Marine Product Presentation

8/8/2019 Marine Product Presentation

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Introduction to Marine Insurance



Marine Insurance

Some of the things you¶ve always wanted to know

but never got around to asking««



"Fireworks" Were In One Or More of The Containers Aboard the mv HANJIN

PENNSYLVANIA



m.v. HYUNDAI FORTUNE¶S misfortune!!-Numerous (60 to 90) containers

blown over the side, forming a debris field about 5 miles long -- many of

which were drifting around the vessel. Cause of fire -explosion inside a tank,

as opposed to an explosion in a container



The Deck Crane of M/V Torm Alexandria Was Lifting Container Aboard.

The Consequences Were Disastrous -- Cargo Rolled The Vessel

Now Known Is That -This Was A 1 x 40' Container

Said Loaded With 24.5 Metric Tons of Steel Rods.



The pictures above show what can happen to containers in

heavy seas, when a ship rolls



The driver suffered a broken back when he was compressed into his

seat.



Is There A Maersk Vessel Down There? Not Likely --

More Likely, This Is A Container Yard Flood Accident «Whatdo you think??



This Is Not A Container Yard Related Loss. This Is A Vessel Matter.



Welcome to the

world of Marine Risks...



Why Marine Insurance ?

1. Once handed over to the carrier, control is lost

2. During transportation goods are exposed to a

variety of hazards

3. Recovery of losses from carriers is very uncertain4. Recovery amount limited

5. Facilitate free flow of trade

6. Indemnity against direct physical loss



So what is Marine Insurance ?



What is Marine Cargo insurance?

Marine cargo Insurance is the insurance of goods

whilst they are in transit from one place to another by road, rail, air, sea, post, courier.



History

1. Mother of all insurances«..Existed even before there wasaccident, fire and liability and even Life insurance«.

2. The first form of marine insurance dates back to the year 3000 BC

3. Chinese merchants dispersed their shipments amongst severalvessels so as to abridge the possibility of damage to the products.

4. The earliest account of insurance came in the form of Bottomry

5. Bottomry bonds were monetary payments that protected tradersfrom debt if merchandise was lost or damaged during voyage.

6. Started developing from Lloyds coffee House (18th century) ±SG(Ship & goods form)



Marine Insurance Today

1. Guided by Marine insurance Act 1906

2. The policy and the wordings were simplified in 1982after more than 200 years of existence.

3. Institute Clauses ± Universal in nature ± devised byInstitute of London Underwriters



1. Follows London Market Clauses

2. Total Market Size : approx INR 1800 crs (including Hull)*

3. 6.5% of total insurance market

4. Marine Cargo business used to be fully tariffed till 1994.

5. But, in course of time, all the Tariffs for different Cargo Risks /Commodities have been gradually dismantled completely ±Including War risks and Strikes, Riot and Civil Commotion risks.

6. Hull Tariff has also been withdrawn few years back.

7. Market is extremely soft, driven by intense competition.

8. Even adverse claims experience is not reflected in the renewalterms ± fear of loss of Fire and Engineering business which so far are profitable portfolios.

* figures for the fy 0708

Marine Insurance in India



And today marine insurance has evolved«

Classes of Marine insurancea) Hull

b) Cargo

c)F

reightd) Liabilities

e) Loss of profits

d) Protection & Indemnity

As of now, Let us look at Marine Cargobusiness only



What does Marine Insurance Cover?

Physical loss or damage to cargo whilst- ± Movement of the cargo from one place to another

within the country (inland)

between India and other countries (overseas)



Features of Marine Insurance

1. An Agreed Value Policy.

2. Marine Cargo insurance policy is a freely

negotiable document.

3. Insurable Interest must exist at the time of loss, not necessarily at the time of effecting

insurance.



International Trade - Flow

Seller 1 2

5 11

Buyer

74

6

10

10

AdvisingBank

8

3

9

Issuing BankIssuing Bank



FOB (Free On Board)

The seller is responsible for all costs and risks until the goods are

on board the vessel. The buyer is responsible from then on.

