Marine Reinsurance

Savio Fernandes
Sr. Manager – GIC Re
Marine Reinsurance

Types of business included within Marine:

 Cargo – Sea, Rail, Road, & Air

 Hull
 Liabilities
 War & Strikes
 Energy

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Marine Reinsurance

Depending on the composition of the

marine account, insurers reinsurance
needs vary considerably.

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Marine Reinsurance

CARGO

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Marine Reinsurance

Institute Clauses (Cargo)

 ICC ‘A’ (All Risks) 1.1.82

Marine Reinsurance

 ICC ‘B’, ICC ‘C’ – Restricted Perils

 Institute War Clause (Cargo)
 Institute Strikes Clauses (Cargo)
 Inland Transit (Rail or Road) Clause

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Marine Reinsurance

ICC A

• All risks of physical loss/damage, except

those specifically excluded (Slide 9).
Cover includes piracy and malicious
damage.

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Marine Reinsurance
ICC B –Covers Named Perils
• Fire, Explosion, Stranding, grounding,
sinking, Overturning or derailment of
land conveyance, collision or contact of
the vessel/conveyance with any external
object,discharge of cargo at port of
distress, EQ, volcanic eruption,
lightning, GA, Jettison,Washing O/board,
entry of lake, river, water, sling loss.

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Marine Reinsurance

ICC C- More restricted than ICC B

• Fire, Explosion, Stranding, grounding,

sinking, Overturning or derailment of
land conveyance, collision or contact of
the vessel/conveyance with any external
object, discharge of cargo at port of
distress, GA, Jettison.

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Marine Reinsurance
Excluding loss or damage caused :

 Wilful misconduct of the assured

 Ordinary losses-leakage, Wear & tear etc
 Insufficient or Inadequate packing
 Inherent vice or nature
 Loss, damages, expenses caused by delay
 Insolvency or financial default of shipowner
 Arising from weapon of war
 Unseaworthiness of vessel or craft
 War & Strikes
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Marine Reinsurance

Marine Delay in Start Up(DSU)/

Marine Consequential Loss/Marine
Loss of profit

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Marine Reinsurance
Underwriting Considerations

 The properties of the cargo

 The Conveyance
 The Transit
 The Weather
 The Socio-economic and political
factors

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Marine Reinsurance
Areas to be considered when assessing
reinsurance requirements
 Accumulation of cargoes on single
vessel
 Accumulation of cargoes at single
location be it warehouse, port area.
 Marine transit plus DSU
accumulation.
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Marine Reinsurance

 Underwriting usually on per sending

basis or per bottom basis.
 Fixing proper retention is important
to improve the quality of retained
account.

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Marine Reinsurance
Suitable types of Reinsurance
 Can be done on Facultative or Treaty
basis.
 Facultative usually for high value or
some specific cargoes
 Quota Share & Surplus combinations
frequently used for cargo reinsurance
 Non-Prop (XOL) treaties on per risk
cum event basis to protect retentions.

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Marine Reinsurance

HULL

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 Marine Reinsurance

HULL - The Exposures

Physical Asset…….……The Ship

Financial Assets………..The Ship’s Earnings

Liability to others…… Third Party Property and Lives

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The Insured Perils arise from:-

Acts of God
Acts of Men
& Other Perils

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 Marine Reinsurance

The Insured Perils can arise from:-

Acts of God………….

 Heavy Weather
 Earthquake
Tidal wave/tsunami
Volcanic Eruption

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 Marine Reinsurance

The Insured Perils arise from:-

Acts of Men…………….

Negligent navigation

Accidents in loading & discharging cargo

Piracy, theft,
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Marine Reinsurance
Sundry Vessels Ocean Going Other Hull
Vessels Insurances
Inland Vessels Dry Cargo Vessels Vessels under
construction
Barges, Floating Cranes,
Launches, Passenger
Bulk Carriers Ship Breaking Risks
Vessels, Tugs and Port Tankers /Tugs / Offshore
Crafts, pleasure crafts
Supply Vessels 1. Offshore
Fishing Vessels
/Anchor Construction
Handling Tug-cum 2. Offshore
Operational Cover
Sailing Vessels Supply Vessels 3. Operators Extra
Expenses (OEE)
Dredger 4. Third Party Liability
Dredgers (Inland) (Ocean Going) 5. BI / Loss of Hire

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Marine Reinsurance
Coverage

 Hull Policy covers the Hull & Machinery

including accessories, equipments, all
materials, navigational gadgets installed on
board, other than cargo

 Policies are on agreed value basis

 The policies provide cover on named –perils

basis.

