The company is engaged in the business of all types of insurances other than life insurances
Introduction The company was incorporated on June 07, 1986 in Bangladesh as a Public Limited Company under the Companies Act, 1913 as amended in 1994. The certificate of commencement of insurances business was obtained from the Controller of Insurance, Government of Peoples Republic of Bangladesh. The shares of the Company are listed with Dhaka and Chittagong Stock Exchanges. Objectives •
To find out the services for the benefit of clients.
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To find out the different policy the company maintains.
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To find out different clauses.
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To find out different premium for different insurance.
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To find out the market segment.
Methodology The methodologies are given below: • • •
Visiting different departments, in order to gather relevant information about the activities and functions. Interviewing different people to get information about the organization present performance status. Analyzing available data.
Sources of Information 1. Primary Data. 2. Secondary data.
Primary Sources of Data • •
Personal interview. Discussion.
Secondary Sources of Dat • •
Study of reports and records of Eastern Insurance Co. Ltd. Review of other related literature.
Corporate Information and Nature and
Business
Principal operating activities The company is engaged in the business of all types of insurances other than life insurances. Basic of accounting The financial statements have been prepared in accordance with Bangladesh Accounting Standards (BAS) on historical cost convention following accrual basis of accounting except cash flow information and interests on FDR and subject to the requirements of the Insurance Act 1938. National economy The state of National Economy was more or less resilient in the year 2005. In the absent of any natural calamity Bangladesh Economy has performed well and recorded GDP growth of ground 6%. It is agriculture sector which has once again played the leading role for this rise in GDP moreover, in textile sector marked significant growth. All these taken together the country experienced higher volume of economic activities. Industry Outlook With this increase in economic activities the premium of the general insurance sector also recorded around 10% growth. And your company’s premium income increased by 20% over the last year. But underwriting profit decreased. This is because the much talked about institutional reforms has not taken place in the insurance sector. As a result as started in last year’s report the management and business procurement cost has increased significantly during the year under consideration In the above circumstances, Board of Directors is making all out efforts to diversify the investment portfolio of the Company. Accordingly, the company has purchased 11 khatas of prime land at 65/1, DIT Extension Road, Dhaka and plans to build Commercial
Complex Cum-Head Office of the Company there very soon. The company also acquired 1, 15,410 shares of the Bangladesh Commerce bank Ltd. The board this year again recommended Stock dividend to raise the capital of the company as required by the Insurance Act. The Chief Controller of Insurance has asked the Insurance Companies established before 1996 to raise their paid up capital to Tk.15 Crore. Consolidation of financial statements Financial Statements of all branches have been consolidated in the central accounts of the Head Office. Employee benefits Defined contribution plan The Company has a Contributory Provident Fund, recognized by the NBR, for its eligible permanent employees, where both company and employees are contributing @ 10% of basic salary. The fund is government and operated by the Board of Trustees of Eastern Insurance Company Ltd., Employees Provident Fund. Defined benefit plan The company has an unfunded gratuity scheme for all permanent employees. This benefit is pay ale to staff on completion of prescribed qualifying period of service under the scheme. No provision was made in the financial statements in respect of reporting year and no actuarial valuation is made so far, as per provision of Bangladesh Accounting Standared-19 “Employees Benefit.” The other benefit the company gives to the employee are given below:•
10% contributed provident fund
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Gratuity
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Incentive bonus
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Festival bonus
Market segment According to market segment there are very popular. Capital The Authorized Capital of the company is Tk.10.00 crore and paid-up capital is Tk.7.50 crore.
Commission & Brokerage The company may, at any time make payment of commission, brokerage for its share for collection of value of stock debenture or to any person who agreed to collect the same. But the rate of such stock value of debenture through brokerage or actual share of debenture sold would not be more than 0.50%. If the company thinks it proper to increase its share capital, may from time to time increase it through creation of new shares of any amount. But such increase of capital should be according to approval of the controller of Insurance in pursuance of Insurance Act and/or rules of Insurance. Such type of new shares will be issued by a general meeting with marked privileges, rights and conditions and if there be no direction, then it will be issued in a way as the Committee of Directors decide. Before the insurance of new shares, a proposal will be given to the members to take the new shares at the ratio as their present shares in the company with the view to increase the share capital. A notice has to be served indicating the proposed number of the shares and fixed time to take shares. If they do not take it within the fixed time, it will be considered that they are unwilling to take the shares. At later times, those shares may be sold by the Directors in profitable way for the highest benefit for the company. By creation of new shares any other way or through the prevailing conditions as set for issue for shares, any increase in the capital will be considered as part of original general capital and such share will be under the similar terms and conditions for transfer of value and represent for voting purpose. The company may, time to time decrease its capital by a special decision, but the paid up capital of the company can not be less than the amount as has been prescribed by the Insurance Act. Joint Share Ownership If two or more persons are registered as owner of a share, in that case they will be considered to have their title on it according to the following rules and other clauses of law and they will receive its benefits of survivorship: The company may refuse to register more than three names against ownership of a joint share. The owners of a joint share singly or jointly will be responsible for such share or for the reasons of all demanded and other necessity of monetary matters to pay them.
