The principles of marine insurance are a set of fundamental rules that govern the operation of marine insurance policies. These principles are essential for understanding the nature of marine insurance and for effectively managing the risks associated with shipping and maritime trade. We will examine the principle of utmost good faith, insurable interest, indemnity, subrogation, contribution, los minimization.

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All in all, 6 major principles govern marine insurance. They are as follows-

  1. Principle of Utmost Good Faith

The good faith principle applies to all types of insurance, including marine insurance. Under this principle, the insured is required to disclose all material facts that could affect the insurer's decision to accept or reject the risk, while the insurer is required to provide all relevant information about the policy terms and conditions.

The principle of utmost good faith is based on the idea that insurance contracts involve an element of trust and mutual reliance between the insurer and the insured. The insurer relies on the information provided by the insured to assess the risks involved in providing insurance coverage, while the insured relies on the insurer to fulfill its obligations under the policy. This principle helps to ensure that both parties are fully informed about the risks involved. This can help to avoid misunderstandings and disputes later. It also allows the insurer to tailor the policy to better suit the needs of the insured.

If either party fails to act in good faith, it can lead to serious consequences. For example, if the insured fails to disclose a material fact that could affect the insurer's decision to accept or reject the risk, the insurer may have grounds to void the policy or deny a claim. Similarly, if the insurer fails to disclose all relevant information about the policy terms and conditions, the insured may have grounds to challenge the validity of the policy or seek compensation for any losses incurred.

What is Insurable Interest?

2. Insurable Interest

The principle of insurable interest requires the insured to have a financial or legal interest in the subject matter of the insurance policy. Insurable interest means that the insured would suffer a financial loss if the event that is being insured against were to occur.

The principle of insurable interest is based on the idea that insurance should be used as a means of transferring risk. Insurable interest is important because it helps to prevent insurance policies from being used for speculative purposes, which can lead to moral hazards and adverse selection. A policy cannot be issued unless you have an insurable interest in buying it.

3. Indemnity

The principle of indemnity requires an insured to be compensated for the actual amount of loss suffered as a result of an insured event, but not more than that. A claim is paid to you after the insurer inspects and calculates the loss. The amount you receive is neither less nor more than the amount you lost. A marine insurance policy can be bought not for profit but for financial protection in case of a disaster.

4. Subrogation

The principle of subrogation allows an insurer to assume the legal rights and remedies of an insured after the insurer has paid a claim. The principle of subrogation is based on the idea that the insurer should be able to recover the amount of the claim from any third party that is responsible for the loss or damage. This also means that if the insured party receives compensation from a third party for the loss or damage, the insurer is entitled to recover the amount paid under the policy.

5. Principle of Contribution

The principle of contribution is a fundamental principle of insurance that applies when an insured party has multiple insurance policies covering the same risk. The principle of contribution requires that each insurer contributes to the cost of the claim in proportion to the amount of coverage they provide.

Under the principle of contribution, if an insured party has multiple insurance policies that cover the same risk, each insurer is responsible for paying a proportionate share of the claim based on the amount of coverage provided. This means that no single insurer can be held responsible for paying the entire cost of the claim.

6. Loss Minimization

The principle of loss minimization requires the insured to take reasonable steps to minimize the potential loss or damage that could occur. This principle is based on the idea that the insured has a duty to mitigate their losses and to take reasonable steps to prevent further damage or loss from occurring. This may include taking steps to prevent theft or vandalism, securing the property, or taking steps to minimize the impact of natural disasters. Failure to take reasonable steps to minimize the loss or damage may result in the insurer refusing to pay the claim or reducing the amount of compensation paid.


The principles of marine insurance discussed above form the foundation of the insurance industry's approach to managing risk in the maritime industry. Together, these principles create a framework for managing risk in the maritime industry and ensure that all parties involved act in good faith to protect against potential losses. It is essential for anyone working in the maritime industry to understand these principles and how they apply to their specific situation to ensure that they are properly protected and able to manage risk effectively.