PARA 13.2|IC 67, Marine Insurance One Liner|Chapter-8 | Hull Insurance, Part 2
Insurance exams offered by the Insurance Institute of India (III), consist of various papers either in Life or Non Life or Combined. Here we are providing ONE LINER IC 67, Maine Insurance Chapter 8 “Hull Insurance – Part 2″ for para 13.2 and III exam . These questions will be very helpful for upcoming promotional exam in 2020.
IC 67, Maine Insurance is a very important topic in insurance promotional exam. This IC 67, Maine Insurance paper comes in all GIPSA exams which makes it very important.
♦CHAPTER 8: HULL INSURANCE-PART 2
- Proposal Form: A duly completed proposal form is invariably obtained from the shipowner.
There are three types of proposal forms, as follows:
- Proposal Forms for sundry hulls like Fishing Vessels, Sailing Vessels, Dredgers, Inland Vessels, etc.
- Detailed Proposal Forms in respect of Ocean-going Vessels.
- Specialised Proposal Forms for certain types of policies e.g. Builders’ Risks Insurance, Ship Repairers’ Liability Insurance, etc
- The Proposal Form elicits information mainly in respect of the following:
- Technical details of the vessel
- Other details of vessel
- Trade related details
- Insurance related details
- Gross Tonnage (GT) indicates that the ship has been measured in accordance with the requirements of the 1969 International Convention on Tonnage Measurement of Ships.
- It is calculated based on the moulded volume of all enclosed spaces of the ship and is used to determine things such as a ship’s manning regulations, safety rules, registration fees, and port dues, whereas the older GRT is a measure of the volume of certain enclosed spaces.( Gross Tonnage (GT))
- DWT means “Deadweight Tonnage”. Deadweight means the capacity in tons of the cargo required to load a ship to her loadline level
- Along with the Proposal Form, following supporting documents are called for:
- Registration Certificate / Licence of the vessel.
- Valuation Certificate on Hull and Machinery and accessories.
- Pre-insurance Survey Report, when required by underwriters.
- Additional queries on the vessel, as may be considered relevant.
- In case of Fishing and Sailing vessels, details of arrears of loan payments to the Bank/ Financier and also confirmation that there is no default
- A marine hull policy is a valued policy. Therefore, the value declared for cover must be adequate
- Underwriters are liable for the cost of repairing Particular Average or General Average, damage irrespective of the insured or the actual value of the ship, except that the insured value constitutes a maximum for any one casualty.
- A low valuation will produce a situation following a major casualty when a constructive total loss (CTL) would easily be arrived at.
- 10. In case the ship is mortgaged to the government, it is necessary to insure for the value fixed by the government for the purpose of insurance
- The main objective of ship classification is to promote safety at sea, for life, for ships and their cargoes as also for the environment
- Ship Classification Societies establish standards, guidelines and rules for the design, construction and survey of ships and of other marine structures.
- The Classification Certificate is the document confirming that a ship has been built according to the rules and standards of the relevant Classification Society, and that it has both structural and mechanical fitness for its intended service
- Classification requires periodical surveying by shore-based personnel in order to ensure that the ship meets the requirements of the Society
- 15. Indian Register of Shipping (IRS): This is a Classification Society established in India in 1975. Till very recently as IRS was not a full-fledged member of the International Association of Classification Societies (IACS)
- Indian insurers were accepting their classification only up to Rs. 10 Crores per vessel but now it has become a full-fledged member and so, its classification is valid for any amount
- Services of Indian Register of Shipping (IRS) are also available for the following purposes:
- Damage surveys of ships, offshore structures and related equipment and containers.
- Warranty surveys for marine transportation and installation of offshore structure.
- Design appraisal, inspection and certification of fixed offshore platforms during construction on behalf of underwriters.
- Survey of damage repairs; preparation of repair specifications; evaluation of tender bids; supervision of repairs; endorsement of repairers’ bills ; etc., whether in India or abroad.
- Every fleet starts with one vessel and over a period of time more vessels attach to it. To start with, every vessel is rated individually, and that is called Initial Rating.
- Twelve months later, when the time for renewal comes, all vessels of the fleet are rated collectively, which is known as Renewal Rating.
- Initial Rating: At the time of Initial Rating, mainly, following factors are taken into account:
- Management and ownership with their corresponding claims experience.
- Type, trade, age, tonnage, all aspects of machinery, whether main, auxiliary or refrigerating.
- Valuation of the vessel.
- If entered with a Classification Society for Hull and Machinery, the dates of survey related to each aspect and whether the Society’s recommendations have been carried out to maintain Class.
- Conditions of insurance being opted, including the Deductible.
- Trading Area known as Trading Warranty
- Prevailing repair costs.
- Underwriting experience of similar risks.
- The underwriter has to fix a rate which should take care of the following losses:
- Total Loss
- Particular Average i.e. accidental partial loss
- General Average contributions
- Collision liabilities
- Salvage Charges and Sue and Labour Charges etc.
- The rate has two components:
- Rate for Risk of ‘Total Loss’
- Rate for Risk of ‘Other than Total Loss’ (also known as ‘Average Loss’ or ‘ Ex TL’).
- The Total Loss rate is a rate percent applied to the insured value of the vessel and is thus conditioned mainly by the value factor of the ship.