In case of death of a joint owner of a share, his heir or heirs will be the recognized owner in that share and will be accepted by the company; but if the Committee of the Directors feel it necessary for satisfaction may demand for proof of the causes for death. In no way the property of a dead owner of a share will be used for payment of a liability of another owner in a joint share. Any person as owner in such a joint ownership in a share may give workable receipt against his dividend for payment of money. Purposes The purposes for which the company has been established: 1. Conduct all types of insurances in Bangladesh and or any where in the world, through its various branches, guarantee and indemnify, particularly accident, liability of the investor, security, compensation to the laborers, insurance against industrial accidents and such other insurance that is at present in force or will be conducted in future and conduct the business of such other legal general insurance and reinsurance against flood, cyclone, hail storm, storm, fire explosion. 2. Give insurance to all types of immovable and/or movable property such as buildings, homes, workshop, godown, house, plant or any other construction, commodity, and any type of machineries wherever they may be situated, insure them against flood, cyclone, hail storm, storm, fire, explosion, damage due to thunder storm and/or insure against loss of profit upsurge or riot, civil commotion, and as a result of civil disorder insure for such other accidents or insure against fire. 3. To underwrite all insurances for motor vehicle, truck, bus, scooter, van tractor and all other types of motor vehicle and with that aim take the risk for those vehicle from road accident, fire, theft, highjack, hooliganism, hail, and/or any other sudden accident. To give sureties against loss or damage in the case of accidental death of owner of the motor vehicle, driver, and passengers or for physical injury and/or loss of limbs, a much as it may be determined. Indemnify the injured persons against their insurance for the personal injury and/or against claim of any loss of third party personal property. 4. To carry on insurance business against of all types of vehicle and compensate the transport owners of all insurance claims for partial or total loss of aero plane, train, rail engine, engine, rolling, staff coach and all types of equipment and
reimburse the claim of third party for the loss sustained as a result of the act of the owner of the insurance. 5. To carry on marine insurance and provide insurance policy to ocean going liner, ships, sea vessels, trawlers, boats and all other types of vessels and to insure against any type of loss and damage and pay insurance money to any kind of damage to the cargo of ocean going vessels freight, advantage of loan on vessel(s), commission demurrage and other type of payment. 6. To do business of insurance for all type of breach of trust, forgery, misappropriation of fund, theft of goods, breaking of contract, non responsibility, breaking the promise and/or for making any damage to the employer principal and master for any type treachery and/or insure to take liability to protect against loss and insure against risk of employer’s liability and all kinds of risks of third parties. 7. To carry on insurance against any loss in any house, work shop, or in a building for looting, high jacking, dacoity, theft, breakage, hooliganism and/or any such accidental cause. 8. To carry on all types of agriculture insurance and with that aim give insurance against loss and damage of crops and death, destruction, injury or loss of cattle. Give assurance against all types of loss of property for drought, insects, disease, storm, flood or such other incidental accidents and give assurance for treatment of cattle, child birth and/or giving treatment to disease that may happen. 9. To take liability of guarantee Insurance, especially regarding any office or employment or stay or for performance of trust and assure security against all loss and liability. Give assurance for stock share or for other security deposits and give guarantee for security money and entrusted property or property transferred to court. Ensure the timely payment and guarantee the performance of bill of exchanges, letter of promise, liability, contract and any other liability at time. 10. Any person an/or for the sickness of his family members, birth of child, disease and treatment, any unforeseen incidents, care and offer for any kind of treatment which will take the responsibility of a company, principal or master insurance. 11. Take liability of investment and business of mortgaged insurance and give insurance against mortgaged debenture and loss for other security or invested money.
12. To re-issue or counter re-issue with other insurance or reinsurance and related to above business take the responsibility of such reinsurance. Conduct all types of insurance business other than as listed in the above list. 13. To grant policies and enter into contract with one person, firm, company, corporation or any other type of organization according to privileges and terms and conditions as may be arranged and if deemed expedient to contract for repayment or provision of money or moneys worth either by way of liquidated damage or agreed compensation. 14. If any claim is raised against the company for any approved transaction by the company or done or accepted by any other way for any approved contract or policy with the company and though legally not being acceptable, make payment for this, satisfy them or compromise with them. 15. Whatever the company is authorized to do or is capable to do, it will consolidate with such other person or persons, firm, company, corporation, or other organization who are doing similar business or are authorized to do or will be doing such business, be engaged in partnership or joint venture enterprise, make arrangement for distribution of profit, give mutual benefits, do cooperation which may directly or indirectly benefit the company. 16. Invests and transact the money and securities which will not be immediately used for any purpose of the company in such a way as may be decided from time to time. 17. To take and acquire share from any other companies or earn them through any other means and hold them whose aim is wholly or partially similar to and by whose conduct of any business the company is benefited. 18. To procure land buildings through purchase, lease, exchange or in any other way and to earn tenancy right through succession or to achieve any interest that remains within them/or if considered to be proper keeping all rights related to the said lands, giving it under lease and to bring them under account. 19. To sell or settle any function of the company or its part if appears to be proper. Specially, to sell or settle the share debentures or securities of other companies which are fully or partly in conformity with the objectives of this company. 20. To enter into any arrangement with any government or authority or municipality or any other organization conductive to the company’s object or appears to
