What is Endorsement in Marine Insurance?

Marine insurance is a type of insurance that deals with the risks associated with the transportation of goods and people over water, air, land and rail. Its primary objective is to protect the interests of the parties involved in the transportation of goods.

The primary stakeholders in marine insurance include shipowners, cargo owners, financiers, etc., who have a vested interest in the safety and successful delivery of goods.

Endorsements are a fundamental aspect of marine cargo insurance, allowing for the customisation and modification of insurance policies to meet the specific needs and circumstances of the insured parties.

These modifications can include various aspects of the policy, such as coverage limits, terms and conditions, and the inclusion or exclusion of particular risks. It is vital to endorse a marine policy for the following reasons:

Customisation

Endorsements enable policies to be tailored to the unique needs and circumstances of the insured parties, allowing for a more precise alignment of coverage with the specific risks involved.

Flexibility

Marine voyages often involve changing conditions and unforeseen events. Endorsements provide the flexibility needed to adapt a marine insurance policy to evolving circumstances, ensuring the coverage remains relevant and effective.

Risk Management

Endorsements are instrumental in risk management as they allow specific perils and coverage extensions to be included or excluded. Insured parties can protect themselves against the risks that are most relevant to their situation.

Cost Control

Endorsements can be used to adjust the cost of insurance coverage by increasing or decreasing coverage limits or modifying the terms and conditions. This can help insured parties manage their insurance costs effectively.

Legal Compliance

Endorsements ensure that insurance policies remain in compliance with relevant laws and regulations, especially in the case of international voyages where different jurisdictions may have distinct requirements.

A marine insurance policy comes in different forms based on coverage. The two most common forms are:

Cargo Insurance

Marine cargo insurance is designed to protect the goods being transported. It covers losses or damage to the cargo due to perils like sinking, theft, or damage during loading and unloading.

Hull Insurance

Hull insurance covers the ship or vessel itself. It protects against damage to the hull, machinery, equipment, and liabilities arising from collision, salvage, and general average.

You can request a marine endorsement to modify, expand, or restrict the terms and conditions of a policy. After you understand the endorsement meaning in insurance, you must acquire information about the different types of endorsement in marine insurance.

There are four main categories of endorsements in marine insurance - standard, non-standard, voluntary, and mandatory. Let us delve into each of these with examples:

Standard

Standard endorsements are predefined and widely recognised modifications that are commonly used in marine insurance policies. They are typically part of industry-standard forms and are readily available for use by insurers and insured parties. Standard endorsements are well-established and widely accepted within the marine insurance sector.

Examples of standard endorsements in marine insurance include Institute Cargo Clauses (A, B, and C) and various Institute Time Clauses.

Institute Cargo Clauses (A, B, and C): These are standard clauses that define the extent of coverage in marine cargo insurance. Clause A provides the most extensive coverage, Clause B is intermediate, and Clause C offers the most restrictive coverage.

Institute Time Clauses (e.g., Institute Time Clauses - Hulls 1/10/83): These standard clauses specify the coverage terms and conditions for hull insurance policies, particularly those covering vessels. They may define coverage for perils such as fire, collision, and machinery breakdown.

Non-Standard

Non-standard endorsements are modifications that are not part of the commonly recognised industry standards. They are custom or unique amendments to an insurance policy that are specifically designed to address the particular needs or circumstances of the insured party. Non-standard endorsements are created on a case-by-case basis and may require negotiation between the insurer and the insured.

For example, an insured party has a unique cargo that requires specific coverage not provided by standard clauses. The insurer may draft a non-standard endorsement to address the specific risks associated with this cargo, such as unique transportation requirements or extraordinary perils.

Voluntary

Voluntary endorsements are those that the insured party voluntarily chooses to add to the insurance policy. The insured typically selects these endorsements to enhance, limit, or customise the coverage according to their specific requirements. The decision to include voluntary endorsements is at the discretion of the insured party.

For instance, a cargo owner decides to add an "Additional Perils" endorsement to their cargo insurance policy to provide coverage for war risks and political instability during a particularly risky shipping route.

Mandatory

Mandatory endorsements in a marine insurance policy are those required by law, regulations, or governing bodies. They are not optional but are necessary to ensure that the insurance policy complies with legal or regulatory requirements. These endorsements are typically implemented to protect the interests of third parties, such as crew members, passengers, or the public.

Here is an example of a mandatory marine endorsement:

In many countries, the carriage of passengers on vessels is subject to strict regulations. There may be mandatory endorsements related to liability coverage for passenger injuries or mandatory endorsements that ensure compliance with international maritime conventions.

Obtaining a marine insurance endorsement involves a process that depends on the specific needs and circumstances of the insured party and the nature of the marine insurance policy. Here are the general steps to get a marine insurance endorsement:

Identify the Need for an Endorsement

Determine the specific requirements or changes that necessitate an endorsement. Whether you need to expand coverage, modify policy terms, or add coverage for unique risks, it is crucial to identify why you require an endorsement.

**Discuss with the Insurer

Marine insurance can be complex, and it helps to work with an experienced insurance broker or underwriter who specialises in marine insurance endorsements. They can help you assess your insurance needs and guide you through the process of obtaining an endorsement.

Draft the Endorsement

The insurance company or underwriter will draft the endorsement based on the terms and conditions of your existing policy and your negotiation with the insurance company. The endorsement will outline the modifications to the policy and the specific changes being made.

Review and Approval

Carefully review the endorsement to ensure that it accurately reflects the changes or additions you discussed. If you agree with the terms, sign the endorsement to approve it. Depending on the insurance company, they may require written or electronic confirmation of your acceptance.

Incorporate the Endorsement

Once the endorsement is approved and payment (if applicable) is made, the endorsement will become part of your marine insurance policy. Make sure you keep a copy of the endorsement for your records.

Endorsements in marine insurance are written modifications or additions to an insurance policy that serve to customise and adapt coverage to the unique needs and circumstances of insured parties. They can include standard, non-standard, voluntary, or mandatory changes to policy terms, coverage limits, and conditions. Endorsements are essential for tailoring marine insurance policies to specific situations, ensuring that coverage aligns with the dynamic and complex nature of the maritime industry and that legal and regulatory requirements are met.

TATA AIG provides a marine insurance policy with options for customisation to avail adequate coverage and ensure that your cargo reaches its destination securely and timely.

Do endorsements in marine insurance have deductibles?

Some endorsements may modify the deductible amount or conditions, while others may leave the deductible unchanged. The endorsement and base insurance policy should clearly outline the specific terms and conditions regarding deductibles.

When is an endorsement in marine insurance required?

Endorsements in insurance are required or recommended in various situations to modify or customise the terms and conditions of an insurance policy. It is essential to work closely with your insurance provider or agent to determine when an endorsement is required or recommended.

They can assess your unique circumstances and coverage needs and help you obtain the appropriate endorsements to ensure your insurance policy aligns with your specific situation.

What is the validity of endorsement in insurance?

The validity of an endorsement in insurance is typically tied to the validity of the underlying insurance policy to which the endorsement is attached. The endorsement cannot extend beyond the expiration date of the base policy.