To identify the territory of regulation and tax of a marine risk consider:
1. the nature of the cover provided;
2. The jurisdiction in which the vessel is registered;,
3. The physical location of the property;  and
4. The location of the insured’s residence(s) or business establishment(s).

Ship’s hull and ship’s liability
Yacht hull and liability
Marine cargo
Charterer’s insurance
Bareboat charters
Vessels under construction
Mortgagees’ insurance
Mortgagees’ interest insurance (MII)
Mortgagee additional perils (MAP)
Mortgagee’s financial loss
Kidnap and ransom (vessels and ship’s crew)
Carrier’s liability
Ship’s crew personal accident cover

Ship’s hull and ship’s liability

Ship’s hull insurance covers physical damage to a ship’s hull and machinery. Ship’s liability insurance covers risks associated with the operation and use of ships, e.g. carrier’s liability and other associated third party liability.

The risk location may be determined by one or more of the following factors:

• Physical location of the vessel (place of operation)
• Jurisdiction in which the vessel is registered
• Location of the insured’s residence or business establishment

Please see the territory specific guidance on Crystal for specific risk location rules.

It is possible for a contract to have more than one risk location, if, for example, it covers more than one vessel, and the insured vessels are registered in more than one jurisdiction. It is also possible for the risk location rules of different territories to overlap, i.e. where one territory determines risk location by insured’s business establishment and another territory determines it by vessel registration. Therefore a single vessel can have multiple risk locations. 

Yacht hull and liability

Yacht insurance covers losses arising from physical damage to the yacht’s hull. Yacht liability insurance covers owners and operators of yachts for third party liability.

The risk location can be determined by any one or more of the following factors.

• Physical location of the vessel (place of operation)
• Jurisdiction in which the vessel is registered
• Location of the insured’s residence or business establishment Please see the territory specific guidance on Crystal for specific risk location rules.

It is possible for a contract to have more than one risk location, if, for example, it covers more than one vessel, and the insured vessels are registered in more than one jurisdiction. It is also possible for the risk location rules of different territories to overlap, i.e. where one territory determines risk location by insured’s business establishment and another territory determines it by vessel registration. Therefore a single vessel can have multiple risk locations. 

Marine cargo

Marine cargo insurance covers losses arising from physical damage to cargo and related liabilities whilst it is in transit by sea and for up to 60 days whilst in storage. (After 60 days it will be seen as Property - Standalone storage.)

The risk location is usually the territory in which the insured is resident or its business establishment is situated. However, in a few instances, where the goods are physically situated or being transported to and from will also create a regulatory and tax location of risk.

Please see the territory specific guidance on Crystal for specific risk location rules.

If the contract covers more than one business establishment, and the establishments are located in different territories, the contract will have more than one risk location.

Charterer’s insurance
 
Charterer’s insurance covers an insured for risks associated with the charter of a vessel.  The charterer does not have an insurable interest in the vessel but their risks associated with the use of the vessel fall under the ship’s liability insurance classification.

• Charterer’s liability insurance covers the charterer for liabilities to the ship owner (hull damage) and to third parties.
• Charterer’s interest insurance covers the charterer for loss of future income if the vessel becomes a total loss during the voyage.
• Charterer’s loss of hire insurance covers loss of earnings if the vessel is sub-chartered and the voyage is restricted due to hull damage.

Where the policy is written in relation to a specified vessel the risk location is determined in the same manner as ship’s hull and liability (see above).

Where the vessel is not specified or is unknown the risk location is the territory in which the insured is resident or its business establishment is located.

Bareboat charters

Bareboat charters insurance covers the interest of a charterer when he has complete control of a vessel. Under a bareboat charter the charterer has an insurable interest in the hull.

The risk location is determined in the same manner as ship’s hull and liability (see above).

Vessels under construction

Vessels construction insurance covers physical damage to a vessel during the course of its construction and includes third party liability. The insured is normally the ship builder but can be anyone with an insurable in the vessel, including the party that commissioned the vessel. Until launch a partly-constructed vessel is classified as moveable property.

