The need for co-insurance

In principle, there is no reason to restrict or prevent co-insurance of interests other than the mortgagee’s under the owner's insurances. In many instances there will be no need to co-insure such other third parties under the owner's loss of hire insurance, but in special circumstances such co-insurance serves a useful purpose.  It may well be that the parties are better served by arranging a separate and independent loss of hire insurance for each individual interest.

A chartererwho operates the vessel to serve his own transport needs will hardly need loss of hire insurance because the vessel will normally be off-hire under the off-hire clauses commonly included in charterparties, alternatively no freight will accrue until the voyage is performed. If the freight is at risk, a separate freight insurance may be placed.Such freight insurance must not be confused with freight interest insurance pursuant to Chapter 14 of the Plan. Chapter 19 of the 1964 Plan contained conditions for freight insurance, but this chapter was not maintained in the 1996 Plan. The demand for this type of insurance was considered so small that it was left to the insurers interested in this segment of the market to develop their own conditions.

For parties who charter vessels in order to trade them in the market (or sublet them on time charterparty or comparable terms), it is probably preferable to take out a separate loss of hire insurance than to be co-insured under the owner's loss of hire insurance. Nevertheless, in principle both the owner's and the charterer's interests in the earning capacity of the vessel may be insured under the same policy. The owner's interest will be the charter hire and the charterer's interest will be the balance between the freight he earns in the market and the charter hire payable to the owner.

The company structure of a shipowning and operating group may also make it desirable to effect one loss of hire insurance for the whole group and co-insure the interests of the various companies in the group under the same policy.