The Policy under the Marine Insurance Act 1906

The Policy under the Marine Insurance Act 1906

Under the UK Marine Insurance Act, a marine insurance policy is a document that concretizes the contents of the marine insurance contract. It confirms the insured party, the subject matter insured, the sum insured, the transport route, the applicable Clauses, and other contract terms.

Section 22 of the Marine Insurance Act 1906 (MIA 1906) stipulates that a marine insurance contract cannot be used as evidence unless it is embodied in a marine insurance policy compliant with the Act.

This does not mean that the contract is not formed until the policy is issued. A marine insurance contract may be concluded when the insurer accepts the insured’s proposal, and the insurance policy may be issued at or after contract formation.

Therefore, if an incident occurs before the issuance of the policy, it is necessary to verify the timing of the insurance proposal, the insurer’s acceptance, the cover note, slip, open cover arrangements, the confirmation of coverage, and commencement of the insurance period, rather than relying solely on the policy issuance date.

Sections 22 to 31 of MIA 1906 set out the items that must be stated in the marine insurance policy, the insurer’s signature, distinctions between Voyage Policy and Time Policy, descriptions of the subject matter insured, Valued Policy, Unvalued Policy, Floating Policy, interpretation of policy terms, and matters relating to premium not yet fixed.

In practical marine cargo insurance under international trade, the insurance policy should not be treated merely as post-incident documentary evidence. It must be read as a primary document to confirm the contract’s scope, the insured parties, the insured value, sum insured, applicable ICC Clauses, transport route, special terms, and notifications.

Scope Covered in This Article

Item	Contents Covered in This Article	Contents Covered in Other Articles in Detail
Marine Insurance Contract and Policy	Relationship between contract formation and policy issuance under MIA 1906 Section 22	Details on timing of contract formation are covered in articles on utmost good faith, duty of disclosure, and representations.
Matters Stated in the Policy	Name of the insured or insurance arranger and description of the subject matter	Requirements for establishing insurable interest are covered in specialized articles.
Insurer’s Signature	Signature by insurer or their agent and co-insurance	Details on Lloyd’s market and co-insurance are confirmed in individual contracts.
Voyage Policy	Policy covering a specific route from one place to another	Insurance period under ICC is addressed in dedicated articles on insurance periods.
Time Policy	Policy covering a fixed period	Details of hull insurance and period-based contracts are covered in separate articles.
Valued Policy	Policy stating the agreed value of the subject matter insured	Specific loss indemnity amounts are discussed in articles on loss valuation.
Unvalued Policy	Policy in which the value of the subject matter insured is not specified and the Insured Value is established later	Methods for calculating insured value are covered in specialized valuation articles.
Floating Policy	Policy in which the vessel name, cargo details, and other particulars are specified by subsequent declarations	Practical operation of Japanese open policies is confirmed by individual contracts.
Interpretation of Policy Terms	Relations to MIA 1906 Section 30 and traditional policy terms	Definitions and coverage of ICC terms are treated in articles on respective Clauses.
Unfixed Premiums	Judgment on reasonable premiums and additional premiums	Individual insurer rate schedules and underwriting criteria should be confirmed with the insurer.

Purpose and Background of the System

In marine insurance contracts, the time of contract formation and the issuance of the formal insurance policy may not coincide.

In international cargo transportation, when shipment is imminent, coverage may be secured beforehand with the insurer’s consent or via a cover note, with the formal insurance policy or certificate of insurance issued at a later date.

Additionally, in ongoing cargo shipments, general terms applying to the entire transaction may be established in advance, while details such as vessel name, B/L number, invoice number, cargo value, and transportation route are declared later by specific confirmation notices for each shipment.

Under such practices, it is necessary to specify the contract details as evidence and clearly identify which cargo, which transport, which value, and which parties are covered by the insurance.

Sections 22 through 31 of the MIA 1906 set out the evidential function performed by the marine insurance policy and the fundamental structure to confirm contract terms via the policy.

Basic Structure of MIA 1906 Sections 22 to 31

Section	Main Legal Concept	Basic Content	Points to Confirm in Marine Cargo Insurance Practice	Main References
Section 22	Contract Formalization via Policy	A marine insurance contract must be embodied in a marine insurance policy to be used as evidence	Separate contract effective date from policy issue date	Application form, acceptance record, cover note, insurance policy
Section 23	Contents of the Policy	The name of the insured or the person arranging insurance on their behalf must be stated	Verify the identity of the claimant against the name on the policy	Insurance policy, sales contract, invoice, B/L
Section 24	Signature of the Insurer	Signature of the insurer or a representative of the insurer is required	Confirm each insurer’s underwriting share in co-insurance	Insurance policy, co-insurance slip
Section 25	Voyage Policy and Time Policy	Differentiates policies based on location from those based on time period	Check whether the contract centers on the transport leg or the insurance period	Insurance policy, insurance period, transport instructions
Section 26	Specification of the Subject Matter Insured	Describe the subject matter with reasonable certainty in the policy	Confirm that the description of goods matches the actual cargo	Invoice, packing list, SDS, B/L
Section 27	Valued Policy	The agreed value of the subject matter insured is recorded in the policy	Distinguish policy valuation, sum insured, and amount of loss	Insurance policy, insurance schedule, valuation documents
Section 28	Unvalued Policy	No value is stated on the policy; the Insured Value is determined later	Confirm value proof documents after loss occurrence	Invoice, freight charges, insurance premium, incidental costs
Section 29	Floating Policy	General terms set in advance; details such as vessel name are specified subsequently by notice	Check notice order, omissions, value, and good faith corrections	Final notification, shipment list, invoice, B/L
Section 30	Interpretation of Policy Terms	Interpret the meaning of traditional policy formats and terminology	Avoid mixing modern clauses with traditional terms	Insurance policy, applicable ICC, special clauses
Section 31	Unagreed Premium	If no agreement can be reached, a reasonable premium or additional premium shall be paid	Check rating for similar risks, risk increases, and market conditions	Quotation, rate tables, underwriting records, additional terms