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Marine Reinsurance
Standard Clauses

 Institute Time Clause –TLO 1.10.83 (including

salvage, salvage charges and sue & labour)
 Institute Time Clause –Hull 1.10.83 with 3/4th
Collision liab. extended to 4/4th
 Institute Builders Risks Clause
 Institute Voyage Clause
 Institute Yacht Clause– 01.11.85
 ITC Hulls Port Risks dated 20.07.1987
 Institute Fishing Vessels Clause – 20.07.87

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Marine Reinsurance
Perils covered under ITC Hulls 1.10.83
Loss of, or damage to, the subject matter insured caused
by :

1. Perils of the seas, rivers, lakes or other navigable waters

2. Fire, explosion
3. Violent theft by persons from outside the vessel
4. Jettison
5. Piracy
6. Breakdown or accident to nuclear installation or reactor
7. Contact with air craft or similar objects, or objects falling
therefrom, land conveyance, dock or harbour equipment or
installation.

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Marine Reinsurance
8 Earthquake volcanic eruption or lightning.
9. Accidents in loading discharging or shifting cargo or fuel.
10.Bursting of boilers breakage of shafts or any latent defect in the
machinery or hull
11. Negligence of master, officers, crew or pilots
12. Negligence of repairers or charters provided such repaiers or
charters are not an assured hereunder.
13. Barratry of master, officers or crew.
14. Contact with aircraft, helicopter or similar objects or object
falling therefrom.

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Marine Insurance

 In addition to the above perils, the

policy also covers 3/4ths collision
liability, general average/salvage and
sue and labour.
 Therefore, The Institute Time Clauses
Hulls, in case of a covered loss,
insures up to four interests.

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Marine Reinsurance
Points to be considered

 Name
 Type
 Nature of cargo usually carried
 Age
 Tonnage
 Sum Insured
 Flag
 Class – Class maintained-IACS Classes
 ISM code compliant
 Area of operation –geographical limits

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Marine Reinsurance
Points to be considered

 Type of Cover opted

 Ownership-reputation-owner operated
 Ship Management –experience
 Type of crew
 Whether vessel is mortgaged
 Whether singleton fleet
 Whether vessel is covered against P&I risks.
 Whether vessel is given on charter
 Past Loss Experience
 Deductible

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Marine Reinsurance
Areas to be considered when assessing
reinsurance requirements
 Varying values of vessels in a fleet i.e. a
few peak values followed by others
considerably lower
 Liabilities can add to claims e.g 3/4th
collision, Sue & labour, salvage charges,
General Average
 Accumulation of vessels at ports
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Marine Reinsurance
Reinsurance Arrangements:

 Can be done on Facultative or Treaty

basis
 Surplus Treaty preferred
 Surplus treaties usually ceded on top
and pro rata basis
 Marine Excess of loss on per event
basis.
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Marine Reinsurance

Marine Liabilities

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Marine Reinsurance
Marine Liability

 Covers any liability legally incurred in

connection with the furtherance of
marine business.
 Including protection & indemnity
(P&I) and pollution to stevedores
liability

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Marine Reinsurance
Marine Liability - Areas of Concern

 Claims arising tend to be settled a long

time after the policy period has expired.
 Quality of the security of the reinsurer is
important
 Accumulation arising from single event
 Legal costs incurred in defending legal
actions

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Marine Reinsurance
Marine Liability – Suitable Reinsurance

 Usual form of reinsurance in marine liability is

non-proportional but other forms of
reinsurance are also used
 Due to enormous limit required, important for
insurers and reinsurers to balance its account
to an acceptable net line by way of
reinsurance.
 Much of these liabilities are underwritten by
P&I clubs

