Marine Business Insurance: Protect Your Shipments

Marine business insurance is the oldest form of insurance in existence today. Dating back to the early 1600s, marine insurance has provided protection for shipbuilders, merchant transports and other users of the waterways who carry goods between ports. Marine business insurance protects against risks of loss to a shipper due to piracy, storms and other calamities that may occur.

This form of insurance protection is an important part of our system of commerce and no company operating on the sea, rail or air could function without having some type of marine insurance protection.

History of Marine Insurance

The system for insuring ships and cargo came from England around 1601. Some of the earliest companies who built there business around insuring ships was Lloyd’s of London, a company which still exists today.

The early coverage provided protection for shipping companies based on the seaworthiness of their vessels and the level of protection they needed to protect their goods and ships against liability arising from various sources. Protecting the ability of countries to engage in trade is an important protection and over time led to the creation of the concept of reinsurance, or risk sharing, for which Lloyd’s of London is famous for today.

Marine Insurance Act of 1906

Laws that govern marine insurance evolved in England and were set forth in code in the United States through the passage of the Marine Insurance Act of 1906. The law, as part of the reforms that came out President Theodore Roosevelt’s administration like the Pure Food and Drug Act, sets forth the various definitions and conditions for an insurer and insured’s liability.

Companies that sell marine insurance tend to specialize in this type of coverage above other lines of insurance protection and have an advanced and unique understanding of the Marine Insurance Act. The protections that were established in 1906 for ships and shipping include cargo containers, oil pipelines, air transport vehicles and other instruments of commerce.

Types of Protection

The protections provided in a marine insurance policy can limit either liability to damages and loss that occurs to the vessel only or the cargo or both. The more comprehensive the coverage, the more expensive the insurance. The plans are based on the same principles of indemnity, or restoration to original value, as other insurances but also look differently at the word and statements used to secure the coverage.

Words such as concealment, fraud, warranties and non-disclosure take on different meaning for both the insured and the insurance company in a marine insurance policy due to the size of the policy benefit and the greater potential for moral hazard to occur. Moral hazard is the risk that a loss may occur because of the fact that fraud or deceit was used to obtain the insurance.

Marine insurance is an important form of insurance protection. It is necessary to provide a form of indemnification against loss for the shipping community and provides a benefit that protects the economic interests of many nations.

blog comments powered by Disqus