Early civilizations, which arose by waterways, depended on watercraft for transport. The Egyptians were probably the first to use sea-going ships (Vessels) for transportation of goods and the need of protecting the interest of Shipowners and Cargo owners gave birth to Marine Insurance.

To develop a system of prudent underwriting in Marine Insurance, the insurance companies wanted to categorize ships according to the risk, which depended on the ship’s physical condition. However, every categorization required the development of suitable classification criteria. There was a need for a neutral party to protect the interests of the ship owners, the ship insurers and the general public. Therefore, Marine Insurers based at Lloyd’s coffee house in London, attempted to develop a system for the independent technical assessment of the ships presented to them for insurance cover.

What is classification?

Marine classification is a system for promoting the safety of life, property, and the environment primarily through the establishment and verification of compliance with technical and engineering standards for the design, construction and life-cycle maintenance of ships, offshore units and other marine-related facilities.

In 1760 a committee was formed for this purpose and the first classification society was founded in 1760 under the auspices of Lloyd’s and its first Register of Ships was published in 1764 which is still in existence today.

Initially, an attempt was made to ‘classify’ the condition of each ship on an annual basis. The condition of the hull was classified A, E, I, O or U, according to the excellence of its construction. Equipment was classified into 3 categories- G (good), M (middling-mediocre), or B: (bad). In due course G, M and B were replaced by 1, 2 or 3, which is the origin of the well-known expression ‘A1’, meaning ‘first or highest class’.

The concept of classification slowly started spreading to other countries and insurance markets with the establishment of several other major Classification Societies and similar registers were founded in other marine states

What is Classification Society & IACS?

A Classification Society is an organisation which:

(i) publishes its own classification rules in relation to the design, construction and survey of ships. verify the structural strength and integrity of essential parts of the ship’s hull and its appendages, and the reliability and function of its machinery which have been built into the ship to maintain essential services on board.

(ii) verifies compliance with these rules during construction of ship and periodically during a classed ship’s service life; and by verifying compliance with international and/or national statutory regulations

(iii) publishes a register of classed ships.

As the classification profession evolved, the practice of assigning different classifications has been superseded, with some exceptions. Today a ship either meets the relevant class society’s Rules or it does not. Consequently, it is either ‘in’ or ‘out’ of ‘class’. It means a ship is either classified or not classified without any gradation. Classification Societies are often simply referred to as ‘Class Societies’ or just ‘Class’.

With the passage of time several societies came into operation, and this led to setting up of International Association of Classification Societies (IACS) – a technically based non-governmental organization with Head Quarter in London in 1968.

IACS provides a forum within which the member societies can discuss, research, and adopt technical criteria that enhance maritime safety. It strives to facilitate an exchange of knowledge of technical developments and works to harmonize classification rules and survey procedures among its members.

A Classification society is an impartial organization and is neither controlled by anyone nor does it have any interest in ship-owners, shipbuilders or others engaged commercially in the manufacture, equipping, repair or operation of ships. One of the principal objectives of the classification system is to develop safety standards in the shipping industry so as to enhance the safety of life and property at sea. These standards are contained in rules established by each Society for building and operating merchant vessels, supervise the construction of new ships on behalf of shipyards.

A Classification society consists of technical experts and its primary activity is the certification of ships. A ship owner or a shipyard engages them to verify that the ship is built or maintained in accordance with the rules of the classification society. If A ship has been designed and built as per Rules of a particular Society and   ship meets the requirements of the class rules, a class certificate is issued by that Society and ship is considered as Classed vessel by the Insurers. For this reason, classification societies are referred to as the unofficial policemen of the maritime world. However, such a certificate cannot be construed as a warranty of safety, fitness for purpose or seaworthiness of the ship which must be entirely assured by the ship owner. It is an attestation only that the vessel is in compliance with the Rules that have been developed and published by the Society issuing the classification certificate.,

Further, Classification Societies are not guarantors of safety of life or property at sea or the seaworthiness of a vessel because the Classification Society has no control over how a vessel is manned, operated, and maintained between the periodical surveys which it conducts.

These Classification societies also keep in mind International Convention for the Safety of Life at Sea, (SOLAS), 1988 Protocol to the International Convention on Load Lines. The United Nations Convention on the Law of the Sea (UNCLOS) and various international conventions under the auspices of International Maritime Organization (IMO)

How many Classification Societies are there?

