Marine cargo insurance in an international environment
In the main, insurance is a "localised" affair. We insure a factory, a house, a shop, a vehicle, a person etc. In the case of benefit insurance we cover contingencies related to specific persons, again a "localised" affair.However, in the case of...
In the main, insurance is a "localised" affair. We insure a factory, a house, a shop, a vehicle, a person etc. In the case of benefit insurance we cover contingencies related to specific persons, again a "localised" affair.
However, in the case of marine cargo insurance we go "global". The subject-matter insured, be it the vessel or the cargo it is carrying, might change its location any minute, and so do the circumstances surrounding its voyage.
Once a container-load on a vessel starts its journey there is no telling where it will end up, even if a final destination is specified both in the cargo policy and in the bill of lading. Which is why cargo cover is of its very nature very flexible, allowing for circumstances beyond normal control.
Even the phrase, of the utmost importance, "in the ordinary course of transit" contained in the Duration Section of the Institute Cargo Clauses (A) CL. 252 (and in all other clauses) is followed by 'emergency' provisions in case the destination has to be changed for a number of specified reasons among which "delay beyond the control of the assured, any deviation, forced discharge," etc.
To quote one example: A vessel picked up a container-load of printing paper at a Portuguese port but had to change course on being notified that there was congestion at the Maltese port. It proceeded to Liverpool where it discharged the container for transhipment to Malta on the next available vessel. It was winter-time, and soon the container was covered with snow.
Within a week it was on its way to its original destination but the journey to the much milder Mediterranean climate meant also a substantial change of temperature resulting in heavy condensation which produced wetting within the container. The assured had notified his insurers, who had agreed to hold cover. The subsequent claim in respect of wetting of the paper was honoured.
I was once dumbstruck when a client informed me that the vessel carrying his goods to St Petersburg had taken the Bering Straits route. It was mid-winter, when icebergs are floating around. And you have to lump it!
In this regard it is important to emphasize that any change of voyage or circumstance has to be promptly notified to underwriters. This is specified both in the relevant Duration sub-clauses which provide for such changes and also in the note (in italics) at the foot of practically every set of ICC clauses. In point of fact, the right to have one's cargo "held covered" in such circumstances is "dependent upon compliance" with the obligation to "give prompt notice to the underwriters". 1 It has actually been held by the courts that such notification to underwriters is to be given "whether the policy wording requires such notice or not". 2
It is also pertinent to note that ICC clauses specify which circumstances justify "holding covered" on the part of Underwriters.
The global or international nature of marine insurance is evident from its very historical evolution.
It is probably safe to hold that marine insurance was practised by the Pheonicians who were great seafarers and merchants. They plied the coast of the Mediterranean and are said to have ventured even as far as England. And they were certainly familiar with bottomry, with a boat owner and his clients agreeing to make good in solidum if the wares, mainly textiles and dyes, of one or more of the merchants and stocked at the bottom of the boat were lost at sea or suffered such damage as to become unsaleable.
The practice was probably taken up by the Greeks and Romans and was certainly adopted in medieval Italy from where it was taken to London by the Lombards. The Jews of the great diaspora also had a substantial say in the spread of marine insurance in Europe and in England where they ran their business along with the Lombards until they were expelled towards the end of the 13th century.
This historic internationalisation of the marine market goes on unabated, and it is no coincidence that a very substantial amount of marine insurance goes through London and is placed at Lloyd's or with the Institute of London Underwriters (ILU).
London became the focal point of the world's marine business and the British companies' subsidiaries or agents in the colonies, not excluding Malta, channelled their business to their principals in the British capital or in other British cities. Soon the world's marine market followed the British pattern and it is no wonder that ICC clauses invariably contain the clause "This insurance is subject to English law and practice". 3 Which does not mean that local courts cannot take cognizance of insurance contracts agreed to and issued in their country and falling under their jurisdiction; but local courts have to consider the ages-old practice of the English courts and the interpretations given by these courts to words and phrases contained in the various marine clauses. This is not the case with other classes of insurance.