CFR (Cost And Freight )

The seller is responsible for all charges incurred to the place of

discharge, except for loss or damage after they have been delivered

into the custody of the ship owner at the place of shipment or point

of FOB. It is the buyer's responsibility to insure the goods once

they are delivered to the place of shipment or FOB until they reach

their final destination.

International Sale Contracts (Incoterms)



CIF (Cost, Insurance and Freight )

± The seller's responsibilities are the same as

for CFR sales, except that the seller arranges insurance to the final destination of the goods, providing cover in terms that areusual to the trade. The buyer pays for and

takes title to the policy when the goods arepaid for .

International Sale Contracts (Incoterms)



International Sale Contracts

er s is trans ers Ins rance co ere

Free On Board(FOB) When goods pass the ship¶s

rail at port of shipmentBuyer (seller up to the ship)

Cost and Freight(CFR) As for FOB, but the seller prepays freight to destination Buyer (seller up to the ship)

Cost, Insurance,Freight (CIF)

When goods cross ship's railat port of shipment

Seller (insurance policy soldto buyer with cost of goods)



Incoterms ± Risk Transfer



e er o cre an argoinsurance

1. Letters of Credit are important in international trade.

2. In dealing with Letters of Credit, banks must ascertain whether an insurancepolicy provides adequate security should any loss of or damage to the goodstake place during transportation. From this point of view it is evident thatmarine cargo insurance plays a very important role in the operation of Lettersof Credit.

3. When the sales contract provides that payment will be made under a Letter of Credit, the importer arranges with his bank (the issuing bank) for opening of the required Letter of Credit in accordance with the sales contract.

4. When the exporter has loaded the goods on board the overseas vessel andobtained the required documents, he will draw a draft and attach to it theshipping documents including an insurance policy required by the Letter of Credit.

5. Then, he presents the draft together with the documents to his negotiatingbank who must examine the documents to see whether they are in accordancewith the terms and conditions of the Letter of Credit.

6. This examination must be carried out with reasonable care,since, if there be

any discrepancy in the documents the negotiating bank will not be able toenforce payment against the issuing bank.

7. If the documents are found to be in order, payment by the negotiating bank ismade to the exporter.

8. The bank will forward the draft and documents to the issuing bank who willthen check the documents and will claim payment from the importer.



Some Important Marine concepts..

1. Agreed Value

2. General Average

3. Particular Average



Agreed Value

1. Since it is impracticable to assess the market value of the insured goods

at the time and place when and where the loss of or damage to them

takes place during the course of transit, an agreement on the valuation of

the goods is made beforehand between the insurer and the assured

when the contract of marine cargo insurance is concluded.

2. Such value is called "Agreed Insured Value" and the marine cargo

insurance policy is called a "Valued Policy".

3. The insured amount is the limit of the amount, for which the insurer is

liable in respect of one accident, and insurance premiums are calculated

upon this amount.

4. Although the Insured Value and Insured Amount are different

terminologies, the insured amount is normally fixed at the same as theinsured value.



PA and GA«..

Expenses and damages incurred as the result of damageto a ship and its cargo, and/or of taking direct action toprevent initial or further damage to the ship and its cargo.These expenses and damages are paid by the owner of thepart of the ship and cargo which actually suffers a loss.Contrast with General Average.

Expenses and damages incurred as the result of damageto a ship and its cargo and/or of taking direct action toprevent initial or further damage to the ship and its cargo.These expenses and damages are paid by those with aninterest in the ship and its cargo in proportion to their values exposed to the common danger. Contrast with

Particular Average



Coverage«««Overseas Transit

Types of cover & scope

± Institute cargo clauses

prepared by Institute of London Underwriters(followed world wide)

± ICC µC¶ (Basic Cover)

± ICC µB¶ (Intermediate Cover)

± ICC µA¶ (All risks Cover)



Coverage««.Overseas Transit

Risks Covered

± ICC µC¶

± Reasonably attributable to

Fire, explosion

Stranding, grounding, sinking, capsizing of vesseletc.

