Risk, Title and Insurance

Presented by: Group 5Instructor: Ms.Pham Nguyen Minh

Chau

Hanoi, Nov 2014

Member List• Nguyên Xuân Triu – 1211250023• Dư Lưu Di u Huyên – 1211510028ê• Đỗ Thị Thu Hằng – 1211510018 • Phạm Thị Hoài Thu – 1215510064• Phạm Thị Hải Yến – 1213510077 • Nguyên Việt Hưng – 1111110548

Structure1. TITLE

2. RISKS

3. INSURANCEDefinition and functions of insuranceTypes of insuranceDocuments of InsuranceWho pays the Insurance

TITLE1/ Definition

• Title means legal ownership of the item purchased. The parties can specify a time and place for title to be transfered.

TITLE2/ Transfering title

• Until the supplier receives payment from the buyer.

• At some point while the item is in transit. Title subject could be transfered to a security interest in the product (a lien) that would be released upon payment.

TITLEExample:

• A supplier in Country A could specify that title transfers while the item is on the high-seas before it arrives at Country B irrespective of the delivery term.

RISKS1/ Definition:• The chance that events will deviate

significantly from expectations.

2/ Classification:• Two risks are involved in the sale of goods:• + the risk of the goods injuring a third party• + risk of loss or damage

RISKS3/ Fore majeure:• Extraordinary events or circumstances beyond the control

of the parties:• Những việc xảy ra bất thường hoặc trong hoàn cảnh vượt

ra ngoài khả năng kiểm soát của các bên:• - A war, strike, riot, crime,… (Chiến tranh, đinh công, bạo

lực, tội phạm,…)• - Hurricane, flooding, earthquake, volcanic, eruption, tidal

wave, landslide, fire, plague, epidemic, quarantine restriction, perils of the sea, war declared or threat of the same. (Bão, lũ lụt, động đất, núi lửa, thủy triêu, sạt lở đất, hỏa hoạn, dịch bệnh, hạn chế kiểm dịch, những nguy hiểm từ biển, đe dọa chiến tranh hoặc những đe dọa tương tự)

RISKS3/ Fore majeure:• Civil commotion, blockage, arrest or restraint of

government, rulers or people, requisition of vessel or aircraft, strike, lockout, sabotage or other labor dispute, explosion, accident or breakdown in whole or in part of machinery, plant, transportation or loading facility, government request, guidance, order or regulation,…

• (Bạo động, tình trạng bị bao vây, bị bắt hoặc bị giới hạn bởi chính phủ, người cầm quyên, hoặc người dân; lệnh trưng thu tàu biển, máy bay; cuộc bạo động; nhà máy đóng cửa, sự phá hoại, hoặc các tranh chấp lao động khác; vụ nổ; tai nạn hoặc hỏng hóc toàn bộ hay 1 phần máy móc, nhà xưởng, phương tiện vận tải hoặc phương tiện chuyên chở; yêu cầu, hướng dẫn, đê nghị hoặc luật pháp của chính phủ,…)

• Unavailability of transportation or loading facility, bankruptcy or insolvency of the manufacturer or supplier of the goods,…• (Phương tiện vận tải chưa sẵn sàng; phá sản hoặc

trong tình trạng không trả được nợ cho bên sản xuất hoặc bên cung ứng hàng hóa.)

RISKS4/ Deal with risk by:

RISKS• (1) Retaining or accepting: assume risk because

some risks cannot be eliminated, it's worth assuming• (2) Avoiding: remove risk through eliminating the

situation or activity that presents risk • (3) Minimizing the chance of loss/risk: setting up

policies, procedures, trainings, etc. that reduce the risks being undertaken • (4) Transfering the risk: transfer risk through

insurance or through leases/other types of contracts

InsuranceDefinition and function of insurance

Types of insurance

Documents of Insurance

DEFINITIONInsurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. The insurer, or insurance carrier, is a company selling the insuranceThe insured, or policyholder, is the person or entity buying the insurance policy. The amount of money to be charged for a certain amount of insurance coverage is called the premium.

DEFINITIONThe transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) in the case of a financial (personal) loss. The insured receives a contract, which details the conditions and circumstances under which the insured will be financially compensated.

FUNCTIONSProviding protection and preventing loss –

transfering risk from risk averse to risk neutral or less risk averse

Risk management strategy: Risk Pooling or diversification – “the whole risk is smaller than the sum of its parts” (Law of Large Numbers)

A credit tool: saving and investment tool

TYPES OF INSURANCE POLICYFloating Policy Open Cover

Similarities:- Used in special (unusual) insurance policy- Offer the exporter insurance cover on all shipments over a periodof time: + Each shipment is covered by a Certificate of Insurance, which only contains basic insurance clauses and can be simply filled out for each delivery. + A ceiling is set on the overall figure and automatically reduced by the value of each shipment.

TYPES OF INSURANCE POLICYFloating Policy Open Cover

• Cargo is not specified, but time frame is:

Automatically expires. Regardless of the cargo, means of transport, point of departure or sometimes within specific limitations set by the insured.

• Cargo is specified, but time frame is not:

Does not expire. The total value of the cargo and the number of scheduled shipments are simply specified.

• Not an insurance policy, just an agreement of the insurere to issue an insurance policy.

Valued policy

• The exporter states the value of the goods on the insurance document. A valued policy is a policy which the insurer agrees in advance that the value of the subject matter insured and it shall be conclusively taken as the value of the subject matter when it is damaged.

