Marine Insurance Study Guide Part 1

I. Introduction Chap 3: Marine insurance 1.1. Why need marine insurance? →long practice in int’l trade, có quy định insurance trong các incoterms high value of subject-matter insured/cargo (hàng có gtri lớn cần bảo hiểm) long time to ship (LCL VN-Europe 16~60 days, many risks in transport, war…) legal obligation in int’l trade (liability of carrier) commercial obligation part of the owners risk management risk reduction (risk về fire, thiên tai, rớt hàng…) Losses - Follow up question Who has suffered a loss? → cargo owner (shipper/exporter/LSP), carrier Other costs? → cost related to cargo (repair/replace/repack), cost related to vessel, indemnity/compensation to others (oil pollution, Freight loss? → loss of freight to collect (loss of cargo/sea accident → consignee not pay freight to carrier) Collision liability? Legal liabilities? Salvage (cứu hộ) Wreck removal (di dời, trục vớt,.. xác tàu) Oil pollution and clean up costs, emergency response services → Which insurance covers do you need to have taken out prior to these incidents in order to be protected? Cargo insurance Vessel: hull insurance + P&I (liability insurance) Others How can you cover your interests, and where? – this is what we will look into….. Capital interest (involve money) Income interest Freight interest Third party interests Markets: Scandinavian, English, other (famous for ship building) moving to China,.. 1.2. History of marine insurance A historical view - coi YT ik Oldest type of insurance known – history and traditions affect the markets and covers of today Marine Insurance developed in the Mediterranean, then in England (still the dominant nation - most famous Lloyd) The world of marine insurance has undergone major changes over the past centuries… (type of cargo vd liquid tanker) Risks and liabilities have changed and increased dramatically…..Why and how? (increase in technology → rise in criminal tech?) 1.3. Characteristics of Marine Insurance International (from country to country) Long traditions (both to claim collision -400 years ago) Brokers based High risk profile Few providers and few markets (93.9% Europe, 22.9% Asia/Pacific, 11.7% North America, 2% rest of the world) 1.4. Classification / Types of Marine Insurance Property Insurance ● Hull Insurance: Loss or damage to the vessel itself ● Cargo Insurance: Loss or damage to the cargo ● Freight Insurance: Loss of freight income Indemnity Insurance: Liability of ship owners ● Collision liability insurance: Liability of insured vessel for damage resulting from collision ● Protection and indemnity - P&I insurance: Liability for bodily injury including death or property damage and unexpected vessel related expenditures II. Marine Risks 2.1. Definition of risks Marine risks are the risks that occur on the sea/ the risks of the sea/ the risks related to an ocean voyage. → risks of the Sea (only happen in the Sea, vd băng trôi đá ngầm), in the Sea (can happen in other transport, vd pirate), rủi ro của biển/trên biển 2.2. Types of risks (final) list types of marine risks 2.2.1. Based on causes → risk gây ra bởi gì (5 types) 1. Act of God (thiên tai): bad weather, thunderstorms, and lighting, tsunamis, earthquakes, floods, volcanic eruptions, etc. 2. Accidents (tai nạn vd collision) 3. Perils of the Sea (hiểm họa của biển # accidents, belong to the sea only, mang đặc trưng riêng của biển): bad weather, thunderstorms, and lighting, tsunamis, earthquakes, floods, volcanic eruptions, etc. 4. Political Act (war, SRCC - strikes, riots, civil, commotions, arrest…) 5. Others (nhẹ nhẹ, wear and tear, wet,...) 2.2.2. Based on practice (insurance technique) → thường dùng hơn trong insurance rules, 3 groups ● Insurable risks (common insured risks): 7 (stranding, sinking, fire or explosion, collision, jettison, missing, extraneous/auxiliary risks) → if risks happen, cause loss/damage → get indemnity, dựa vào historical data để list insurable risks ● Extra insurable risks (Relatively excluded risks) → nhóm rủi ro phải bảo hiểm riêng or rủi ro loại trừ kh tuyệt đối, có thể trả tiền thêm để được cover (mua riêng). Gồm có war, SRCC (strike, Riots, and Civil Commotions) VN-near Russia → mua thêm war insurance VN-Japan thì kh cần ● Excluded risks (Absolutely excluded risks): kh bao giờ đc bảo hiểm → wilful misconduct, ordinary