Loss of Hire

Loss of hire insurance was rarely taken out by Shipowners before the Suez Canal crisis in 1956, when air strikes resulted in the demobilisation of several ships and the closing of the Canal. As a result of the sudden increased demand for tonnage, charter rates soared, and Shipowners felt the need to insure their interest in their vessel’s earning capacity in addition to the traditional hull- and P&I insurance. Rather than insuring only loss of hire in the literal sense, Owners are actually insuring their loss of earnings in general, but the term “loss of hire insurance” has been maintained. What loss of hire insurance covers is the Shipowner’s loss of earnings resulting from physical damage to a particular insured vessel, which must be recoverable under the hull & machinery insurance. However, there are other equally fortuitous events, such as typhoons, floods, strikes in ports, congestion, war or riots, which do not fall within the scope of loss of hire insurance, the reason being that it is assumed the Shipowner would be able to influence to a certain degree the way, in which these events will affect the operation of his vessel.