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Overview on the Practice of Subrogation in Marine Insurance
Subrogation ensures insurers, after indemnifying an insured cargo owner, may exercise rights against liable third parties. In marine insurance, this doctrine safeguards fairness, prevents unjust enrichment, and supports efficient allocation of maritime risks. For Indonesia (aspiring to strengthen its Global Maritime Fulcrum policy) the refinement of subrogation practice reflects a crucial step toward positioning the nation as a trusted hub of cargo carriage, maritime law, and trade governance.
By Setyawati Fitrianggraeni and Marcel Raharja
Introduction
Marine insurance is indispensable to international trade, as the seas remain the primary corridors of cargo carriage. Among its doctrines, subrogation plays a critical role in ensuring insurers can pursue third-party claims after indemnifying insured parties. By preventing double recovery and securing equitable distribution of losses, subrogation sustains both the financial stability of insurers and the integrity of global commerce.
In Indonesia, the significance of subrogation must be understood in light of its Global Maritime Fulcrum (GMF) vision (a national maritime policy designed to elevate the country’s role as a strategic maritime hub). This policy underlines Indonesia’s reliance on shipping and insurance frameworks to ensure safe, competitive, and sustainable maritime trade.[1]
Internationally, subrogation aligns domestic practice with global marine insurance standards, many of which trace their roots to English law, the Hague-Visby Rules, and international arbitration regimes.
This article examines the statutory basis of subrogation under Indonesian law, doctrinal foundations, comparative insights, and the arbitration dimension. It situates the practice within Indonesia’s broader maritime strategy, exploring how strengthening subrogation enforcement contributes to the Global Maritime Fulcrum’s ambition.
Legal Analysis
Statutory Framework in Indonesia
The Indonesian Commercial Code (KUHD) and Law No. 40 of 2014 on Insurance regulate subrogation. Article 284 KUHD affirms that upon indemnification, insurers assume the insured’s rights against liable third parties.[2] Further, the Insurance Law obliges insurers to provide certainty and fairness in claims settlement, implicitly reinforcing subrogation as a mechanism for equitable recourse.
Doctrinal and Comparative Foundations
The principle of subrogation is grounded in indemnity. It places insurers in a “middle” position, ensuring the insured is compensated without allowing unjust enrichment, while giving insurers the right to pursue recovery.[3]Although much of the jurisprudence originates from common law, Indonesian courts have applied similar reasoning in general insurance contexts, including motor vehicle insurance disputes. In South Barito Regency, for instance, courts emphasized that insurers’ subrogation rights are valid provided indemnity has been paid, thus strengthening doctrinal coherence across insurance types.[4]
Application in Marine Cargo Insurance
In marine contexts, subrogation frequently arises when insurers, having indemnified the insured, pursue claims against third parties responsible for loss or damage. One common example is against carriers under bills of lading, where breaches such as improper stowage, delay, or deviation trigger liability. The Hague-Visby Rules[5] (though not directly adopted into Indonesian law) remain persuasive as part of international carriage standards, reinforcing carrier liability frameworks.
However, subrogation in marine insurance is not confined to claims against carriers. It may also be invoked where the insured party is itself a carrier who insures cargo that it owns or transports in a dual capacity as shipper. In such cases, insurers may pursue recovery from other liable third parties (e.g., port operators, stevedores, or subcontractors) depending on contractual allocation of risk. Subrogation therefore functions broadly: whenever loss or damage occurs to insured goods during voyage, insurers who have indemnified the loss may seek recourse against the party actually responsible.
In Indonesia, insurance policies generally include clauses on subrogation rights, and these rights are exercised once indemnity is paid, sometimes accompanied by a Declaration of Subrogation. This document serves as notification to third parties that the insurer has lawfully stepped into the shoes of the insured. The Supreme Court has confirmed the necessity of such formalities. In Supreme Court Decision No. 2821 K/Pdt/2014 (PT Asuransi Allianz Utama Indonesia as Claimant v PT Mulia Borneo Mandiri as Respondent)[6], the Court emphasized that a legal relationship between insurer and third party arises only after the issuance of a Declaration of Subrogation, thereby validating the insurer’s standing to sue. This precedent underscores how subrogation is concretely practiced in Indonesia: indemnity must be paid, rights transferred through declaration, and claims then pursued in court or arbitration as appropriate.
Arbitration Dimension
A pressing issue is whether disputes involving subrogated insurers fall within the competence of arbitration. Generally, arbitral clauses in bills of lading or charter parties bind insurers exercising subrogated rights, since they step into the shoes of the insured. For Indonesia, where policymakers are considering the establishment of a panel of experts capable of overseeing marine insurance cases, recognizing subrogation within arbitral jurisdiction is critical to attracting investor confidence and strengthening dispute resolution in the maritime sector.
