A form of goods in transit insurance, marine cargo coverage provides a range of commercial operators with financial protection in the event of loss or damage to freight. Many marine cargo insurance policies offer global coverage which means that goods that are being sent internationally – not just within the UK – from one location to another will be covered. Indeed, some policies even cover cargoes that are not currently in transit, perhaps being temporarily stored at a container port somewhere before the next stage of their journey is arranged. Given that marine cargo insurance is a more specialist form of insurance than other goods in transit policies – such as courier insurance or haulage freight insurance, for example – it is useful to understand what sets this sort of coverage apart.
Read on to discover everything you need to know bout marine cargo insurance, who it is designed for, what sort of coverage you can expect from it and whether or not you may need it on top of a policy you might already have, such as HGV insurance, for example.
What Is Marine Cargo Insurance?
To begin with, it should be stated that marine cargo insurance is just like any other form of insurance – such as hire and reward insurance, for instance – in that it is a financial product. Insurance companies sell marine cargo insurance policies to firms that need commercial protection when conveying goods outside their usual jurisdiction, typically via ocean-going vessels navigating international waters. In fact, this sort of financial product was one of the earliest forms of commercial insurance ever offered. When the London marine insurance market began offering such products to merchants to help protect their vessels and cargoes from potential losses, they tended to be known collectively as shipping insurance.
Underwriters in the City of London remain at the centre of the global marine insurance market often providing the required cover for tanker shipments and huge container vessels alike. Today, however, marine cargo insurance is often provided by individual insurance firms for one-off consignments and for annual cover for freight forwarding firms. So-called parcel insurance or cargo insurance, therefore, covers international shipments against individual losses while the big underwriting firms help to cover the wider risks of losing entire vessels.
In short, if you run a firm with an international supply chain that means you ship your own goods from factories in the Far East to the UK with international shipping operators, marine cargo insurance is likely to be of benefit. The same goes for people who arrange such shipments for third parties, usually freight forwarders. Marine cargo insurance, therefore, is about managing the risks associated with freight consignments, not container vessels themselves.
Does Marine Cargo Insurance Differ From Marine Freight Insurance?
No, marine freight insurance is just another term used by some operators in the marine cargo insurance industry that essentially means the same thing. Both types of policy can cover loose cargoes, such as aggregates that have been loaded onto an ocean-going vessel within the hull of the ship as well as with more conventional shipping container shipments. That said, policies differ and some marine cargo insurance may only be adequate for shipments that are being made in sealed containers. This is because shipping containers provide an additional layer of physical protection and security when goods are in transit, particularly by sea when they could be exposed to corrosive sea spray.
It is worth noting that marine insurance is another term that is widely used by the insurance industry. This covers a much wider range of insurance policy types than commercial marine freight insurance, however. The term marine insurance could cover many other things that are at sea than commercial cargo and freight. For example, owners of pleasure boats such as sailing ships and yachts will often take out some form of marine insurance suited to their vessel, its size, value and range of activities. Nonetheless, if such a boat were to be used to convey commercial shipments, however small, then some form of cargo insurance would be advisable to cover the additional risks involved with such activities both in harbour and at sea.
What Are the Main Types of Marine Cargo Insurance?
Firstly, it is important to take on board that marine cargo insurance policies differ greatly and no two are likely to be exactly the same. That being said, there are three broad types of cargo insurance that are suited to international shipments. The first of these is generally referred to as marine liability insurance. This sort of cover is usually taken out by operators in the international shipping services sector. It covers them for any accidents that might occur to workers or members of the public while cargoes are being ferried from one destination to another. For example, if a container were to be dropped accidentally at a dock injuring a passer-by or a docker, then this is the sort of policy that might be needed. It would also cover accidents that occurred when loading goods onto a ferry, for example, if this caused damage on a car deck to people or their property. You can think of this as akin to public liability insurance only for locations like ports and international waters where cargo handlers are outside of national or regional jurisdictions.