assisting with the objective of the company. To realize, to execute to gain profit and to apply such facilities right and commission from the government or such other authority which the company thinks fit and to run the activities being unanimous with such arrangement right, facilities and commissions. 21. To help, assists or patronize for establishment of association organization and fund for facility of the present and previous employees of the company and the persons dependant or related to them, and to give donation, charity and welfare assistance or any other facilities and to give those persons pension allowances insurance money etc. 22. Establishment and termination of branch and/or local council or advisory council, agency in Bangladesh and/or in abroad. 23. For the business and interest of the company construct alter or maintain any building. 24. Make payment of wages to such person or company who gave their assistance for establishment of the company or for its business development in insurance or capital of the company, share, debenture, stock or other security. 25. Cheque, letter of right, exchange bill, warrant, debenture and other transferable and/or collection of transferable documents, exchange them, sell, accept, take in hand, prepare issue. 26. To act as agent for insurance of any bill, bond, debenture for proposed or not proposed contribution by the public and give assurance for such type of security or share money. 27. Purchase of interest, exchange or acquire interest and purchase, surrender or to release in any other way, cancel abolish or to take money against any policy, security, donation or agreement issued, executed or accepted or confined. 28. Sanction annual stipend for any kind of permanent or conditional and immediate or deferred and/or of any other type of stipend. 29. Accumulate capital for any interest of the company and keep separated such amount of property specifically under condition or unconditionally and give the profit, or any other type of special privilege, benefit chance to such class of person
who have insured with any branch of the company and have transaction with the company. 30. To enter into an agreement under determinable conditions and facilities with cash money at a time or through annual premium or in any other way for formation, saving and to pay for depreciation fund, supplementary fund, abolition fund or any other special fund with lessee, loan receiver, creditor, stipend receiver and others. 31. To do such business or exchanges as the company consider to be proper for achievement of the above mentioned objectives or any one of them or any objectives related to it. Tangible fixed assets Tangible fixed assets are stated at costs less accumulated depreciation. Maintenance and normal repairs are expensed as and when incurred while major renewals and improvements are capitalized and the assets replaced, if any, are retired. On disposal of assets, the cost and accumulated depreciation are eliminated and again or loss on such disposal is reflected in the Profit and Loss Account, which is determined with reference to the net book value of the assets and net sales proceeds. Depreciation Depreciation on fixed assets is charged on Reducing Balance Method at rates varying from 10% to 25%. Full year’s depreciation has been charged on addition of fixed assets on or before July 31, of each year. Otherwise no depreciation has been charged. Revenue recognition Revenue is recognized when the policy for risk coverage is issued Future Expansion •
Their want to make the company an ideal one & create value for their clients and shareholders.
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They also want to become most caring Insurance Company with dedication, dynamism, innovation and client need comprehensive service.
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To maximize services for the benefit of their clients.
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To create confidence and trust amongst the Insured’s.
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To increase value added services.
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To maximize the profit of the company.
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To strive for creating a healthier environment for all stakeholders.
Marine Insurance Marine insurance has been defined as a contract between insurers and insured whereby the insurer undertakes to indemnify the insured in a manner and to the interest thereby agreed, against marine losses incident to marine adventure. Section 2(13)A of the insurance act 1938 defines marine insurance as follows:“Marine insurance business” means the business of effecting contracts of insurance upon vessels of any description, including cargoes, freights and other interests which may be legally insured in or in relation to such vessels, cargoes and freights, goods, wares, merchandise and property of whatever description insured for any transit by land or water or both and weather or not including ware-house risks or similar risks in addition or as incidental to such transit and includes any other risks customarily included among the risks insured against in marine insurance policies. The company maintains two types of marine insurance:1. Hull insurance 2. Cargo insurance Hull insurance Insurance of vessels and its equipments are included under hull insurance. Cargo insurance It may be written under a single risk policy. Elements of marine insurance contract The marine insurance has the following essential features which are also called fundamental principals of marine insurance, 1. Features of general contract 2. Insurable interest 3. Utmost good faith 4. Doctrine of indemnity
5. Subrogation 6. Warranties 7. Proximate cause Features of General Contract •
Proposal
The broker will prepare a slip upon receipt of instructions to insure from ship owner, merchant or other proposers. Proposal forms, so common other branches of insurances, are unknown in the marine insurance and only the ’slip’ so called ‘the original slip’ is used for the proposal. The original slip is accompanied with other material information which the broker deems necessary for the purpose. •
Acceptance
The original slip is presented to the Lloyd’s Underwriters or other insurers or to the Lead of the insures, who initial the slip and the proposal is formally accepted. But the contract cannot be legally enforced until a policy is issued. The slip is an evidence that the Underwriter has accepted an insurance and that he has agreed subsequently to sign a policy on the terms and conditions indicated on the slip. •
Consideration
The premium is determined or assessment of the proposal and is paid at the time of the contract. The premium is called consideration to the contract. Insurable interest An insured person will have insurable interest in the subject matter when he stands in any legal or equitable relation to the subject matter in such a way that he may benefit by the safety or due arrival of insurable property or may be prejudiced by its loss, or by damage thereto or by the detention thereof or may incur liability in respect thereof. Since marine insurance is frequently effected before the commercial transactions to which they apply are formally completed. It is not essential for the assured to have an insurable interest at the time of effecting insurance, though he should have an expectation of acquiring such an interest. The insurable interests in marine insurance can be formed mainly in case of cargo. Utmost good faith The duty of the utmost good faith applies also to the insurer. He may not urge the proposal to effect an insurance which he knows is not legal or has run off safely. But the duty of discloser of material facts rests highly on the insured because he is aware of the material common in
