While marine transportation has facilitated trade, cultural exchange and exploration over the centuries, it has also been challenging for mariners with a host of perils and risks. In marine insurance, it is of utmost importance to understand and mitigate such hazards for the benefit of insurers, shipowners and cargo owners.
This article focuses on the risks that can be termed perils of the sea in marine cargo policy. Having a clear understanding of the complexities of such risks can help you make informed decisions so that you are sufficiently safeguarded from maritime trade uncertainties.
Understanding Perils of the Sea in Marine Insurance Meaning
With regard to marine insurance in India, perils of the sea refer to a particular category of hazards and risks that cargo and ships encounter while on their maritime journeys. In broad terms, the “perils of the sea” cover those damages to the vessel due to “Acts of God” during its voyage.
Furthermore, it includes casualties or accidents that do not occur due to a human being’s free will. Such perils are generally considered unpredictable and unavoidable as they arise from the natural conditions or elements at sea. However, there are also exclusions in marine insurance for perils at sea, which are discussed below.
Marine Insurance Types for Protection from Perils of the Sea
Now that you have a better understanding of the perils of the sea in insurance, let us take a glance at the different marine insurance types that you can select from to provide coverage for perils in marine insurance.
- Hull and Machinery Insurance – This insurance provides coverage for the damage or physical loss of the ship, equipment and machinery.
- Marine Cargo Insurance – One of the important types of marine insurance is marine cargo insurance, which provides coverage for the cargo’s insured value against damage or physical loss during transit, irrespective of the mode of transportation.
- Freight Insurance – This insurance policy covers the value of commodities and goods in transit. It safeguards against potential financial losses from risks like loss, damage, destruction or cargo theft.
- Liability Insurance – This insurance protects operators and shipowners from third-party liabilities, such as property damage, death or injury of passengers or crew members, cargo claims, pollution, etc.
Common Examples of Perils of Sea under Marine Insurance Plans
Tempest and Storms
One of the common perils of the sea in marine insurance includes storms at sea. Violent storms, cyclones and hurricanes with turbulent seas and powerful winds can easily threaten the vessel’s safety, structure and navigation, resulting in losses or damages.
Fire
In marine insurance, coverage is provided for damage or loss caused by a fire that results from lightning, explosion, spontaneous combustion, the heat of fire or smoke, negligence of the crew, etc.
Armed Attack
Acts of piracy resulting in cargo theft, ransom demands, ship hijacking and crew abduction can cause substantial losses to cargo owners and shipowners.
Collision
Another big risk during a voyage is a collision with submerged objects, other vessels or icebergs. Such accidents can result in prominent damage to the cargo or hull, or both, causing financial losses to both cargo owners and shipowners.
Jettison
If the ship faces noteworthy damage or is about to sink, intentional cargo jettisoning is required to preserve the crew and vessel’s safety. Due to this action, the jettisoned cargo is lost, for which coverage is provided under the marine policy.
General Average
If there is an extreme emergency in which the cargo and ship are face-to-face with a common risk, the general average gets precedence. In this, all involved parties make a proportional contribution to cover the losses that had to be incurred to protect the common interest.
Sinking
If the ship sinks due to heavy shifting of cargo, instability or adverse weather conditions can result in total losses as well as prominent financial repercussions.
Perils of the Sea – Exclusions
Coverage under marine insurance is not provided in the following scenarios:
- War or warlike operations
- Negligence or wilful misconduct
- Civil commotions, strikes or riots
- Delay in transit, loss of earnings or loss of market
- Inherent vice
- Inadequate packing
- Loss caused by rats
- Goods’ breakage
- Wear and tear
Conclusion
It is clear from above that maritime ventures come with their own set of risks, which can range from piracy threats to navigational hazards and from violent storms to human errors. Through marine insurance, these risks are transferred from cargo owners and shipowners to the insurance companies, providing the former with peace of mind.