Maritime trade is also fraught with risks – from turbulent seas and natural disasters to theft and accidents, countless dangers can threaten vessels and their valuable cargo. For centuries, a specialized form of protection has evolved to help mitigate these risks: marine insurance.
In fact, the first formal marine insurance policy recognized today dates back to 1350 A.D. Known as the Rôles d’Oléron, it’s one of the earliest attempts to ‘put on paper’ a set of international maritime laws.
A Short History Of Cargo Marine Insurance
These Medieval Marine insurance laws were drawn up in French at approx. 1286, containing regulations for the wine trade from Brittany and Normandy to England, Scotland, and Flanders.
But the unrecorded history of marine insurance is believed to date hundreds of years back, from the distant times when the very first sea traders, the Phoenicians, transported cargo around the Mediterranean at 1200 BC.
These early forms of marine insurance mostly concerned hull and cargo that was greatly put at stake during weeks or even months os sea-battering voyages.
Even though sea traders and buyers have been holding stock certificates or contracts for centuries, there are records of marine insurance legislation disputes coming before the English courts in the 16th and 17th centuries.
Where Does Liability Lie In Cargo Loss Or Damage?
Evolving from practice, to contracts, to litigation, and ultimately to legislation, marine insurance through the ages included the difference between human and natural causes.
But is it always easy to distinguish between the two? Not really. Consider the case of a raging storm – an “act of God” indeed. However, failure to steer away from it, promptly seek shelter, or keep the vessel well maintained – all are obviously “acts of man”.
Even today, “marine insurance is based on agreed levels of uncertainty. The owner of the vessel and the shippers of the cargo know where the vessel is supposed to go,[ … ] but they don’t know what it is doing at any moment. Neither do the insurers.”
Still, proper marine insurance is highly important and, in our day, mandatory in international shipping.
But how exactly does the supply chain industry define marine insurance today?
What Is Marine Insurance?
Marine insurance is designed to cover damage or loss related to ships, cargo, terminals, and various transportation modes. It minimizes financial risks due to accidents, machine failures, natural disasters, piracy, or other mishaps that occur while goods are transferred, obtained, or held between ports of origin and final destinations.
Importance Of Marine Insurance
Marine insurance plays a key role in global trade and international shipping.
Mitigates Risk: Look at marine insurance as a safety net that reduces financial exposure in case of cargo loss and various types of damage. At the same time, it saves on other business resources like staff time, costly legal activities, credibility, etc.
Enhances Trade Confidence: Financial security enhances confidence among buyers, sellers, and other stakeholders, facilitating business continuity even after an incident.
Ensures Regulatory Compliance: More often than not, marine insurance is a legal or contractual requirement for international shippers. It’s mandatory for vessels operating in some countries, but it’s also a requirement for sellers under certain Incoterms (International Commercial Terms) like CIF – Cost, Insurance, and Freight and CIP – Carriage and Insurance Paid To.
Encourages Investment: Mitigating the risks associated with cargo shipping operations creates a more stable environment that encourages investment in international trade.
Types Of Marine Insurance
There are many different types of marine cargo insurance and all types of different policies to accommodate shipper and cargo needs, agreeenents between consignors and consignees, international trade and shipping regulations, etc.
Some stem from the depths of cargo shipping history, like cargo and hull insurance, and still aim to protect capital investment and assets.
But as the supply chain and transportation operations expand and evolve, new kinds of cargo marine insurance have emerged in the last few decades.
Today, then, some of the most common types include:
Marine Cargo Insurance
The most fundamental type of marine insurance covering the loss or damage of goods being transported by sea, from the port of origin to the final destination. Cargo insurance protects shippers, buyers, importers, and exporters.
Common causes of cargo loss during transit include fire, explosion, accidents, collisions, theft, malicious damage, shortages, non-delivery, damage during loading/unloading, and cargo mishandling. Last year, cargo insurance accounted for the largest share of global marine insurance premiums at 56.9%.
Freight Insurance
This mostly protects the freight forwarder or carrier against losses and liabilities caused by negligence or errors. In contrast to cargo insurance, freight insurance covers legal costs in cases where the shipper sues the freight forwarder. It also compensates shippers and protects the reputation of a freight forwarder.
Liability Insurance
This type covers legal liability to third parties, like claims arising from physical injury or asset damage caused by the insured party’s negligence during maritime operations.
Protection & Indemnity (P&I) Insurance
A type of liability insurance, Protection and Indemnity (P&I), covers a shipowner’s legal liability for cargo damage, physical injury/death, collision, and other maritime risks.
Hull Insurance
Although this type of insurance covers the vessel itself, its hull and machinery, it is essential for cargo shipping simply because the vessel’s safety and condition directly impact the cargo it carries. Hull insurance protects against a broad range of risks like collision, grounding, fire, piracy, and severe weather. Last year, hull insurance premiums globally reached USD 9.2 billion.
Keep Your Cargo Covered With All-Risk Insurance
At Ship4wd, we don’t only offer the best freight-forwaring quotes and services. We want to mae sure your cargo travels safely across the world.
Our special international cargo insurance services, in partnership with Loadsure®, are designed to protect international shipments against many kinds of risks that came come up during transit.
Ship4wd’s all-risk coverage applies door-to-door and protects your shipment from mechanical breakdowns, inside theft, fraudulent pick-up, loading and unloading damage, and Acts of God.
And the best part? You get everything in a single dashboard!
Our insurance service is fully integrated into the Ship4wd shipping process, so you can easily add Loadsure’s all-risk insurance directly from your Ship4wd dashboard!
Getting coverage is digital and fast. It literally takes less than a minute to add international cargo insurance to your shipment. Get started now!