Secondly, there is another type of marine insurance policy type known as hull insurance. Typically, these sorts of policies are taken out by the owners of commercial vessels. As the name implies, damage to the hull of ships would be covered. However, the name is generic and any accidental damage to the ship’s superstructure would normally be covered, including damage caused to the inside of the hull, for example, from a spilt commercial load. Usually, hull insurance covers machinery and equipment or systems used on board vessels, too. Therefore, it is sometimes called hull and machinery insurance by some insurance companies.
Lastly, there is marine freight insurance. This is the sort of marine cargo insurance that covers the cargo itself. Typically, such policies cover damage to cargoes that are in transit. Given that the risks of seawater damage to commercial freight are greater when vessels are at sea, such policies tend to focus on losses caused by water damage or corrosive sea salt. In addition, freight that is damaged due to human error, such as it not being secured within a container safely to prevent damage from the pitch and roll of ocean-going vessels, would usually be covered so long as this constitutes a genuine accident and not negligence. There again, marine cargo insurance policies also tend to provide cover against man-made problems, such as the theft of goods from ports and from piracy when at sea. Damage that might occur from a vessel striking another or running aground would also usually be covered. If a ship were to sink and all of its cargo be lost, marine freight insurance should also cover firms which have such policies at the time covering the value of their freight. Please remember that marine freight insurance is not all the same and coverage can vary from one policy to the next.
Who Needs Marine Cargo Insurance?
Any firm that is involved with shipping goods from one country to another – unless by road, which would usually come under haulage freight insurance – is likely to need some marine cargo insurance cover. This could include large international businesses that have supply chains which extend to different parts of the world. Such firms, even if they keep their logistical arrangements in-house with their own ships, drivers and lorries, would usually benefit from marine freight insurance for the parts of the journey that are in international waters or aerospace. At other times, HGV insurance or goods in transit insurance will probably be adequate, especially when goods have arrived in the UK and are on the final leg of their journey.
In addition, people or companies that arrange international shipments on behalf of their clients will often take our sufficient marine freight insurance to cover any losses their customers might suffer. In the main, such businesses and professionals are referred to either as shipping agents or freight forwarders. In terms of insurance, both professions essentially mean the same thing. They arrange for goods to be collected from their clients’ premises and have them conveyed to a port such as Liverpool, Thamesport, Immingham or Portsmouth, for example. The goods are then loaded onto shipping vessels, typically in shipping containers, and conveyed into international waters. On arrival at their destination port, the goods will be unloaded, processed by local customs officers and prepared for the next stage of their journey. Although haulage freight insurance is usually adequate for the stages of the shipment that take place locally, while the goods are portside or at sea, they will often only be covered if the agent or freight forwarder has adequate marine freight insurance.
Sometimes, shipping companies themselves have marine freight insurance. This might be a part of their wider shipping insurance. However, such arrangements won’t necessarily cover the full value of a container shipment, for example. Anyone arranging for the international transit of higher-value items will probably be under-insured if they don’t have their own marine cargo insurance to cover losses from damage or theft and rely on the shipping company’s instead.. This would certainly be the case when shipping cars internationally when car transporter insurance would probably also be needed for a full level of coverage to be achieved.
Finally, importation and exportation firms that deal with international shipments can also benefit from marine freight insurance. When finished goods are being shipped internationally, they will also require adequate coverage. If your firm arranges such shipments – even those made directly from the supplier to the customer in a process known as dropshipping – without its own marine freight insurance, then the shipping company’s coverage may not be adequate for all losses. Alternatively, it would be advisable to seek out a freight forwarding firm which has marine cargo insurance cover and sub-contract your logistical arrangements for imports and export through it.
What Are the Benefits of Marine Cargo Insurance?