other branches of insurance are not used in the marine insurance. Ships and cargoes proposed for insurance may be thousands of miles away, and surveys on Underwriters’ behalf are usually impracticable. Doctrine of indemnity The contract of marine insurance is of indemnity. Under no circumstances and insured is allowed to make a profit out of a claim. In the absence of the principal of indemnity, it was possible to make a profit. The insurer agrees to indemnify the assured only in the manner and only to the extend agreed upon. Marine insurance fails to provide complete indemnity due to large and varied nature of the marine voice. The basis of indemnity is always a cash basis as underwriter cannot replace the lost ship and cargoes and the basis of indemnification is the value of the subject matter. This value may be either he insured or insurable value. In marine insurance there is a exception of the doctrine of indemnity. That is profit allowed but it may be applicable in case of cargo loss. Doctrine of subrogation The aim of doctrine of subrogation is that the insured should not get more than the actual loss or damage. After payment of the loss, the insurer gets the right to receipt compensation or any sum from the third party from whom the assured is legally liable to get the amount of compensation. The main characteristics of subrogation are as follows:1. The insurer subrogates all the remedies, rights and liabilities of the insured after payment of the compensation. 2. The insurer has right to pay the amount of loss after reducing the sum received by the insured from the third party but in marine insurance the right of subrogation arises only after payments has been made, and it is not customary as in fire and accident insurance, to alter this by means of a condition to provide for the exercise of subrogation rights before payment of a claim. 3. After indemnification, the insurer gets all the rights of the insured on the third parties, but insurer cannot file suit in his own name. Therefore, the insured must assist the insurer for receiving money from the third party. Warranties Warranties are the statement according to which insured person promises to do or not to do a particular thing or to fulfill or not to fulfill a certain condition. It is not merely a condition but a statement of fact. Warranties are more vigorously insisted upon then the conditions because the contract comes to an end if a warrantee is broken whether the warrantee was material or
not. In case of condition or representation the contract comes to end only when this ware material or important. Warranties are of two types:1. express warranties 2. Implied warranties Express Warranties Express warranties are those warranties which are expressly included or incorporated in the policy by reference. Implied Warranties These are not mentioned in the policy at all but are tacitly understood by the parties to the contract and are as fully binding as express warranties. In marine insurance, implied warranties are very important . According to company seaworthiness of ship is one type of implied warranties. Seaworthiness of ship The warranty implies that the ship should be seaworthy at the commencement of the voyage, or if the voyage is carried out in stages at the commencement of each stage. This warranty implies only to voyage policies , though such policies may be of ship, cargo ,freight or any other interest. There is no implied warranty of seaworthiness in time policies. A ship is seaworthy when the ship is suitably is constructed , properly equipped, officered and manned, sufficiently fuelled and provisioned, documented and capable of withstanding the ordinary strain and stress of the voyage. The seaworthiness will be more clear from the following points: 1. The standard to judge the seaworthiness is not fixed . It is a relative term and may very with any particular vessel at different period of the same voyage. A ship may be perfectly seaworthy for Trans-ocean voyage. A ship may be suitable for summer but may not be suitable for winter. Their may be different standard for different ocean, for different cargo, for different destination and so on. 2. Seaworthiness does not depend merely on the condition of the ship, but it includes suitability and adequacy offer equipment, adequacy and experience of the officers and crew. 3. At the commencement of journey, the ship must be capable of withstanding the ordinary strain and stress of the sea.
Marine insurance policies The marine insurance policy is issued only when the contract has been finalized and it would be legal documents of evidence of the contract. The form of marine insurance policies has been taken from pretty old times. The old forms of policy has been practiced today due to its practicabilities which took after a numerous legal decisions during the fast centuries it has also been practiced that only form of policy is standardized and different clauses are added for applying to various types of policies. The standard policy generally contains the following information:•
Name of insured or his agent.
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Subject matter insured. It may be ship cargo.
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Risks insured against.
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Name of vessel and officer.
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Description of voyage or period of insurance.
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Amount and term of insurance.
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Premium.
There are various clauses which are suitably inserted according to the nature and type of policies. Hull and cargo policies have different standard clauses. Classes of policies Different classes of policies are used in marine insurance such as voyage, valued, time, mixed etc. 1. Voyage policies The policy is issued to cover a particular voyage from one port to another port and form one place to another. The policy mentions the port of departure and the port of destination, between which the risks are generally underwritten. This policy is not suitable for hull insurance as a ship usually does not operate over a particular route only. In this case the risks may be covered from one place to another covering a period of one year. 2. Time policies The policy is generally taken for one year although it may be for less than one year. This policy is commonly more used for hull insurance than for the cargo insurance. The policy may cover while navigating the vessel or while under construction. Risks covered under construction for more than twelve months. There are standard clauses in relation to premium, freight, interests etc which are added to this policy. The time policy may be taken in case of goods and other movable vessels.
3. Voyage and time policies or mixed policies In this policy, the elements of voyage policy and of time policy are combined in under this policy. The reference is made certain period after completion of voyage. 4. Valued policy Under this policy the value of loss to be compensated is fixed and remains constant throughout the risk except where there is fraud and excessive over-valuation. The value of the subject matter is agreed between the insurer and the assured at the time of taking the insurance. It is also called the Insured value or agreed value. It forms the measure of indemnity at the time of loss. The insured value is not necessarily the actual value. It may be total invoice, e.g., cost of goods, freight, shipping charges, insurance and certain percentage of margin to cover anticipated profits. Policy Condition In order to make the standard policy suitable for the different types of contracts , suitable conditions are added to the policy. The conditions are inserted in the policy in the form of clauses . The clauses took the standard form with special meanings. 1. Hull Clauses These clauses are mainly framed with the insurances on vessels and are incorporated in hull policies. The clauses may be pertaining to losses resulting from collision, standing, general average, etc. ‘All risks policy’ may be issued or certain risks may be excluded from the policy by inserting suitable clauses. ‘Inland or Port Risk Clauses’ may be incorporated in the policy to determine the extent of loss. These clauses are known as ‘Institute Time Clauses’. 2. Cargo clauses These clauses are used in the insurance of goods and are incorporated in cargo policies. The clauses describe the nature, extent and scope of the insurance and define comprehensive conditions and restrictions. The additional marine perils against which cover may be sought or which excluded from the policies are interested through special clauses. Terms and conditions of cargo insurance are specially incorporated in the policies. ’With Average or With Particular Average’ ‘Exposed during transit’ etc. are the important clauses of cargo insurance. The underwriting of cargo risk depends the nature of goods, the susceptibility of the goods, intentions of the insurer and insured and willingness of the assured to pay extra premium. This clauses is known as’ Institute Cargo Clause’.
