Introduction:
The growth of international trade makes sea transportation the main backbone of global goods movement. Millions of tonnes of cargo, ranging from consumer goods to essential raw materials, cross the oceans every day, connecting ports on every continent. However, behind this greatness and success there are unavoidable risks that threaten the safety and success of maritime transportation. Therefore, transportation insurance is very important to secure investments and maintain the smooth flow of goods in the global supply chain.
What is marine cargo insurance? Marine cargo insurance is a means of financial protection for shippers and recipients of cargo against the risk of loss or damage that may occur when shipping goods by sea. In complex international trade situations, this insurance plays an important role as insurance against various threats that could disrupt or destroy the transportation of goods, including: For example: ship accidents, bad weather, even criminal acts such as robbery. By paying a certain premium, parties involved in sea freight transportation can transfer the financial risk of possible losses to the insurance company, thereby ensuring the smooth and safe operation of the global supply chain.
Why Is Transportation Insurance Important?
Marine cargo insurance is a critical tool for managing these risks. It provides financial protection to shippers and recipients of cargo against loss or damage that may occur during transit. Insurance not only acts as protection against economic losses, but also as a guarantee of the sustainability of complex global supply chains.
- Protection against physical risks
One of the main benefits of marine cargo insurance is protection against physical damage or loss of goods due to accidents such as maritime accidents, cargo transfer at sea, or ship stranding. This insurance covers various types of damage, ranging from minor damage to total damage to the cargo being transported.
- Protection from weather and natural disasters
Bad weather can pose a serious threat to maritime transportation. High waves, hurricanes, and even tropical storms can cause significant damage to cargo that is not properly protected. Marine cargo insurance often covers the risks of extreme weather and natural disasters, giving shippers peace of mind that these types of risks are covered financially.
- Protection from Criminal Risk
Apart from natural disasters, maritime cargo is also vulnerable to criminal activities such as robbery and theft. Marine cargo insurance often covers these risks, but there are usually certain conditions that shippers must comply with, such as the use of safe routes and proper securing of cargo.
- The Importance of Liability Insurance
In addition to protecting the cargo itself, marine cargo insurance covers legal responsibility (liability) that may be borne by the owner or operator of the ship if damage is caused by the cargo in transit. This is important in relation to international regulations regarding the responsibility of ships to third parties.
Important Function of Marine Cargo Insurance in International Trade
Marine cargo insurance is not only an additional financial product when transporting goods across the ocean, but is also very important in maintaining the stability and smoothness of international trade. Below are some of the main features of marine cargo insurance.
- Protection against physical risks
Marine cargo insurance provides financial protection against damage or loss of goods caused by various physical risks such as ship accidents, cargo movements, and even fire. send. Without this protection, the financial risk of physical loss can become very stressful for the parties involved in the trading transaction.
- Protection against weather and natural risks
Sea cargo is vulnerable to bad weather threats such as storms, high waves and heavy rain which can result in cargo damage or total loss. Shipping insurance covers these risks and provides peace of mind to shippers and recipients of cargo as they are protected against losses due to unexpected natural disasters.
- Protection against criminal risks
Criminal activity such as robbery and cargo theft also poses a significant threat to maritime transportation, and although marine cargo insurance can cover these risks, the insured often has certain precautions and cargo safety conditions that must be observed. .
- Legal Responsibility
Apart from protecting the cargo itself, freight insurance also covers any legal liability that the ship owner or ship operator may have to third parties. It also covers compensation costs that may arise due to losses caused by the cargo in transit, such as environmental damage or damage to other vessels.
- Maintain the smooth running of the global supply chain
Marine cargo insurance helps maintain the smoothness and reliability of global supply chains. This insurance protects against risks that are unpredictable and often beyond the control of the cargo sender or consignee, so that international trade can proceed without significant obstacles due to the potential for large losses.
Maritime cargo insurance has various important functions and is not only a means of economic security, but also a key element of the success and sustainability of international trade. A good understanding of the benefits and types of marine cargo insurance is very important for all parties involved in the movement of goods across the world’s oceans.
Benefits of Sea Cargo Insurance:
Marine cargo insurance offers many important benefits to international trade participants, both shippers and recipients, as well as all parties involved in the global supply chain. This article details these benefits, including financial protection, business stability, effective risk management, and various other aspects.
- Financial protection against physical risks
One of the main benefits of marine cargo insurance is protection against physical risks for the cargo being transported. Maritime cargo poses various risks, including ship accidents, cargo movement at sea, and even fire. Proper insurance protects shippers and consignees from the significant costs of replacing or repairing cargo damaged or lost during ocean transit.
If a maritime accident occurs and part or all of the cargo is damaged, marine cargo insurance provides compensation based on the insured value, thereby reducing the economic impact and causing major losses for the parties involved.
- Protection from storms and natural disasters
Adverse weather conditions such as storms and high waves can cause serious damage to cargo transported by ship. Shipping insurance covers these risks, giving shippers and cargo recipients peace of mind that they are protected against major losses that may occur due to natural disasters or extreme weather events.
