Insurance of newbuildings, conversions, and repairs

Before the vessel is handed over to the owner, the shipyard carries the risk of damage to the newbuilding and of losses caused to third parties or the shipyard facilities by the ship itself whilst under construction. This often happens when floating or launching the ship or during the sea trial. The customary principles of coverage under builders' risk insurance are listed in the box (below right).

Conversions and repairs to ships are covered under special conversion and repair policies. As conversions usually take longer than repairs, the vessel is often taken out of the hull insurance cover for the period of construction and is covered under a conversion insurance together with the conversion works performed by the shipyard. The principles of coverage are the same as in the case of a newbuilding.

Whilst the ship is undergoing repairs, the owner usually remains protected by hull insurance. Unlike the shipyard, which is covered, on the one hand, for losses involving the repair work it performs (repair insurance) and, on the other, for damage to the ship it is repairing (liability insurance). The cover for the shipyard's two different risks may also be combined under a composite repair and liability cover.

Builders' risk insurance usually covers the following:

• —
  Loss of or damage to the newbuilding and its equipment, such as nautical instruments and fixtures
• —
  Loss of or damage to the shipyard facilities due to the impact of the newbuilding or its equipment (the slipway and the keel blocks are often excluded from the cover, however)
• —
  The costs of raising or removing a newbuilding and clean-up costs
• —
  Loss or damage during floating operations or launching, shifting to the fitting-out quay, and while moored at the fitting-out quay
• —
  Loss or damage during the sea trial

« back  |  continue »