leakage/loss/wear-and-tear, insufficiency or unsuitability of packing, inherent vice, delay, insolvency or financial default, atomic or nuclear fission, unseaworthiness of vessel,... *Insurable risks: (Insured common perils: the risks that are normal insured in original insurance clauses) Main risks (Rủi ro chính): all kinds of risks will be insured in any terms and conditions, even if the narrowest; if happened loss will be very large 1. Stranding: The running of a ship or other vessel on shore; it is either accidentally or voluntary → tàu bị mắc cạn - The vessel drives in shallow water - Taking ground - Need external force to get out of the ground (salvage) Safely taking ground: take advantage of tide → chạm đáy an toàn → in consequence of some accidental or unusual occurrence, she comes in contact with the ground or other obstruction, and remains hard and fast upon it + needs an external force in order to getting off the stranding 2. Sinking (chìm): the vessel goes down below the surface of water, go to the bottom - Below the water - Taking ground - Go to the bottom and submerge → nếu chìm mà kh chạm đáy thì có tính là sinking kh, chỉ chìm + floating, xưa VN phải chạm đáy mới tính là chìm, giờ thì đổi chỉ cần under the water sinking thường là result của collision 3. Fire (hỏa hoạn): combustion or burning, in which substances combine chemically with oxygen from the air and typically give out bright light, heat, and smoke fire#burning, hỏa hoạn # cháy, hỏa hoạn = cháy ngoài tầm kiểm soát - Normal fire: crew members smoke cigarettes and throw into cargo - Inherent fire (hỏa hoạn mang tính nội tỳ): the cargo itself could make a fire → insurer kh bồi (cargo là hàng có thể tự cháy vd coal, gas, LNG, LPG), cần ký thêm loại khác cho hàng dễ cháy 4. Collision: a vessel running into another object, fixed or floating, except water → payment for both to blame collision clause = khoản mà cargo owner pay for his carrier (final) both to blame collision clause là gì? + liability of cargo insurer + liability of vessel insurer + liability of P&I insurer 5. Jettison (vứt/ném xuống biển) - to cast (goods) overboard in order to lighten a vessel or aircraft or to improve its stability in an emergency. - to throw off (something) as an obstacle or burden; discard. Causing General Average: for the safety of the trip in an emergency → very popular risk in sea, throw part of the cargo or gear of the vessel overboard to lighten the load and save the vessel → cái này chỉ có trong đường biển thôi vì trên biển là 1 hành trình đơn độc. máy bay ko thả hàng xuống dc 6. Missing: the vessel/cargoes disappear after a period of time - French Law: 6 months for short trip, 12 months for long trip ntn là short/long? short <4000km in sea, long >4000km in sea VN-Sing short - UK Law: 3 times of the voyage, no less than 2 months and exceed 6 months VD: VN-US bth đi mất 1 months → 3 months để notice missing, 23 months VD: VN-Japan 10 days → 30 days, need to wait until 90 days to announce missing T is from the time disappearing (quãng thời gian cần thiết cho tàu đi từ địa điểm dừng lại cuối cùng cho tới bến đến) VD: VN-France >4000km theo luật từng nước French law: long trip → 12 months mới đc notice missing UK law: 2.5*3=7.5 months > 6 months → chỉ cần 6 tháng kể từ khi đi là đã đc ròi VN Marine Code: 1.5*3=4.5 >3 months → 4.5 tháng kể từ khi tàu mất tích (?) 7. Extraneous risks/Auxiliary risks (rủi ro phụ) - Theft, pilferage and / or non-delivery. - Fresh water and rainwater damage. - Hook and / or oil damage. - Heating and sweating. - Damage by mud, acid and other extraneous substances. - Breakage. - Leakage. - Busting / tearing of bags - Pirates (trước thì cướp biển nằm ở war, bây h nằm ở nhóm rủi ro phụ vì có thể xảy ra sea or other modes) → TV dễ nhớ: rách vỡ chảy, bẹt cong vênh, trộm cắp cướp, ko giao hàng, giao thiếu hàng *Extra insurable risks - rủi ro bảo hiểm riêng, rủi ro loại trừ kh tuyệt đối (relatively excluded) 1. Strikes - strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions - any terrorist or any person acting from a political motive. 