This global flair is a positive one because it gives the market a stability of practice which is strengthened by the fact that major re-insurers have generally adopted the London market ICC Clauses as their basis of re-insuring marine risks.
And one has to note that marine insurance legislation in so many countries, such as France and The Netherlands, follows, in the main, the same lines of the London marine market.
By and large this has also been the position in Malta. Marine legislation was "independent" up to the first half of the 20th century when a general revision of Maltese legislation was undertaken. This legislation, obviously, also inspired by Italian practice as its wording clearly shows, owed its origins to the time of the Order of St John and had been amended and up-dated in the mid-1800s when a general revision of the laws of Malta was undertaken. Ordinance No. XIX of 1858, 4 dealing with average, jettison and contribution, and other relative legislation make most interesting reading. These were consolidated within the Commercial Code (now Cap. 13) in the 1942 Edition of the Laws of Malta.
The Marine Insurance Act enacted by the British Parliament in 1906 strengthened further the influence of the London marine market on the world's marine insurance market.
The advantage of this global situation is that marine underwriters, claim handlers, surveyors and loss adjusters speak one language.
They have the same clauses to go by, identical documentation to check, the same rules to follow, as in the case of the Rules of Practice of the Association of Average Adjusters.
Insurance policies such as those available for property, though offering what one could call basic covers, vary from one country to another, even from one company to another in the same country. Not so in the case of marine where the ICC Clauses are, so to speak, the rule, and extensions of cover (or exclusions of certain risks) are given for specific concrete situations. This has certainly helped consolidate the importance of marine insurance in the global commercial system. One might even argue that marine insurance is the kingpin on which the whole system revolves. 5
Can one imagine the system working without insurance? Not in the least. Would the banking system accept to issue Letters of Credit were these not sustained by insurance provisions? Of course not!
In this regard we, as insurers, owe a duty to our clients to guide them in the choice of insurance cover.
For example, it is no secret (I speak of the local market, though similar situations are not alien to other ones) that bankers have been known to advise clients to take out the minimal insurance available, possibly in reply to a client's request to keep costs as low as possible. In doing so they do not realize the vast difference between the ICC (A) and the (B) and (C) Clauses, which give very restricted cover and do not include theft. Should ICC CL. 272 (Theft, Pilferage and Non-Delivery) be included, the additional premium would raise insurance costs very near to those normally charged for (A) Clauses.
Guiding clients means, for example, telling them if their cargo falls under trade categories for which specific ICC Clauses apply (e.g. timber, food, oils), these should be used to the exclusion of normal clauses, namely (A), (B) or (C) Clauses.
Rendering a professional service is at the core of our business, wherever it is practiced, at home or abroad.
1. R.J. Lambert, Templeman on Marine Insurance. Its Principles and Practice. 6th Ed. Pitman, 1986, p. 88ff.
2. Victor Dover, A Handbook of Marine Insurance, 8th Ed. revised by R.H. Brown. Witherby, 1975, p. 366.
3. The revision of the ICC marine clauses that came into effect from the 1st January 1982 onwards entailed the retention of several words and terms that had been defined by the English Courts over the centuries. The word 'English' is used due to Scotland having its own laws and practices.
4. Raccolta di leggi, proclami, notificazioni, ordinanze, ed altri atti pubblicati dal Governo di Malta, dal 5 Ottobre 1813 al 31 Dicembre 1859. Seconda Edizione. Emendata ed accresciuta degli atti legislattivi pubblicati in seguito al 31 Dicembre 1859, fino al 1864. Malta 1864, pp. 1055-1060. It now forms part of Title IV, Sub-titles I (Of Average) and II (Of Jettison and Average Contribution), articles 441 to 468, of Cap. 13 of the Laws of Malta.