Unvalued policy

• The exporter don’t state the value of the goods on the insurancedocument. An unvalued policy is a policy which does not specify the value of the subject matter insured, but subject to the limit of the sum insured. It leaves the insurable value to be ascertained by specified means in advance.

TYPES OF INSURANCE POLICY

Time policy • Covers risks arising during a specified period

Voyage policy • Covers risks that arise during an entire transit

period irrespective of how long it takes. • Marine insurance policy that (unlike a time

policy) provides cover for one trip, and usually protects only the cargo and not the ship (vessel).

Mixed policy• Covers both time and voyage periods

TYPES OF INSURANCE POLICY

TYPES OF INSURANCE POLICY

Marine Insurance Policy: 3 variant clausesCargo Clauses A (All Risks Covered): Covers anything not excluded => excludes risks of unseaworthy vesselGeneral Exclusion Clause excludes results of: Willful misconduct of assured, Wear and tear, Poor packaging, Inherent vice in the goods, Delay, Insolvency of carrier, Use of nuclear weapons.

TYPES OF INSURANCE POLICY

Cargo Clauses B and C (Risks Covered): Exclude anything not expressingly covered and risk of unseaworthy vessel.* Cargo Clauses C:• Covers reasonable losses: Fire, explosion; stranded, sunk, capsized vessel or craft; overturning or derailment of land conveyance; collision or contact of vessel, craft or conveyance with any external object other than water; discharge of cargo at a port of distress; general avarage sacrifice; jettison• If Institute War Clauses or Institute Strikes Clauses are

included: risks of war or strikes are to be covered

TYPES OF INSURANCE POLICY

* Cargo Clauses B:• Covers the same reasonable losses like Cargo

Clauses C but also includes:Earthquake, volcanic eruption or lightning; wahsing overboard; entry of water into place of storage on vessel, craft, conveyance...

Insurance Policy• A contract (generally a standard form contract)

between the insurer and the insured determines the claims which the insurer is legally required to pay.

• The preparation of a policy considerably takes time so it does not meet the documents' requirement of promptness and leads to incurred expense of delay.

DOCUMENTS OF INSURANCE

DOCUMENTS OF INSURANCECertificate of Insurance

• Gives the details of the individual shipment under the agreement between the exporter and the insurer covering all their shipments over a period of time.

Letter of Insurance

• In addition to the certificate of insurance, states that the goods are insured => no legal force except as evidence in a law suit against the exporter.

WHO PAYS THE INSURANCE?Two parties are involved: The exporter and the

buyer. Who is responsible for arranging insurance?Two ways deciceding who should insure• Based on the delivery:

+Before the point of delivery, the exporter insures.

+After the point of delivery, the buyer does.

• Based on Incoterms(CIP, CIF). Generally, the buyer shall insures the goods because of their full information of transportation and time.

Translate to Vietnamese

Practice

Neither Party shall lose any rights hereunder or be liable to the other Party for damages or losses on account of failure of performance by the defaulting Party if the failure is occasioned by government action, war, terrorism, fire, explosion, flood, strike, lockout, embargo, act of God, or any other cause beyond the control and without the fault or negligence of the defaulting Party. Each Party agrees to use all reasonable efforts to correct the condition as quickly as possible and to give the other Party prompt written notice when it is again fully able to perform its obligations.

Translate to Vietnamese

Practice

Cả 2 bên đều sẽ không mất bất kì quyền lợi nào hay phải chịu bất cứ trách nhiêm nào với bên còn lại về những mất mát, tổn thất do viêc không thực hiên được hợp đồng đã quy định nếu như viêc không thực hiên đó bị gây ra bởi những hành động của chính phủ, chiến tranh, khủng bố, cháy nổ, lũ lụt, đình công, nhà máy đóng cửa, cấm vận, các hiên tượng tự nhiên, hoặc những nguyên nhân khác nữa nằm ngoài khả năng kiểm soát và không phải do lỗi hoặc sơ suất của 1 bên. Các bên đồng ý dùng tất cả những nỗ lực hợp lý để sửa chữa tình trạng này càng nhanh càng tốt và gửi cho bên còn lại thông báo bằng văn bản khi hoàn toàn có thể tiếp tục thực hiên lại nghĩa vụ của mình.

Translate to English

Practice

Việc giao hàng được thực hiện theo CIF cảng Kobe (Nhật Bản), Incoterms 2010. Ngày giao hàng dự định là ngày 15 tháng 10năm 2011. Rủi ro và quyên sở hữu đối với hàng hóa sẽ chuyển từ người bán sang người mua ngay khi giao hàng

Translate to English

Practice

Delivery of the Goods shall be made CIF, Kobe Port (Japan), Incoterms 2010. The scheduled date of Delivery shall be 15 October 2011… Risk and title to the Goods shall pass from the Seller to the Buyer immediately on Delivery.

• Marine Insurance Policy: 3 variant clauses• Cargo Clauses A (All Risks Covered): covers anything

not excluded => excludes risks of unseaworthy vessel• General Exclusion Clause excludes results of: Willful

misconduct of assured, Wear and tear, Poor packaging, Inherent vice in the goods, Delay, Insolvency of carrier, Use of nuclear weapons.

• Covers reasonable losses: • fire, explosion; stranded, sunk, capsized vessel or

craft; overturning or derailment of land conveyance; collision or contact of vessel, craft or conveyance with any external object other than water; discharge of cargo at a port of distress; general avarage sacrifice; jettison• If Institute War Clauses or Institute Strikes Clauses

are included: risks of war or strikes are to be covered