Do Not Confuse the Marine Insurance Contract with the Marine Insurance Policy

Category	Meaning	Timing of Formation or Issuance	Main Evidence	Practical Notes
Insurance Application	An act by the insured party proposing insurance terms and requesting acceptance	Before contract formation	Application form, insurance request email	An application alone does not guarantee insurer approval.
Insurer’s Acceptance	An expression of the insurer’s willingness to accept the proposed risks	Generally at the time of contract formation	Acceptance email, underwriting system record	Check whether acceptance is conditional or unconditional.
Cover Note	Provisional proof of contract before official policy issuance	After or simultaneous with acceptance	Cover Note	Confirm coverage terms, duration, and any unresolved issues.
Marine Insurance Policy	Official document specifying the details of the marine insurance contract	At or after contract formation	Marine Policy	Do not mechanically treat the issuance date as the contract formation date.
Insurance Certificate	Document certifying insurance coverage for individual cargo under a master contract	After confirmation notice, etc.	Insurance Certificate	Also verify the underlying master contract and applicable clauses.

The Role of the Policy under MIA 1906 Section 22

Section 22 of the MIA 1906 states that a marine insurance contract must be embodied in a marine insurance policy that complies with the Act to be used as evidence.

This provision does not mean that a marine insurance contract without an issued policy automatically does not exist or is invalid.

The timing of contract formation is determined based on when the insurer accepts the proposal.

Subsequently, to legally prove the contract terms, it is required that the contract be embodied in a marine insurance policy conforming to the requirements of the MIA 1906.

The policy may be issued either at the time of contract formation or after the contract has been formed.

If an incident occurs before the policy is issued, it should be confirmed whether the proposal and acceptance were completed before the incident, whether the insurance period had commenced at the time of the incident, and whether the accepted terms and the policy issued later are consistent.

Chronology When an Incident Occurs Before Policy Issuance

Time	Event	Legal and Practical Implications	Supporting Documents
9:00 AM	The insured applies for coverage	Awaiting insurer's acceptance	Coverage request email
10:00 AM	Insurer agrees to underwrite without conditions	Possibility of contract formation	Acceptance email, underwriting record
11:00 AM	Cargo is moved out of the warehouse to start transportation	Consider insurance inception under ICC terms	Outgate record, trucking waybill
1:00 PM	Cargo is damaged due to a truck accident	Claim may be considered if contract is formed and within insurance period	Accident report, photos
Next day	The formal insurance policy is issued	Policy issuance after the incident may still specify contract terms	Insurance policy document

In this example, the mere fact that the policy was issued the day after the incident does not automatically mean the incident is uninsured.

It should be confirmed whether the acceptance at 10:00 AM was effective, whether insurance coverage under the Clause began at 11:00 AM, and whether the subsequently issued policy matches the terms of acceptance.

Section 23 of the MIA 1906 and the Insured's Name

Section 23 of the MIA 1906 stipulates that the marine insurance policy must include the name of the insured or the name of the person who arranges the insurance on behalf of the insured.

In marine cargo insurance for overseas shipments, multiple parties such as the seller, buyer, cargo owner, trading company, bank, consignee, import agent, or others may be involved in a single transaction.

As a result, the name of the insured on the insurance policy, the party bearing the risk under the sales contract, the cargo owner, the name on the invoice, and the shipper and consignee on the Bill of Lading may not match.

Differences in names alone do not automatically negate a claim for insurance proceeds.

What is important is who held the insurable interest at the time of loss, whose benefit the insurance policy intended to cover, whether the claim rights have been transferred by the policy or endorsement, and whether the claimant has contractual rights to the insurance proceeds.

Differences Between the Insured Party on the Insurance Policy, B/L Party, and Insurable Interest

Designation or Status	Basic Meaning	Relationship to Insurance Claims	Points of Caution
Insured Party on the Insurance Policy	The party whose interest is protected under the insurance contract	Central to the claim rights	Comprehensive insured party indication and transferability should also be confirmed.
Shipper on the B/L	The party named in the Shipper field on the Bill of Lading	Not necessarily the insured party under the insurance contract	May be the exporter, trading company, or NVOCC.
Consignee on the B/L	The named party involved in cargo delivery	Does not always hold insurable interest at the time of loss	Endorsement chain should be confirmed for order B/Ls.
Seller / Buyer on the Invoice	Parties to the sales contract	Used to verify risk transfer and economic loss	Ownership transfer is not solely determined by Incoterms.
Bank	Party involved in Letter of Credit transactions or collateral interests	May receive insurance documents or hold collateral interest	Receipt of documents by the bank and insurance coverage are separate issues.
Actual Loss Bearer	The party that suffers the economic loss from an accident	Key factor in determining the existence of insurable interest	Confirm consistency with the rights holder named on the policy.

