Every cargo carried around the world in a ship is of value, whether that be a container full of microchips from Japan, or a chest of drawers that caught the eye of a European tourist holidaying in Australia. The owners of both cargoes will place a value on their products, however small or large that may seem comparatively. Should the unthinkable happen to that cargo, or indeed the ship as a whole, the cargo and ship owners will not want to out of pocket and will want to be financially covered. Marine Insurance, the oldest form of insurance, protects shipping companies and cargo owners against the loss of a ship and/or cargo. Typically, the owner of the cargo will be compensated for losses sustained from fire, shipwreck, and so on, but not for losses that can be legally recovered from the carrier. Usually, marine insurance is divided into two divisions: hull and machinery and Protection and Indemnity. Other forms of marine insurance are designed to cover other risks such as the cost of delays resulting from strikes and losses resulting from trading a vessel in regions affected by war.
Protection and Indemnity (P&I)
P&I cover responds to the liability for damage or loss that the insured party has caused to others. P&I insurance serve to shield the insured party from the risk of their liability to others stemming from maritime activities. P&I insurance differs from loss insurance in that it only responds to the liability for damage or loss that the insured party has caused to another party. This form of insurance emerged in the latter half of the 19th Century due to a coverage gap created when courts determined that a shipowner who had to caused damage to another vessel in a collision could not recover their liability for damages to the other vessel under a standard hull and machine policy.
Hull and Machinery
Hull and machinery insurance protects an insured vessel or fleet against physical damage caused in transit. Hull and machinery also protects an owner’s legal liability that may arise from the policy holder’s vessel colliding with another vessel and damaging the vessel or its cargo. Hull and machine insurance does not cover an owners legal liability stemming from injury, death, or property damage to fixed installations caused by collisions, these issues are covered by P&I insurance.
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