Everything You Need to Know About Marine Insurance

The purpose of this article is to provide you with a complete guide to marine insurance. We will be looking at the meaning, types, benefits and coverage of marine insurance. 

The following is the detailed information about marine insurance that you were looking for:

Definitions and types of coverage

The objects of marine insurance are:

  • the risks to the ship, the cargo, and all parties involved


  • the responsibility towards third parties

Its scope is the transfer of such risks from whomsoever is concerned in the shipping venture to the insurer. As far as cargo is concerned, the coverage of such risks extends from when the cargo is delivered to the carrier until it is re-delivered to the receiver.

The insurance contract is:

  • onerous: i.e., it involves obligations.
  • aleatory: i.e., it originates in the occurrence of contingent events.
  • reciprocal: i.e., the parties concerned are mutually bound by the contract.

The terms and conditions of the insurance contract must be embodied in the insurance policy.

The policy must be contracted and issued either at the time of signing the contract or even later. In fact, with a view to proving the existence of an insurance contract covering the hull and machinery, the insurer usually issues a letter of intent and, in the case of cargo insurance, an insurance certificate.

The insurance policy may be issued to a named party, to the order of or to a holder, but it is never deemed to be a title of credit.

Insurance contracts relate to:

  • the ship (hull and machinery), contracted by shipowners, supplemented by P.&I. coverage for any damage other than covered by hull and machinery insurance. Shipowners join one or more P. & I. clubs, which are associations set up for this very purpose.
  • the equipment (containers, chassis, etc.) covered by the Through Transport Club (a P. & I. club specializing in such kinds of cover).
  • the cargo, contracted by the shipper.

In detail, hull and machinery insurance covers:

  • the total loss of the ship
  • partial damage to the ship.
  • third party liabilities as well as equipment and outfits, stores and provisions for the officers and crew, and, in the case of specialized vessels, the special fittings they require.

P. & l.-s cover:

  • damage to cargo under the B/l contract
  • liability towards third parties (e.g. stevedores)
  • crew sickness
  • fines incurred by shipowners, etc.

The cargo insurance covers are:

  • the all risks: insurance coverage of cargo, which includes coverage due to external causes such as fire, collision, pilferage, etc.; usually excluding special risks such as acts of war, strikes, riots, unless covered by endorsement;
  • the total loss: a total loss occurs when the goods are destroyed or when they arrive at their destination in such a condition that they are no longer utilizable, neither similar to the goods insured.
  • the free of particular average (the insurer covers the total loss, the contribution in a general average, and the loss of cargo that has fallen overboard);
  • the free of particular average, except instances of fire, collisions against a ship or craft, collisions against a fixed or floating structure, and submersion;
  • the free of particular average for cargo on deck (the insurer covers the total loss, average contribution, and the loss of cargo due to rough seas on specialized vessels such as container carriers and Ro/Ro, but not on conventional vessels);
  • a special policy, including also the particular average; 
  • the cargo insurance on containers is set forth in the Institute Container Clauses-Time, 1987, which are the rules established by the association of British insurers known as the International Underwriters Association and are universally accepted.

The insurance coverage on containers may be contracted in one’s own name, for the account of third parties, or to whom it may concern.

In this last case, the beneficiary can be identified by referring to the bill of lading covering the carriage of the cargo.

The particular average

The particular average is a fortuitous partial loss.

As provided by the letter of credit, when CIF or CIP sales are involved, the seller/exporter applies to an insurance company for insurance coverage. He then endorses it, in favour of the buyer/importer or the issuing bank, to the extent of the CIF or CIP value of the cargo (inclusive of the sea freight and of the insurance premium) plus 10% to cover the expected profit.

When the value of the cargo cannot be assessed, the insured value must be equal to 110% of the amount guaranteed in the letter of credit.

As already mentioned, the cargo insurance cover should comply with the provisos of the letter of credit. The insurance policy should be dated no later than the date of shipment and should mention the name of the liquidator, or his agent, at the port of destination.