Transactions Where the Insured Party's Name Often Becomes an Issue

Transaction	Common Name Discrepancies	Main Points to Confirm	Practical Measures
CIF Transactions	The seller arranges insurance, but the benefits in case of an accident transfer to the buyer	Transferability of the policy, endorsements, timing of risk transfer	Check insurance documents together with sales documents as a set
L/C Transactions	The bank holds the insurance policy or certificate	L/C terms, policyholder name, endorsements, security interests	Distinguish between the bank’s document examination and the right to claim insurance proceeds
Transactions via Trading Companies	Different names for manufacturer, trading company, and final buyer	Chain of sales contracts, risk bearing, scope of insured party	Match each sales contract with the insured party shown in the policy
Import Agency	The customs declarant name differs from the economic owner of the cargo	Agency agreement, invoice, payment relationships, insurable interest	Do not determine claim rights based solely on the customs declarant name
NVOCC or Freight Forwarder Name	Shipper or Consignee on House B/L differs from the cargo owner	Freight forwarder's role, authority to arrange insurance, insured party designation	Differentiate between the name in the transport contract and the status under the insurance contract
Transactions Including Secured Parties	Coexistence of cargo owner and secured parties such as banks	Loss Payee, transfer, priority of insurance payment	Clarify the beneficiary of insurance proceeds before any accident occurs

Section 24 of MIA 1906 and the Insurer’s Signature

Section 24 of MIA 1906 requires that a marine insurance policy be signed by the insurer or a person representing the insurer.

The signature serves as a crucial element indicating that the insurer has accepted the risks and terms stated in the policy.

When multiple insurers underwrite the same policy, unless expressly stated otherwise, each signature or acceptance is understood to constitute a separate contract with the insured.

In cases of co-insurance, it is necessary to confirm the underwriting proportions of each insurer.

For example, if Insurer A underwrites 60%, Insurer B 30%, and Insurer C 10%, each insurer is generally responsible for its respective share of the risk.

A distinction should be made between co-insurance and overlapping insurance where multiple independent insurance contracts cover the same interest.

MIA 1906 Section 25: Voyage Policy and Time Policy

Comparison Item	Voyage Policy	Time Policy	Mix of Voyage and Time	Practical Meaning
Basis of Contract	From a specific location to another location	From a specific date for a fixed period	Both location and period	Judgment is made according to the wording of the policy.
Typical Example	From a warehouse in Tokyo to a warehouse in Singapore	Insuring a vessel for one year	Focuses on the voyage while setting a maximum period	The focus differs between marine cargo insurance and hull insurance.
Relation to Marine Cargo Insurance	Often suitable for specific cargo shipments	Difficult to specify start/end points of cargo transport alone	Combines period and individual shipments in all-risk or blanket policies	Insurance periods for individual cargo are also checked under ICC.
Accident Determination	Whether the incident occurred during the insured transport section	Whether the incident occurred during the insured period	Whether both location and period conditions are met	Not judged based on only one of location or period.
End of Contract	End of the insured voyage or transport	Expiration of the designated period	Termination event specified in the policy	Insurance termination events under ICC may occur earlier.

Overseas marine cargo insurance generally has the nature of a Voyage Policy, covering transport risks from the cargo’s point of departure to its destination.

However, under a blanket annual policy, continuous transactions over a certain period are managed by a master contract, and individual shipments are insured by confirmation notices, requiring management by both period and voyage aspects.

Even if the overall contract is valid for one year, the insurance period for each cargo is determined individually based on the confirmation notice, start of transport, discharge at the final warehouse, and other conditions.

MIA 1906 Section 26 and the Description of the Insured Object

Section 26 of the MIA 1906 requires that the insured object be reasonably and clearly described in the marine insurance policy.

In marine cargo insurance, the description of the insured object is typically based on documents specifying the cargo name, quantity, weight, packaging type, invoice number, Bill of Lading number, vessel name, transport route, and other details.

However, it is not required to record all details of the nature and extent of the insured interest in the policy.

If the insured object is described using general terms, the description is interpreted as applying to the interest intended to be covered under the insurance contract.

Moreover, when determining the meaning of terminology in the policy, relevant trade usages or industry practices may be taken into consideration.

Items to Check in Cargo Description

Check Item	Appropriate Description Example	Potential Problematic Description	Practical Response
Cargo Name	Industrial CNC Machine	Machinery	Use a name that reasonably identifies the cargo
New or Used	Used CNC Machine	Used goods indicated only by the same generic name as new goods	Declare condition and existing damage
Hazardous Materials	Official product name, UN number, and hazard classification	Chemical Products only	Match with SDS and hazardous goods declaration
Frozen/Refrigerated Cargo	Frozen Seafood at -20°C	Food Products only	Indicate set temperature and temperature control conditions
Quantity and Packaging	10 Wooden Cases	Quantity or packaging unit unclear	Cross-check with the packing list
Transport Section	Tokyo Warehouse to Singapore Warehouse	Japan to Singapore only	Specify the starting point and final destination
Vessel or Flight Name	Confirmed vessel name or booking information	Not corrected, left as old vessel name	Update confirmation notice when vessel name changes
Transaction Number	Invoice number, B/L number	Miswritten number from a different transaction	Confirm one-to-one correspondence with cargo details

Section 27 of MIA 1906: Valued Policy

A Valued Policy is an insurance policy where the insurer and the insured agree on the value of the insured subject matter, which is then stated in the policy document as the declared value.

Provided there is no fraud and no conflict with other provisions of MIA 1906, the Policy Valuation stated in the insurance document serves as the agreed basis for determining the Insured Value between the insurer and the insured in cases of total or partial loss.

However, Policy Valuation and Sum Insured are not identical concepts.

Policy Valuation refers to the agreed value used as the basis for calculating compensation under a Valued Policy.

Sum Insured refers to the insurance amount representing the insurer’s contractual liability limit.

Unvalued Policy under MIA 1906 Section 28

An Unvalued Policy is an insurance policy where the value of the insured subject matter is not stated on the policy document. The Insured Value is determined after a loss occurs.

With an Unvalued Policy, the Insured Value is established within the Sum Insured limit, following the valuation provisions set out in MIA 1906.

