What transport reinsurance covers

Transport reinsurance protects insurers that accept risks connected with carriage. This includes hull insurance for sea and river vessels, shipowners' liability, cargo on all modes of transport, aviation risks (aircraft hull and the liability of air carriers and airports), railway rolling stock, and the liability of carriers and freight forwarders. For clients these are direct lines: cargo insurance, marine and inland water transport and aviation risks.

What makes this line special

  • High unit values. A single vessel or aircraft may be worth more than an insurer's entire annual premium income in the line.
  • Accumulation. Dozens of insured ships, containers and aircraft can be in one port, warehouse or airport at the same time, so one event affects many policies.
  • International nature. Risks cross borders, and losses are settled under the rules of different jurisdictions and maritime law, including general average and average adjustment.
  • Separate war risks. War, strikes, seizure and confiscation are insured on special terms and are often excluded from the main cover.

Which treaties are used

For the flow of cargo shipments, proportional treaties are used: quota share or surplus. Retentions on large vessels and aircraft are protected by per risk excess of loss, and accumulations in ports by per event excess of loss, including cover for simultaneous claims from several interests (clash). The largest units, such as ships, drilling rigs and aircraft, are often placed facultatively. More on non-proportional forms is in the non-proportional reinsurance section.

Cargo: open covers and accumulation

Cargo is most often insured under open covers, general policies that automatically cover all of a client's shipments for a year, with each shipment declared. For the reinsurer this is a flow of homogeneous risks that is convenient to cede on a quota share or surplus basis. The main threat is accumulation: goods of different cargo owners insured with the same insurer may end up in one warehouse, on one ship or in one port at the same time. That is why limits per storage location and per conveyance are set both in the original policies and in the reinsurance treaties.

Practice in Russia

Reinsurance is governed by Article 967 of the Civil Code and Law No. 4015-1, and the regulator is the Bank of Russia. JSC Russian National Reinsurance Company (RNRC), founded by the Bank of Russia, participates in Russian programs: insurers must offer it a share of the risks they cede to reinsurance (50% of the ceded obligations as a general rule), and risks connected with sanctioned persons are ceded to RNRC.

Since 2022, the transport line has been among the first affected by sanctions. Western insurers and reinsurers have largely stopped covering Russian aviation and marine risks, and some shipowners have lost their usual liability protection abroad. A significant part of these risks has been taken on by Russian insurers with reinsurance support, including from RNRC. Additional capacity is sought from reinsurers in countries that have not joined the sanctions, with mandatory checks of the counterparty, the vessel's route, the cargo and the payment route.

What matters

  • Sanctions clauses in the original policy and in the reinsurance treaty must match, otherwise a gap in cover arises.
  • War, strikes, seizure and cyber attacks: check where they are covered and where they are excluded.
  • Accumulation data: the value of goods in warehouses and ports, and the number of fleet units in one place.
  • Cargo policy terms: the clauses on which the cargo is insured, the deductible, the stages of transit covered.
  • The procedure for settling large losses: average agents, surveyors, average adjusters.

Who needs this protection

Transport reinsurance is needed by insurers that cover shipping companies and airlines, cargo owners, freight forwarders, ports and terminals, and leasing companies. The greater the accumulation of value in one place, the more important per event protection becomes, not only cover for individual risks.

How Polis Re helps

Polis Re specialists help prepare information on the fleet, cargo flows and accumulations, select reinsurers and reinsurance intermediaries with experience in marine and aviation risks, and support the placement. Definitions are in the insurance glossary. To discuss your needs, submit a request.