Danish Marine Insurance.docx

SUMMARY

A simple definition of the word insurance would be “Protection against future loss.” Marine insurance is another variant of the general term ‘insurance’ and as the name suggests is provided to ships, boats and most importantly, the cargo that is carried in them. Marine insurance is very important because through marine insurance, ship owners and transporters can be sure of claiming damages especially considering the mode of transportation used. Of the four modes of transport – road, rail, air and water – it is the latter most which causes a lot of worry to the transporters not only because there are natural occurrences which have the potential to harm the cargo and the vessel but also other incidents and attributes which could cause a huge loss in the financial casket of the transporter and the shipping corporation. Incidents like piracy and possibilities like cross-border shoot-outs also pose a major threat when it comes to water transportation and therefore in order to avoid any loss because of such events and happenings, in the interest of the corporation and the transporter, it is always beneficial to have a back-up like a marine insurance. Another important aspect of having marine insurance is that a transporter can choose the insurance plan as per the size of his ship, the routes that are taken by his ship to transport the cargo and many such minor points which could go a great length in affecting the transporter majorly. Also, since there are various plans and policies which indicate about covering not just the cargo but also the vessel, the transporter can choose and avail of the best policy that suits his business the best. However, as much as marine insurance provides fair claim to transporters and corporations, it has to be understood that marine insurance is also one of the trickiest and strictest insurance areas right from the time the concept of marine insurance commenced – i.e. from the 17th century onwards. While dealing with the scope and range of marine insurance, it is very important that a ship’s captain follows a rigid protocol in terms of the route taken and the time taken for the cargo and the vessel to reach the intended port of destination. Because if there is any discrepancy or violation in terms of the route taken, i.e. if the captain varies or digresses in his route from the one originally intended as a part of the ship’s course, then even if there is any mishap occurring to the vessel or the cargo, the insurance claim will be rejected completely without any possibility of the claim being reimbursed to the claimant at some future date after a few tough negotiations. Therefore it becomes very important that a ship’s captain takes due consideration about the prescribed routes so as to avoid a failed insurance contract because of an unplanned loss due to the deviation in the route. This would bring about not just caution on the part of the captain but would also reduce the possibility of losing important insurance claims because of inadvertence and negligence.

Marine insurance is a safe haven for shipping corporations and transporters because it helps to reduce the aspect of financial loss due to loss of important cargo. Also, it helps to bring about to the transporting companies and to the receiving parties, the duty, dedication and the straightforwardness of the insurance companies.

1 INTRODUCTION

Marine insurance is basically a protection of ship, cargo or property due to loss or damage while it is in transit from one place to other. A marine insurance agreement is a contract in which the insurer covers the assured, in the event of losses incurred during transit. The amount of insurance is decided by the insurer. The Marine Insurance is particularly beneficial for those business owners who travel a lot or deal with high-value items. The origin of this policy cover dates back to 17th century when one of the insurance company of London started it for its clients. They introduced the concept of inland marine coverage to guarantee goods coverage even after it had been unloaded from the ship. Not to be left behind, the practice spread to London merchants during the 16th century. At first a group of merchants gathered together and agreed to bear all risks among themselves, a sort of mutual insurance. Common law played little or no part in resolution of disputes concerning the sharing of losses. In 1601 merchants in London secured the establishment by statute a chamber of assurance that was outside the normal legal system.

The great London fire of 1666 aroused public conscience and paved the way for insurance as an answer to make good damage and disaster to public property and loss of innocent lives. It was Lord Mansfield as the Lord Chief Justice in the mid-eighteenth century applied principles derived from merchant law as well the more traditional common law concepts to resolve disputes over insurance and by the time of his retirement in 1788, the jurisdiction of the courts over insurance matters had been established.

Marine insurance retained its prominent position for some considerable time and from the late 17th century onwards was increasingly transacted at a coffee house in the city of London owned by George Lloyd who acted as an intermediary and also doubled as an arbitrator over disputes among merchants concerning their insurance agreements and losses.

Merchants who were gathered in Lloyd’s coffee house wanting insurance would pass round to the people assembled there and willing to provide insurance a slip of paper containing details of the shippers, ship, cargo, voyage etc. Those willing to accept a share of the risk inscribed their name and signature on the slip under the information about ship, cargo, voyage etc. Lloyd offered to assist the merchants in this endeavour by offering his services for a small fee.

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PRECLUDE

Marine insurance was the earliest well-developed kind of insurance, with origins in the Greek and Roman marine loan. it was the oldest risk hedging instruments our ancestors used to mitigate risk in medieval times were sea/marine (Mutuum) loans, commend contract, and bill of exchanges .Separate marine insurance contracts were developed in Genoa and other Italian cities in the fourteenth century and spread to northern Europe. Premiums varied with intuitive estimates of the variable risk from seasons and pirates. Modern marine insurance law originated in the Lex Mercatorian (law merchant). In 1601, a specialized chamber of assurance separate from the other Courts was established in England. By the end of the seventeenth century, London's growing importance as a centre for trade was increasing demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house on tower street in London. It soon became a popular haunt for ship owners, merchants, and ships' captains, and thereby a reliable source of the latest shipping news.

Lloyd's Coffee House was the first marine insurance market. It became the meeting place for parties in the shipping industry wishing to insure cargoes and ships, and those willing to underwrite such ventures. These informal beginnings led to the establishment of the insurance market Lloyd's of London and several related shipping and insurance businesses. The participating members of the insurance arrangement eventually formed a committee and moved to the Royal Exchange on Cornhill as the Society of Lloyd's. The establishment of insurance companies, a developing infrastructure of specialists (such as shipbrokers, admiralty lawyers, bankers, surveyors, loss adjusters, general average adjusters, et al.), and the growth of the British Empire gave English law a prominence in this area which it largely maintains and forms the basis of almost all modern practice. Lord Mansfield, Lord Chief Justice in the mideighteenth century, began the merging of law merchant and common law principles. The growth of the London insurance market led to the standardization of policies and judicial precedent further developed marine insurance law. In 1906 the Marine Insurance Act codified the previous common law; it is both an extremely though and concise piece of work. Although the title of the Act refers to marine insurance, the general principles have been applied to all non-life insurance. In the 19th century, Lloyd's and the Institute of London Underwriters (a grouping of London company insurers) developed between them standardized clauses for the use of marine insurance, and these have been maintained since. These are known as the Institute Clauses because the Institute covered the cost of their publication. Out of marine insurance, grew non-marine insurance and reinsurance. Marine insurance traditionally formed the majority of business underwritten at Lloyd's. Nowadays, Marine insurance is often grouped with Aviation and Transit (cargo) risks, and in this form is known by the acronym 'MAT'. It is common for marine insurance agencies to compete with the offerings provided by local insurers. These specialist agencies often fill market gaps by providing cover for hard-to-place or obscure marine insurance risks that would otherwise be difficult or impossible to find insurance cover for. These agencies can become quite large and eventually become market makers. They operate best when their day to day management is

independent of the insurers who provide them with the capital to underwrite risks on their behalf

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OBJECTIVE