Some specimen of the cargo clauses of this company is given below. (FOR USE ONLY WITH THE NEW MARINE POLICY FORM) INSTITUTE WAR CLAUSES (CARGO) RISKS COVERED 1. This insurance covers, except as provided in Clauses 3 and 4 below, loss of or damage to the subject matter insured caused by 1.1
war civil war revolution rebellion insurrection, or civil strike arising there from, or any
hostile act by or against a belligerent power 1.2 capture seizure arrest restraint or detainment, arising from risks covered under 1.1 above, and the consequences thereof or any attempt threat 1.3 2.
derelict mines torpedoes bombs or other derelict weapons of war. This insurance covers general average and salvage charges, adjusted of determined
according to the contract of affrighted and/or the governing law and practice incurred to avoid or in connection with the avoidance of loss from a risk covered under these clauses. EXCLUSIONS 3.
In no case shall this insurance cover
3.1
loss damage or expense attributable to willful misconduct of the Assured
3.2
ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the
subject matter insured 3.3
loss damage or expense caused by insufficiency or unsuitability of packing or
preparation of the subject-matter insured (for the purpose of this Clause 2,3 packing shall be deemed to include stowage in a container or lift van but only when such stowage is carried out prior to attachment of this insurance or by the Assured or their servants) 3.4
loss damage or expense caused by inherent vice or nature of the subject-matter insured
3.5
loss damage or expense Proximately caused by delay, even though the delay be caused
by a risk insured against (except expense payable under Clause 2 above) 3.6
loss damage or expense arising from insolvency or financial default of the owners
managers chatterers or operators of the vessel 3.7
any claim based upon loss of or frustration of the voyage of adventure
3.8
loss damage or expense arising from any hostile use of any weapon of war employing
atomic or nuclear fission . And/or fusion or other like reaction or radioactive force or matter
4.4.1 In no case shall this insurance cover loss damage or expense arising from unseal worthiness of vessel or craft unfitness of vessel craft conveyance container or lift van for the safe carriage of the subject- matter insured, where the Assured or their servants are privy to such unseal worthiness or unfitness, at the time the subject-matter insured is loaded therein. 4.2
The Underwriters waive any breach of the implied warranties of seaworthiness of the
ship and fitness of the ship to carry the subject-matter insured to destination, unless the Assured or their servants are privy to such unseal worthiness or unfitness. DURATION 5.1
This insurance
5.1.1 attaches only as the subject-matter insured and as to any part as that part is loaded on an oversea vessel and 5.1.2 terminates, subject to 5.2 and 5.3 below, either as the subject-matter insued and as to any part as that part is discharged from an oversea vessel at the final port or place at dicharge. or on expiry of 15 days counting from midnight of the day of arrival of the vessel at the final port or place or discharge, whichever shall first occur, nevertheless, subject to prompt notice to the Underwriters and to an additional premium, such insurance 5.1.3 Re-attaches when, without having discharged the subject-matter insured at the final port or place of discharge, the vessel sails thereform, and 5.1.4 terminates, subject to 5.2 and 5.3 below, either as the subject-matter insured and as to any part as that part is thereafter discharged from the vessel at the final (or substituted) port or place of discharge, or on expiry of 15 days counting from midnight of the day of re-arrival of the vessel at the final port or place of discharge or arrival of the vessel at a substituted port or place of discharge, whichever shall first occur. 5.2
If during the insured voyage the oversea vessel arrives at an intermediate port or place
to discharge the subject-matter insrued for on-carriage by oversea vessel or by aircraft or the goods are discharge from the vessel at a port or place of refuge, than, subject to 5.3 below and to an additional premium if required, this insurance continues until the expiry of 15 days counting from midningt of day of arrival of the vessel at such port or place, but thereafter
reattaches as the subject-matter insured and as to any part as that part is loaded on an oncarrying oversea vessel or aircraft. During the period of 15 days the insurance remains in force after discharge only whilst the subject-matter insured and as to any part as that part is at such port or place. If the goods are on-carriage within the said period of 15 days or if the insurance reattaches as provided in this clause 5.2.1 Where the on-carriage is by oversea vessel this insurance continues subject to the terms of these clauses, or 5.2.2 Where the on-carriage is by aircraft, the current Institute War Clauses (Air- Cargo) (excluding sendings by post) shall be deemed to form part of this insurance shall apply to the on-carriage by air. (FOR USE ONLY WITH THE NEW MARINE POLICY FORM) RISKS COVERED INSTITUTE STRIKES CLAUSES (CARGO) 1
This insurance covers, excepts as provided in Clauses 3 and 4 below, loss of or damage to the subject matter insured caused by
1.1.
Strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions
1.2. any terrorist or any person acting from a political motive. 2
This insurance covers general average and salvage charges, adjusted or determined according to the contract of affreightment and / of the governing law and practice, incurred to avoid or in connection with the avoidance of loss from a risk covered under these clauses.