5. Joe Felice-Pace, Marine Cargo Clauses. A Collection of Non-Institute Cargo Clauses. Witherby, 1998.
• Mr Felice Pace is a marine cargo executive consultant at Middlesea Insurance plc.
However, in the case of marine cargo insurance we go "global". The subject-matter insured, be it the vessel or the cargo it is carrying, might change its location any minute, and so do the circumstances surrounding its voyage.
Once a container-load on a vessel starts its journey there is no telling where it will end up, even if a final destination is specified both in the cargo policy and in the bill of lading. Which is why cargo cover is of its very nature very flexible, allowing for circumstances beyond normal control.
Even the phrase, of the utmost importance, "in the ordinary course of transit" contained in the Duration Section of the Institute Cargo Clauses (A) CL. 252 (and in all other clauses) is followed by 'emergency' provisions in case the destination has to be changed for a number of specified reasons among which "delay beyond the control of the assured, any deviation, forced discharge," etc.
To quote one example: A vessel picked up a container-load of printing paper at a Portuguese port but had to change course on being notified that there was congestion at the Maltese port. It proceeded to Liverpool where it discharged the container for transhipment to Malta on the next available vessel. It was winter-time, and soon the container was covered with snow.
Within a week it was on its way to its original destination but the journey to the much milder Mediterranean climate meant also a substantial change of temperature resulting in heavy condensation which produced wetting within the container. The assured had notified his insurers, who had agreed to hold cover. The subsequent claim in respect of wetting of the paper was honoured.
I was once dumbstruck when a client informed me that the vessel carrying his goods to St Petersburg had taken the Bering Straits route. It was mid-winter, when icebergs are floating around. And you have to lump it!
In this regard it is important to emphasize that any change of voyage or circumstance has to be promptly notified to underwriters. This is specified both in the relevant Duration sub-clauses which provide for such changes and also in the note (in italics) at the foot of practically every set of ICC clauses. In point of fact, the right to have one's cargo "held covered" in such circumstances is "dependent upon compliance" with the obligation to "give prompt notice to the underwriters". 1 It has actually been held by the courts that such notification to underwriters is to be given "whether the policy wording requires such notice or not". 2
It is also pertinent to note that ICC clauses specify which circumstances justify "holding covered" on the part of Underwriters.
The global or international nature of marine insurance is evident from its very historical evolution.
It is probably safe to hold that marine insurance was practised by the Pheonicians who were great seafarers and merchants. They plied the coast of the Mediterranean and are said to have ventured even as far as England. And they were certainly familiar with bottomry, with a boat owner and his clients agreeing to make good in solidum if the wares, mainly textiles and dyes, of one or more of the merchants and stocked at the bottom of the boat were lost at sea or suffered such damage as to become unsaleable.
The practice was probably taken up by the Greeks and Romans and was certainly adopted in medieval Italy from where it was taken to London by the Lombards. The Jews of the great diaspora also had a substantial say in the spread of marine insurance in Europe and in England where they ran their business along with the Lombards until they were expelled towards the end of the 13th century.
This historic internationalisation of the marine market goes on unabated, and it is no coincidence that a very substantial amount of marine insurance goes through London and is placed at Lloyd's or with the Institute of London Underwriters (ILU).
London became the focal point of the world's marine business and the British companies' subsidiaries or agents in the colonies, not excluding Malta, channelled their business to their principals in the British capital or in other British cities. Soon the world's marine market followed the British pattern and it is no wonder that ICC clauses invariably contain the clause "This insurance is subject to English law and practice". 3 Which does not mean that local courts cannot take cognizance of insurance contracts agreed to and issued in their country and falling under their jurisdiction; but local courts have to consider the ages-old practice of the English courts and the interpretations given by these courts to words and phrases contained in the various marine clauses. This is not the case with other classes of insurance.