In marine cargo insurance for overseas shipments, the Insured Value may be verified using invoices, freight charges, insurance premiums, related expenses, and other relevant documents.

Even if the Sum Insured is specified on the policy, this does not necessarily represent the actual Insured Value.

Comparison of Valued Policy and Unvalued Policy

Comparison Item	Valued Policy	Unvalued Policy	Practical Implications
Timing of Value Determination	Agreed upon at contract conclusion	Proven after damage occurs	Value documentation becomes more important in Unvalued Policy.
Value on the Policy	Includes Policy Valuation	Does not include Insured Value	Sometimes only the Sum Insured is stated.
Basis for Total Loss Calculation	Policy Valuation	Insured Value	The basis of calculation may differ even for the same cargo.
Basis for Partial Loss Calculation	Apply damage ratio to Policy Valuation	Apply damage ratio to Insured Value	Compensation amounts may differ even with the same damage ratio.
Proof of Value	Agreed value serves as the standard in principle	Proof by invoice or similar documents is required	Document deficiencies can affect valuation.
Fraud	Determinacy of agreed value may be denied	Truthfulness of submitted documents is questioned	Intentional overstatement should be avoided.

Do Not Confuse Valued Policy with Constructive Total Loss

The Policy Valuation stated in the Valued Policy serves as an important criterion for determining the Insured Value between the insurer and the insured.

However, a high Policy Valuation alone does not automatically establish a Constructive Total Loss.

In cases of Constructive Total Loss, factors such as the recoverability of the cargo or vessel, repairability, salvage expenses, repair costs, additional transportation costs to the destination, and other relevant circumstances are taken into consideration.

While the Policy Valuation forms the basis for calculating the indemnity amount, it does not automatically fulfill the conditions required to establish a Constructive Total Loss.

Example Figures for Valued Policy and Constructive Total Loss

Consider a machine with a Policy Valuation of 12 million yen, and the post-marine accident situation as follows.

Item	Amount	Meaning in Judgment
Policy Valuation	12 million yen	Agreed valuation under Valued Policy
Cargo recovery cost	2.5 million yen	Cost to recover the cargo
Repair cost	5 million yen	Cost to restore functionality
Additional transport cost to destination	1 million yen	Cost to transport to destination after repair
Total costs	8.5 million yen	One factor in determining constructive total loss

In this example, the total costs of 8.5 million yen are below the Policy Valuation of 12 million yen.

Therefore, the mere fact that the Policy Valuation is 12 million yen does not alone establish constructive total loss.

On the other hand, if the sum of the recovery, repair, and additional transport costs reaches 13 million yen, and considering the post-recovery value and contractual judgment criteria, it is economically unreasonable, constructive total loss could become an issue.

In actual judgment, the reasonableness of costs, residual value, post-repair value, applicable provisions, and the terms of the insurance policy should be confirmed.

Floating Policy under MIA 1906 Section 29

A Floating Policy is a policy that defines the subject matter insured in general terms, with individual particulars such as the vessel name specified by subsequent declarations.

In marine cargo insurance for overseas shipments, it can be understood as a framework similar to a comprehensive prospective policy used by companies transporting numerous cargoes continuously, which issues confirmation notices for each shipment.

A comprehensive contract does not automatically and unconditionally pay insurance money for all cargoes within a certain period.

It is necessary to declare each cargo according to the contractually specified subject cargo, transport route, declaration deadline, value calculation, excluded cargo, and notification method.

Items to Confirm in the Floating Policy Confirmation Notice

Notification Item	Details	Main Documents	Impact if Incorrect
Vessel Name / Voyage Number	The actual vessel or transport service carrying the cargo	Booking, B/L	May result in inability to identify the cargo involved in the incident.
Shipment Date	The date the cargo was loaded or dispatched	B/L, In-gate Records	Affects notification order and insurance period.
Cargo Description	Specific name of the cargo covered by insurance	Invoice, Packing List, SDS	Difficult to distinguish from non-contract cargo.
Quantity / Weight	Number of packages, pieces, weight, etc.	Packing List, B/L	Affects confirmation of damage quantity and value.
Invoice Number	Corresponding number with trade documents	Commercial Invoice	May cause confusion with declarations of different cargo.
B/L Number	Corresponding number with the transport document	B/L, Sea Waybill	Affects identification of the incident segment and recourse against the carrier.
Transport Route	From export location to the final import destination	Booking, Delivery Instructions	Start and end points of the insurance period become unclear.
Cargo Value	Declared value calculated according to the contract	Invoice, Freight, Rate Calculation	Affects insurance premium and compensation amount.

Order and Completeness of Final Notification

Section 29 of MIA 1906 requires that, unless otherwise specified in the insurance policy, final notifications should be made in the order of dispatch or shipment.

The insured must notify all shipments covered under the conditions of the Floating Policy.

Selective notification of only damaged cargo, while omitting notification of undamaged cargo, is inconsistent with the premise of the Floating Policy.

Additionally, the declared cargo value must be made in good faith.

Selective changes to the declared value after learning of the occurrence or absence of damage should be distinguished from bona fide corrections.