EXCLUSIONS 3 3.1. 3.2
in no case shall this insurance cover loss damage or expense attributable to wilful miscoduct of the Assured ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the
subject matter insured 3.3
loss damage or expense caused by insufficiency or unsuitability of packing or
preparation of the subject-matter insured (for the purpose of this clause 3.3 "packing" shall be deemed to. include stowage in a container or lift van but only when such stowage is carried out prior to attachment of this insurance or by the Assured or their servants) 3.4
loss damage or expense caused by inherent vice or nature of the subject
Matter Insured 3.5
loss damage or expense proximately caused by delay, even thought the delay be caused
by a risk insured against (except expenses payable under Clause 2 above) 3.6
loss damage or expense arising from insolvency or financial default of the owner's managers charterers or operators of the vessel
3.7
loss damage or expense arising from the absence, shortage or withholding of labour of any description whatsoever resulting from any strike, lockout, labour disturbance, riot of civil commotion
3.8 any claim based upon loss of or frustration of the voyage or adventure 3.9 loss damage or expense arising from the use of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive forceor matter 3.10 loss damage or expense caused by war civil war revolution rebellion insurrection, or civil strife arising there from, or any hostile act by or against a belligerent power. 4. 4.1 In no case shall this insurance cover loss damage or expense arising from Unseal worthiness of vessel or craft, unfitness of vessel craft conveyance container or lift van for the safe carriage of the subject matter insured, Where the Assured or their servants are privy to such unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein. 4.2 The Underwriters waive any breach of the implied warranties of Seaworthiness of the ship and fitness of the ship to carry the subject matter insured to destination, unless the Assured or their servants are privy, to such unseaworthiness or unfitness. DURATION 5.
5.1 This insurance attaches from the time the goods leave the warehouse or place of storage at the place named herein for the commencement of the transit, continues during the ordinary course of transit and terminates either
5.1.1 on delivery to the Consignees' or other final warehouse or place of storage at the destination named herein, 5.1.2 on delivery to any other warehouse or place of storage, whether prior to or at the destination named herein, which the Assured elect to use-either 5.1.2.1 for storage other than in the ordinary course of transit or 5.1.2.2
for allocation or distribution or
5.1.3 on the expiry of 60 days after completion of discharge overside of the goods hereby insured from the oversea vessel at the final port of discharge whichever shall first occur. 5.2 If, after discharge overside from the oversea vessel of the final port of dishcharge, but prior to termination of this insurance, the goods are to be forwarded to a destination other than that to which they are insured hereunder, this insurance, whilst remaining subject to termination as provided for above, shall not extend beyond the commencement of transit to such other destination, 5.3
This insurance shall remain in force (subject to termination as provided for
5.4
above and to the provisions of clause 6 below during delay beyond the control of the Assured, any deviation, forced discharge, reshipment or transshipment and during any variation of the adventure arising from the exercise of a liberty granted to ship owners or charterers under the contact of affreightment. Return of premium In case of return of premium the company follows three methods. They are:•
Short-Term
•
Pro-rata
•
Proportionate
In case of Short-Term the insurer will be gainer and in case of Pro-rata the party will be gainer. Marine Losses Losses in marine insurance business are result of the various perils. Marine perils “Marine
Perils
means
the
perils
consequent
on,
navigation of the sea, that is to say, perils of the seas, fire, war
or
incidental
to,
the
perils(enemies), pirates,
rovers, thieves, captures, seizures, restraints and detainment of princes and peoples, jettisons and other perils, either of the like kind or which may be designated by the policy.” •
Perils of sea
Under perils of sea, ordinary action of the winds and waves, ordinary wear and tear to the vessel, inherent of the risk of the cargo are not i0ncluded. Perils of the sea refers to fortuitous accidents or casualties of the sea. If the loss arising out of any of the perils of
the sea insured is attributable to the fraud or willful misconduct of the assured, the underwriter is acquitted from the liability under the policy. •
Fire
Damage resulting from fire and smoke is included under fire-peril. The water used fro extinguishing fire may cause damage to the insured goods. So, this peril is also insurable. The damage due to spontaneous combustion may be maritime peril and be insured against. Damage done due to lightning, explosion and fire originating from negligence of the crew is recoverable from underwriters. The losses which are not included in the standard policy can be covered by having special clauses and paying extra-premium. •
Enemies
He ships belonging to the foe may cause loss to the insured and is re-underwritten by the marine policy. This policy extends to all the persons of the enemy country and to their hostile acts provided such acts from part of the enemy actions. •
Pirates, Rovers, Thieves
The perils on account of pirates, rovers and thieves were common in olden times, nut it has been reduced considerably this day. These acts are generally committed for the pursuit of individual game by the persons beyond the jurisdiction of a state. The term ‘thieves’ does not mean clandestine theft or a theft committed by any one of the crew or officers or passengers. Jettison Jettison means voluntary throwing away of the cargo or part of a vessel’s equipment for the lightening or relieving the ship for common safety. The aim of the intentional throwing away of the goods or property is to relieve the vessel from some imminent peril. Accidental falling of things does not constitute jettison. Explosion The risk of explosion has greatly increased. The explosion on board of a vessel damaging hull or cargo or both could be constructed as a peril on the sea. An explosion on shore might damage a ship or its cargo. Marine cargo policies were amended to include the risk of explosions not clearly caused by war perils. The explosion, in case of hull policies, ‘on ship board or else where’ is covered in the amended “Intimate or negligence clause”.
Strikes, riots and Civil Commotion Clause The marine insurance on cargo is extended to cover from warehouse to warehouse or otherwise insures the goods on shore prior to shipment and after discharge, the danger of underwriters being held liable for losses, resulting from the unlawful acts of strikers from riots or civil commotions is materially enhanced. The insurers are unwilling to assume liability for losses due to unlawful acts. Marine losses If the loss take place on account of any of the perils insured against with the insurers, the insurer will be liable for it and shall have to make good the losses to the assure. IF the peril is insured, the insurer will indemnify the assured, otherwise not. The doctrine of causal proximal is to be applied while calculating the amount of loss. It means for payment of losses, the real or proximate cause is to be taken into account. If the proximate cause is insured, the insurer will pay, otherwise not. Total loss Losses are deemed to be total or complete when the subject matter is fully destroyed or lost or ceases to be a thing of its kind. It should be distinguish from partial loss where only part of the property insured is lost or destroyed. In case of total loss, the insured stands to lose to the extent of the value of the property provided the policy amount was to that limit. Actual total loss Actual total loss is a material and physical loss of the subject matter insured. Where the subject matter insured is destroyed or so damaged as to cease to be a thing of the kind insured, or where the insured is irretrievably deprived thereof, there is an actual total loss. When a vessel is foundered or when merchandise is so damaged as to be valueless or when ship is missing it will be an actual total loss. The actual total loss occurs in the following cases:•
The subject matter is destroyed, e.g., a ship is entirely destroyed by fire.
