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Chapter 12 Marine and aviation reinsurance 12/7 Chapter

Be aware 12
Whereas non-marine markets tend not to cover any loss from war risks, the marine market accepts some cover
because while cargo is at sea the possibilities of accumulation are more limited, and indeed once a war breaks out it
is possible for ships to disperse and reduce the potential for catastrophic losses. This allowance is restricted to
cargo afloat, so there is no cover while cargo is being transported on a land leg or in storage.

In cargo insurance the structure of the cover is usually based on the type and quality of the
The structure of the
transportation. For this purpose different categories can be formed as illustrated below. cover is usually based
on the type and
Cargo and specie transported by: quality of the
transportation
• ships classified 100 A1 in the Lloyd’s Register or equivalent, up to 15 years of age and having a gross
tonnage of more than 1,000;
• non-classified ships of more than 1,000 tons;
• ships and coasters of less than 1,000 tons;
• river or inland vessels;
• trains;
• lorries;
• regular airlines; and
• charter aircraft.
If there is a combined voyage involving marine and inland transportation, the underwriting limit for the
most exposed part of the voyage is determined and applied to the complete combined journey, including
the intermediate storage.
Be aware
In the case of Lloyd’s Register classification – see www.LR.org – we have referred to on several occasions, the
relevance of 100A1 is that:
• ‘100’ indicates the vessel is suitable for seagoing service;
• ‘A’ shows that the vessel is accepted into the appropriate Register class and is maintained in good and efficient Reference copy for CII Face to Face Training
condition; and
• ‘1’ shows that the vessel has good and efficient anchoring and mooring equipment.

A2B Underwriting considerations
A marine cargo account needs careful examination as the inherent risk may vary within subclasses.
A cargo account is particularly difficult to break down to individual risks as there are so many different
A cargo account is
types of cargo. Therefore, the reinsurer needs to have, or be provided with, up-to-date knowledge of any difficult to break down
current problems affecting the direct cargo market so that it can make a decision as to what effect, if to individual risks
any, those problems will have on the insurer’s portfolio.
As it can be difficult to obtain an exact breakdown of the insurer’s cargo account, reinsurers generally
rely on an information sheet that should include:
• details of the normal lines written;
• the classes of business written or excluded;
• premium income for each class; and
• the loss records.
Any particularly high risks or high value commodities being covered, such as bullion or specie, must be
identified.

Question 12.4
We have made several references to ‘specie’ in these sections. What do we mean by this?

Specie may range from small sendings by registered mail or other specialist carriers to the larger limit
vault and premises risks. The insurance of the main precious metals and mining companies may also be
included. Finally, the general specie risk code also includes the transit and storage of securities which is
a specialist area aligned to the bond market.
Any potential for accumulation of several cargoes at any one location, at any one time, should be
identified and advised.