The per sending limit signifies the maximum amount or value the insurance company shall pay in case of loss or series of loss occurring out of a particular single shipment or consignment. If the policy has an add-on of extra coverage of duty on imports the per sending limit will include the amount of duty in the sum insured. If the claim falls within the events covered in the policy but the value is determined basis the investigation is found to be higher than the limits defined under the policy, then the insurance company will only pay a ratable proportion of the loss as the Per Sending limit bears to this higher value in respect of such loss.
The underwriter will review the actual risk and determine what perils will be covered in the marine insurance policy under what conditions. It will be a difficult situation for the insurer if the per sending limit is not mentioned in the schedule of the policy there are chances of liability amount exceeding the capacity of the insurer to pay the claims and incur huge losses in their insurance
Per sending limit clause is mentioned to define the maximum liability of the primary insurer on a specific risk. Clearing mentioning the limit in the schedule of the policy will avoid any cases of confusion in case of a claim by the insured. The per sending limit also helps in determining the premium payable to the insurer on the marine insurance policy.
The reinsurance arrangements are also governed by the exposure to certain commodities with pre agreed per sending limits with a view to stabilize the overall loss experience and maintain solvency margins.
