 Operation of ships as well as carriage of cargo by sea has always been of
extraordinary risk. Despite the fact that ships are built of steel and supplied with
navigation devices, which guarantee determination of the ship location at the world seas
with precision under one metre, nobody yet has been able to guarantee that when sailing
from one port to the other ships will move in smooth waters only. By today, no medicine,
except radar, has been found against fogs that appear on the sea quite often. Dense fogs
alongside with heavy rain or snow often create such situation for ship deck officers when
technical devices are of little help and it is only your own intuition you have to depend
on. In case the ship owner overlooks all such risks related to operating a ship, he may
one day wake up and learn that the quite expensive property he owned has either lost its
value considerably or, what is more awful, practically lost. In order to sleep soundly, a
prudent owner will try to find an option to hedge such risks. For hedging such risks,
there are two ship insurance classes in world practice, with the code names H&M and
P+I. |
H&M, i.e. Hull
and Machinery is insurance of the machinery and hull of the ship. To make it easier, this
is insur ance of the
property owned by the ship owner, i.e. insurance of the hull of the ship and machines
installed there. It is quite ordinary that a ship owner has received funds from a bank in
order to purchase a ship, and so the bank has a vital interest in the insurance of the
ship and property installed on this ship. At the same time, each repair of the hull or
machinery, especially at foreign ports, may cause quite big expenses for the ship owner,
and naturally insurance money would be of big help to the ship owner as well as assistance
of insurance representative in order to ensure prompt and efficient arrangement of the
ship repairs.
This is quite ordinary that the ship owner considers his property unsinkable and
non-destructible, and he agrees to insure his property only when the bank, which financed
the purchase of the ship, demands it and even then he insures it preferably against total
loss. This is possible, but shipwreck is not an everyday matter and, for example, in case
of bigger hull damage repair expenses may considerably exceed what the ship owner can
afford, which in its turn may lead the ship owner to bankruptcy. To avoid such events, the
only thing we can do is to insist that ship owners consider seriously risks related to sea
sailing already upon buying a vessel. |
P+I, i.e. Protection and Indemnity.
Here such risks are included which the ship owner’s ship or its activity may cause to
third parties or property of such third parties. This is insurance of liability to legal
as well as to natural persons. As an example, we may indicate here such possible damage as
pollution of the sea environment, collisions with other ships or floating objects (buoys), damage to
cargo carried by ship, injuries of the crew members, etc. In each particular case the ship
owner is free to choose to take insurance cover just against such risks which in his
opinion should be covered. We in our turn may assist the ship owner on preparation a
liability insurance package suitable just for each particular ship, considering at the
same time possibilities of the ship owner to cover a certain share of the damage himself
in case of an insured occurrence. This share is called deductible. On determining the
deductible, a rule is applied that the bigger the deductible the smaller the insurance
premium, and at the same time the smaller the deductible the bigger the insurance premium
payable in order to receive the insurance cover. In major part, international P+I clubs
are engaged in insurance of ship owners' liability and whose members are ship owners;
insurance premiums paid by ship owners form funds of the club which are used on settlement
of problems caused by its members or on indemnifying the caused damage. In case the
disbursed amounts exceed the contributions made to the club, ship owners are requested to
make additional contributions. This may happen up to a year or two later. There are also
insurers of ship owners' liability who act on commercial basis who do not request
additional amounts in such manner. One of these is, for example, Ingosstrah in Moscow.
Totally without liability insurance navigation is quite risky because very often goods
carried by ship cost millions of dollars and in case of their damage it is quite obvious
that the ship owner will be unable to compensate the damage to the owner of the goods. |
As already from the beginning of 1997 we have
quite tight relations with a number of financial institutions of Estonia as well as of
foreign countries, when supporting our clients. In connection with that we have been
active in the international ship brokerage chain. It means that we have a constantly
changing database on a lot of ships of various types intended either to be sold or
purchased. Under purchase or sale of a ship we do not mean only that through our company
the seller and the buyer of the ship establish contacts, but also that we guarantee the
execution of a legally correct purchase and sale transaction in the Estonian environment
as well as anywhere abroad. This in its turn provides that we are even in charge of
arrangement of legalisation of entire documentation related to the purchase or sale at the
level of consular departments of ministries of foreign affairs, and documents related to
registration of ships and deletion of ships from the ship register. At the same time,
purchase or sale of a ship does not mean that the only thing for us is to arrange a
transaction as soon as possible and then forget about it, but also that the buyer as well
as the seller are satisfied with the transaction and no later conflicts arise, for
example, in respect of the completion of the ship or its technical state prior to sale.
Avoidance of such problems already before they are born is ensured by the arrangement of
technical inspection and valuation of ships sold and purchased, which is done with our own
resources, and here we also have quite long-term expertise. Borders of states and location
of ships far from the Baltic region is no problem for us. Whole documentation which is
prepared by our company in relation to the above transactions may be drawn up in the
Estonian, Russian or English language. In case the ship owner is willing, for example, to
Bareboat Charter the ship upon purchasing it to an offshore company, we are ready to
provide any kind of assistance connected to registration under the flag of any country.
Third insurance where we can be of assistance is arrangement of cargo
insurance. The fact that the ship owner insures his liability does not mean that the cargo
owner is allowed totally to ignore insurance of his cargo. There is an unwritten rule in
insurance that when the insured has indemnified the loss, it quite definitely will use his
subrogation rights the party directly guilty for the damage caused and try not to remain
the last payer. This is naturally also applicable in case of cargo damage. If the ship is
guilty, then, in order to lessen nervous strain the issue should be resolved by the ship P
+ I insurance and representative of the cargo insurance and not by the cargo owner who
obviously does not feel at home in the jungle of terms and conditions of insurance
regulations. Such disputes may be very expensive. But if the cargo is insured, the
insurance company will guarantee a qualified survey of this cargo and valuation of damage
at any world port with the later collection of damage amounts directly from the person who
has caused the damage. The only obligation of the cargo owner would be to pack the cargo
pursuant to international regulations prior to shipment considering at the same time
suitability of various goods for carriage by sea. We can be of assistance to the cargo
owner starting with advising on issues pertaining to packing of the cargo up to finding of
a suitable insurer. The basic rule is that insurance should be efficient and function also
in the state to which the cargo is shipped. And this should be possible through various
inspectors and representatives who represent the cargo insurer.
As operating of ships and carriage of cargo by
sea are both activities related to extraordinary risk, it is understandable why insured
occurrences, which require big amounts of money, happen most often namely to ships and
cargo carried by sea. 