When goods are being transported out of the UK, they may not be covered for as many eventualities as they would be if they were to remain in the country. Of course, this depends on how such goods are covered already, for example, whether or not they are being conveyed by a driver with proper hire and reward insurance. However, it is not simply because marine cargo insurance provides cover when freight is in international waters that it can be so beneficial. It is also because of the sort of additional risks that goods can be exposed to when they’re at sea. This means that marine freight insurance is just as advantageous when goods are heading to the UK by sea as when they’re being exported.
Typically, marine cargo insurance policies provide specific clauses that relate to water damage when at sea. Although most goods in transit policies cover damage from exposure to rainwater, marine freight insurance will usually deal with eventualities like corrosion caused by sea spray or from goods being washed overboard into the sea altogether. There again, goods that are improperly impounded – this would mean by people other than the official authorities in a certain country – would usually be protected. The same goes for damage caused by fire or smoke when freight is on board a vessel or within a closed port environment. As previously mentioned, theft – even theft that is caused by piracy at sea – will also usually be covered along with other incidents that are only likely to occur in the world’s oceans. This would include goods being stranded, the vessel conveying the freight sinking or damage caused by collisions whether they are at sea, within canals or inside ports.
Overall, the principal benefit of marine freight insurance is that it lowers exposure to business risk from both minor and major incidents. Many firms that send and receive international shipments or arrange them as a service provider for others can face significant financial losses from goods being damaged or lost at sea. Bear in mind that this is not merely down to the value of the goods that would need to be replaced but reputational damage as well as delays to supply chains – and their knock-on effect – too.
How Is Marine Cargo Insurance Calculated?
Different insurance firms offer different means of calculating the costs of marine cargo insurance. Some freight forwarding firms and international logistical operators ask for their insurance to be calculated annually based on a typical year’s worth of business they might undertake. Under such circumstances, it may be necessary to up their cover for one-of-a-kind jobs when particularly high-value items are being conveyed internationally on behalf of their client. Equally, transporting goods to a particularly high-risk part of the world may involve paying a one-off premium.
There again, some international shippers and haulage firms only ask for marine cargo to be calculated for them as and when they need it. Under such circumstances, the overall value of the shipment will be estimated to work out how much the policy is likely to cost. Some raw material shipments are calculated according to their weight while finished consumer products – such as electronic gadgets, for example – will be insured according to either their wholesale or retail value depending on the size of the shipment involved. Please note, however, that different insurance companies have their own methods for calculating the cost of marine freight insurance policies.
Does Marine Cargo Insurance Cover Rail and Air Freight Shipments?
Yes, it does. Policyholders should always check the specifics of the coverage their insurance offers because this will vary. For example, some marine freight insurance will cover air freight shipments that are travelling internationally but not domestically within the UK. However, this is not universal and this guidance is merely intended to ensure freight forwarding firms and other logistical operators have the cover that is necessary for their shipments.
Although some marine cargo insurance doesn’t cover goods being conveyed by rail services, there are numerous examples of policies that do. This can be useful when shipping goods inland in a foreign country, for instance, whereby a port of entry allows for shipping containers to be immediately loaded onto awaiting container wagons. Given that container shipments are designed for inter-modal use, cargo insurance that covers them and their contents tends to provide protection in whichever mode they are being used.
Marine Caro Insurance in Summary
To sum up, marine cargo insurance and marine freight insurance are both terms widely used to refer to the coverage of goods that are in transit by air, sea or rail, especially insofar as long-distance and international shipments are concerned. Marine cargo insurance is part of the wider shipping insurance sector that is centred in the City of London. It is typically needed by freight forwarders and international logistical operators to provide protection against:
– Losses at sea or at ports when goods are outside of national jurisdictions.
– Theft, whether from piracy or pilfering.
– Damage caused by seawater, corrosion or certain other environmental factors.
– Perils such as sunk vessels, war, groundings and collisions.
– Mislaid goods or shipments that fall overboard.
– Losses caused by incidents on rail networks or during air freight services.