- The “ex TL” element of the risk is mainly determined by the size of the ship. It is fixed as a certain amount, says Rs. 30/- multiplied by the Deadweight Tonnage (DWT) or the Gross Tonnage (GT) of the vessel
- Deadweight tonnage represents a vessel’s carrying capacity in terms of weight and Gross Tonnage in terms of volume.
- GT is the volume of the interior of the vessel. With cruise/passenger vessels the GT is more likely to be used for calculation.
- Both the premiums (Rate for Risk of ‘Total Loss’ and Rate for Risk of ‘Other than Total Loss’ )are combined and the resultant premium, divided by the insured value, is then expressed as a rate percent on that insured value, and that single rate (called the “Slip Rate”) will be quoted to the client.
- Shipping Company National Shipping Line Vessel M.V. “RATNA” Year built 1997
Insured value Rs. 30,00,00,000
Type General Cargo Carrier, Conditions of insurance ITC Hulls 1/10/83
Deductible under Clause No. 12 Rs. 15,00,000/-
Trading Warranties Institute Warranties 1.7.76
Total Loss rate 0.75% and Ex TL rate Rs. 40/- per GRT
Calculation of Premium
Total Loss Premium @ 0.75%
On Rs. 300,000,000 Rs. 2,250,000
Ex TL Premium @ Rs. 40 /-
Per GRT i.e. 40 x 10,000 Rs. 400,000
Total Premium i.e. ‘A’ plus ‘B’ Rs. 2,650,000
“Slip Rate” is expressed as: (2,650,000 x 100) / 300,000,000 = 0.883% p.a.
- Physical Hazard: If the physical hazard reveals adverse features, the insurer may insist on:
- Pre-insurance survey
- Compliance of Warranty Survey
- Limiting the scope of cover
- Imposition of adequate excess to be borne by the assured
- Loading of premium
- Moral Hazard: if moral hazard is indicated, the proposal will be declined. Superior or inferior types of vessels can be rated, but moral hazard cannot be rated.
- Some examples of risks which have adverse underwriting features are:
- Older country crafts, small boats, yachts etc.
- Vessels over 20 years old.
- Shipbreaking risks.
- Vessels belonging to the owner with a background of very adverse claims experience or where there is default in repayment of outstanding mortgage loan.
- Fishing vessels can be insured as per the following terms:
- Institute Fishing Vessels Clauses (IFVC) 20.7.87 but limited to pay only TL/CTL (including Salvage, Salvage Charges and Sue and Labour)
- IFVC, 20.7.87 with P & I risks (clause 20) deleted,
- IFVC, 20.7.87 ,
- All policies have to be subject to the warranty: “Warranted Vessel to comply with local laws and regulations with regard to registration and licensing.”
- No cover shall be granted on Fish Catch on board the Fishing Vessel/Trawlers
- Fishing Nets whilst on shore under repair or whilst stored in godowns, can be covered against perils like Fire, Theft and Burglary in other than Hull departments and no cover shall be granted under a Marine Hull policy
- When the net is not on the Vessel, the sum insured of the Vessel shall not be reduced. During such times, if the Vessel becomes a total loss, claims will be paid subject to deduction for the net.
- Facility to pay premium in instalments as per the “Premium Instalment Clause” can be agreed for fishing vessels with H&M Sums Insured exceeding Rs. 20 lakhs
- For vessels upto H&M Sum Insured Rs. 20 lakhs, there is a provision to charge 40% of Annual premium for 3 months cover, which can be renewed for next 3 months by collecting another 30% and then again for 6 months by collecting another 30%
- All Fishing Vessels/Trawlers shall contain the following warranty:
- Warranted Vessel, when not employed, shall be safely anchored or moored or secured.
- Warranted Vessel shall not be employed during adverse weather conditions notified by the concerned Port Authorities and/or Directorate of Fisheries.
- Warranted during adverse weather, vessel shall remain in safe waters properly moored ; and
- if already at sea, shall return forthwith as soon as they become aware of the adverse weather warnings; and
- vessel shall be manned adequately at all times except when in harbour, sheltered/safe waters, when it should be secured properly and adequate watch and ward maintained throughout the period it remains therein.
- The deductible for vessels valued upto Rs.100 lakhs is 0.50% of their respective sums insured or 10% of the assessed loss, whichever is higher
- Sailing Vessels can be covered on the following terms:
- As per ITC-Hulls-Total Loss Only (Including Salvage, Salvage Charges and Sue and Labour),
- Wider conditions incorporating the P & I liabilities risks of ITC-Hulls –Port Risks 20.7.87 are also possible. Deductible — 33 1/3% of assessed loss or Rs.1,000, whichever is higher, each claim.
- Subject to ITC Hulls 1.10.83 with deductible as above.
- Examples of Inland Vessels are: Barges, Pontoons, Flats, Floating Cranes, Launches, Passenger Vessels, Tugs etc. employed in Inland Waters
- Dredger is a craft used to bring up sand, mud, gravel, etc. from the sea, river and canal bottoms in order to open and deepen channels and make them navigable. These crafts are fitted with the machinery and appliances for dredging work.
- For Dredgers valued upto rupees one crore and falling within the purview of the Manual — ¼ % of the Sum Insured for H & M interests or Rs.1,500, whichever is higher, all claims other than TL/CTL, each accident or occurrence.
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