In an exciting collaboration between Minet Malawi, Britam, and The Daily Times - Malawi's leading newspaper - we are thrilled to introduce a groundbreaking initiative that will redefine your Wednesdays. Welcome to the Insurance Insights Column – a weekly rendezvous with the world of insurance and contemporary issues that matter. Every article aims to illuminate the intricate landscape of insurance products and relevant topics that impact us all. The articles are educative at all levels, catering to both practitioners and non-practitioners.
As published in The Daily Times (Malawi) on December 4th, 2024
No country exists in isolation. Malawi neither consumes all the goods that she produces nor produce all the goods she consumes. Almost ninety-five per cent of the tobacco that our farmers in Kasungu, Dowa, Mchinji and Lilongwe produce is exported, smoked or used as raw materials elsewhere. Most of the durables and consumables that we use are produced abroad and imported into the country. In short, every country no matter how rich it may be, participates in international trade. International trade relies very much on the availability of marine insurance for its successful and expeditious handling.
Importantly, international trade is achieved through the use of borrowed money. Banks as financiers are not keen to commit their funds unless satisfactory arrangements have been made to take care of the transportation perils.
Under marine insurance, the mode of conveyance is by road, rail, sea, air or any combination of these forms.
Transit perils are many and varied. MV Ilala I was capsized by heavy storm off Chitimba waters on Lake Malawi. Engine failure can cause the ship to sink. Poor visibility causes collision with other ships, icebergs or hidden rocks. The gigantic Titanic hit a submerged iceberg and sunk off the Atlantic Ocean on its maiden journey to America. Goods are sometimes damaged through negligent handling by transporters whilst in transit. Risks against which a ship and its cargo are insured on sea are collectively known as ‘perils of the sea.’ Common causes of loss of or damage to cargo on land include fire, overturning of the vehicle, theft, pilferage, pirate hold-ups, war, riots and floods, among others.
There are four types of marine coverage. These include hull, cargo, freight and legal liabilities to third party property damage and bodily injury.
Marine cargo insurance is taken by international transporters for physical loss of or damage to goods whilst in transit between countries. You can take cargo insurance on specific, floating or open cover bases. Transportation of goods from one warehouse of departure to a warehouse of arrival falls under specific cover. Insurance people refer to it as ‘one-off’ cover. For instance: with the onset of the rainy season, one fertilizer dealer may be importing a consignment of granular fertilizer from India for Affordable Input Programme (AIP). Cover applies from the moment the consignment leaves a warehouse in India until it arrives at another warehouse in Malawi. Cover lapses upon offloading the bags of fertilizers from the truck in Malawi.
Under open basis, there is no expiry or renewal date. You have an automatic cover to both outgoing and incoming shipments. All you do is to declare to the insurer on a regular basis, usually monthly, the amount of goods (mzigo) that have been shipped or received. Premium is paid for each shipment as it is declared. Terms are agreed in advance. To minimize exposure, insurers usually fix a limit as to how much may be insured per shipment or per truck. The other restriction lies in the use of the Institute Clauses. Institute Clauses are provisions that extend or restrict the extent of marine cover.
Floating marine cargo policy is where a large sum insured is granted. Each time shipments are made, the insured declares and is deducted from the outstanding sum insured.
Hull insurance is for the vessel itself. Ships such as MV Mtendere, Kandwindwi or tugs are insured under the policy. Cover applies whilst the ship is in motion or at rest in a port. Marine hull is popular among owners of pressure crafts, cruise boats and yachts or dhows for material damage and liability risks.
Money paid for transportation of cargo is known as freight. In the event that your client’s goods have been lost in transit or the ship is sunk, freight is not realized. You incur a loss in revenue. Insurance for freight caters for the loss in shipping revenue. As rule of thumb, freight insurance is taken alongside marine hull or cargo insurance. You cannot buy it as a stand-alone policy. It is a consequential loss cover. Talk to us. We are here to guide and serve you.
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