Maritime law and marine insurance

Where the rules are written

Maritime law has three layers:

• International conventions, which states implement in national law. Many of them were adopted at the UN's International Maritime Organization (IMO).
• National law. In Norway the main act is the Norwegian Maritime Code (sjøloven, Act of 24 June 1994 No. 39), with rules on, among other things, collisions (chapter 8), limitation of liability (chapter 9), carriage of general cargo and bills of lading (chapter 13), chartering (chapter 14) and general average (chapter 17).
• Standard contracts and terms agreed by the parties, such as BIMCO's charter parties and the Nordic Marine Insurance Plan.

How much the parties can agree themselves varies. With some exceptions, the chartering rules apply only as far as nothing else follows from the contract, practice between the parties or custom (section 322). The rules on carriage of general cargo are largely mandatory: a term in a contract of carriage or a transport document is invalid to the extent that it departs from them (section 254).

Charter parties and standard forms

A charter party is the contract for hiring a ship. The commercial side is covered in the guide to the freight market; legally, the difference is about who is responsible for what:

• Voyage charter: the owner operates the ship and pays the voyage costs, and the charterer pays freight. The contract sets the laytime for loading and discharging and what is paid when it is exceeded (demurrage).
• Time charter: the owner places the ship and crew at the charterer's disposal for a period, and the charterer decides the voyages and is responsible for loading, discharging and other employment of the ship (Maritime Code sections 378 and 381). Hire is not payable for time lost to, for example, repair of damage the charterer is not responsible for (section 392); in the contracts this is called off hire.
• Bareboat charter: the charterer takes over the ship without crew, with full control and the legal and financial responsibility, and usually pays all operating costs, including hull and P&I insurance (BIMCO).

Most charter parties are based on standard forms with rider clauses. The shipping association BIMCO publishes many of them: GENCON 2022 for voyages, with the bill of lading CONGENBILL 2022, NYPE 2015 for time charters of dry cargo ships (developed with ASBA and the Singapore Maritime Foundation), BARECON 2017 for bareboat charters and SUPPLYTIME 2017 for offshore support vessels. SUPPLYTIME uses knock for knock: each party bears loss of or damage to its own property and injury to its own personnel, regardless of who is at fault.

The bill of lading

When the cargo has been received or loaded, the carrier issues a bill of lading: a document that is evidence of the contract of carriage by sea and that the goods have been received or loaded, under which the carrier undertakes to deliver the goods only against return of the document (Maritime Code section 292). It has three functions:

1. Receipt for what was received, how much and in what condition. Without reservations from the carrier, it is evidence that the goods were received as stated, and against a third party who has taken it up in good faith it cannot be disproved (section 299).
2. Evidence of the contract of carriage. Towards holders other than the shipper, the terms in the bill of lading apply (section 292).
3. Right to the cargo. Whoever shows they are the rightful holder can demand delivery of the cargo (section 302). That is why cargo can be sold while at sea by transferring the bill of lading, and why banks use the documents in letters of credit.

If the owner delivers the cargo without an original bill of lading, the owner can become liable to the holder of the document, and such liability is usually excluded from P&I cover. In the oil trade, where a cargo can be sold several times on the way, the owner therefore often requires a letter of indemnity from the charterer before delivering without the original. A sea waybill gives no such right to the cargo: the carrier delivers to the consignee named in the document (section 308).

The insurances: hull, P&I, cargo and war

The ship, the liabilities and the cargo are insured separately, often with different insurers.

The insurances complement each other: ordinary marine insurance covers all perils except war perils and a few others, and what the hull insurance excludes in a collision, such as personal injury, pollution and wreck removal, falls under P&I.

The Nordic Marine Insurance Plan

The Nordic Marine Insurance Plan of 2013 is a set of standard terms for insuring ships. It is an agreed document between the Nordic Association of Marine Insurers (Cefor) and the shipowners' associations of Denmark, Finland, Norway and Sweden. The Plan applies when the parties have agreed that the insurance shall be based on it (Clause 1-1).

The Plan has common rules for all the insurances and separate parts for hull, war risks, loss of hire and other insurances, including mobile offshore units and ships under construction. The hull insurance also covers liability for collision and striking, but not, for example, personal injury, pollution and wreck removal (chapter 13). The Commentary to the Plan is part of the insurance contract (Clause 1-1). The English text is the authoritative version, and the Plan and Commentary are freely available at nordicplan.org.

The latest version, Version 2027, was published on 1 October 2026 (Cefor, read 5 Oct 2026). The insurance contract states which version it is based on.

The P&I clubs

P&I insurance is mostly provided by clubs: mutual insurers owned by the shipowners and charterers insured with them, and not run for profit. The premium is first set provisionally (the advance call). If claims for a policy year turn out higher than expected, the club can collect more (a supplementary call), so the members pay for each other's claims.