Overturning / Derailment of land conveyance

Collision

± Caused by Discharge at port of distress

General Average sacrifice, Jettision



Coverage««. Overseas Transit

Risks Covered ± ICC µB¶

All those in µC¶

± Reasonably attributable to

Earthquake, volcanic eruption, lightning

± Caused by

washing overboard

entry of sea, river, lake water

loss of total package while loading / unloading from

vessel or craft



Coverage««. Overseas Transit

Risks covered

± ICC µA¶

All risks of loss or damage other than excluded



Cargo Clause Comparison

Risks Institute Cargo Clauses

(Proximate Cause) A B C

General Average Sacrifice Yes Yes Yes

Jettison Yes Yes Yes

Washing Overboard (deck cargo) Yes Yes NoSeawater entering Ship, Craft, Hold, ConveyanceContainer Lift Van or Place of Storage

Yes Yes No

River or Lake Water entering same Yes Yes No

Loss overboard during Loading/Discharge (total lossonly)

n/a Yes No

Any risks of physical loss or damage not specified Yes No No



Coverage««. Inland Transit

Types of cover & scope

± Inland Transit Clauses

± Inland Transit Clause µC¶ (Basic Cover, FireRisks Only)

± Inland Transit Clause µB¶ (Intermediate Cover)

± Inland Transit Clause µA¶ (All risks Cover)



Coverage««. Inland Transit -C

Risks Covered

± Fire ± Lightning



Coverage««. Inland Transit -B

± Coverage in Inland Transit ³C´ Clause´

± plus

± Breakage of bridges

± Collision with or by the carrying vehicle

± Overturning of the carrying vehicle

± Derailment or accidents of like nature to the

carrying railway wagon/ vehicle.



Coverage««. Inland Transit -A

Risks covered

± All risks of loss or damage other than excluded



Exclusions

1. Wilful misconduct of assured

2. Ordinary leakage, loss of weight / volume, wear &

tear 3. Insufficiency / unsuitability of packing

4. Inherent vice / nature

5. Delay



Exclusions

6. Insolvency / financial default of carriers

7. Deliberate / malicious damage

8. Nuclear weapons and contamination

9. Unseaworthiness / unfitness of vessel etc.

10. War / war like operations

11. Strikes, riots, civil commotions



Duration of cover

± Attaches with the commencement of transit

± Continues during the ordinary course of transit

± and

± Terminates «.



Duration of cover

Terminates

a) On delivery at destination

b) On delivery at any other place prior to destination as

elected by insuredOR

On expiry of 7(local movements)/30 (air shipments)/60

(sea shipments) days after «.

± Whichever shall first occur



Underwriting considerations

1. Actual physical risk ± cargo

2. Packing.

3. Conveyance involved

4. Duration of Insurance5. Environment

6. Others



Underwriting considerations Actual physi cal risk ± cargo

1. Properties2. Condition

3. Valuation

4. Packing

5. Normal losses

Convey anc e invol ved

1. Type

2. Owner

3. Flag

4. Experience

5. Pre-ocean/Air carriers

6. Post-ocean/Air carriers



Underwriting considerations Du r at ion of Insu r anc e

1. Length of voyage2. Route/s

3. Direct/via

4. Transshipments if any

5. Inland legs

6. Road conditions

7. Port/Airport facilities

8. Warehouse facilities

Environment 1. Weather

2. Season

3. Political/social atmosphere



Underwriting considerations

O t hers

1. Moral hazard

2. Insureds¶ Risk management philosophy

3. Past claims experience ± preceding 3 years with claim

amounts vis a vis premium amounts paid and turnover .

