Category: Marine · Reviewed by Tim Roche, Director · PI & Commercial · Last reviewed 2026-06-05
Average in marine insurance is the framework for adjusting partial losses to a marine adventure, divided by sections 64 to 66 of the Marine Insurance Act 1906 into particular average (a partial loss falling on a single interest) and general average (a sacrifice or expenditure made for the common safety, shared between all interests in the adventure).
Category: Marine insurance Also known as: marine average, partial loss adjustment, average loss First codified: Marine Insurance Act 1906, ss.64–66; York-Antwerp Rules from 1890 Related legislation: Marine Insurance Act 1906 [1]; York-Antwerp Rules (private code) [4]
In marine insurance, ‘average’ refers to a partial loss. The term derives from the medieval Italian avaria (later French avarie), meaning damage or loss to a maritime venture. Whereas a total loss results in payment of the full insured value (an actual total loss being defined in s.57 of the MIA 1906 and constructive total loss in s.60), a partial loss may be a particular average (a partial loss borne by one interest), a general average (shared loss), or a salvage charge incurred to save property from peril [1][3].
The Marine Insurance Act 1906 provides the statutory framework. Section 64 defines particular average as ‘a partial loss of the subject-matter insured, caused by a peril insured against, and which is not a general average loss’. Section 66 defines general average loss as ‘a loss caused by or directly consequential on a general average act’ - that is, ‘any extraordinary sacrifice or expenditure voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure’. Section 65 deals with salvage charges, recoverable as a loss by perils insured against [1].
Average matters because marine adventures historically involved multiple interests at risk in a single voyage: the ship, the cargo (often belonging to multiple owners), and the freight (the carrier’s earnings). When losses occur, the allocation of those losses between interests depends on whether they are particular average (one interest bears its own loss) or general average (the losses are shared among all interests in proportion to their value).
The average framework remains the foundation of marine loss adjustment, supplemented by the York-Antwerp Rules for the detailed mechanics of general average adjustment and by the professional services of average adjusters who prepare the adjustments in major cases.
Sections 64 to 66 of the MIA 1906 are the principal statutory provisions. Section 64 defines particular average and includes ‘particular charges’ (expenses incurred by or on behalf of the assured for the safety or preservation of the subject-matter insured, other than general average and salvage charges) as recoverable but not as particular average. Particular charges are commonly addressed through the ‘sue and labour’ clause in modern policies, which permits and requires the assured to take reasonable steps to minimise loss and recover the resulting expense [1].
Section 66 sets out the law of general average in considerable detail. The section codifies the common law as developed over centuries, with the seminal case of Birkley v Presgrave (1801) 3 East 220 (sometimes also cited as 3 Esp 89) providing the classic definition of general average. Lord Lawrence stated: ‘All loss which arises in consequence of extraordinary sacrifices made or expenses incurred for the preservation of the ship and cargo come within general average, and must be borne proportionally by all who are interested’ [1][5].
Section 66 also provides for: the assured’s right to claim general average loss from the insurer (s.66(4)); the requirement of contribution from non-insured property under general average bond or guarantee; and the insurer’s right to recover from other interests by subrogation in cases where the assured has paid more than its proper share. Section 78 imposes the duty of sue and labour. Section 79 confirms the insurer’s right of subrogation on payment.
Modern general average adjustment is governed by the York-Antwerp Rules by incorporation in the contract of carriage (typically the bill of lading or charterparty). The Rules are not statutory but are a private code adopted by international agreement and revised periodically through the Comité Maritime International. The current standard versions are York-Antwerp Rules 1994 and 2016, though earlier versions (notably 1974 and 1994) remain in widespread use [4][5].
Salvage charges under s.65 are governed in English law by the Merchant Shipping Act 1995 (incorporating the International Convention on Salvage 1989) and by the LOF (Lloyd’s Open Form) salvage contract, the standard market salvage agreement.
Average issues arise when a marine casualty causes partial loss. The first step in any loss is to identify whether the loss is particular average, general average, salvage or some combination. Examples of pure particular average include heavy weather damage to cargo in a single hold, sweat damage to a single consignment, and grounding damage to the ship’s bottom plating. The cost is borne by the insurer of the affected interest [1][3].
General average arises when the master or shipowner makes an extraordinary sacrifice or expenditure for the common safety. Classic examples include: jettison of part of the cargo to refloat a stranded vessel; deliberate damage to a hold by firefighting to extinguish a fire that threatens the whole vessel; payment of salvage to a salvor who has saved the entire adventure; or sacrificial use of fuel beyond normal consumption to escape a peril. The loss is shared between all interests (ship, cargo, freight) in proportion to their values, with the adjustment prepared by an average adjuster [1][4].
Practical handling involves: declaration of general average by the shipowner; issue of general average bonds (signed by cargo owners) and guarantees (issued by their insurers); appointment of an average adjuster; collection of evidence and values; preparation of the adjustment over a period that may run to years for complex cases; and ultimate payment of contributions. Cargo owners typically face requests to provide GA security as a condition of release of their cargo, which insurers under Institute Cargo Clauses cover are required to provide on the assured’s behalf.
Salvage operations under LOF (Lloyd’s Open Form) result in salvage awards arbitrated in London under Lloyd’s Salvage Arbitration Branch procedures. The award is shared between interests in proportion to the salved values, broadly in parallel with general average contribution.
The principal variants of average are well established: particular average (single interest); general average (shared); salvage (paid for rescue services); particular charges (sue and labour, falling on the affected interest); and special charges (incurred for ascertainment of loss, not falling within average per se).
Coverage variations across the Institute Cargo Clauses affect how average claims are handled. ICC (A) covers particular average from any cause not excluded, ICC (B) covers particular average from named perils, and ICC (C) covers only the narrowest particular average from major casualties. All three include cover for general average contribution and salvage charges in cl.2 of the respective wordings.
The franchise and excess provisions in older marine policies addressed average specifically. The ‘memorandum’ in the SG Form excluded particular average for certain commodities (grain, salt, fruit) below specified percentages of damage, treating partial losses below the threshold as not covered. Modern policies use deductibles rather than franchises, with the deductible applying per loss rather than as a threshold for cover.
US average concepts run broadly in parallel with English law, with the American Institute Marine forms reflecting similar distinctions. Civilian European systems use different terminology but the underlying concepts of single-interest partial loss and shared sacrifice are common to all maritime traditions.
A bulk carrier with cargo of 50,000 tonnes of agricultural products grounds on a reef during a coastal passage. The vessel sustains hull damage estimated at $2.8m, and part of the cargo (approximately 5,000 tonnes) is damaged by seawater entering the breached hold. Salvors are engaged under LOF and refloat the vessel, with a salvage award subsequently arbitrated at $1.6m. The shipowner declares general average. An average adjuster is appointed and prepares an adjustment over the following 18 months. The adjustment classifies losses as follows: hull damage from grounding contact - particular average to the ship (paid by hull insurance); cargo damage from seawater - particular average to cargo (paid by the cargo insurer under ICC (A), if the relevant policy applies); salvage cost - general average, shared between ship, cargo and freight in proportion to their values at the port of refuge (each contribution paid by the respective insurer). The shipowner’s P&I Club handles any pollution and wreck removal exposures.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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