Definition:Loss of hire insurance (LOH)
🚢 Loss of hire insurance (LOH) is a specialized marine insurance product that indemnifies a shipowner for the revenue lost when a vessel is taken out of service following an insured peril, such as a collision, grounding, or machinery breakdown. Often described as the marine equivalent of business interruption insurance, LOH covers the daily earnings a vessel would have generated during the period it remains off-hire — that is, unable to fulfill its chartering obligations. The coverage typically sits alongside a vessel's hull and machinery policy and is underwritten by many of the same markets, including Lloyd's syndicates and major Nordic and Asian marine insurers.
⚙️ When a covered incident forces a vessel into dry dock or renders it inoperable, the LOH policy begins to respond after a pre-agreed deductible period — commonly 14 or 30 days — during which the owner absorbs the financial loss. Once the deductible is exhausted, the insurer pays a pre-agreed daily amount (the "daily indemnity") for each additional day the vessel remains out of service, up to a maximum indemnity period that is typically capped at 90, 120, or 180 days. The trigger for payment is tightly linked to physical damage or breakdown that falls within the scope of the companion hull policy; purely commercial delays or scheduling disputes do not activate the cover. Claims adjusters and surveyors verify the nature and duration of the repair, and the daily rate is usually negotiated at inception to approximate the vessel's expected charter income.
💡 For shipowners and operators, LOH insurance is a critical tool for managing cash-flow risk in an industry where fixed costs — crew wages, loan repayments, and lease obligations — continue to accrue even when a vessel earns nothing. A large containership or tanker can lose tens of thousands of dollars per day off-hire, and without LOH coverage, an extended repair period could push a marginal operator into financial distress. The product also matters to lenders and mortgagee interest holders, who often require LOH cover as a condition of ship financing. From an underwriting perspective, LOH portfolios demand careful assessment of vessel age, maintenance records, and trade routes, because older tonnage on demanding routes generates claims at materially higher rates.
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