2. War (the war itself, types of wars) - War; civil war; revolution; rebellion; insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power (result of war) - capture seizure arrest restraint or detainment, arising from risks covered under 1.1 above, and the consequences thereof or any attempt thereat (weapons) - derelict mines torpedoes bombs or other derelict weapons of war. → not include but can choose to buy ⇒ pay extra premium *Excluded Risks / Absolutely excluded risks → kh có ai bán bảo hiểm, kh bao giờ mua đc 1. loss damage or expense attributable to wilful misconduct of the insured → hành động cố ý gây tổn thất của ng được bảo hiểm VD: VN nhập xe máy từ japan, tới HK cố ý tháo rời ra để hưởng tax spare parts ít hơn whole 2. ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject-matter insured → hao hụt tự nhiên 3. loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject- matter insured 4. loss damage or expense caused by inherent vice or nature of the subject-matter insured → nội tỳ của spham (seafood, fruit..), latent defect (ẩn tỳ-kh thể phát hiện bằng các pp) vs inherent vice (nội tỳ-bản chất) 5. loss damage or expense proximately caused by delay, even though the delay be caused by a risk insured against → delay kh đc bồi cho dù delay caused by insurable risks 6. loss damage or expense arising from insolvency or financial default of the owners managers charterers or operators of the vessel VD: VN time charter boat of China, VN carrier for India by C/P, China lien vessel and cargo vì VN kh trả hire → India kh đc bảo hiểm dù China giữ hàng là sai vì đây là financial default of carrier VD: Chủ tàu bán bớt hàng để mua nhiên liệu thì chủ hàng kh đc bảo hiểm bồi thg 7. any claim based upon loss of or frustration of the voyage or adventure 8. loss damage or expense arising from any hostile use of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter. → giống giống war nhma serious hơn, vũ khí hạt nhân nguyên tử, sử dụng chất phóng xạ, vũ khí chiến tranh/hạt nhân không đc bảo hiểm (tiêu chuẩn k đc là catastrophic loss) 9. unseaworthiness of vessel or craft, unfitness of vessel craft conveyance container or liftvan for the safe carriage of the subject-matter insured, where the Assured or their servants are privy to such unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein. → seaworthiness of vessel: proper crew member, hầm hàng sạch sẽ sẵn sàng để chở hàng,... (Ngân + Liên) Marine Insurance Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or property by which cargo is transferred, acquired, or held between the points of origin and final destination. Needs for marine insurance • Exporters and importers face all the time uncertainties of loss of their goods. • Insurance is used to protect their financial interests against such risks and actual losses. • Without adequate insurance and protection of the interests of those with goods in transit, international trade would be negatively affected. • Liability of carriers to the goods is very limited Classification • Marine cargo insurance: covers export- import goods carriage by sea and relatedreasonable costs • Hull insurance: covers material loss of or damage to hull and machinery, a portion of costs for collision liability, and other reasonable costs. • Protection and indemnity insurance: provide cover to shipowners against thirdparties liabilities in connection with the operation of vessels Types of risks ● Base on the causes - Acts of God: vile weather, thunderstorm and lightning, tsunami, earthquake, flood, volcanic eruption, etc. - Perils of the sea: ship striking upon the rocks, ship sinking, ship collision, colliding with iceberg or other objects - Risks caused by Social- political actions: war, SRCC (strikes, riots, civil, commotions) - Risks caused by particular actions of people: thieve, robber - Risks caused by other sources ● Base on the insurance technique - Insured common perils: including main risks (6) and auxiliary risks → total nhớ 7 ý - Relatively Excluded Perils: war, SRCC - Absolutely Excluded Perils: 7 cái History of marine insurance ● Marine insurance as we know it today, can be described as mother of all insurances ● It is believed to have originated in England owing to the frequent movement of ships over high seas for commerce and trade ● Prior to the development of marine insurance, the people across the world, had a system of: ○ – pooling their contributions so that if any one of them suffers loss during voyage ○ – he would be compensated from the pool. ● Today marine insurance has assumed a vast dimensions due to ever expanding trade across the globe ● It involves large shipping