•
The subject matter is so damaged as to cease to be a thing of the kind insured. Here, the subject matter is not totally destroyed but damaged to such an extent as the result of the mishap, it is no longer of the same specie as originally insured.
•
The insured is irretrievably deprived of the ownership of goods even they are in physical existence as in the case of capture by enemy, stealth by thief or fraudulent disposal by the captain or crew.
•
The subject matter is lost.
Partial loss Partial loss is there where only part of the property insured is lost or destroyed or damaged. Partial losses, in contradiction from total losses, include •
Particular Average losses.
•
General Average losses.
Particular average loss Particular average loss is defined as ‘a partial loss’ of the subject matter insured caused by a peril insured and is not a general average lost. The general average lost or expense is voluntarily done for the common safety of all the parties insured. But, the particular average loss is fortuitous or accidental it cannot be partially shifted to others but will be borne by the persons directly affected. The particular average loss must fulfill the following conditions:•
Particular average loss is a partial loss or damage to any particular interest caused to that interest only by a peril insured against.
•
The loss should be accidental and not intentional.
•
The loss should be of the particular subject matter only.
•
It should be the loss of a part of the subject matter or damage thereto or both.
General Average The general average loss will be there where the loss is caused by an extraordinary sacrifice or expenditure voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperiled in common adventure. Payment of Claims When the policy has been issued the risk for the peril insured against is covered. The contingency against which protection is given or not materialized when the loss incurred against actually occurs; the insured has got to make a claim on the insured for indemnification of loss. If loss does not occur, no payment would be made to the insured.
Documents Required For Claim The following documents are required at the time of claim. •
Policy or certificate of insurance.
•
Bill of Lading. It determines the scope of the contract of carriage.
•
Invoice or bill stating terms and conditions of sale.
•
Copy of protest: In the event of stranding of or accident to the vessel, the master of the ship notes ‘protest’ before a consul or notary public. The protest states that everything was done to bring to safety. The ship and cargo and loss or damage was not due to lack of diligence on the part of the master of the crew.
•
Certificate of Survey: This is necessary to find out whether the necessary franchise is reached or not in case of particular average.
•
Account sales or Bill of sale: Similar documents where goods have been sold. The difference between gross sound value and proceeds as per account sales might be accepted as amount of loss.
•
Letter of subrogation: It gives the underwriters to sue and recover compensation from third parties where the same is due.
Rate fixation in marine insurance The rate fixation in marine insurance is not so scientific as in life insurance. The tariff offices follow the collective system of tariff rating. Eastern insurance company follows tariff rates in calculating the premium. Tariff rates Marine insurance business is governed by the tariffs formulated by the Tariff Advisory Committee which is a statutory body established under the provisions of the insurance act 1968 “to control and regulate the rates, advantages, terms and conditions that may be offered by insures in respect of general insurance business. The tariffs provide rates of premium for almost all classes of risks as also rules and regulations governing the business and standard form of wordings for the contract and it is extensions. Some specimen of the rate fixation of this company is given below. IMPORTS TARIFF Rates are strictly net: All Rates must be shown on the Policy GENERAL CONDITION Scope of the Tariff i) This Tariff applies to all imports into Bangladesh a) By Steamer or Powered Vessels.
b) By mechanised goods carrying vehicles via land routes including Rail. Rates as per this tariff. c)
By Air: The Rates to be charged for Imports by Air will be as per Air tariff.
Exclusions : Specie, Bullion, Currency Notes, Securities, Paper of Value, Precious Stones and Jewellery, Precious Metals, Personal Effects, Postal Despatches and Bulk Petroleum Oil are Excluded from the scope of this Tariff. All non-petroleum oil (e.g. edible oils) in bulk come within the scope of the Tariff. Ftegutations and Agreement The Regulations and Agreements section is applicable to this tariff except where otherwise varied by the provisions hereinafter included. Scope of Cover: (i)
Wider Cover in terms of the Institute Cargo Clauses 'A' may be given by charging 'B'
rate plus all the five rates as per Rate schedule No. 1. (ii)
There is no provision in the Tariff for reduction in Rates in respect of so much of the
sum insured as is represented by cover against Customs Duty and Tax. iii)
Any variation of any tariff terms and/or conditions whereby the risk of insurers is made less is permissible, but such variation shall not entitle the assured to any reduction in tariff Rates unless such variation of the terms and/or conditions of the tariff has been submitted to the Committee and a special Rate has been fixed.
iv)
Rulings : 1.
Wider Covei like Theft, Pilferage and Non-Delivery can
v)
be granted with Clause 'C' charging schedule additional premium but Theft and Pilferage alone cannot be granted.