  • Pre launch

    In most circumstances, the risk location is where the vessel is being constructed.

    The main exception to this rule is in the EEA where the regulatory risk location for moveable property, which includes pre-registered vessels, is the territory where the insured is resident but the tax risk location remains the location of the moveable property. 

    If the contract covers more than one vessel, being built in more than one territory, then there will be multiple risk locations.

    Where the moveable property’s location is uncertain or variable, the risk location is the territory in which the insured’s residence or business establishment is located.

    Please note: In some territories, e.g. Canada and the US, the location of the insured’s residence or business establishment creates a risk location irrespective of the physical location of the insured property. Consequently, if the insured property is in a different territory from the insured’s residence or business establishment, there are two territories for regulation and tax.  
  • Post launch

    Once the vessel has been launched the risk location is determined in the same manner as ship’s hull and liability (see above).


Mortgagees’ insurance

Mortgagees’ interest insurance (MII)

MII covers the lender’s interest in the underlying asset i.e. the hull. The policy will respond where the owner’s hull insurance fails.

Where the policy is written in relation to a specified vessel the risk location is determined in the same manner as ship’s hull (see above).

Where the vessel is not specified the risk location is the territory in which the insured’s business establishment is located.

Mortgagee additional perils (MAP)

MAP insurance covers mortgagees against the risk of loss arising when a vessel is responsible for pollution and the vessel owner’s liability exceeds the limits of their liability insurance. In such circumstances the vessel may be seized by the claimant to satisfy the liabilities for the event.

Where the policy is written in relation to a specified vessel the risk location is determined in the same manner as ship’s hull and liability (see above).

Where the vessel is not specified the risk location is the territory in which the insured’s business establishment is located.

Mortgagee’s financial loss

Mortgagee’s financial loss covers a mortgagor’s inability to repay their loan. This is a financial interest rather than a hull interest.

The risk location is the territory in which the insured’s business establishment is located.

Kidnap and ransom (vessels and ship’s crew)

Kidnap and ransom insurance provides cover in the event that a ship is seized and /or its crew are kidnapped. The insured is normally the ship owner or operator.

Where the policy is written in relation to a specified vessel the risk location is determined in the same manner as ship’s hull and liability (see above).

Where the vessel is not specified or is unknown the risk location is the territory in which the insured is resident or its business is established.

Carrier’s liability

Carrier’s liability insurance covers a ship owner’s or operator’s liability in respect of losses arising from damage to cargo or related liabilities while the cargo is in their care and in transit.

Where the policy is written in relation to a specified vessel the risk location is determined in the same manner as ship’s hull and liability (see above).

Where the vessel is not specified or is unknown the risk location is the territory in which the insured is resident or its business is established.

Ship’s crew personal accident cover

Ship’s crew accident insurance provides cover in the event of death or injury to a member of a ship’s crew. The insured is normally the ship owner or operator.

Where the policy is written in relation to a specified vessel the risk location is determined in the same manner as ship’s hull and liability (see above).

Where the vessel is not specified or is unknown the risk location is the territory in which the insured is resident or its business is established.


Definition of 'business establishment'

European Union (EU) legislation defines the term ‘establishment’. Outside the EU the term is not so well defined, so in the absence of any contradictory guidance, it is appropriate to follow the EU approach.

Examples of business establishments:

  • subsidiary companies 
  • branches of companies 
  • representative offices 
  • offices managed by businesses’ own staff 
  • tied selling agents 
  • factories and workshops 
  • mines and quarries 
  • oil and gas wells 
  • drilling platforms fixed to sea bed

 

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Risk locator tool

Risk Locator | Establish the location of your risk

Frequently asked questions 

Introduction to Risk Location

What is risk location and why is it important ?

Introduction to risk location

Establishing the risk location

To help establish risk location please consider the questions provided via the link below

How to establish the risk location

Class of business guidance

To help you establish the risk location please consider the class of business

Class of business guidance 

Risk Location Examples

The interaction of different territorial rules can make a given scenario complex. Applying the principles set out will assist market participants in establishing the risk location.

Risk location examples

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