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HMRC internal manual

Tonnage Tax Manual

Background material: Marine insurance

Insurable interestsFrom the point of view of an officer dealing with a shipping company, the normal interest will be that of shipowner, whose risk is obvious.

A bareboat charterer may also be required under the charterparty to insure the vessel for the benefit of both owner and charterer.

The interest of a time-charterer or a voyage-charterer is limited to a potential liability, which may be incurred if they damage the ship.

The custom of brokers taking out insurance to cover a principal’s ship has developed to the stage where it accepted in law that they can be directly responsible for the premium to insurers who do not know the name of the shipowner.

InsurersInsurers fall into three broad categories:


  • insurance companies,
  • Lloyd’s underwriters, and
  • mutual insurance

Types of policy

  • The types of policy available also divide into three broad types (plus reinsurance):
  • the ship and its fittings and equipment,
  • the merchandise carried, and
  • the ‘freight’, representing the profit expected to be made by the shipowner.

Protection and indemnity clubs (P&I clubs)The P&I clubs or associations are the vehicle for mutual insurance by shipowners. An estimate of members’ claims for the year is made and members pay an initial call depending on the ships they have entered in the club. A supplementary call may be made if claims exceed the previous estimate.

A particular type of insurance in which some clubs specialise is termed ‘freight, demurrage and defence’, and is intended to cover legal costs incurred by a shipowner in connection with the operation of his ships.


* General average TTM15230