This global flair is a positive one because it gives the market a stability of practice which is strengthened by the fact that major re-insurers have generally adopted the London market ICC Clauses as their basis of re-insuring marine risks.
And one has to note that marine insurance legislation in so many countries, such as France and The Netherlands, follows, in the main, the same lines of the London marine market.
By and large this has also been the position in Malta. Marine legislation was "independent" up to the first half of the 20th century when a general revision of Maltese legislation was undertaken. This legislation, obviously, also inspired by Italian practice as its wording clearly shows, owed its origins to the time of the Order of St John and had been amended and up-dated in the mid-1800s when a general revision of the laws of Malta was undertaken. Ordinance No. XIX of 1858, 4 dealing with average, jettison and contribution, and other relative legislation make most interesting reading. These were consolidated within the Commercial Code (now Cap. 13) in the 1942 Edition of the Laws of Malta.
The Marine Insurance Act enacted by the British Parliament in 1906 strengthened further the influence of the London marine market on the world's marine insurance market.
The advantage of this global situation is that marine underwriters, claim handlers, surveyors and loss adjusters speak one language.
They have the same clauses to go by, identical documentation to check, the same rules to follow, as in the case of the Rules of Practice of the Association of Average Adjusters.
Insurance policies such as those available for property, though offering what one could call basic covers, vary from one country to another, even from one company to another in the same country. Not so in the case of marine where the ICC Clauses are, so to speak, the rule, and extensions of cover (or exclusions of certain risks) are given for specific concrete situations. This has certainly helped consolidate the importance of marine insurance in the global commercial system. One might even argue that marine insurance is the kingpin on which the whole system revolves. 5
Can one imagine the system working without insurance? Not in the least. Would the banking system accept to issue Letters of Credit were these not sustained by insurance provisions? Of course not!
In this regard we, as insurers, owe a duty to our clients to guide them in the choice of insurance cover.
For example, it is no secret (I speak of the local market, though similar situations are not alien to other ones) that bankers have been known to advise clients to take out the minimal insurance available, possibly in reply to a client's request to keep costs as low as possible. In doing so they do not realize the vast difference between the ICC (A) and the (B) and (C) Clauses, which give very restricted cover and do not include theft. Should ICC CL. 272 (Theft, Pilferage and Non-Delivery) be included, the additional premium would raise insurance costs very near to those normally charged for (A) Clauses.
Guiding clients means, for example, telling them if their cargo falls under trade categories for which specific ICC Clauses apply (e.g. timber, food, oils), these should be used to the exclusion of normal clauses, namely (A), (B) or (C) Clauses.
Rendering a professional service is at the core of our business, wherever it is practiced, at home or abroad.
1. R.J. Lambert, Templeman on Marine Insurance. Its Principles and Practice. 6th Ed. Pitman, 1986, p. 88ff.
2. Victor Dover, A Handbook of Marine Insurance, 8th Ed. revised by R.H. Brown. Witherby, 1975, p. 366.
3. The revision of the ICC marine clauses that came into effect from the 1st January 1982 onwards entailed the retention of several words and terms that had been defined by the English Courts over the centuries. The word 'English' is used due to Scotland having its own laws and practices.
4. Raccolta di leggi, proclami, notificazioni, ordinanze, ed altri atti pubblicati dal Governo di Malta, dal 5 Ottobre 1813 al 31 Dicembre 1859. Seconda Edizione. Emendata ed accresciuta degli atti legislattivi pubblicati in seguito al 31 Dicembre 1859, fino al 1864. Malta 1864, pp. 1055-1060. It now forms part of Title IV, Sub-titles I (Of Average) and II (Of Jettison and Average Contribution), articles 441 to 468, of Cap. 13 of the Laws of Malta.
5. Joe Felice-Pace, Marine Cargo Clauses. A Collection of Non-Institute Cargo Clauses. Witherby, 1998.
• Mr Felice Pace is a marine cargo executive consultant at Middlesea Insurance plc.