Marine cargo insurance is a specialised property insurance that protects goods and merchandise during transportation. It covers a wide range of transportation modes, including sea, air, road, and rail, ensuring that the property is insured against loss or damage resulting from various perils associated with the journey.
Before we begin, note that Marine Insurance, in general, is very wide and involves areas within the insurance industry, including;
- Marine Liability Insurance.
- Goods-in-transit Insurance (also known as GIT).
- Freightforwarders Insurance (this mostly applies to those in the logistics business).
- Warehousemen Insurance (applies to warehouse operators).
- Carrier Liability Insurance.
This blog article focuses on the general framework of Marine Insurance. If you are looking for a more specific requirement (or niche), the good news is that Cover Buddies can probably assist you with it. We suggest you contact us directly here instead.
The roots of marine cargo insurance can be traced back to the Marine Insurance Act of 1906 (MIA). This legislation established the framework for insuring property as it moves from one location to another. Although the primary focus of the MIA was sea transportation, it has evolved to encompass other methods of transit like air, road, and rail.
The Harter Act of 1893 was another significant milestone in the history of marine cargo insurance. Before this act, ocean freight carriers were not responsible for damages or cargo loss during transit. The Harter Act defined the responsibilities of ocean freight carriers and prevented them from including clauses that would release them from specific liabilities. However, it also recognized that carriers could not be held liable in circumstances beyond their control.
Marine cargo insurance covers a wide range of goods and merchandise during transit. The property can include raw materials, components, finished products, machinery, office furniture, samples, engineers' tools, and exhibition materials. Essentially, it can cover anything being transported from one place to another.
The Marine Insurance Act defines 'maritime perils' as the risks associated with the carriage of property by sea. These include sinking, stranding, collision, fire, war perils, piracy, theft, capture, jettison, washing overboard, and other perils of a similar nature or as designated by the policy. Insurers have the discretion to include additional risks that may be appropriate for other transportation modes, such as crashing, derailment, and overturning. However, it is worth noting that the normal action of wind and waves is not considered a peril of the sea.
While marine cargo insurance offers comprehensive coverage for the property during transit, there are certain exclusions that policyholders should be aware of. Some common exclusions in marine cargo insurance policies include:
Policyholders must carefully review the coverage and exclusions of their marine cargo insurance policy to ensure that their property is adequately protected during transit.
According to the Marine Insurance Act, anyone with an insurable interest in the property can obtain marine cargo insurance. This includes buyers, sellers, shipping and forwarding agents, carriers, charterers, and other parties involved in the transportation process. Insurable interest refers to a legal or equitable relationship with the property, where the party may stand to benefit from the safe arrival of the goods or be harmed by their loss.
For example, a manufacturer selling goods overseas has an insurable interest in the products until payment is received. Similarly, the buyer also has an insurable interest or expectation of receiving one and can, therefore, purchase marine cargo insurance. The Act specifies that the insured party must have an insurable interest in the property at the time of loss. However, it is not necessary to have an interest when the insurance is initially obtained.
Unlike other forms of property insurance, marine cargo insurance policies must account for the possibility of ownership changes during the coverage period. The insured property, such as goods and merchandise, may change hands as it is bought and sold during transit.
Transferring a marine cargo insurance policy from one party to another is called "assignment." Under certain terms of sale, such as Cost Insurance and Freight (CIF), the seller may contract to obtain cargo insurance covering the entire voyage, with the buyer or any other party with an insurable interest entitled to claim directly from the insurer. The seller typically provides the buyer with an insurance policy or certificate.
Marine cargo insurance policies are assignable unless they contain specific terms to the contrary. The policy certificate typically includes the name and address of the insurer's claims representative in the destination country and is signed by the policyholder. This allows the buyer to receive a settlement for loss or damage to the goods in transit as though they were the originally insured party.
The Importance of Marine Cargo Insurance
Marine cargo insurance plays a critical role in the global trade and transportation of goods. It provides financial protection for businesses and individuals involved in the transportation process, ensuring that they are not left with significant financial losses in the event of loss or damage to the property during transit.
Some key benefits of marine cargo insurance include:
Marine cargo insurance is an essential protection for businesses and individuals transporting goods and merchandise. Policyholders can ensure their property is adequately insured against the various perils associated with transit by understanding the coverage, exclusions, and assignment process. As global trade continues to grow and evolve, marine cargo insurance will remain a vital component in safeguarding the interests of all parties involved in the transportation process.
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Cover Buddies is Malaysia's preferred commercial insurance provider and can help you with your insurance requirements. Contact us via WhatsApp or book a free consultation.