b) Settlement of a loss on actual or market value at the time of loss is generally

1.4 MEANING OF MARINE INSURANCE

Marine insurance is concerned with overseas trade. International trade involves

 Marine insurance has two branches:

1. Ocean Marine Insurance.

2. Inland Marine Insurance.

1.5 PRINCIPLES OF MARINE INSURANCE

1. Utmost good faith:

1.6 FEATURES OF MARINE INSURANCE

1) Offer & Acceptance:

4) Utmost good faith:

7) Period of marine Insurance:

(1) Express Warranties

(2) Implied Warranties.

The following types of warranties are explained below:

A ship is seaworthy when the ship is suitably constructed, properly equipped,

3. At the commencement of journey, the ship must be capable of withstanding the

4. Seaworthiness also includes "Cargo-Worthiness". It means the ship must be

It cannot be expected from the cargo-owner to be well-versed in the matter of shipping

3. Other Implied Warranties:

There are other warranties which must be complied in marine insurance.

(a) No Change in Voyage:

(b) No Delay in Voyage :

(c) Non deviation:

There are following exceptions of delay and deviation warranties:

 Deviation or delay is authorized according to a particular warranty of the policy.

 Deviation or delay was due to barratry.

1.7.1 WARRANTIES IN MARINE INSURANCE :

Warranty in Contract Law:

The term ‘warranty’ in its most traditional non-insurance sense is understood as a

Warranty in Insurance Law:

Secondly, in marine insurance it is a statutory rule that an express warranty must be

1.7.2 CLASSIFICATION OF MARINE INSURANCE WARRANTIES:

A marine warranty is defined by S 35 (1) of the MIA 1963 as follows:

(1) Classification of promissory warranties according to the time of undertaking:

(2) Classification of promissory warranties according to the nature of the undertaking:

(3) Classification of promissory warranties according to their structure:

To determine whether there was a common intention to incorporate an express warranty in

(a) If it goes to the root of the contract;

(c) If damages would be an inadequate or unsatisfactory remedy for the breach.

of an express warranty is unique to marine insurance and has no application in non-marine

(i) Warranties as to geographical limits

(ii) Warranty as to stowage and salvage services

(iii) Warranties as to cargo carried

(iv) Survey warranties.

(v) Premium warranties.

There are four warranties implied by the MIA 1963:

(i) Warranty of sea worthiness – S 41 (1), (3), and (4);

(ii) Warranty of port worthiness – S 41 (2);

(iii) Warranty of cargo worthiness – S 42 (2);

(iv) Warranty of legality – S 43.

Warranty of sea worthiness:

Seaworthiness has been further interpreted to mean “ability to withstand ordinary

iii) Latent defect in hull and machinery.