MARINE CARGO INSURANCE

Because of the enormous risks involved in international trade, it has become a core part of the international trading process for the parties involved to insure their respective risks. One of the major risks that international traders (exporters and importers) face is the risk of damage or loss during the transportation process. This is where marine insurance comes into play. ‘Marine insurance’ is thus the term used to described the insurance taken out to cover the risks involved in all forms of transportation, for example, sea, road, rail and air, from the point where the goods are loaded onto their first form of transport until they arrive at their final destination.

As there are many risks involved in the transportation cargo internationally, traders want to minimize these risks. A loss of goods to a buyer (or seller – depending who has contractual ownership of the goods at the time of the damage/loss) could mean:

• Loss of business
• Loss of money
• Loss of goodwill
• Delays in utilisation of the goods
• Expensive repairs
• Penalties for late delivery

Any of these factors could put a small firm out of business and can even cause larger firms serious financial difficulties. The sensible trader will make certain that he or she has taken out suitable insurance cover, covering the correct value and risks thereby ensuring that all aspects of marine insurance have been suitably addressed.

The marine insurance contract is a contract of indemnity. The insurer, undertakes to indemnify the insured against financial loss or expenses incurred resulting from any of the risks and hazards which are defined in the policy document. The insurer will define his liability in such a manner that he does not become responsible for loss or damage resulting from any misconduct of the insured. The insured must therefore take reasonable steps to protect the goods/cargo from any potential hazards by ensuring that the cargo/goods are packed, labeled and stored correctly.

The insurer will also limit his liability by excluding losses which arise inevitably from the nature of the goods, such as evaporation or natural deterioration. The insurer therefore indemnifies the insured against fortuitous loss (dropping, crushing, breaking, rusting etc of the goods themselves), accidents and disasters, together with the loss of damage which may arise from causes over which the insured can exercise no control, such as war, riots, strikes and civil commotions.