Notifications Omitted or Erroneous Due to Good Faith and Notifications Commonly Viewed as Problematic

Case	Circumstances Often Judged as Good Faith Errors	Circumstances Often Viewed as Problematic	Supporting Documentation	Initial Action
Incorrect Ship Name	Declared the old ship name despite a ship name change for the same booking	Intentionally declared a different ship unrelated to the accident vessel	Booking change notice, B/L	Correct with explanation of the change history
Incorrect B/L Number	Single-digit input mistake but other cargo details match	Replaced B/L with unrelated cargo after the accident	B/L, Invoice, internal entry logs	Submit original documents and entry logs
Invoice Amount Error	Miscalculation in currency conversion or addition	Intentionally increased declared value after identifying damage	Invoice, exchange rate documents, calculation sheets	Correct with accurate calculation basis
Omission of Shipment Notification	Input omission by staff, but recorded in regular management tables	Declared only accident cargo retrospectively, omitting non-accident cargo	Shipment list, internal ledger, past notifications	Verify consistency with all shipments
Incorrect Cargo Description	Minor differences due to model changes or translation	Designated dangerous goods as general cargo	SDS, specifications, Invoice	Explain the actual nature of the cargo
Reversed Notification Order	Multiple staff entered data on the same day resulting in swapped order	Declared more favorable cargo first after learning of the damage	Transmission time, shipment date, system logs	Record chronology and reasons
Error in Transport Section	Failed to update final delivery destination changes	Altered destination to fall within insurance period after accident	Sale contract, delivery instructions, change notices	Check timing of changes and approval status

Whether an error is due to good faith is not determined merely by the staff explaining it as a careless mistake.

A comprehensive assessment is made based on the shipment list, previous notification practices, internal ledgers, emails, system logs, timing of corrections, point of accident awareness, and reporting status of non-accident cargo.

Declaration of Value After Notice of Loss or Arrival

Under Section 29 of the MIA 1906, unless otherwise stipulated in the insurance policy, if the declaration of value is made after notice of loss or arrival, the insured subject related to that notice is treated as an Unvalued Policy.

This rule exists to prevent the insured from selecting a favorable value only after confirming the outcome of the incident.

For example, declaring a lower value if the cargo arrives without damage and only declaring a higher value in case of a total loss would be inconsistent with the principle of a fair Floating Policy.

When the value is declared after loss occurrence, it may be necessary to substantiate the Insured Value through invoices or other documentation, rather than simply treating the declared amount as the agreed value under a Valued Policy.

Numerical Example of Value Notification after an Accident

For cargo covered under a Floating Policy, assume the contract was a Valued Policy where the agreed value was properly confirmed and notified as 12 million yen before the damage occurred.

However, if the value is declared as 12 million yen only after receiving notice of total loss, and there is no specific provision in the insurance policy, it may be treated as an Unvalued Policy.

Subsequently, if the Insured Value calculated from the invoice, freight, insurance premium, and other documents is 10 million yen, the 12 million yen declared after the accident does not necessarily become the agreed valuation amount.

Notification Timing	Declared Value	Insured Value	Basic Calculation Basis
Properly confirmed and notified before damage occurrence	12 million yen	Handled as the contractually agreed value	Policy Valuation of 12 million yen
Value notified for the first time after total loss notice	12 million yen	Documented at 10 million yen	Confirmed as Insured Value of 10 million yen under Unvalued Policy

The actual payout amount should be determined based on the Sum Insured, contract conditions, notification provisions, and value documentation.

Section 30 of MIA 1906 and Interpretation of Policy Terms

Section 30 of the Marine Insurance Act 1906 (MIA 1906) provides that marine insurance policies may follow the form set out in the First Schedule to the Act, and the terms and expressions appearing in the policy should, unless special circumstances apply, be interpreted according to the meanings defined in that Schedule.

This provision relates to the traditional S.G. form and the interpretation of terms unique to marine insurance.

In modern marine cargo insurance, it is common practice to establish the contract terms by combining the insurance policy, specification, and Institute Cargo Clauses (A), (B), or (C), among others.

Therefore, it is necessary not to judge the scope of coverage solely by the older traditional policy terms but to prioritize confirmation of the actually incorporated clauses, special conditions, and policy wording.

Section 31 of MIA 1906 and Undetermined Premiums

Section 31 of the MIA 1906 stipulates that when insurance is arranged on the condition that the premium will be negotiated later, and the negotiation ultimately fails to reach an agreement, a reasonable premium shall be payable.

Similarly, when insurance is arranged on the condition that additional premiums will be negotiated later upon occurrence of certain circumstances, and despite such occurrence the negotiation fails, a reasonable additional premium shall be payable.

The reasonable premium is not an amount arbitrarily deemed appropriate solely by the insured nor a sum voluntarily proposed by the insurer after a loss.

It is determined based on factors such as similar cargo, transportation route, risk conditions, insurance period, sum insured, historical rates, prevailing market standards at the time, and the degree of risk increase.

Factors for Determining Reasonable Premiums and Additional Premiums

Determining Factor	Details to Confirm	Main Documents	Notes
Nature of Cargo	General cargo, hazardous goods, used machinery, refrigerated cargo, etc.	SDS, specifications, Invoice	Confirm the actual hazard, not just the cargo name.
Transport Route	Origin, destination, transshipment ports, high-risk areas	Booking, route information	Separate additional risks such as war and sanctions.
Mode of Transport	FCL, LCL, deck cargo, air, land transport, etc.	B/L, transport plan	Number of handling stages and exposure risks differ.
Insurance Terms	ICC(A)(B)(C), deductible amounts, special clauses	Insurance policy, quotation terms	Reflects the scope of coverage.
Insured Amount	Maximum amount the insurer is liable for	Invoice, insurance schedule	Accumulation risks become significant for high-value cargo.
Storage Period	Additional storage beyond normal transport time	Storage plan, warehouse conditions	Confirm fire protection and security conditions at storage location.
Past Transaction Rates	Previously agreed rates for similar risks	Past policies, quotations	Adjust when market conditions have changed.
Market Rates	Rates applied to similar risks at the same period	Underwriting records, market data	Do not base judgment solely on a single insurer’s retrospective offer.