4. Repair facilities

5. Handling facilities

6. Recovery possibilities



Minimum info required to quote

1. Client name and business.

2. Complete details of the cargo along with packing.3. Details of the voyage.

4. Value at risk.

5. Per bottom limit - This denotes the maximum value of any shipment on aconveyance. Shipment values exceeding this limit would remainuncovered unless prior notice is given to the Company & suitable

amendments have been made in the policy. 6. Per location limit-This denotes accumulation of all shipments at any one

place at any one time, e.g. intermediate storage, carriers¶ or other godowns, at the port awaiting shipment & similar places

7. Previous Claims experience

8. Coverage desired.

9. Basis of valuation.10. Intermediary name and commission to be given.

S f



Specific cargoes

Project CargoesInstitute Replacement Clause( Machinery)

Exclusions

ROD - On deck Cargo and/or in respect of unpacked or partially protectedgoods or Unless caused by an insured peril or

ICC µC

Electrical & Mechanical derangement ± unless caused by insured peril.

Warranted :1. Supervised and approved by an approved surveyor during loading, stowage and unloading

and all recommendations fully complied with.

2. Loaded, stowed and secured on to inland conveyance,India under the supervision of approved surveyors and all recommendations complied with.

3. Brand new cargo in manufacturers packing

4. Direct Transits without transhipments or held covered at rate to be agreed

Inland Transit:ODC cargo to be transported in low bed multi axle truck trailer

Carriage in closed vehicle or covered by Tarpaulin

S ifi



Specific cargoes

Pipes, Asbestos Sheets and the like

Cutting Clause ± Damaged portion to be cut and the

salvage thus realised to be regarded as sound

material unless the material so salvaged falls short

of the minimum required size/length for the specificuse. Allowance for damaged portion to be

determined.

S ifi



Specific cargoes

Food Grains/Edible Oil Etc.,

Hold, tanks including connecting pipe-lines certifiedfit and clean for the cargo intended.

Bagged Cargo/Loose

- Type of Packing to be considered.

- Co-mingling of cargo or separation.

Hot Rolled Coils/Steel Sheets

On Deck Cargo suitably lashed,secured

Excluding: ROD Loading/Unloading supervision



Specific cargoes-packing and damages

Asbestos Cementsheets.

Loose/Crates Brittle.Damage toedges; breakage.

Cast iron scrap Bulk/loose Full of foreign

matter/Wt.difference

G.I.sheets Loose/crates Flaking;white rust;

crusting.

Machinery Cases./crates Bkg., rusting, theft.

Grain (wheat, maize,

barley)

Hessian bags. Fermentation when

wet; infestation, htng.

M.V.Parts Cases/crates/boxes Rusting, bkg., radia-tor core damage.




Flour Bags Tainting, heating,

Tearing of bags,

rodents,exposure.

Cement Bags Deterioration with

age.Water damage.

caking

Sugar Bags Hygroscopic.Caking.Lu

mpiness.tearing of

bags.

Tea Chests Water damage.Pilferage.Taint dmg.




Crude Oil Bulk; in tanker Contamination.

Leakage,

Mixing with

water.

Paints Drums Leakage, mixing

with sea water.

Important Guidelines-Marine cum Erection Covers ±



MARINE CUM ERECTION COVERS-

While quoting for MCE covers, specific info must be obtained (for the MarineTransit portion) with regard to the following, in addition to other requirements ±

1. Type of machinery imported or procured locally along with details of critical machineries

2. Dimensions of the machinery.

3. If over dimensional, then whether adequate loading/unloadingsupervisions are available at the load port and disport?

4. Any other additional covers required.

5. Warranted Supervised and approved by an approved surveyor duringloading, stowage and unloading and all recommendations fully compliedwith.

6. Exclude electrical, mechanical derangement unless caused by external,visible and physical means.

Important Guidelines-Marine cum Erection Covers

Project Cargoes



Break up of Turnover required for ±

1. Imports2. Customs Duty (Actual or Deemed / Contingent)+

3. Domestic purchase of raw materials, consumables &stores+

4. Any number of inter- factory / inter-depot / to & fro jobworker movements

5. Exports (FOB/CIF)6. Domestic sales of finished goods

7. Temporary storage cover at intermediate locations like Jobworkers / C & F premises etc.

Final rate is the weighted average rate arrived at after applying individual

rates on each of the above values declared.