Basic Rates The following minimum basic Rates should be charged in respect of all Cargo under deck by Vessels falling within the Classification Clause (Ware house to Ware house) :I Chtttagong l-Chalna/Khulna ICC (A)
ICC (B)
0.70% plus all five rates as per Rate schedule 0.70%
ICC (C) 0.50%
No. 1 a
0.80% plus all five rates as per Rate schedule 0.80%
0.60%
No. 1
Fire Insurance Fire insurance is a device to compensate for the loss consequent upon destruction by fire. Thus the fire insurer shifts the burden of fire losses from their actual victims over to all the members of the society. It is a cooperative device to share the loss. It relieves the insured from the horror of the fire losses to which he is exposed. Causes of Fire Fire waste is the result of two types of hazard viz., ’physical’ and ‘moral’. 1. Physical Hazard:- It refers to the inherent risk of fire in the property which may occur due to inflammable nature, construction, artificial lighting and heating, lack of extinguishing apparatus use of the property etc. 2. Moral Hazard:- The moral hazard depends upon the man as physical hazard depends on the property. The property may be set on fire by the owner or by any person with his willingness; carelessness and lack of sense of duty may also increase the fire waste. Prevention of loss Insurance is meant for indemnification of loss and not for prevention of loss although every reasonable step can be taken to eliminate it or minimize it through the agencies engaged in prevention of loss. Preventive efforts are given below: Construction: In construction of building, fire resistive materials, fire proof construction, greatest care in exercising selection of the type and planning of the construction , availability of fire extinguisher , water supply, proper passage in emergency are various activities which reduce the chance of fire. Fire Services: The important thing is to extinguish fire before it reaches large proportions. The owner should consider equipping his building with an automatic sprinkler system. Similar fire fighting equipment may be established. Such services can be provided by insurers with the help of fire fighting associations. Occupation:
There are considerable hazard in certain occupation e.g. in oil or coke or chemical industry. Insurance in these concerns is available at higher rate. Insurers help by stimulation and charging lesser premium in fire fencing occupation. Management: Good management of property may reduce the chances of fire. Carelessness and indifference can not be over emphasized because these increase the chance of fire. Exposure: Fire insurance rates are determined on the basis of possibility of exposure. Fire proof services may reduce the chances of exposure to a greater extent. Policy The company follows standard fire policy. A standard form of fire policy is given below. Period of fire insurance policies Usually fire policies are issued for one year and are called ‘annual insurance’. Policies issued for a period shorter than one year arte known as ‘Short-Term Policies’ and those issued for a period more than one year are called ’Long-Term-Policies’. But in practice only annual policies are common. ‘Short-Term’ and ‘Long-term’ policies are rarely used. Longterm policies are generally issued in case of building. Alteration in the policy will be made according to the change in building and terms of insurance. The premium rate is determined according to the nature, location, construction of the property. Moreover, the period of insurance is also taken into account for computing premiums. Policy Conditions The fire insurance may be defined as a contract by which the insurer agrees to make good any loss suffered by the insured through damage or destruction of properties by fire up to the sum assured in consideration of payment called premium. The contract of fire insurance is expressed in a document described as a policy. It provides for the payment of a sum of money as representing the pecuniary loss incurred by the insured through the damage or destruction by fire of the property described in the policy or alternatively the restoration or replacement of what has been damaged or destroyed. Standard form of policy Fire insurance may be of varied nature, but the standard form of policy includes several conditions which are common to most of the fire policies . The fire insurance contract , principle and practice are governed by the conditions contained in the policy . The standard form of policy at present is the outcome of several vicissitudes in the past. In the beginning,
the conditions were very few but with the advancement of the fir insurance several conditions were introduce. Now the conditions became very complex and varied .Now , therefore, several conditions are deleted from the policy and sometimes, the policy is called ‘ condition less policy ‘ although no policy can be condition less at a time. Implied conditions The following conditions are implied conditions in fire insurance. 1. Existence of property 2. Insured property 3. Insurable interest 4. Good faith 5. identity Express conditions The express conditions in fire insurance are given below:1. Miss description 2. Alteration 3. Exclusion 4. Fraud Rate fixation in fire insurance The rate fixation in fire insurance is not so scientific as in life insurance. The physical hazard can be estimated satisfactorily but the moral hazard, being varied and unknown, cannot be ascertained so correctly. While calculating the premium, various relevant factors of both the hazards are properly estimated and evaluated the premium must be adequate enough to provide for full payment of claims including catastrophic losses, expenses of management and a margin of profit. The tariff offices follow the collective system of tariff rating. Eastern insurance company follows tariff rates in calculating the premium. Tariff rates Fire insurance business is governed by the tariffs formulated by the Tariff Advisory Committee which is a statutory body established under the provisions of the insurance act 1968 to control and regulate the rates, advantages, terms and conditions that may be offered by insures in respect of general insurance business. The tariffs provide rates of premium for almost all classes of risks as also rules and regulations governing the business and standard form of wordings for the contract and it is extensions. Some specimen of rate fixation of fire policy is given below.
Conclusion The insurance Industry as a whole is passing through a critical stage in Bangladesh. The Government has realized the limitations of the present Insurance Act and decided to recast it suitably in 2003. Since then efforts are made to amend the Insurance Act in line in those of other countries but unfortunately the process has not yet been completed. Of course there is no possibility of the new Insurance Act to be in force before the next Government takes over. In the absence of the new Insurance Act and the modern concept the Insurance Industry can not really take off and meet the market demand. The Government has asked the Insurance Companies established before 1996 to increase their capital to Tk. 15 crore. So they increase their capital by TK. 7.5 crore. References Md.Abdul Motalib Principal Officer (U/W) Contract no:01716793927 Eastern Insurance Co. Ltd. Munira Absar Senior Officer Eastern Insurance Co. Ltd. Layla Rahman Junior Officer Eastern Insurance Co. Ltd. ANNUAL REPORT-2005