Numerical Example of Undetermined Additional Premium

Assume the basic premium for the usual route is 100,000 yen, and the insurer agreed to cover the risk with a condition that any additional premium for a route change to a dangerous area will be negotiated later.

Even if no final agreement on the additional premium is reached between the insurer and the insured after the route change, a reasonable additional premium corresponding to the increased risk will be an issue.

Examples of similar underwriting cases around the same period are as follows.

Comparison Case	Cargo / Route Conditions	Additional Rate	For Insurance Amount of 100 Million Yen
Comparison Case A	Same Type of Cargo / Same Dangerous Area	0.08%	80,000 yen
Comparison Case B	Same Type of Cargo / Similar Dangerous Area	0.10%	100,000 yen
Comparison Case C	Somewhat Higher Risk Conditions	0.12%	120,000 yen

If the actual cargo, route, and storage conditions most closely resemble Comparison Case B, an additional premium around 100,000 yen may be considered a reasonable reference.

However, this is a simplified example for explanation purposes. In practice, judgment involves considering the market conditions at the time, the insurer’s underwriting standards, the coverage period, deductibles, and accumulation risks comprehensively.

Practical Flow for Verifying Marine Insurance Policies

1. Confirm the Timing of Contract Formation
   Organize the dates and times of the application, acceptance, cover note, and policy issuance.
2. Verify the Insured Party
   Compare the insured party on the policy with the seller, buyer, cargo owner, and claimant.
3. Confirm the Insurable Interest
   Check who economically bore the cargo damage risk at the time of the incident.
4. Check the Insurer and Subscription Shares
   For co-insurance, identify the subscription share of each insurer.
5. Identify the Type of Policy
   Confirm whether it is a Voyage Policy, Time Policy, Valued Policy, Unvalued Policy, or Floating Policy.
6. Review Cargo Details
   Match the cargo description, quantity, packaging, invoice number, and B/L number.
7. Verify the Transport Section
   Check the starting point, final destination, and transshipment details on the insurance policy.
8. Confirm Applicable Clauses
   Check for ICC(A)(B)(C), War Risks Clause, Strikes Risks Clause, and any special clauses.
9. Distinguish Between Policy Valuation and Sum Insured
   Confirm whether the policy is valued or unvalued.
10. Verify Notification for Floating Policy Finalization
    Check the notification date, order, declared cargo, and declared value.
11. Check the Premiums
    Confirm terms for fixed premiums, provisional premiums, and additional premiums.
12. Document Any Discrepancies as Evidence
    Preserve correction histories, emails, system logs, and related documents.

Common Practical Issues

Case	Main Issues	Reference Documents	Key Considerations	Initial Actions
Cargo incident occurs before policy issuance	Timing of contract formation and insurance period	Application, acceptance email, cover note	Was insurer’s consent obtained before the incident?	Secure records including time details
Insured name on policy differs from Shipper on B/L	Insured party vs. name on transport documents	Insurance policy, B/L, sales contract	Who held the insurable interest at the time of the incident?	Do not decide based on name alone; clarify contractual relationships
Buyer claims under CIF transaction	Transfer of insurance policy and insurable interest	Invoice, insurance policy, endorsement, L/C	Has the right to claim insurance proceeds transferred to the buyer?	Check original policy and endorsements
Used machinery described as general Machinery	Reasonable description of the subject matter	Invoice, photos, inspection records	Are important cargo characteristics properly reflected?	Notify insurer that goods are secondhand
Incorrect vessel name on Floating Policy	Correction in good faith	Booking changes, B/L, input history	Did the error exist before the incident became known?	Promptly correct with explanation of background
High cargo value notified after incident	Handling as Unvalued Policy	Incident notification, final notification, invoice	Was the value determined after the loss was identified?	Provide evidence of objective Insured Value
Partial shipment unreported under blanket open cover	Whether all shipments were declared	Loading list, declaration ledger, past notices	Was selective notification limited to accident cargo only?	Verify consistency with all shipments
Claim of constructive total loss on valued policy	Policy Valuation and constructive total loss requirements	Repair estimate, salvage costs, residual value	Confirm economic reasonableness beyond agreed valuation	Organize cost breakdown and recoverability
Additional premium after route change not agreed	Reasonable additional premium	Old route, new route, past rates, market data	Rate for similar risks and extent of additional risk	Collect comparable underwriting data

Scenario for System Application 1: Cargo Incident Before Policy Issuance

Assume the insured applied for coverage at 9:00 AM, the insurer unconditionally accepted the risk at 10:00 AM, transportation of the cargo started at 11:00 AM, and an incident occurred at 1:00 PM.

The formal insurance policy was issued the following day.

Section 22 of the MIA 1906 does not stipulate that the contract does not exist if the policy was not issued before the incident.

The contract is considered effective from the acceptance at 10:00 AM, and if the risk under the applicable Clause began at 11:00 AM, the incident at 1:00 PM may be subject to review under the insurance contract.

It is necessary to verify the acceptance email, the insurer’s authority to bind coverage, the attached terms, the cargo transportation start time, and the content of the subsequently issued policy.

Scenario 2 of System Application: Discrepancy in Named Party under CIF Transactions

Assume a Japanese seller exports cargo under CIF terms and arranges marine cargo insurance in the seller's name, and the cargo is damaged during transit.

On the B/L, the Shipper is the seller, and the Consignee is "to order" of the bank, with the risk under the sales contract having transferred to the buyer at the time of the incident.

In this case, it should not be concluded immediately that the buyer cannot claim insurance proceeds solely because the insurance policy is in the seller's name.

