What vessel insurance includes

Water transport insurance is a group of classes for owners and operators of sea and river vessels: dry cargo ships, tankers, tugs, barges, passenger and fishing vessels, harbour craft. The main ones are:

  • hull and machinery (called "KASKO" for vessels in Russia) — insurance of the vessel itself and its machinery;
  • shipowner liability insurance — to third parties, crew, passengers and cargo owners;
  • additional classes: freight insurance, builders' and ship repairers' risks, war risks, crew accident insurance.

Marine insurance is governed by the Merchant Shipping Code of the Russian Federation, which has dedicated rules on the contract of marine insurance and on general average. Inland waterways are covered by the Inland Water Transport Code and Chapter 48 of the Civil Code.

Hull and machinery

Typical hull cover includes:

  • total loss of the vessel, including constructive total loss — when repair makes no economic sense;
  • damage to the hull, machinery and equipment from grounding, storm, fire, collision and other perils of the sea;
  • salvage and loss prevention costs;
  • the vessel's share of general average — expenses and sacrifices shared between ship, cargo and freight;
  • collision liability towards other vessels — either within hull cover or under shipowner liability.

Wear and tear, corrosion, consequences of poor maintenance and wilful acts of the insured are usually not covered. War risks and strikes are normally insured separately.

Shipowner liability

This class protects against claims arising from operating the vessel:

  • harm to the life and health of crew, passengers and others;
  • loss of or damage to cargo carried;
  • pollution by oil and other substances;
  • wreck removal;
  • damage to berths, locks and other fixed objects;
  • quarantine and other costs imposed by authorities.

Cargo owners insure their own interest separately — see cargo insurance.

What the law requires

  • Oil pollution. Russia is party to the international conventions on civil liability for oil and bunker oil pollution damage. Owners of ships carrying more than 2,000 tonnes of oil in bulk as cargo and, for bunker oil pollution, owners of ships over 1,000 gross tonnage must hold insurance or other financial security and a certificate confirming it.
  • Passengers. A carrier of passengers by sea or inland waterway must insure its liability under Law No. 67-FZ — see OSGOP. On inland waterways the contract runs for at least the navigation season.
  • Ports and hazardous facilities. Hydraulic structures and hazardous production facilities on shore fall under OSOPO.

Hull cover is not required by law, but banks and leasing companies financing a vessel usually require it.

What drives the price

  • vessel type, size, age and value;
  • classification society class and technical condition;
  • trading area and season, ice conditions;
  • type of work: cargo, passengers, towing, fishing;
  • crew qualifications and quality of ship management;
  • claims history, deductible and liability limits.

Insurers usually place large vessels and fleets into reinsurance, so the strength of an insurer's reinsurance protection matters.

Choosing an insurer

  • Experience in marine and river insurance and in-house claims specialists.
  • A network of surveyors and average agents in the ports on your routes.
  • Readiness to issue the certificates and guarantees that ports and authorities require.
  • Clear terms on general average, salvage and collision liability.

See the catalogue under Insurance companies and request a quote via the request form.

Claims

  1. Notify the insurer immediately and take steps to save the vessel and limit the loss.
  2. Record the event in the ship's documents. After a maritime casualty the master files a sea protest.
  3. Wait for the surveyor's inspection before repairs and agree the repair yard with them.
  4. In a general average case, the apportionment is prepared by an average adjuster; the insurer takes part in the calculations and provides guarantees.

Common mistakes

  • The vessel operates outside the agreed trading area or navigation period.
  • Class confirmation has lapsed — many contracts then cease to apply.
  • The hull sum insured is below market value — the payout is reduced proportionally.
  • Hull cover is in place but liability cover is not, although the largest claims are made against the shipowner.

The crew can additionally be covered under employee accident insurance.