This rate is to be applied ONLY ON THE SALES TURNOVER

Declaration Basis ± Monthly / Quarterly Audited Sales Figures

Important Guidelines-Sales Turnover Policies



1. Age of the vessel should not exceed 20 years for bulk and heavy cargoes

and 25 years for general and containerized cargoes.

2. Anything beyond these age limits would not only jeopardize cargoes butalso be liable for additional premium.

3. Vessel should be 'Classed' by one of the approved Classification Societies.Classification ensures physical seaworthiness of the vessel based onregular inspection by the approved societies.

4. Vessel should be entered into one of the reputable P&I Clubs. This willensure financial stability of the ship owners and / or charterers.

5. Register yourself on www.equasis.org and check on the complete details of the vessels. This is a f ree site.

Important Guidelines-Vessel Details



Storage (beyond the duration clause) cover during the course of

transit should be restricted to Fire and Allied Perils. EQ andBurglary could be covered. Terrorism/Processing losses should bespecifically excluded.

Avoid giving storage covers for longer duration

Excess during storage (as per erstwhile Fire Tariff) should bementioned clearly.

ACT OF GOD PERILS: 5% of the claim amount subject to minimumof Rs. 10,000.00 for each and every claim.

Other than AOG perils ± Rs. 10000/- for all claims each accidentand/or occurrence.

Important Guidelines- Incidental Storage



Process-

1. Standard commodities with rate cum conditions/exclusions grid is available.2. Authority to be given only to selected Intermediaries who have a good

Marine premium potential with good claim experience

3. Pre-requisites are-

1. Intermediary code is existing in FG systems.

2. Amount deposited for Float account by the Intermediary.

3. Float Account created in the name of the Intermediary.

4. All cheques to be drawn in favour of F

UTURE GENERALI INDIAINSURANCE COMPANY LIMITED

5. Intermediary to send a request along with the list of authorisedsignatories who would be counter-signing the policies

6. Intermediary to send a list of users giving full name and surname.Whenever the users change or authorised signatories change, theintermediary to inform the company for discontinuance and addition of new users/signatories.

4. An XL sheet shall be provided to the Intermediary to issue the policies whichshall have restriction on the max per sending limits, rates, excess,commodities etc.

5. The xl sheet to be sent to FG every day. The issued policies shall beuploaded in the system and Policy numbers generated against each of themto be communicated back to the intermediary.

Authority to Intermediaries to issue Specific Marine Policies.

D li d/R f l Ri k At FG



Declined/Referral Risks At FGCargoes

± Gold, silver, diamonds and precious stones including jewelry

± Bulk commodities

± Second hand machinery on all risks cover.

± Cash in transit

± Financial documents, banknotes, coins, securities, shares, cheques, etc.

± Art and antiques

± Containers as cargo ± Live animals/creatures of any kind

± Newsprint unless in containers

± Container as a cargo for overseas transits and all risks cover for local

movements.

± House hold goods and personal effects on all risks.

± Personal baggage. ± Currency notes and coins.

± Nuclear / Radioactive goods/explosives/ammunitions

± Livestock, live cargo etc.

± Scrap metal in bulk

D li d/R f l Ri k t FG



Declined/Referral Risks at FG

Coverage

± Stock throughput policies ± Carrier¶s legal liability

± Policies covering more than 12 months

± Marine ALOP

± Marine DSU

± Infrastructure projects

± Rejection risks

± Consignments to and from Iraq/Afghanistan

± Shipments of cargoes in bulk like coal, fertilizers, crude oil, iron ore.

± Consignments to and from West African Ports

± Accounts with high loss frequency-claims experience exceeding 85%

± Inward reinsurance acceptance

± Co-insurance acceptance

Exclusions1. No fronting for any other Insurance Company may be undertaken

2. Financial guarantees



Thank You

Marine Product Presentation

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