It is necessary to verify the policy's negotiability, endorsements, L/C documents, transfer of insurable interest, and succession of the right to claim insurance proceeds.

The mere fact that the bank has received the insurance documents does not automatically confirm the buyer's right to claim insurance proceeds.

Scenario for System Application 3: Incorrect Vessel Name in a Floating Policy

For cargo covered under a Floating Policy, suppose that after the initial confirmation notification named Vessel A as the intended ship, the cargo was actually loaded onto Vessel B due to a vessel name change, but the responsible person did not update the notification.

After an incident, verification of the B/L reveals the vessel name error.

If records of booking changes, the B/L, internal ledgers, and past notification practices confirm that the previous vessel name was simply used for the same cargo, there may be room to correct this as an honest mistake.

However, if after the incident the declaration was substituted with other uninsured cargo or if only the incident cargo was selectively declared, it is less likely to be regarded as a good-faith correction.

System Application Scenario 4: Post-Accident Valuation Notification

Assume that after a total loss of cargo covered under a Floating Policy, the insured party notifies for the first time a valuation of 12 million yen.

The Insured Value confirmed from the invoice and other documents was 10 million yen.

Unless otherwise specified in the insurance policy, the cargo related to the post-accident valuation notification may be treated as under an Unvalued Policy.

Therefore, the declared 12 million yen after the accident does not automatically become the Policy Valuation. Instead, the objective Insured Value of 10 million yen based on documentary evidence will be used as the reference for evaluation.

Application Scenario 5: Valued Policy and Constructive Total Loss

Assume a machine with a Policy Valuation of 12 million yen is damaged in a marine accident, requiring recovery costs of 2.5 million yen, repair costs of 5 million yen, and additional transportation costs of 1 million yen.

The total costs amount to 8.5 million yen.

The mere fact that the Policy Valuation is 12 million yen does not automatically establish a constructive total loss.

It is necessary to consider the total costs, post-repair value, salvage value, recoverability, and contractual criteria.

If the total costs are less than the agreed value and repair plus transportation are reasonably feasible, it may be handled as a partial loss.

Scenario 6 for System Application: Undetermined Additional Premium

Assume that the route is changed from a regular shipping lane to one passing through a high-risk area, and the insurer agrees to the change on the condition that the additional premium will be negotiated later.

Subsequently, no final agreement is reached regarding the additional premium.

In this case, the additional premium is not necessarily zero.

A reasonable additional premium should be calculated based on market rates applied to similar cargo, during the same period, on comparable routes, and under equivalent coverage conditions.

If the additional premium rates for comparable transactions range from 0.08% to 0.12%, and the risk level is intermediate, a benchmark rate around 0.10% could be applied.

Scenario 7 for System Application: Voyage Policy and Blanket Open Cover

Suppose a company enters into a blanket open cover valid for one year and transports multiple cargo shipments from Tokyo to Singapore during that period.

Even if the blanket contract is valid for one year, it does not mean that each cargo shipment is covered continuously for one year.

For each cargo, the subject of coverage is specified by a confirmation notice, and coverage is individually determined from the start of normal transport to the end of insurance at the final destination.

It is necessary to separately confirm the contract period management of the blanket open cover and the transport leg management, similar to a Voyage Policy, for each shipment.

Common Misunderstandings

Misunderstanding	Actual Consideration	Practical Points
The contract is not concluded until the insurance policy is issued	The contract may be concluded once the insurer accepts the application.	Separate the acceptance date from the policy issuance date.
Section 22 of the MIA 1906 invalidates the contract if there is no policy	The same section regulates the evidentiary use of the marine insurance contract.	Do not confuse invalidity with inadmissibility of evidence.
The insured named on the insurance policy must always be the same as the Shipper on the B/L	The insured party named in the insurance contract may differ from the party named on the transport documents.	Confirm the insurable interest and claim rights.
Consignee named on the B/L always has the right to claim insurance proceeds	The name in the Consignee field alone does not determine claim rights.	Verify the policy, insurable interest, and any assignment.
The insurance coverage is confirmed once the bank accepts the insurance policy	Document compliance under the L/C and insurance coverage under the contract are separate issues.	Check applicable clauses, insurance period, and cause of loss.
Voyage Policy only covers the sea leg	Depending on contract terms, it may cover inter-warehouse multimodal transport.	Verify location descriptions and ICC clauses.
A comprehensive one-year policy covers each individual cargo shipment for one year	The insurance period for each shipment is judged by individual transport start and end dates.	Distinguish the comprehensive contract period from individual transit periods.
A Valued Policy always pays the full Policy Valuation amount	Consider the type and extent of damage, Sum Insured, and deductibles.	Differentiate between total loss and partial loss.
A high Policy Valuation implies constructive total loss	Constructive total loss requires separate judgments, such as salvage or repair costs.	Distinguish agreed value from conditions for occurrence.
An Unvalued Policy sets the insured amount as the insurance value	Sum Insured is a liability limit; Insured Value is determined separately.	Check value documents such as invoices.
Under a Floating Policy, the value can be freely declared even after the loss	Value declarations after loss or arrival notification may be treated as Unvalued Policy declarations.	Provide accurate notifications before loss occurs.
Any missed notification can always be corrected after the loss	Distinguish between innocent errors and selective post-loss notifications.	Check full shipment declarations and past declaration practices.
If the premium is not agreed upon, payment is not required	Under Section 31 of the MIA 1906, a reasonable premium amount is relevant.	Confirm comparable rates and market levels.

