Learn about the sea hull insurance and its importance in cargo transport

  • 01/12/2020
  • 9 minutes

Whoever works with navigation knows that the care with the vessels and their contents must be general. Everything is aligned with a common purpose, and all parts of the ship must be insured and in perfect working order. 

Ensuring that vessels are recovered or even rebuilt, in the event of total loss and/or particular average, is the objective of marine hull insurance. All of this without loss to the owners of ships operating in the water cargo transportation segment.

In this post, we will cover a little bit of the history of this service. We will also talk about what are its main coverages, the risks to maritime transport that make it necessary and, also, the impact that exists even in the event of a demand for international cargo insurance.

For this, we have the support of the insurance manager of the Wilson Sons Group, Poliana Ituassu. Dive deep!

What is marine hull insurance?

In the shipping industry, insurance is a historical element, which dates back to ancient times, when boats sailed in the Aegean and Mediterranean seas. Its function is basically to ensure that losses caused by damage to vessels are replaced without the owner having any losses or even the total loss of their means of transportation.

At that time, the operation was similar to that of a cooperative today: whoever lost a ship would have the construction of a new vessel guaranteed by the other navigators participating in the trip. After all, one depended on the other for the success of foreign trade, which happened only by the waters and had shipping as one of the main characters.

The first insurance contract as it is today was signed in 1347 and, since then, its essence has changed very little. “Maritime insurance is a very traditional specialty, and its general conditions have not changed since 1983″, explains Poliana. 

“The improvements and opportunities are on account of the additional coverages that are included and/or adapted to insure new exposures and risks identified, such as loss of revenue (Loss of Hire), piracy and cyber attack”, adds the manager.

Which are the main hull insurance coverages?

In addition to the history, it is important to understand which are the main coverages available for the insurances. Keep reading!

Hull & Machine (Particular Average or Total Loss)

This coverage is directed to damage caused to the vessel due to an event of sudden and unforeseen cause. For example: collision and machine breakdown.

Assistance and Rescue

Remuneration or reward due to anyone who has saved or participated in the insured object in a situation of serious danger. Coverage is assessed on a case-by-case basis and is directly related to the investigation of the hazardous situation.

General Average

This cargo insurance in maritime transport is covered to compensate for damage or extraordinary additional expense, made with the deliberate purpose of saving — the maritime adventure — as much of the ship or the transported cargo as possible.

War and Strike

Directed to damages caused to the vessel due to acts of war, seizure, arrest, provisional attachment or detention, lockout, civil commotion, confiscation or expropriation.

Shipbuilders’ Insurance

Coverage to guarantee both the hull and the machines used in the construction of vessels due to loss/damage caused to the goods and, including money for the removal of debris, pollution or refloating/removal of the sunken hull. It also guarantees reimbursement for damages due to other people harmed by these claims.

Why contract this type of insurance?

Maritime transport is a professional activity that, like any other, has its risks. Therefore, having insurance to cover possible damage to vessels is essential for anyone working in the field.

“I believe that the greatest risk faced in the absence of good hull insurance is the shipowner not having the necessary financial capacity to cover expenses incurred and the additional costs involved in the event, and may have difficulty in supporting due repair of the vessel and guarantee the operational resumption in a timely manner”, ponders Poliana.

Bearing this in mind, the main reason for contracting insurance is precisely to transfer the risk to the insurance market, ensuring predictability and comfort in relation to the shipowner’s financial health. After all, in this way, eventual losses and exposures are minimized and covered by the insurance contracted.

Most frequent risks

When it comes to risks in maritime transport, the main ones are guaranteed by the basic coverage (hull and machine), especially the damage caused as a result of collision and machine breakdown.

However, there are situations where there is a greater loss. If a vessel runs aground, the cargo itself may also be lost, for example. In that case, any damage to the goods transported can be protected by two insurances:

  • coverage of General Average — is directly related to the shipowner’s participation and responsibility in guarding the cargo;
  • P&I (Protection & Indemnity) coverage — applicable to guarantee the compensation of damages to third parties. It is the insurance used, for example, in cases where the cargo is damaged or contaminated during the trip. If it is proven that the damage was the responsibility of the shipowner, the cover can be triggered.

How can Wilson Sons help with shipping agency?

Contracting a good shipping agency is essential to ensure excellent assistance in the various services that involve the activities of the segment, from the release of parts to the issuance of certificates, contact with suppliers and port authorities, cargo collection, among other services.

Wilson Sons Shipping Agency is one of the best alternatives on the market, as it is present in the main Brazilian ports, with 18 branches spread across the country. In addition to customer service and commercial representation, the company operates in other spheres of shipping agency such as port and market intelligence — and also online services.

In this article, we sought to address one of the main points of sea cargo transportation: hull insurance. This very old practice is essential to this day to ensure the tranquility of both shipping professionals and companies that send their cargo by vessel and, also, customers, who await receipt of items, often from the other side of the world.

Get in touch with Wilson Sons and learn more about our work right now!