Twelve clubs work together in the International Group of P&I Clubs, among them Gard and Skuld. According to the Group, between them they cover about 87 % of the world's ocean-going tonnage (igpandi.org, read 5 Oct 2026). Each club pays the first part of a claim itself, currently up to USD 10 million. Anything above that is shared between all twelve under a common agreement (the Pooling Agreement), and the largest claims are covered by a joint reinsurance programme renewed every year (same source).

The authorities require proof of insurance. The owner of a Norwegian ship of 300 gross tonnage or more must have insurance or other security for liability that can be limited under the Convention on Limitation of Liability for Maritime Claims, and the certificate must be kept on board (Maritime Code section 182 a).

General average and the York-Antwerp Rules

General average is a rule for sharing a sacrifice. It applies when an extraordinary sacrifice or expenditure is intentionally and reasonably made for the common safety, to preserve ship and cargo from a peril they face together (York-Antwerp Rules, Rule A). Examples are throwing cargo overboard to save the ship, or the costs of putting into a port of refuge.

The loss is shared between ship, cargo and freight in proportion to the value of what was saved, so owners of undamaged cargo must contribute too. The owner usually demands security, normally a guarantee from the cargo insurer, before the cargo is released. In Norway an average adjuster (dispasjør) decides whether the conditions are met and calculates the shares in an adjustment (Maritime Code section 462).

The sharing follows the York-Antwerp Rules of the international maritime law organisation CMI (Comité Maritime International). Under section 461 of the Maritime Code they apply unless otherwise agreed, and contracts often state which version applies. The latest is the York-Antwerp Rules 2016, approved at the CMI conference in New York in May 2016 (CMI, read 5 Oct 2026).

Collisions and limitation of liability

In a collision, liability is based on fault. If only one ship is at fault, it pays for the whole loss. If both are at fault, liability is shared in proportion to the faults, and equally if the proportion cannot be established. If the collision is accidental, or no fault can be shown, each ship bears its own loss (Maritime Code sections 161 and 162). Fault is judged partly against the international collision regulations (COLREGs), which in Norway are set out in the regulations on preventing collisions at sea.

Limitation of liability means that the shipowner, the registered owner, the charterer and the manager can limit their total liability for claims arising from the same incident to an amount calculated from the ship's tonnage (Maritime Code sections 171 and 175). The limits are set in special drawing rights (SDR), the International Monetary Fund's unit of account, and differ for personal injury and property claims. The rules are based on the Convention on Limitation of Liability for Maritime Claims of 1976, as later amended (LLMC).

The right to limit is lost only if the person liable personally caused the loss intentionally, or recklessly and with knowledge that such loss would probably result (section 174). Claims for salvage and general average contributions cannot be limited under these rules, and oil pollution has its own liability rules in chapter 10 (section 173).

Sanctions and insurance

Insurance is one of the services sanctions target. Companies in the countries behind the price cap on Russian oil may only insure the carriage of such oil if it was bought at or below the cap; see the guide to AIS, sanctions and the shadow fleet.

For the P&I clubs this has two consequences. The club rules contain sanctions clauses: cover does not apply where a payment would expose the club to sanctions. And the clubs have made cover for carrying Russian oil conditional on the member following the price cap rules, including statements about the price (attestations).

Insurance from unknown or thinly capitalised providers is one of the features the authorities point to in the shadow fleet. The risk is that nobody can pay for oil spills, wreck removal and damage to other ships after an accident. In Norway, the Norwegian Maritime Authority can turn away foreign ships without a liability insurance certificate from Norwegian ports (Maritime Code section 182 b).

Sources

• Norwegian Maritime Code (sjøloven) – Lovdata (in Norwegian) – sections 161–162 (collisions), 171–175 and 182 a–b (limitation and compulsory insurance), 254 and 292–308 (general cargo, bills of lading and sea waybills), 322 and 378–392 (chartering), 461–462 (general average)
• GENCON 2022 – BIMCO – the standard voyage charter party, with CONGENBILL 2022; NYPE 2015, BARECON 2017 and SUPPLYTIME 2017 have their own BIMCO pages
• The Nordic Marine Insurance Plan of 2013 – Cefor – the parties behind the Plan and Version 2027, published 1 October 2026; read 5 Oct 2026
• About – International Group of P&I Clubs – twelve clubs, about 87 % of ocean-going tonnage, the retention and the Pooling Agreement; read 5 Oct 2026
• York-Antwerp Rules – CMI – the York-Antwerp Rules 2016
• Convention on Limitation of Liability for Maritime Claims (LLMC) – IMO

The guides are written by OESA students to explain concepts and how things fit together. They are not investment advice. Figures that are not definitions carry a source and a date; if you find an error, let us know at philipstave@oesa-global.com.