companies that require protection: ○ – not only for their costly fleet against the perils of the sea, but also ○ – to the cargo being carried in each of these ships. ● The value of each ship and the cargo carried therein, may be costing millions of usd to the owners. Marine insurance market ● Lloyd’s, a corporation established in London, is the biggest centre for marine insurance in the world ● Lloyd’s was a coffee house frequented by tradesmen, shipowners, and others ● The coffee house became the meeting ground for brokers, insurers, and ship owners for negotiating their business. ● Titanic was insured by Lloyd’s, and Lloyd’s paid an insurance claim of one million $ when Titanic sank in 1912 III. Loss and damages Types of losses level partial <100% (VN), tùy vào civil law of each country total responsibility particular average general average Partial loss/damage: Total loss/damage: rate of loss/damage ● Actual total loss/damage: mất toàn bộ thực tế (actual total loss is when the vessel is lost or beyond repair) ● Constructive total loss/damage: tổn thất toàn bộ ước tính → not actually happen (chưa hoàn toàn, 95%) but ○ cannot avoid actual total loss/damage or ○ cost to cover up to insurance value/amount According to MIP, there is a constructive total loss if the repair cost exceeds 80% of the value of the vessel (final) What is constructive total loss + example? (là gì, khi xảy ra thì có 1 action là abandon, nói về abandonment NOA) NOTICE OF ABANDONMENT Abandonment: the insured abandon all rights and responsibilities of subject matter insured, transfer SMI to the insurer → insurer có thể bán lại cho ai đó, có lợi cho both parties → rule: phải là constructive (not yet happen) mới đc abandon - NOA: tendered and accepted → phải đợi cty bảo hiểm chấp nhận thì mới miễn trách - Cannot change subject matter insured phải là property mới đc abandon, kh đc abandon human beings after the NOA, the subject matter belongs to the insurance company General Average: as the result of General Average Action - General Sacrifice - For the safety of all the people and cargo/vessel - By the people - Cause General Average - Contributed by the rate of rescue - Rules: YORK ANTWERP RULES 2004 (final) what is the general average loss/act? example? (final) So sánh GA PA PA GA Causes of loss Random and unexpected incidents (eg. natural disaster, unexpected accident, acts of God, Perils of the sea) Intentional and reasonable action/act Contribution to loss A particular person personally affected by the damage of their subject matter → bear by themselves There is a contribution between the parties Anyone’s loss is their own responsibility, no contribution Saved interest must contribute Insurance liability Depends on the agreement/conditions in Cargo owners are always the insurance contract (ICC 1982 clause compensated → Immediate A or B or C) compensation regardless of insurance conditions Location where it happened Can occur on sea, river, lake,... associated with water journey Only in the sea Only for marine voyage On sea/land/air (?) that are related to maritime journeys Example Cargo blew away by storm Intentionally throw away cargo for common safety Why GA applied only to losses occurring at sea? → chỉ trên sea mới vứt hàng đc, kh thể vứt khi đang trên air or road → at sea khó có ng help immediately, trên land thì có thể nhờ hỗ trợ General Average - YORK ANTWERP RULES Steps 1. Identify the Value of GA 2. Identify the Value of Rescue 3. Rate of GA 4. Contribution 5. Financial Control (exercises) cal GA Hung Vuong Vsl with insurance value of 10mil transported cargoes of Tocontap (rice, 2 mil in value), and Vinafood 1 (tea, 3 mil in value), Vinafood 2 (coffee, 3 mil in value). During the trip, the storm came and blew away 500,000usd of coffee in the sea. The master decided to threw cargo of Tocontap, loss of 1 mil, for the safety of the whole trip. Freight of all cargoes that will be collected at destination is 500,000usd. The master also decided to speed up the vsl, avoiding the storm are. At port of destination, the master announced GA and asked all the shipper to pay deposit. The repair cost of machine is 200, 000usd. Calculate the contribution to this GA. Answer: Value of GA =GA sacrifice GA cost/expenditure = 1 + 0.2 = 1.2 Value of rescue (at time of GA action) = 10 + 2 + 3 + 2.5 + 0.5 (freight) = 18 Rate = 1.2/18=0.067 