In addition, marine cargo insurance decisions also consider natural disasters such as tsunamis and earthquakes that can impact ships and cargo. In this case, the protection provided by insurance not only reduces financial risk but also helps maintain the continuity of the flow of goods which is important for the global economy.
- Protection from Crime and Theft
Sea cargo is often the target of criminal acts such as robbery and theft. Depending on the type and coverage of insurance you choose, transportation insurance may cover these risks. Although certain conditions must be met, insurance provides financial protection against damage resulting from such crimes and provides additional security for those involved in maritime transportation.
- Legal Responsibility
Apart from protecting the cargo itself, freight insurance also covers any legal liability that the ship owner or ship operator may have to third parties. It also covers compensation costs that may arise due to losses caused by the cargo in transit, such as environmental damage or damage to other vessels.
This protection is important from the point of view of international regulations regarding the liability of maritime vessels for cargo and damage caused by the operation of such vessels. Marine cargo insurance can help offset legal risks by ensuring that these costs are covered in the event of a claim related to your cargo transportation operations.
- Global supply chain stability
Marine cargo insurance also ensures the stability of global supply chains. By reducing the uncertainty associated with unforeseen risks, insurance helps maintain the smooth flow of goods from producers to consumers around the world. When companies feel more financially secure, they tend to be more confident in conducting international trade transactions, thereby strengthening the integrity and resilience of the entire global supply chain.
- Benefits for the world economy
The importance of marine cargo insurance can also be seen from a macroeconomic perspective. Marine cargo insurance helps maintain the overall stability of the global economy by reducing the impact of major losses on businesses and individuals in international trade. Smooth international trade, protected from significant risks, makes a positive contribution to global economic growth, creates jobs and facilitates the exchange of goods and services that are important for the development of countries around the world.
- Effective Risk Management
Transport insurance is not only important for protection against economic losses, but also for effective risk management. By paying relatively low premiums compared to the possibility of large losses, entrepreneurs transfer the risks associated with sea freight transportation to insurance companies that have the resources and capabilities to manage these risks. This allows companies to focus on their core business without worrying too much about potential risks that could disrupt operations.
- Comply with International Contract and Regulatory Requirements
Marine cargo insurance is often a contractual requirement in international commercial transactions, especially when cargo is transported across national borders or multiple jurisdictions. Parties involved in international trade are often required to insure their cargo based on the contracts they have entered into as a form of risk protection for all parties involved.
- Development and Innovation of the Insurance Industry
The importance of marine cargo insurance has also encouraged the development of the insurance industry itself. Insurance companies continue to develop innovative products that are more flexible, have a wider reach, and meet the growing needs of global businesses. This includes improving risk assessment, using technology for real-time risk monitoring and management, and developing insurance products that can be adapted to different types of cargo and transportation routes.
- Service Quality and Company Reputation
Lastly, transportation insurance also helps improve service quality and company reputation. By ensuring that cargo is well protected in transit, companies can build trust with business partners and customers. This trust is very important in the international trade industry which is based on long-term relationships and mutually beneficial cooperation.
Types of Marine Cargo insurance:
Marine cargo insurance is an important tool in the complex global shipping industry. There are different types of shipping insurance depending on the different needs of the shipper, consignee, and ship operator. A deep understanding of this type of insurance is important for all parties involved in the global supply chain to be able to manage risk effectively and ensure the smooth delivery of goods across oceans. Below is a detailed explanation of the types of sea freight insurance that are commonly used.
- All Risk Insurance
All Risk Insurance is the most comprehensive type of marine cargo insurance. This Directive aims to protect cargo from various risks, except those risks that are specifically excluded by this Directive. Risks that are usually covered by comprehensive insurance include property damage, loss of cargo, theft, and other risks that may occur during transportation. However, there are certain exceptions, such as damage caused by improper handling or maintenance of the cargo, or damage caused by the natural characteristics of the cargo itself
All-risk insurance is usually chosen by shippers who want the most comprehensive protection against risks that may occur during the transportation of their cargo. Although premiums are generally higher than other marine transportation insurance policies, extensive risk coverage provides peace of mind.
- Total Loss Only (TLO) Insurance
Total Loss Only (TLO) insurance is a type of marine cargo insurance that only guarantees total loss of the cargo being transported. This means that insurance provides compensation if the cargo is completely lost or cannot be found due to certain events such as ship accidents or other maritime disasters.
Premiums for TLO are generally lower than for all risks because the risk coverage is more limited. TLO is often chosen for low-value cargo or cargo where the risk of physical loss is considered low. However, keep in mind that TLO does not provide protection against partial losses or other risks covered by comprehensive insurance.
- No Specified Average (FPA) Insurance
Marine Cargo Insurance, often also called No Specified Average (FPA) or Average insurance, is a type of marine cargo insurance that provides protection for your cargo only if it loses protection against loss or damage. a exceeds a certain percentage of the rated load. This percentage is usually stated in the policy (e.g. 3% or 5%).
Under the FPA, shippers can only file claims if cargo loss or damage exceeds a certain percentage. If a shipment is lost or damaged by less than that percentage, the sender cannot file a claim with the insurance company.
