Ships and other ocean vessels are a costly investment, and the bigger the investment, the higher the risk of loss. Though marine accidents are not as common as road accidents, they result in significant losses when they occur. In 2017, marine accidents caused around 1,163 deaths and insured losses amounting to $197 million. The insured losses from the Costa Concordia cruise ship accident, in which a cruise ship capsized after hitting obstacles off the Italian coast in 2012, had hit $2 billion by 2014; this shows how costly marine accidents can be. Marine insurance policies such as hull and machinery insurance help marine investors cover losses resulting from different marine travel risks.
Insurance policies are classified according to the risks they cover. Beside hull and machinery insurance, other types of marine insurance covers are freight, cargo, and protection and indemnity insurance covers. Below are some of the marine industry risks that investors should insure as they can cause significant losses.
Damage to Hull and Machinery
For a ship to operate effectively, the hull and other equipment in the vessel should be in good condition. Collisions and other marine perils may damage the machinery, making it impossible for the ship to operate. Further, if a ship’s parts are damaged, the safety of the passengers and cargo on board is compromised.
Hull and machinery damages are customarily covered under hull and machinery insurance cover. Under this cover, any physical damage to the ship caused by different risks is compensated by the insurer. This enables the ship to resume operations as fast as possible after a marine accident. Most hull and machinery insurance covers have a collision liability provision; this means that the insurer will cover damages to other ocean vessels in the event of a collision.
The UK is a hub for global trade, and millions of tonnes of goods move in and out of the country every year. According to the UK Department of Transport, 248.3 million tonnes of imports and 138.5 million tonnes of exports went through UK ports in 2017. As these goods move around the world, they are faced with many risks that can damage them. Marine cargo insurance protects cargo owners against damages while the cargo is in transit or storage. Marine cargo insurance cover can include third-party risks if the cargo being transported is dangerous
In a marine accident, the negligent party is liable for the losses incurred by third parties. For example, in a collision, the ship and cargo of the non-negligent party may be damaged. Paying these damages can take a huge financial toll on the ship owners or shipping agents if they had not insured against third-party risks. Some third-party risks are covered under hull and machinery insurance, but the shipping agent needs to understand the third party risks they are exposed to and insure them separately.
This risk mainly faces ship owners and merchant vessels corporations. In the course of the shipping business, legal disputes with cargo owners and other marine businesses might arise. Since legal fees in such cases are hefty, marine investors should ensure legal fees are included in hull and machinery, and third-party covers; otherwise, they should insure them separately.
Marine transport is faced with a myriad of risks, and ship owners and shipping agents should insure against the risks to ensure a continuous flow of business. While the risks discussed above are the common risks in the marine industry, one should research the specific dangers facing their marine business and take insurance cover for them.