Today, though there are several such classification societies across the world   but only 12 internationally recognized classification societies are members of the International Association of Classification Societies (IACS) as under:

  1. American Bureau of Shipping(ABS)- US
  2.  Bureau Veritas (BV) -France
  3. Croatian Register of Shipping– CRS- Croatia
  4. China Classification Society-CCS- China
  5. Det Norske Veritas DNV- Norway
  6. Indian Register of Shipping – IRS-India

The names of these societies are suffixed with an acronym to give a classification Society identity to ships.

Indian Register of Shipping (IR Class)

IRS was founded in 1975 to act as a catalyst of self-regulation by Indian Shipping Industries and to serve as a forum for research and development. It was established and registered as not for profit public limited company. It became member of IACS in 1991 and has been providing ship classification services since then.Today, IR Class acts on behalf of the Maritime Administration of Government of India as the sole authority for final assignment of Load Lines in Indian flag vessels and also as the security organization that determines compliance under  the International Ship and Port Facility Security (ISPS) Code for Indian flag ships and port facilities. IRS was appointed as the only recognized organization for conducting audits under the ISM Code for all Indian flag vessels.

The International Underwriting Association(IUA) under the Institution Classification Clause recognizes the IRS and by  virtue of this ships classified under the IRS would not attract any extra premium. IRS carries out statutory design appraisal, surveys and certification work on behalf of Flag States, when so authorized by the Governments of such states via the International Maritime Organization Conventions and Codes such as International Convention on Load line, International Convention for the safety of Life at Sea (SOLAS), International Tonnage Convention and International Convention on Maritime Pollution Prevention (MARPOL).

Today, more than 90% of the world’s cargo-carrying ships’ tonnage is covered by the classification standards set by member societies of IACS.  Current list of IACS members is available at www.iacs.org.uk.          

Importance of Classification in Marine Insurance

Simultaneously, with the growth of classification societies the insurers were looking forward to utilization of ship classification information for insurance of Cargo and Ships. This led to the development of Institute Classification Clause.

  • Currently Institute Classification Clause (1/1/2001) is used for all cargoes which are sent through Ships. According to the Institute Classification Clause, the insurance agreed in a policy applies only to cargoes carried by vessels classed with a classification society that is a member or associate member of the International Association of Classification Societies (IACS). This clause is attached  to cargo policy where cargo is being carried in ships
  • The purpose of this clause is to ensure that  carrying ships are not overage and are maintained well. A vessel classified by a classification society is of specified age and in good condition

As per this clause, this insurance and the marine transit rates as agreed in the policy or open cover apply only to cargoes and/or interests carried by mechanically self-propelled vessels of steel construction classed with a Classification Society which is a member or Associate Member of the International Association of Classification Societies (IACS*),

Or

  •  a National Flag Society as defined below, but only where the vessel is engaged exclusively in the coastal trading of that nation (including trading on an inter-island route within an archipelago of which that nation form’s part).
  • For Cargoes and/or interests carried by vessels not classed as above must be notified promptly to underwriters for additional premium
  • Age Limitation – Cargoes and/or interests carried by Qualifying Vessels (as defined above) which exceed the following age limits will be insured on the policy or open cover conditions subject to an additional premium to be agreed.
    Bulk or combination carriers over 10 years of age; or other vessels over 15 years of age.
  • The requirements of this Clause do not apply to any craft used to load or unload the vessel within the port area.
  • National Flag Society- A National Flag Society is a Classification Society which is domiciled in the same country as the owner of the vessel in question which must also operate under the flag of that country.

Relevance of Classification Society in Marine Underwriting and Claims

Cargo Insurance- The cargo going by sea is subject to Institute Classification Clause (1/1/2001) and if ship does not comply with the provisions of this clause and there is a claim under Cargo Policy then claim may not be admissible.

Hull Policy- The insurance under Hull Policy is subject to Class of the ship declared /accepted at the time of granting insurance. This cover under Hull Policy automatically terminates if there is change of the Classification Society of the Ship, or the class has been changed, suspended, discontinued or class has been withdrawn or validity of Class has expired. However, if the Vessel is at sea, then such automatic termination shall be deferred until arrival at her next port.

Further where such change, suspension, discontinuance, or withdrawal of her Class has resulted from loss or damage covered under Hull Clause, then such automatic termination shall only operate provided the Vessel sail from her next port without the prior approval of the Classification Society.

Classification societies have been incorporated into the maritime system quite seamlessly. They have been playing vital role in the overall maritime operations for more than two centuries which is important not only for insurers but also for Ship Builders, Ship owners and general public.

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