With the requirement, each of the above-mentioned ships is subject to assessment and certification. When a ship enters the territorial waters of any member country, the Port State Control officer may exercise power over it such as going on board, carrying out inspections, and asking for the required certificates. Failure to carry the certificates may result in detention of the ship, an order to take remedial measures, or refusal to enter port. The insurance market fully supports the introduction of the ISM Code.
Statistics show that the majority of marine losses are caused by human error.
The ISM Code, therefore, will have the impact of reducing loss both to ships and cargo. The insurance market, therefore, introduced some provisions to deal with the application of the ISM Code. The first clause introduced was the Cargo ISM Endorsement prepared by the Institute of London Underwriters. The Endorsement will also be applicable to shipments on board all other cargo ships and mobile offshore drilling units of 500 GRT or more from July 1, 2002. However, the exclusion will not apply where the insurance has been assigned to a third party claiming hereunder who has bought or agreed to buy the subject matter insured in good faith under a binding contract.