Marine insurance

Marine insurance is a type of commercial liability insurance that provides coverage (financial backing) against perils and losses associated with the transportation of goods. Marine insurance is possibly the oldest type of commercial insurance in the world, dating as far back as the thirteenth or fourteenth century.

Marine insurance includes a variety of coverage lines. The two general classifications are ocean marine and inland marine. These classifications can be most easily described as insurance coverage for goods that are transported by water ("ocean marine") and insurance coverage for goods that are transported by land ("inland marine"). Ocean marine typically covers international voyages and losses that occur once goods are loaded onto a vessel or are at least a mile offshore. Ocean marine can also include coverage for the vessel itself and liability for accidents. Inland marine covers various property types that are movable or not fixed in one location. Inland marine evolved to address advances in mobility and technology that saw valuable goods transported in a variety of ways.

Brief History

The earliest proof of marine insurance can be traced to city-states such as Florence and Venice in an area of Italy then known as Lombardy in the fourteenth century. At that time, Italian merchants were world traders who transported goods by sea from Asia and North Africa to Europe. Ocean travel was quite perilous at the time; whole ships could be lost due to natural perils involved in traveling on the seas, such as storms and accidents. Additionally, great risk came from violent pirates and privateers, who attempted to profit in times of war and peace by boarding ships and claiming merchandise for themselves or sinking ships to force losses on enemies. Merchants and their investors risked losing their entire financial capital with every voyage.

Experts believe that Italian merchants began to deal with this problem in the early 1300s by inventing an early form of marine insurance. They developed financial instruments called "sea loans" that minimized the impact of threats from both natural and human perils.

Sea loans were designed to spread the cost of losses at sea over the entire merchant community. In the typical sea loan, one or more merchants borrowed money from multiple investors for a voyage. If the ship sank or the goods were otherwise lost, the investors would "forgive" the loan, which means the merchants did not have to pay back the money. This practice of spreading risk over multiple parties (agents called underwriters in modern times) is still practiced in contemporary insurance because it helps prevent situations in which one party alone is responsible for a catastrophic loss.

Sea loans and the practices behind them spread to other parts of the world with trading. By the fifteenth century, it was common practice in London to insure ships that carried goods. These policies were governed by verbal contracts of insurance that carried the full weight of law—called the Law Merchant. The Law Merchant encompassed the code of practices followed in the insurance of goods for trade. It established and codified the rules for merchants (insurance buyers) and investors (underwriters). Over time, these policies were standardized and institutionalized by well-known insurance institutions such as Lloyd’s of London. They protected and financed overseas voyages, thus ensuring that trade among nations could continue.

Ocean Marine

Ocean marine insurance coverage is closely related to historical marine coverage as described. It offers indemnification—or the obligation to pay—for loss or damage that occurs on vessels during their time offshore. In insurance, the process of indemnity means to "make whole" or to be repaid the value of the insured item(s). Ocean marine insurers are considered liable, or legally responsible, to make their insureds, or purchasers of insurance, whole.

Ocean marine overage primarily includes insurance coverage for the vessel or hull of the ship, its cargo (goods), freight revenue due to the ship's owner, and legal liability for any negligence by the shipper, the carrier, or their employees. For example, it may cover a variety of risks involved in sea travel, such as damage to wharves, piers, and other structures along waterways that may be struck by a ship; damage to other ships or their cargo that results from a collision; and injury incurred by individuals on board other such vessels.

Ocean marine coverage is offered for both domestic and international voyages and for cargo ships, both large and small. However, specific losses and goods covered by any insurance policy vary by insurer and policy.

Inland Marine

Inland marine insurance grew from the idea of marine insurance. It provides property insurance coverage for damage or loss that may arise for property not fixed in one place. It applies mainly to property that may be transported via land.

Many different inland marine coverage lines are available. Typical inland marine policies include the following types of coverage:

• Animals/livestock for mortality during transit
• Builders’ risk and contractors’ equipment
• Computer systems
• Fine arts dealers, galleries, museums, and other types of exhibitions
• Guns and ammunition
• "Jewelers block," which covers the inventory of manufacturers, retailers, and wholesalers of jewelry
• Musical instruments, such as those associated with an orchestra or other entertainment groups
• Certain types of infrastructure, such as cell phone towers and bridges
• Mobile medical equipment, such as scientific and medical diagnostic equipment and salesperson supplies
• Motortruck cargo
• Property in temporary storage
• Radio and television towers and satellites

The coverage provisions of any inland marine insurance policy will govern the insurer’s liability for property loss in any of these or other related areas.

Bibliography

"Insurance Clauses - Marine." Risk Management: Oregon Department of Administrative Services, www.oregon.gov/das/risk/pages/insclausesmarine.aspx. Accessed 14 Nov. 2024.

Levine, Jason. “What Is Inland Marine Insurance?” Harry Levine Insurance, 28 July 2021, www.harrylevineinsurance.com/what-is-inland-marine-insurance. Accessed 14 Nov. 2024.

"Inland Marine Insurance." The Hartford, www.thehartford.com/inland-marine-insurance. Accessed 14 Nov. 2024.

Medina, Brandon. “A Complete Guide to Inland Marine Insurance.” Construction Coverage, 7 Oct. 2024, constructioncoverage.com/inland-marine-insurance. Accessed 14 Nov. 2024.

Moynihan, Shawn. "Inland & Ocean Marine: Everything You Need to Know." PropertyCasualty360, 2 Oct. 2014, www.propertycasualty360.com/2014/10/02/inland-ocean-marine-everything-you-need-to-know. Accessed 14 Nov. 2024.