Any damage suffered by the cargo will be liquidated at a destination to the beneficiary (the receiver or a Bank) upon submission of the insurance certificate, the surveyor’s report, and the full export documentation.

After settlement, and upon receipt from the beneficiary of a declaration confirming that his claim has been settled in full, the insurance company will be able to claim from the carrier in recourse under subrogation at least part of the amount paid, should the latter prove liable for the damage suffered by the cargo.

The general average

“General average’ differs totally from the ‘particular average’. It follows upon the ‘general average’ act defined in rule ‘A’ of the York-Antwerp Rules (last revised 1974) as follows: 

there is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure”

“The essentials of a general average loss are that it should be:

  • extraordinary
  • reasonable
  • deliberate (intentional or voluntary)
  • for the common benefit
  • in time of general peril”

Deliberate and reasonable events could be, for example, a vessel stranded on purpose to prevent its sinking, or damaged cargo as a result of using salt water to extinguish a fire and from engaging salvage assistance or proceeding to a port of refuge following a machinery breakdown or other peril. 

In case of a positive result, (i.e. the ship is not lost), all those who have interests at risk on board (the shipowner, the charterer who is due to earn freight charges, the cargo owners, the shippers and the receivers, as well as those who suffered no damage, or those not covered by an insurance policy) must contribute to the loss rateably. This is so that no one interested shall benefit at the expense of another, and that the property sacrificed shall be in no better and no worse position than if other property had been sacrificed in its place.

The contribution is compulsory, even if one of the parties involved can be shown to be responsible for the event that caused the sacrifice.

The contribution may be covered by insurance extended to the general average: the insurer will refund each party involved with the amount paid to contribute to the loss.

Protection and Indemnity Clubs (P. & I.)

P. & I. Clubs are associations formed by shipowners to provide mutual insurance coverage against risks that are not covered by the “Hull and Machinery” insurance policy. As a rule, P. & I.’s also covers the refund of damages to third parties.

The associations are divided into three branches, each covering one of the following risks: 


  • Responsibility for injuries to individuals who are not members of the crew, as well as damage to other vessels and to port structures.


  • Responsibility for cargo shortages, damage, and pollution, contributions to the general average, legal expenses, and fines due to discovery of stowaways
  • Refund of expenses for repatriation of sick crew-members
  • Refund of fines imposed on account of illegal actions on the part of the master and/or members of the crew.


  • Legal assistance in any circumstances where the vessel’s or owner’s interests should be protected. The coverage comes into effect by becoming a member of any P. & I. Club.

Members are to provide annual contributions aimed at creating a common fund. If the total of the amounts paid out exceeds the total fund available, additional contributions will be requested from members. At the end of each year, any amount left over is returned to all members proportionally.

Big shipping companies usually join more than one club in order to conveniently split their contributions and to receive adequate coverage in exchange.

In line with the centuries-old seafaring tradition of Britain, most P. & I. are British. However, P. & I. clubs have also come into being in other countries.

The most reputed and internationally accepted P. & I. clubs are:

  • The London Steamship Owner’s Mutual Insurance Association Ltd.;
  • The North of England Protection and Indemnity Club;
  • The West of England Mutual Insurance Association;
  • The International Transport Intermediaries Club;
  • The Through Transport Mutual Insurance Association Ltd.;
  • The American Steamship Owners’ Mutual Protection and Indemnity Association, Inc.;
  • The Steamship Mutual Underwriting Association (Bermuda) Ltd.;
  • The Shipowners’ Mutual Strike Insurance Association (Bermuda) Ltd.;
  • The U.K. Mutual Steamship Assurance (Bermuda) Ltd.;
  • The International Transport Intermediaries Club


Marine insurance is a type of insurance that protects the owner of a boat or ship from financial loss in case of accidents. In this article, we have discussed some of the important things to know about marine insurance.

In conclusion, marine insurance is an important type of insurance that can protect you against financial losses in case your boat or ship suffers an accident.