By Sofia Naznim

Process of evaluating the risk that the ship owner's might face in the marine activity. They decide how much coverage the client should

receive, how much they should pay for it, or whether even to accept

the risk and insure them.

Underwriting involves measuring risk exposure and determining the premium that needs to be charged

to insure that risk.

The function of the underwriter is to protect the company's book of business from risks that they feel

will make a loss and issue insurance policies at a premium that is commensurate with the exposure presented by a risk.

SNH ©

To protect the shipowner’s investment in the ship. It is

basically a property insurance which covers the ship itself, the machinery

and equipment.

The owner will be protected for losses caused by loss of or damage to the

ship and its equipment.

SNH ©

The volume of premiums received

must be sufficient to pay for repairs

Cost of repairs have been affected by inflation whether

vessel is new or old

The rate must provide a fund for

total loss and liabilities

Sound quotation can only be given with the assistance of

detailed past records

To evaluate and asses the risk that

the ship owner might face

SNH ©

SNH ©

BULK CARRIER

OIL TANKER

REFIGERATED CARGO

CARRYING VESSEL

LIVESTOCK CARRIER

SNH ©

LNG CARRIER

CAR CARRIER

CONTAINER CARRIER

HEAVY LIFT CARRIER

SNH ©

Carrying raw dry cargoes in huge cavernous holds, such

as coal, iron ore, grain, sulphur, scrap metal

Bulkers range from about 25,000 Deadweight tons (handy size) through the medium size (Panamax) vessels of about 75,000

DWT, to the giant (cape size) vessels of up to 200,000

DWT

SNH ©

SNH ©

The crude carrier - carries crude oil

The clean products tanker - carries the refined

products, such as petrol, gasoline, aviation fuel, kerosene and paraffin.

SNH ©

Refrigerated Cargo Carrying Vessels (Reefers) are purpose built to carry fruit, meat and

other food products across the sea in a fresh and clean manner

SNH ©

The carriage of live animals around the world is performed by specialist

vessels, designed (or adapted) to transport large numbers of cattle and sheep in secure but humane

conditions.

This transport of live animals requires experienced and specialized

operators. The dangers of disease, rejection, injury and death to and

from the animals is particularly high, coupled with the current activities of

animal rights activists.

SNH ©

SNH ©

The LNG carrier (Liquefied Natural Gas) and it's cousin the LPG carrier (Liquefied

Petroleum Gas) are products of the late twentieth century.

LNG and LPG are the preferred fuel types of

certain countries for their industrial power needs.

In its natural state, LNG is a gas, so to transport it, it

needs to be kept as a liquefied state by reducing the temperature down to a

temperature of approximately MINUS 160

degrees C.

Obviously, the carriage of a potentially explosive

substance - kept at very low temperatures in an unstable liquefied state - presents a

very dangerous cargo, yet it is for this very fact, that LNG Carriers have about the best safety record of all maritime

vessels. Only the best officers and crews are

employed on these vessels, and the vessels themselves

are maintained meticulously, and renewed frequently.

SNH ©

The car carrier or more correctly the P.C.C. (Pure Car carrier) or

P.C./T.C. (Pure car/truck carrier), could never be described as a beauty of the seas, yet in it's

rectangular design, is purpose built to carry large numbers of cars.

SNH ©

SNH ©

These vessels are built for speed, and can reach upwards of 28 knots,

moving cargoes around the world. Globally storing and returning empty boxes has become an industry in itself

Through-transport or inter-modal transport, means that these

containers can be offloaded from a ship, and rapidly loaded onto trains or

onto container Lorries for onward transport to the place of delivery. Recently, this has led to serious

security concerns

SNH ©

Built to load, carry and discharge

large, unusual shaped cargoes (or

even smaller vessels) that will

simply not fit inside the holds of

conventional vessels. Shaped quite unlike any other

cargo vessels, heavy lift vessel are

designed to cope with unusually

large cargos that will not fit inside

normal, conventional vessels.

SNH ©

The majority of vessel are only designed for craning the

cargos on board or rolling them onto the side of the vessel,

but a few heavy lift vessels can be ballasted down, so that

cargoes (often on pontoons) can be floated on. The vessel is

then raised, lifting the cargo, (now resting on the deck of the heavy lift vessel), out of the water, ready for ocean transit,

often to the other side of the world. These specialist vessels

are often used in the oil industry for the carriage of jack up

rigs. Other unusual cargoes can include power plants,

desalination units, generators and yachts. In 2003, heavy lift vessels were used to carry away the cut up sections of the

TRICOLOR when she was removed from the bottom of the

Dover Straits.