- General Average Insurance
General average insurance is a type of marine cargo insurance that is related to the general principles of average maritime law. Generally, if the safety of the ship, cargo or passengers on a voyage is threatened and part of the cargo or other property must be sacrificed or costs incurred to avoid the danger. This principle requires that everyone involved in the voyage bear the costs and losses arising from this rescue operation.
Large average insurance covers costs incurred in large average situations. These include salvage costs, additional costs for disposing of the remaining cargo, and even the cost of sacrificing part of the cargo to avoid major losses.
- War and Strike Risk (WAR) Insurance
War and Strike Risk (WAR) insurance or also known as SRCC (Strikes, Riots, and Civil War) insurance is a type of marine cargo insurance that provides protection against damage caused by work. or losses caused by war, terrorist attacks, riots, or riots. This risk is often not covered by standard shipping insurance. Therefore, shippers transporting cargo through areas prone to conflict or political tension may wish to add war insurance or SRCC as part of their insurance coverage.
- Delayed Startup Insurance (DSU)
Delayed Startup Insurance (DSU) also called Advanced Loss Profit (ALOP) is a type of additional insurance that protects the sender or recipient of shipments from economic losses and/or prevents losses caused by delays in the start of operations or projects due to damage to equipment related to shipping the cargo. An example of this is when there is a significant delay in a critical supply for a particular project, resulting in a delay in the start of business or production operations.
DSU insurance covers lost revenue and additional costs incurred as a result of these delays, helping to minimize the negative economic impact on cargo shippers or consignees.
- Rejection Risk Insurance
Rejection Risk Insurance protects the sender or recipient of the cargo from the risk that the cargo sent will be rejected by the recipient because it does not meet the expected specifications or is damaged in a type of marine cargo insurance that protects. Delivery procedures. This insurance provides protection against costs associated with returning a shipment to the sender or repairing or replacing a rejected shipment.
- Freight Insurance Insurance
Insurance Transport insurance is general insurance that covers various risks related to the transport of goods, including the risks mentioned above. These policies can often be tailored to the specific needs of the cargo shipper or consignee and can include a combination of the various types of marine cargo insurance listed above.
Facilities Available in Climbing Insurance:
The options available for marine cargo insurance are a variety of additional services and options that insurance companies offer to their customers to increase flexibility and protection when managing marine cargo risks. The facility is designed to meet the diverse needs of shippers, consignees and ship operators as they address the complex challenges of the international trade environment. Below is a detailed explanation of various marine cargo insurance services.
- Additional Services for Certain Cargo
Most marine cargo insurance companies offer additional services that can be tailored to specific types of cargo. For example, for cargo that is sensitive to temperature damage (such as refrigerated cargo or chemical cargo), additional facilities may include special facilities to maintain proper temperatures and protect against damage caused by extreme temperature fluctuations.
Additionally, additional equipment may include special protection for high-value cargo such as art, jewelry, and electronics that are vulnerable to theft or physical damage. By considering these special needs, insurance companies can help ensure that highly valuable or sensitive cargo is optimally protected during transit.
- Equipment tailored to specific routes or regions
Some marine insurance companies may provide equipment optimized for certain routes or regions. For example, shippers who frequently ship cargo through areas known to be at risk of theft or political risk may want to select additional facilities to protect their cargo from existing risks. War and Strike Risk Insurance (WAR) or Strike, Riot and Civil War Insurance (SRCC) is one example of equipment that is often needed for cargo transportation through areas that are politically unstable or prone to social chaos.
This feature allows shippers to tailor their insurance coverage to the specific risks of each transportation route, minimizing potential losses that may occur due to unforeseen events along the cargo route.
- Multimodal Transportation Equipment
In a complex global trade environment, goods transportation often involves multiple modes of transportation, such as from ships to land vehicles and trains. The intermodal option for marine cargo insurance allows shippers to extend insurance coverage to the entire cargo journey, even when the cargo moves from one mode of transportation to another.
This equipment is important because it guarantees the protection of the cargo during the journey, not only during the journey by ship, but also during loading and unloading and transfer between other modes of transportation. This helps reduce insurance coverage gaps that can occur between different freight transport segments.
- Scheduled Delivery Option
Shippers making scheduled or regularly scheduled deliveries often choose a special scheduled delivery insurance option. These facilities can include more competitive premium offers and special terms on insurance policies to meet shippers’ business needs more efficiently.
Additionally, scheduled shipping facilities may also include the option to adapt policy terms to specific shipping schedules, so shippers can reduce the risks and administrative burdens associated with scheduled cargo shipments to make them easier to manage.
Conclusion:
Marine cargo insurance is not just an additional cost when transporting goods by sea, but is a useful preventative measure to protect your assets and investments from various risks that may arise. By implementing appropriate security measures, both shippers and recipients of cargo can reduce uncertainty and increase confidence in the global supply chain. Therefore, an in-depth understanding of the types of marine cargo insurance and their benefits is very important for all parties involved in international trade.