Fundamental Factors When Underwriting Marine Cargo Insurance

Written by stephen hicks
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Fundamental Factors When Underwriting Marine Cargo Insurance
Marine insurance protects goods in transit. (Buena Vista Images/Photodisc/Getty Images)

Marine cargo insurance, unlike most types of insurance, is custom tailored to protect individual shipments and is not standardised across international borders. Because cargo insurance is so diverse, and can vary so broadly depending on the types of goods being shipped, the origin and destination of the goods and the method of shipment -- factors used to craft a policy -- are equally diverse. There are some fundamental factors similar to most policies of this type.

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Origin/Destination

Goods typically begin and end their journey in warehouses and utilise several methods of transportation to ship from one to another. Marine cargo insurers want to know the origin and destination of the cargo they are insuring to consider potential claims problems. For example, if one insurer protects the cargo from origin warehouse to port, another protects during transit at sea, and a third protects from port to destination warehouse, a claim could be delayed while the respective insurers decide who accepts liability for the loss. By contrast, an insurer that protects the shipment from "warehouse-to-warehouse" does not run into these problems.

Types of Goods

Different types of goods face different insurance risks. Perishable goods like certain produce must remain refrigerated during transit, while non-perishable goods like clothing don't require this. An insurer will want to verify that any necessary loss prevention techniques are in place to minimise the risk of damage in transit.

Value of Goods

Insurers need a value of the goods in order to write an insurance policy on them. Some insurers may want itemised descriptions of specific goods and specific values, while others may accept a blanket value that applies to all types of goods being shipped at once. The value of the goods is determined by the person buying the insurance policy, and usually considers the cost of production, any advance payments made by the importer, a certain percentage markup for retail or a combination of these things.

Duration/Location of Journey

The journey itself is important to underwriters. A week long journey poses a smaller risk than one that lasts several weeks or months. Often, policies are crafted to cover specific dates of journey, or are made to cover a specific voyage regardless of duration to accommodate for unexpected delays. Also, because certain areas of the world are more dangerous than others, insurers want to know where the marine vessel will travel and what the risks are of weather, piracy or other losses in that area.

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