SNH ©

Deadweight Tonnage

•Expresses the number of tons of 2,240 pounds that a vessel can transport of cargo, stores, and bunker fuel. It is the difference between the number of tons of water a vessel displaces "light" and the number of tons it displaces when submerged to the "load line."

•Deadweight tonnage is used interchangeably with deadweight carrying capacity. A vessel's capacity for weight cargo is less than its total deadweight tonnage.

Cargo Tonnage

• Is either "weight" or "measurement." The weight ton in the United States and in British countries is the English long or gross ton of 2,240 pounds. In France and other countries having the metric system a weight ton is 2,204.6 pounds.

•A "measurement" ton is usually 40 cubic feet, but in some instances a larger number of cubic feet is taken for a ton. Most ocean package freight is taken at weight or measurement (W/M) ship's option.

SNH ©

Gross Tonnage

•Applies to vessels, not to cargo. It is determined by dividing by 100 the contents, in cubic feet, of the vessel's closed-in spaces. A vessel ton is 100 cubic feet. The register of a vessel states both gross and net tonnage.

Net Tonnage

•Vessel's gross tonnage minus deductions of space occupied by accommodations for crew, by machinery, for navigation, by the engine room and fuel. A vessel's net tonnage expresses the space available for the accommodation of passengers and the stowage of cargo.

•A ton of cargo in most instances occupies less than 100 cubic feet; hence the vessel's cargo tonnage may exceed its net tonnage, and, indeed, the tonnage of cargo carried is usually greater than the gross tonnage.

SNH ©

Displacement

• Vessel is the weight, in tons of 2,240 pounds, of the vessel and its contents. Displacement "light" is the weight of the vessel without stores, bunker fuel, or cargo. Displacement "loaded" is the weight of the vessel plus cargo, fuel, and stores.

SNH ©

Iceberg

Other reasons such as narrow straits, weather (typhoon, monsoon region),

piracy

SNH ©

In order to be registered, an

ocean-going ship must be

certified to be of a particular type

and size and be maintained to

certain minimum standards. While most states (national

governments) do not insist that

ships be "classed," without a

"class" category there would be

considerable difficulties in operating a ship, as "class" is a

requirement of most insurance

companies and shippers using the

vessel.

It also reflects on the risk and safety management

aspects of the vessel, date of last survey to maintain

classification and seaworthiness of vessel

SNH ©

The flag state of a commercial vessel is the state under whose laws the vessel is registered or licensed.

The flag state has the authority and responsibility to enforce regulations over vessels registered under its flag, including those relating to inspection, certification, and issuance of safety and pollution prevention documents.

SNH ©

Masts can be the home of antennas, navigation lights,

radar transponders, fog signals, and similar devices

often required by law.

Ground tackle includes equipment such as mooring

winches, windlasses, and anchors. Anchors are used

to moor ships in shallow water. They are connected

to the ship by a rope or chain. On larger vessels, the chain runs through a

hawsepipe.

Cargo equipment such as cranes and cargo booms

are used to load and unload cargo and ship's

stores.

Safety equipment such as lifeboats, liferafts, and

survival suits are carried aboard many vessels for

emergency use.

SNH ©

A high level of repair costs due to high loss ratio, will indicate

that premiums may need to be increased and vice versa

This premium assessment will be based particular to the vessel type and its trade

The insurers will pay the ship owner for the cost of repairs to the ship after the damage has

been surveyed and tenders from repair yards submitted

The ship owner will, however, have an agreed amount

referred to as the “deductible” which has to be paid by him

before a claim against his insurance policy is submitted

For example, if the deductible is RM 100,000 and a claim for

repairs is RM 300,000, the insurers will compensate the

owner for RM 200,000

SNH ©

An older vessel poses a higher risk

than the newer one

The older the vessel, the higher the risks.