Global and Domestic Coherence
By embedding subrogation practice within clear legal and arbitral frameworks, Indonesia not only ensures doctrinal clarity but also harmonizes domestic insurance practice with global trade governance. This supports the GMF’s ambition to transform Indonesia into a “global maritime axis,” where legal certainty becomes a comparative advantage.
Policy and Governance Relevance
Robust subrogation enforcement has implications beyond dispute settlement. It strengthens Indonesia’s insurance market by lowering systemic risk, enhances cargo owners’ trust in indemnity processes, and reduces reliance on costly litigation. From a governance perspective, it complements national maritime policy instruments such as Presidential Regulation No. 16 of 2017 on the Indonesian Sea Policy, which emphasizes integrated maritime governance.[7]
UNCTAD’s maritime profile highlights Indonesia’s role as one of the world’s busiest shipping nations, underscoring the need for reliable insurance practices. By consolidating subrogation within arbitration-ready frameworks, Indonesia can attract more port calls, lower premiums, and enhance its reputation as a predictable trading hub.
Key Takeaways and Actions
- Policymakers/Regulators should clarify statutory language on subrogation in marine insurance, ensuring harmonization with global practice. Furthermore, policymakers/regulator should Institutionalize a dedicated maritime arbitration body with jurisdiction over subrogation disputes.
- Industry/Enterprises should ensure that carriage contracts and bills of lading contain enforceable arbitration clauses that are binding upon insurers, thereby strengthening dispute resolution mechanisms. In addition, marine insurance policies must incorporate clear provisions on subrogation rights to eliminate ambiguity in recovery proceedings. To further reinforce these rights, the practice of subrogation should be supported by proper formalities, such as issuing a Declaration or Notification of Subrogation, which is commonly required under Indonesian practice to establish the insurer’s legal standing in relation to third parties. Close collaboration between enterprises and insurers is also essential to accelerate claims recovery and minimize disruptions in cargo carriage, ultimately fostering smoother commercial operations.
- Legal Practitioners should anticipate arbitral jurisdiction in subrogation disputes and draft contracts to safeguard client interests.
Closing Reflections
Subrogation illustrates how insurance law and maritime governance converge to shape Indonesia’s role in global trade. As Indonesia charts its Global Maritime Fulcrum course, strengthening subrogation doctrine (and embedding it in a maritime arbitration ecosystem) will enhance legal certainty, investor trust, and maritime competitiveness. In doing so, Indonesia positions itself not only as a maritime crossroads but as a legal anchor in the currents of global commerce. (MRA)
References
Cabinet Secretariat of the Republic of Indonesia, ‘President Jokowi Signs Presidential Regulation on Maritime Policy’’ (2017) <https://setkab.go.id/en/president-jokowi-signs-presidential-regulation-on-maritime-policy/ accessed >
Norton Rose Fulbright, ‘Subrogation Claims – Fighting in the Middle’’ (2016) <https://www.nortonrosefulbright.com/en/knowledge/publications/563caf4a/subrogation-claims-fighting-in-the-middle accessed 4 September 2025>
Simanuntak M, Wijaya A and Januardy I, ‘The Principle of Subrogation in Motor Vehicle Loss Insurance in South Barito Regency’ (2025) 5 Journal of Law, Policy, and Humanities 3273
Article 284 of Indonesian Commercial Code or Kitab Undang-Undang Hukum Dagang (KUHD).
Supreme Court Decision No. 2821 K/Pdt/2014, page 22, Points 24 and 25
[1] Cabinet Secretariat of the Republic of Indonesia, ‘President Jokowi Signs Presidential Regulation on Maritime Policy’’ (2017) <https://setkab.go.id/en/president-jokowi-signs-presidential-regulation-on-maritime-policy/ accessed >.
[2] Article 284 of Indonesian Commercial Code or Kitab Undang-Undang Hukum Dagang (KUHD).
[3] Norton Rose Fulbright, ‘Subrogation Claims – Fighting in the Middle’’ (2016) <https://www.nortonrosefulbright.com/en/knowledge/publications/563caf4a/subrogation-claims-fighting-in-the-middle accessed 4 September 2025>.
[4] Manar Simanuntak, Andika Wijaya and Ivans Januardy, ‘The Principle of Subrogation in Motor Vehicle Loss Insurance in South Barito Regency’ (2025) 5 Journal of Law, Policy, and Humanities 3273, 3276.
[5] The Hague-Visby Rules refer to the amended version of the 1924 Hague Rules, introduced by the Protocol of Visby 1968, which establish a uniform legal framework governing the rights and obligations of carriers and shippers in the carriage of goods by sea.
[6] Supreme Court Decision No. 2821 K/Pdt/2014, page 22, Points 24 and 25.
[7] Cabinet Secretariat of the Republic of Indonesia (n 1).
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Marcel Raharja
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