Category: Marine insurance · Reviewed by Amy Price, Account Executive · Last reviewed 2026-06-05
Marine builders risk insurance covers a vessel under construction against physical loss and damage from commencement of construction through launch, trials and delivery voyage, written principally on the Institute Clauses for Builders’ Risks 1/6/88 with bespoke amendments.
Category: Marine insurance Also known as: marine builders’ risks, MBR, shipbuilders’ risk First codified: Institute Clauses for Builders’ Risks 1/6/88; earlier yards’ wordings from the mid-19th century Related legislation: Marine Insurance Act 1906 [1]
Marine builders risk insurance covers the physical asset under construction at a shipyard — the hull, machinery, equipment, materials and components, both at the yard itself and at the premises of subcontractors and suppliers — against accidental physical loss or damage. Cover typically begins when the first keel block is laid or when materials are first received at the yard, and continues through fabrication, fitting-out, launch, sea trials and (if specified) the delivery voyage to the buyer’s port of choice [3][4].
The standard market wording is the Institute Clauses for Builders’ Risks 1/6/88 (often abbreviated ‘Builders’ Risks 1/6/88’) published by the Institute of London Underwriters and now maintained by the Joint Hull Committee under the auspices of the Lloyd’s Market Association and the International Underwriting Association. The wording provides ‘all risks’ physical damage cover subject to listed exclusions, with separate liability cover for collision and third-party damage during launch and trials. Marine builders risk is normally arranged by the yard for its own account and that of the buyer, supplemented by buyer-arranged delay-in-start-up cover where commissioning revenue is at risk [3][4].
The cover is distinguished from yard plant and machinery property cover (which covers the yard’s own infrastructure), from yard liability cover (third-party legal liability of the yard) and from marine general liability covers placed alongside. Together these comprise the full insurance programme of a shipbuilder [4].
Marine builders risk is a contract of marine insurance falling within the Marine Insurance Act 1906, with the buyer typically holding insurable interest progressively as construction milestones are passed and instalment payments made under the shipbuilding contract. The standard shipbuilding contract forms (BIMCO Newbuildcon; SAJ Form for Japanese yards; CMAC Forms for Chinese yards) all contain extensive provisions on risk allocation, insurance, indemnities and the consequences of total loss or damage during construction [3].
Title generally passes to the buyer either on delivery (the conventional position under SAJ-form contracts) or progressively in line with payment milestones (under English-style contracts such as Newbuildcon, with title passing as instalments are paid). The insurance programme tracks the contractual allocation of risk: the yard generally bears physical risk to the vessel until delivery, but with the buyer paying the premium directly or indirectly through the contract price [1][3].
Where a launch or sea-trial collision occurs causing third-party liability, the cover responds for liability up to specified limits, with separate exposure handled through marine general liability or yard liability policies. Sea trials may involve a temporary registration and a flag state inspection regime, but full classification and certification under SOLAS, MARPOL and other IMO conventions is the responsibility of the yard’s appointed classification society until delivery [4].
A builders risk programme is structured around the contract value of the vessel, which is uplifted to take account of buyer’s supplied items, owner’s items installed during fitting-out, and the loss of profit and overhead on incomplete work that would result from a major loss. Limits are typically set at the contract value plus an agreed margin (usually 110% to 125%) and apply per occurrence and in the aggregate. Premiums are paid in instalments, often as a percentage of the contract value, with adjustment at completion [3][4].
Cover ordinarily extends to materials and components on order at suppliers, in transit to the yard, in storage at the yard or at a subcontractor’s premises and during installation. Specific covers can be added for launch (a particularly high-risk operation traditionally underwritten separately or with a higher deductible), for sea trials (commonly with a navigation limit warranty restricting the trial area) and for the delivery voyage from the yard to the buyer’s specified port [4].
A builders risk claim involves close cooperation between the yard, the buyer, the appointed classification society, the underwriters’ surveyor and the average adjuster. Common loss scenarios include fire in machinery space during outfitting, blocks dropped during construction, weather damage to the wet basin, contamination of paint, faulty welding and damage during launch. Construction defect exclusions (notably the LSW 1131 ‘faulty design or workmanship’ exclusion or the equivalent ‘DE3’ or ‘DE4’ provisions) are heavily negotiated and are a frequent source of dispute [3][4].
The Institute Clauses for Builders’ Risks 1/6/88 is the dominant wording but is often supplemented by bespoke clauses negotiated for the specific contract. The Joint Hull Committee Builders Risks form (JHB) and the IUA Builders Risks form (IUA 9/97) are alternative wordings used in particular markets. Yards in the United States often use a domestic ‘shipbuilders’ risk’ wording that diverges from the Institute Clauses on key points including defects exclusion and inclusion of materials at subcontractors.
Delay-in-start-up cover (DSU) for vessels under construction is written either as an extension to the builders risk policy or as a separate placement, providing cover for loss of earnings of the completed vessel arising from a physical-damage event that delays delivery. Cover typically attaches at a specified deductible measured in days and runs for a maximum indemnity period.
Yacht builders risks for large pleasure craft is written on bespoke wordings reflecting the higher proportion of luxury fit-out and the corresponding loss profile. Project-specific builders risks for offshore platforms, drilling rigs and floating production units (FPSO/FPU/FLNG) are larger placements typically led by Lloyd’s energy syndicates and include onshore fabrication yards, transportation and offshore installation phases.
A Korean shipyard is constructing a 174,000 m³ membrane-type LNG carrier under a Newbuildcon-form contract with a UK-listed owner for a contract price of US$240m. Builders risk insurance is placed by the yard on Institute Clauses for Builders’ Risks 1/6/88 with a sum insured of US$300m (125% of contract value to allow for buyer-supplied items and total-loss recovery) and a delivery voyage extension to a UK port. During fitting-out a fire in the engine room causes damage estimated at US$28m, plus a six-month delivery delay. The builders risk policy responds for the physical damage, less the agreed deductible; the buyer’s separate delay-in-start-up cover responds for the contractual demurrage payable to its first charterer under a long-term hire agreement, subject to the DSU deductible and indemnity period. Figures in this example are illustrative.
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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