This is due to:-

Higher repair cost

Higher maintenance

costs

SNH ©

This may lead to an additional premium by the underwriter

The majority of marine underwriters require a marine survey once every two years

and when a vessel has reached 10 years of age

SNH ©

1.28%

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0-4 yrs 5-9 yrs 10-14 yrs 15-19 yrs 20-24 yrs 25 yrs +

% of World Fleet

Bulkers Tankers Other ships Total

Source: LMIU for Joint Hull Committee

SNH ©

A P&I (Protection and Indemnity) club will keep records for each individual ship entered with the club

These records are normally based on the last five insurance years and provide an accurate record of all payments made by the member

SNH ©

The amount of premiums paid in by the member

The amount of money paid out for market reinsurance

The amount of money paid back to the owner as compensation

Other costs and the amount estimated for claims not settled

SNH ©

The loss ratio will therefore only be one of the elements that form the basis of the

annual renewal process, where the

P&I premiums for the coming year are fixed

A high level of claims, and hence a high loss

ratio, will indicate that premiums may

need to be increased and vice versa, but

other risk measures are also used to

establish the revised premium level

Premiums should be adequate to ensure

that a member contributes equally according to mutual

principles

This implies that, in the long term, a

profitable, or as a minimum, a break-

even premium level has to be set for the

member

SNH ©

These are some of the developments spanning nearly 100

years that have enabled underwriters to gain experience

and to apply that experience to each new succeeding

stage in the evolution of shipping.

Past experience of underwriter provides guide to the

rating of the hull insurance.

The underwriter’s experience with the Assured is a

valuable guide in determining whether the rate is

adequate or excessive.

An adverse loss ratio indicates the need for careful

reconsideration of risk factors; it does not necessarily

indicate that the rate should be revised.

SNH ©

SNH ©

A careful study of the features of any risk should indicate its quality. Good ownership is reflected in good seaworthy craft, maintained in good order and properly managed

SNH ©

The most important.

The physical condition of a vessel is only discoverable through competent survey.

Most large trading vessels are registered with one of the international registers such as Lloyd’s Register of Shipping, The American Bureau of Shipping and Germanischer Lloyd.

For smaller vessels, it would be in an underwriter’s interest to arrange to have surveys completed before making any decision about going on risk.

SNH ©

Inspect a cargo vessel, to check for proper seaworthiness and safety equipment

Some sea routes take cargo ships into dangerous areas that are open to modern piracy, or may have harsh weather conditions

SNH ©

Past claims history will give a clear indication of

good or bad management

Prior claims information should be comprehensive to ensure

that a correct picture is obtained and a proper assessment is

made

SNH ©

Analysis of insurance

requirements/risk management

Liaison with insurers/insurance

brokers

Obtaining optimum recovery

Settling liabilities advantageously

SNH ©

Loss damage liability or expense covered by the Institute Time Clauses-Hulls 1/10/83 (including 4/4ths Collision Clause) or which would be recoverable there under but for Clause 12.

Any claim for any sum recoverable under any other insurance on the Vessel or which would be recoverable under such insurance but for the existence of this insurance.

Any claim for expenses arising from delay except such expenses as would be recoverable in principle in English law and practice under the York-Antwerp Rules 1974.

SNH ©

This insurance may be cancelled by either the Underwriters or the

Assured giving 7 days notice

Whether or not such notice of cancellation has been given this insurance shall terminate automatically

In the event either of cancellation by notice or of automatic termination of

this insurance by reason of the operation of this Clause

5, or of the sale of the Vessel, pro rata net return

of premium shall be payable to the Assured

SNH ©

No claim arising from a peril insured against shall be payable under this insurance unless the aggregate of all such claims arising out of each separate accident or occurrence

Claims for damage by heavy weather occurring during a single sea passage between two successive ports shall be treated as being due to one accident

SNH ©

Excluding any interest comprised therein, recoveries against any claim which is subject to the above deductible shall be credited to the Underwriters in full to the extent of the sum by which the aggregate of the claim unreduced by any recoveries exceeds the above deductible

Interest comprised in recoveries shall be apportioned between the Assured and the Underwriters, taking into account the sums paid by the Underwriters and the dates when such payments were made

SNH ©

War civil war revolution rebellion

insurrection, or civil strife

arising therefrom, or any hostile act by or against a

belligerent power

Capture seizure arrest

restraint or detainment,

and the consequences thereof or any attempt threat

Derelict mines torpedoes bombs or

other derelict weapons of

war

Strikers, locked-out

workmen, or persons taking

part in labor disturbances, riots or civil commotions

Any terrorist or any person

acting maliciously or from a political

motive

Confiscation or expropriation

SNH ©

SNH ©