In the wake of the unprecedented wave of pirate attacks on merchant ships, especially after the Somalia incident in the summer of2008, maritime insurance companies have taken a great interest in working with the global shipping industry to ensure that people, boats and cargoes arrive safely and securely at their destinations.
Piracy is arguably becoming viewed by the insurance companies as a well-constituted practice that functions in a business model which includes precise calculations of the ransom amount of money to be paid and the professional assurances of the security of the crew, ship and cargo while the negotiations proceed.
What is Marine Insurance?
Marine insurance is coverage for properties in transit, and for the commercial vehicles that transport them, on water and on land. Marine insurance is divided into inland marine and ocean marine insurance. While inland marine insurance covers transportation-related or transportable property on land and air transportation, ocean marine insurance backs ocean transport, which includes:
- Hull insurance, which covers physical risk to the ship, like anchoring or damage from heavy seas, collision, sinking, capsizing, fire, piracy, and discarding encumbering cargo to save other property
- Cargo insurance that covers the goods transported in the ship
- Hull war-risk insurance which also includes automatic termination and cancellation provisions in the event of war
- Protection and Indemnity (P&I) which supports liability involving the crew, docks and piers. Ship owners can purchase separate kidnap and ransom insurance for crew members.
The steep increase in pirate attacks have affected marine life insurance market largely regarding the underwriting considerations, terms of cover and the premiums payable by the ship owners. The diversity of the pirates’ methods, targets and the concentration around specific regions make it difficult to include piracy risk as part of a general insurance policy, so it is important to find new ways of dealing with this indispensable challenge. Moreover for seafarers it is important as the insurers would strive to recover the lost or stolen properties and bring the offenders to the court in order to minimize the insurance premiums.
- Marine Insurance policies for piracy attacks are more flexible, and the level of risk and the coverage can be more correctly underwritten and therefore more conciliatory priced.
- The policies of Maritime Insurance are typically paid per transit, and underwriters often charge additional premium for trips through high-risk areas.
- It’s about entirely free of any ambiguity and uncertainty that customers and insurance companies have regarding the scale of any liability on a claim.
- This provides the right combination of coverage considering war and kidnap & ransom cover.
These days, with the exceeding number of pirate attacks jeopardising human lives and properties, maritime insurance companies has come up with the idea of managing risk from a broad perspective fitted to the clients’ specific needs. Client-dialogue about risk, risk mitigation and in accordance to that, the insurance policies get priority.
Marine insurance is available through general insurance companies, online and offline. The insurance vary depending upon type, size and usage of the ship, and the owner’s current insurance history. Be aware as some insurance policies have stipulations on whatever they cover and not, and how much of the damages the owner has to pay out of own pocket. It is also suggested to look at more than one insurance company before deciding on where to buy from. You must also be mindful that the marine insurance varies by country and region.
References: maritimeinformation, swissre, wisegeek