Contribution of vessel (shipowner pay) = 0.067*(10+0.5)= 0.7 mil Contribution of Tocontap: 2*0.067=0.133 mil of Vinafood 1: 3*0.067=0.2 mil of Vinafood 2: 2.5*0.067=0.167 mil Financial results: ● Ship owner: 0.7-0.2=0.5 mil (Shipowner đã trả 0.2mil tiền sửa nên trừ ra) ● Tocontap: 0.133-1= -0.867 → nhận lại 0.867 mil (Tocontap bị ném hàng nên trừ ra 1mil (đc nhận lại tiền) ● Vinafood 1: 0.2 mil Vinafood 2: 0.167 mil BT1 nhóm: Rich Queen Vessel with insurance value of 20mil USD transported cargoes of Company 1 (rice, 1 mil USD in value), and Company 2 (tea, 2 mil USD in value), Company 3 (coffee, 3 mil USD in value). During the trip, the storm came and blew away 500,000 USD of coffee in the sea. The master decided to threw cargo of Company 3, loss of 1 mil, for the safety of the whole trip. Freight of all cargoes that will be collected at destination is 300,000usd. The master also decided to speed up the vessel, avoiding the storm area. At port of destination, the master announced GA and asked all the shipper to pay deposit. The repair cost of machine is 250,000usd. Calculate the contribution to this GA Answer: Value of General Average: VGA= GA sacrifice + GA cost/expenditure =1+0.25=1.25 mil Value of Rescue/Contributing interests: Vessel: 20mil Company 1: 1mil Company 2: 2mil Company 3: 3-0.5=2.5 mil Freight to collect: 0.3 mil Vrescue = 20+1+2+2.5+0.3=25.8 mil Rafe of GA = 1.25/25.8=0.04845 Contribution: Shipowner pay: (20+0.3)*0.04845=0.984 mil Company 1: 0.04845*1=0.048 mil Company 2: 0.04845*2=0.097 mil Company 3: 0.04845*2.5=0.121 mil Financial Result: Shipowner: 0.984-0.25=0.734 mil Company 1: 0.048 mil Company 2: 0.097 mil Company 3: 0.121-1= -0.879 mil BT2 nhóm: Poseidon Vessel with insurance value of 100mil USD transported cargoes of Company 1 (rice, 1 mil USD in value), and Company 2 (tea, 2 mil USD in value), Company 3 (coffee, 3 mil USD in value). During the trip, the storm came and blew away 500,000usd of coffee in the sea. The master decided to threw cargo of Company 3, loss of 1 mil, for the safety of the whole trip. Freight of all cargoes that has been paid 300,000usd. The master also decided to speed up the vessel, avoiding the storm area. At port of destination, the master announced GA and asked all the shipper to pay deposit. The repair cost of machine is 250,000usd Calculate the contribution to this GA Answer: Value of General Average: VGA=GA sacrifice + GA cost = 1+0.25=1.25 mil Value of Rescue: Vessel: 100mil Company 1: 1mil Company 2: 2mil Company 3: 3 - 0.5 = 2.5 mil Vrescue = 100+1+2+2.5=105.5 mil Rafe of GA = 1.25/105.5 =0.01185 Contribution: Shipowner pay: 0.01185*100=1.185 mil Company 1: 0.01185*1=0.01185 mil Company 2: 0.01185*2= 0.0237 mil Company 3: 0.01185*2.5=0.0296 mil Financial results: Shipowner: 1.185-0.25=0.935 mil Company 1: 0.01185 mil Company 2: 0.0237 mil Company 3: 0.0296-1=-0.97 mil (Ngân + Liên) Total loss → Shipowner permanently deprived of use of ship ● Actual total loss: means the whole lot of the consignment has been lost or damaged or found valueless upon arrival at the port of destination ● Constructive total loss: is found in the case where the actual loss of the insured goods is unavoidable, or the ship or the consignment has to be abandoned because the cost of recovery would exceed the value of the ship and the consignment in sound condition upon the arrival of the port of destination. e.g. Example 1: A ship carrying grain on its way to the destination port encountered rough seas and big waves and had to stop at the port for refuge. Cereal is soaked in water. It takes 1 month for the ship to reach the destination port Example 2: the ship is valued and insured for 1.5 million USD, the ship is damaged and if repaired, the repair cost is 1.6 million USD Example 3: The ship carrying iron from Kobe to Hai Phong encountered an accident and had to stop at the port for repairs. The costs of storage, unloading, and onward loading exceed the value of the shipment. Constructive total loss Notice of abandonment (NOA): is a notice in which the insured commits to give up all of his rights related to the subject- matter insured to the insurer in order to be fully compensated. Requirements: ● Where notice of abandonment is accepted the abandonment is irrevocable. The acceptance of the notice conclusively admits liability for the loss and the