Practical Decision-Making Checklist

Situation for Confirmation	Party to Confirm With	Items to Confirm	Actions if Issues Are Found
When applying for insurance	Insurance company or insurance agent	Insured party, cargo, transport segment, applicable clauses, and insured amount	Confirm application details in writing
When receiving underwriting acceptance	Authorized underwriting personnel	Whether acceptance is unconditional or conditional, and time of acceptance	Keep acceptance email or cover note
When receiving the policy document	Insurance company or insurance agent	Consistency with application content and acceptance conditions	If discrepancies exist, immediately request correction
When confirming the insured’s name	Seller, buyer, trading company, bank	Policy name, risk bearing, insurable interest, and endorsement	Verify sales documents and endorsements
When confirming co-insurance	Lead underwriter or each insurer	Underwriting ratios, payment method, and contact points	Create a list of responsibility ratios for each insurer
When confirming cargo details	Shipper, manufacturer, freight forwarder	Cargo name, quantity, packaging, hazards, and transport segment	Match with Invoice, Packing List, and SDS
When confirming a Valued Policy	Insurance company or insurance agent	Policy valuation, sum insured, and valuation conditions	Record the meaning of each amount separately
When confirming an Unvalued Policy	Accounting personnel, insurance company	Invoice, freight charges, premium, and incidental costs	Secure documentation justifying the insured value
When issuing confirmation notice	Insurance company or insurance agent	Vessel name, B/L, Invoice, value, and transport segment	Double-check with original documents
When notification omission is discovered	Insurance company, and lawyer as needed	Good faith, accident awareness timing, declaration status of entire shipment	Preserve history and system records, then notify
When considering constructive total loss	Surveyor, repairer, insurance company	Salvage costs, repair costs, additional transport costs, and residual value	Do not base judgement solely on policy valuation
When additional premiums are not finalized	Insurance company or insurance agent	Comparable rates, increased risks, market conditions, and coverage terms	Discuss reasonable amounts based on comparative data
When filing a claim after an accident	Insurance company or insurance agent	Policy document, confirmation notice, insurance period, covered risks, and damage amount	Submit with aligned contract and accident documents

Do Not Confuse Insurance Policy, Insured Value, and Sum Insured

Term	Meaning	Example	Practical Role
Marine Insurance Policy	A document specifying the details of the insurance contract	Marine Policy	Confirms the insured party, cargo, terms, and insured value
Policy Valuation	The agreed value under a Valued Policy	JPY 12 million	Basis for calculating compensation amount
Insured Value	The value of the interest insured	JPY 10 million calculated from Invoice, etc.	Basis for calculating compensation under an Unvalued Policy
Sum Insured	The insurer's contractual liability limit	Sum insured JPY 10 million	Maximum limit for insurance payment
Amount of Loss	Economic loss actually incurred from the incident	Depreciation of value JPY 3 million	Does not necessarily match the indemnity payment

Summary

Section 22 of the MIA 1906 stipulates that a marine insurance contract must be embodied in a marine insurance policy complying with the Act to be used as evidence.

This does not mean that a marine insurance contract is not formed until the policy is issued. The contract is established upon the insurer's acceptance, and the policy can be issued at or after the contract formation.

Section 23 of the MIA 1906 requires that the name of the insured or the person arranging insurance on the insured’s behalf be stated in the marine insurance policy.

When the insured named in the marine insurance policy, the Shipper or Consignee on the B/L, the parties to the sales contract, and the actual loss bearer differ, the insurable interest, transfer of the policy, and claim rights should be confirmed.

Section 24 of the MIA 1906 requires the marine insurance policy to be signed by or on behalf of the insurer. In cases of joint underwriting by multiple insurers, the underwriting proportion of each insurer should be confirmed.

Section 25 of the MIA 1906 distinguishes between Voyage Policies, covering a specified route, and Time Policies, covering a fixed period.

Marine cargo insurance generally resembles a Voyage Policy, but in blanket policies, the overall contract period and individual shipment transit legs are managed separately.

Section 26 of the MIA 1906 requires the insured object to be stated on the policy with reasonable certainty. The cargo description, quantity, packaging, hazardous classification, transportation route, and transaction reference should match the actual cargo.

For Valued Policies, the Policy Valuation is agreed upon in advance, whereas for Unvalued Policies, the Insured Value is verified after loss occurrence. Policy Valuation, Insured Value, and Sum Insured are distinct concepts.

An agreed value under a Valued Policy does not automatically establish constructive total loss. Recovery costs, repair expenses, additional transport costs, salvage value, and recoverability should be considered.

Under a Floating Policy, the vessel name, cargo details, transit route, and value are specified by a confirmation notice. As a general rule, all relevant cargo must be reported honestly in the order of shipment or dispatch.

Omissions or errors in good faith notifications may be corrected, but selecting only damaged cargo for retrospective reporting or intentionally increasing the value after loss are treated differently.

If the value is declared for the first time after notice of loss or arrival, unless otherwise stipulated in the marine insurance policy, the relevant subject matter may be treated as insured under an Unvalued Policy.

Section 31 of the MIA 1906 allows insurance to be arranged subject to subsequent agreement on the premium or additional premium, and if no agreement is reached, a reasonable premium is payable.

The reasonable premium is judged based on the nature of the cargo, transit route, coverage terms, sum insured, increase in risk, past tariff rates, and market levels at the time.

In the event of cargo damage, it is important to separately organize the timing of contract formation, the insured’s name, insurable interest, cargo details, type of policy, Policy Valuation, Insured Value, Sum Insured, confirmation notices, and applicable clauses.

If disputes arise regarding the named insured in the policy, declarations, valuation, or undetermined premiums, the marine insurance policy, application and acceptance records, sales documents, transport documents, declarations, and system logs should be preserved, and advice should be obtained from the insurer, insurance agent, or a professional familiar with UK marine insurance law.