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Marine Energy

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Marine Reinsurance
Insurances of :

 Energy Package policies

 Drilling Ships/Rigs
 Offshore Construction
 Related Liabilities

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Marine Reinsurance
Areas of concern
 Several peak risks may be relatively
near to each other , as in the Mumbai
High region or on the East coast of India
affecting more than one unit in a single
occurrence.
 Additional Business Interruption costs
where this cover is granted, which could
be greater than the actual physical loss.
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Marine Reinsurance
Types of Energy Reinsurances
 Facultative most preferred in view of complex
nature of the risks and high
values.
 Quota share treaties are also seen where the
primary insurer retains a small percentage of
the limits.
 Excess of loss seen for some of the larger
insurers and reinsurers usually on a risks
referral basis.

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Marine Reinsurance

MARINE CLAIMS

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Marine Reinsurance
Accumulation:

 Arising from Hull/Cargoes

 Arising from Cargoe/Cargoe
 Arising from Hull/Hull
 Port side accumulation

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 Marine Reinsurance

TYPES OF LOSS

A-TOTAL LOSS B-PARTIAL LOSS

1.A.T.L.(ACTUAL TOTAL LOSS) 1.P.A.(PARTICULAR AVERAGE)
2.C.T.L.(CONSTRUCTIVE TOTAL
2.G.A.(GENERAL AVERAGE)
LOSS)

C-EXPENSES
1.SUE & LABOUR CHARGES.
2.PARTICULAR CHARGES.
3.SALVAGE CHARGES.
4.EXTRA CHARGES, E.G.,SURVEY FEE,
SALE CHARGES.

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 Marine Reinsurance
ACTUAL TOTAL LOSS
DEFINITION: There is an ATL where the subject matter insured is:
(1) destroyed, or (2) so damaged as to cease to be a thing of the kind
insured, or (3)where the assured is irretrievably deprived thereof.
EXAMPLES: (1).(a) Machinery badly damaged by serious fire on
the vessel, and reduced to charred metal absolutely beyond repair. It
should be noted that total annihilation or total physical destruction is
not necessary for ATL. (b) Crockery broken into pieces due to
accident of carrying vehicle. (c) Hides damaged by sea water and
completely putrefied.

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 Marine Reinsurance
CONSTRUCTIVE TOTAL LOSS
DEFINITION: There is a CTL:
When the subject matter is reasonably abandoned
because either:
 (a) Actual total loss appears unavoidable, or
 (b) When the cost of recovery, re-conditioning &
forwarding the cargo would exceed its value on arrival.

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 Marine Reinsurance
Salvage Loss:

Where goods are sold or otherwise disposed off at a

port or place short of destination either:
1. Because they are deteriorating
2. Because the cost of getting them to destination would
exceed their value on arrival.

Loss payable on the basis Insured Value less the

proceeds of sale.
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 Marine Reinsurance
GENERAL AVERAGE
DEFINITION: A general average loss may be either a sacrifice or
an expenditure, extraordinary in nature, voluntarily and
reasonably incurred, in time of general peril, for the common
safety of the maritime adventure.
EXAMPLES: -“SACRIFICES”- (1) damage to cargo by water
used in fire extinguishing operations. Water damage to packages
themselves on fire is not allowed in GA. (2) Jettison of cargo for
common safety.(3) Burning of cargo as a fuel when in emergency.
“EXPENSES”-(1) Towage charges in time of peril.(2) Port of
Refuge exp.
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 Marine Reinsurance
PARTICULAR AVERAGE
DEFINITION: It is a partial loss of the subject matter insured,
caused by a peril insured against, and which is not a general average
loss.
EXAMPLES: (1) water damage to piece goods. (2) fire damage to
consignment of vehicle accessories.
IMP.: The difference between P.A. and salvage loss must be clearly
understood. Damaged goods are sometimes landed at an
intermediate port and sold for whatever they are worth because they
would probably be worthless by the time they would arrive at the
final destination. The loss is settled on the basis of the insured value
less net proceeds of the sale. This is Salvage Loss settlement.
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THANK YOU

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