sufficiency of the notice. ● NOA is unnecessary when the consignments have already reached final destination and are in actual total loss Partial loss ● Particular Average: losses of each insured interest individually due to acts of God or Perils of the sea ○ Insurer’s liability: compensate for both of the losses and reasonable costs caused by particular average. ■ Goods: Reasonable costs are the cost used for saving cargo or reducing its damaged measurement. ● General Average: the losses/ damages caused by special expenses and sacrifices that intentionally and reasonably conducted to save the vessel, cargo and freight from a threat in the common ocean voyage. ○ There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure. => General Average are for the common safety of all of the interests (cargo, vessel, freight-to-collect) e.g. A ship carrying goods in stranding status. Order of master: a part of cargo is jettisoned, main engine is damaged (due to the act of forcing the ship off) Result: After repairs at the port of refuge, the ship is able to complete her voyage with the rest of her cargo. Examples • Cargo, freight: – Jettison from underdeck. – Jettison from on deck. – Water or other means used to extinguish a fire on board ship. – Discharge and re-shipment for the purpose of floating a stranded ship when in a position of peril • Ship’s materials: – Masts, spars, sails or rigging cut away for the common safety. – Chains and anchors slipped to avert a threatening peril. – Damage to a vessel's machinery, ropes, winches, windlass and other gear sustained in endeavours to float a stranded ship when in a position of peril. – Damage done in the efforts to extinguish a fire on board or in the process of jettisoning cargo. • Expenditure: – Expenses incurred in floating a stranded ship in peril. – Inward expenses entering a port of refuge to repair damage to ship. – Cost of discharging cargo at a port of refuge for the purpose of repairing damage to ship. – Cost of warehousing, re-shipment of cargo and outward expenses leaving the port of refuge. Essential features: – The loss must be voluntary – It must be properly made – It must be extraordinary in its nature – The object of the sacrifice or expenditure must be nothing other or less than the common safety of ship and cargo – There must be imminent danger, and the object must be the attainment of safety – The loss must be the direct result or reasonably the consequence of the act causing it Contents of GA – GA Sacrifices: to sacrifice properties for the rest ones. – GA Expenditures: consequent costs of GA act or expenditures concerning GA act: ● Salvage cost ● Temporary repairs cost ● Cost at port of refuge ● Wages and maintenance of master, officers and crew reasonably incurred and fuel and stores consumed during the prolongation of the voyage occasioned by a ship entering a port or place of refuge or returning to her port or place of loading ● Interest of 7% shall be allowed on expenditure, sacrifices and allowances in general average until three months after the date of issue of the general average adjustment Ship-owner/ master’s liabilities: – Form GA Notice – Arrange survey service to assess the measure of damage – Send average bond and average guarantee – Arrange GA adjuster – Form Sea Protest (if applicable) Cargo owner’s liabilities: – Declare value of the goods – Receive average bond and average guarantee Legal issues for GA – York Rules 1864 – York- Antwerp 1924 – York- Antwerp 1950, 1974, 1990, 1994, 2004 Amendments of York- Antwerp Rules 2004 (coi thêm slide nếu thích) Calculation: ● Step 1: Determine GA value, which consists of GA sacrifices and expenditures ● Step 2: Determine total value of contributing interests: consists of value of all interests in vessel that were saved by GA act, including properties sacrificed in GA act. Those damages belong to particular average occurred before the GA act are not included in contributing value/ after the GA act are included in contributing value ● Step 3: Determine contributing rate: Rate = total GA value/ total Contributing value ● Step 4: Determine contributing value of each interest C = Contributing rate X contributing value ● Step 5: Determine financial result (actual income/ expenditure of ship owner/ cargo owner after deducting value of the properties or expenditures spending in GA act