IIG Insights: Basic Overview of Marine Insurance
Daniel Stevens, IIG Past President and Head of the Outsourcing Team at Santam, welcomed IIG members and all in attendance. Santam was the sponsor of this IIG Insights session and will be sponsoring a further 3 webinars. Those members registered for this webinar will be automatically included in the other additional sessions. Daniel reminded everyone of the process to be followed to secure one’s CPD hours and certificate via the IIG CPD vault.
Daniel Introduced Miguel Fernandes, presently the Regional Manager within Santam Marine, coastal regions. Miguel has spent 11 years in the short-term insurance industry where he started his career as an Underwriter at Santam Marine (then named Associated Marine), a division of Santam. His portfolio includes Sales, Underwriting, Technical referrals on claims, Product Development and Training & People Development.
Miguel thanked Daniel and the IIG and provided a brief overview of the topic. Some of the basic areas being the history of marine insurance, products, local events, cargo underwriting information and primary contracts.
Miguel began with the history which dates back to 3000BC whereby Chinese merchants were the first to disperse their shipment amoungst several vessels. Lloyds coffee house was the first marine insurance market.
The scope of marine products includes:
- Marine cargo,
- Stock throughput,
- Hull (including commercial vessels & pleasure craft),
- Marine liabilities (ship-repairer’s, container, marina operator, terminal operators etc.)
- Advanced loss of profits
- Delay in start up
Today, the marine insurance market today has serious capacity with many players in the market. There has been significant growth and an increase in the average size of container vessels has increased exposure to major losses. Covid-19 had a direct impact on client turnover as well as a delay in supply chain due to lockdown and capacity of transporters. There is also an increase in cyber risk as well as an increase in incidences of “misdeclared” cargo. Over the last 50 years, there has been a notable growth in container ships by approximately 1,200%.
The top three ports worldwide (cargo handled) are:
- Shanghai China, Singapore, Shenzen China
- South African sea ports capacity is 6 million containers per annum
- Durban is the largest and also handles over 500 thousand motor vehicles of which 100 thousand are for export.
Some of the factors that go wrong are storms, fires, incorrect routing of cargo resulting in risky handling of containers. Handling and packing of cargo must always be dealt by with skilled professionals.
General Average (GA) sacrifices:
- GA is a legal principle of Maritime Law, whereby all parties involved in a voyage are required to proportionally share the losses resulting from a major loss or sacrifice of cargo.
- Durban was hit with a massive storm and numerous vessels broke from their moorings causing significant damage to other vessels as well as port infrastructure.
- Claims exceeded 2 billion ZAR.
The minimum underwriting info required for a quote:
- Name of the insured, maximum value of any one conveyance, packing & voyages and point of origin
- A history of previous losses
Primary contracts include:
- contract of sale/purchase,
- contract of carriage,
- contract of insurance
INCOTERMS® – International Commercial Terms, are three letter trade terms developed by the international Chamber of Commerce and widely used in international and domestic contracts for the sale of goods. They’re accepted by governments and shippers worldwide and are used to prevent uncertainty. A graphic representation of the responsibility matrix was provided. Thereafter Miguel went through some institute cargo clauses which covered low, medium, widest cover as well as cargo exclusions which included willful misconduct and malicious damage and atomic nuclear fission radioactive force or weapons and war & strikes.
Miguel concluded his presentation and accommodated a Q&A session.
Daniel thanked Miguel and went through some of the questions. One of which asked about pirates. Miguel confirmed that marine policy does incorporate piracy but does not engage in ransom as it’s an illegal process. There were many Covid-19 related questions and Miguel advised that there was never an intention to cover communicable diseases in the policy and so there is no cover.
Daniel Stevens closed the session and thanked all in attendance.
by Asiya Swaleh