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Marine Insurance in the Historic Perspective – A Review
The Nordic Association of Marine Insurers
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Introduction
• The lecturer
• Administrative issues
The Nordic Association of Marine Insurers
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Marine Insurance - Background
Risicare –
◦ Adventure, chance, gamble, hazard, risk, run risks, take chances
Risk –
◦ Uncertain future results = Probability & Consequences
Principle of Insurance –
◦ Spreading amongst the many the misfortunes of the few
The Nordic Association of Marine Insurers
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Marine Insurance - Background
What is unique to Marine Insurance?
◦ The insured object moves and is subject to a constant change of perils and risks
Types of Marine Insurance – General use of the term:
M - Marine
(A - Aviation)
T - Transport
Energy Offshore / onshore
The Nordic Association of Marine Insurers
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Marine Insurance - Background
Trade: Exchange of goods and services for money
The development of Marine Insurance is directly linked to the development of trade and the risks associated with trade, -
so let’s look at trading patterns;
The Nordic Association of Marine Insurers
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The Nordic Association of Marine Insurers
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The Nordic Association of Marine Insurers
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The Nordic Association of Marine Insurers
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The Nordic Association of Marine Insurers
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The Nordic Association of Marine Insurers
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The Nordic Association of Marine Insurers
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The Nordic Association of Marine Insurers
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The Nordic Association of Marine Insurers
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The Nordic Association of Marine Insurers
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The Nordic Association of Marine Insurers
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Marine Insurance – Historic Background
Risks to traders
◦ Perils of the sea, - loss of or physical damage to ship and cargo
◦ War Risk, - captures and seizures
◦ Robbery / Piracy / Attacks
The Nordic Association of Marine Insurers
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Marine Insurance – Historic Background
Bottomry
◦ Described in the Codes of Hammurabi (Babylon c. 1,700 B.C.) as a type of insurance
◦ A maritime contract by which the owner of a ship borrows money for equipping and/or repairing the vessel and it being stipulated that if the ship is lost in the specific voyage or period, by any of the perils enumerated, the lender shall lose his money
◦ A conditional loan given to a merchant in advance of the voyage, which is to be repaid with interest if the voyage succeeded, - and forgiven if the vessel is lost
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Marine Insurance – Historic Background
Bottomry (cont’d)
◦ The money is at risk for the lender, not the borrower:
A way to finance an adventure
Not a pure loan, - because the lender accepts part of the risk
Not a partnership, - because the money to be repaid is specific
Not pure insurance, - because it does not secure the risk to the merchant’s property (ship or cargo)
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Marine Insurance – Historic Background
Bottomry (cont’d)
◦ The ”insurer” (the lender) has bought an option on the venture’s final value = a futures contract
Described by Plutarch (Greek, A.D. 46 – 120) in Life of Cato the Elder as a way to make money, calling it ”the most disreputable form of money-lending”
Barcelona 1435 - Regulation of bottomry, interest: 30%
Good or bad, the development of trade was dependent on and supported by bottomry as a way to finance a business venture (and trade)
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Marine Insurance – Historic Background
Insurance as known today starts when exchange of risk becomes law
Law developed from describing accepted conducts and forbidding obviously unfair behaviour to reflect complains from the various interested trading parties
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Marine Insurance – Historic Background
Guilds
◦ Based on the mutual principles
◦ Protection against perils of the sea: Danish navigators 11th & 12th century
◦ Use of premium
First written record 1255
”Santa Clara” – October 23, 1347
Oldest document in existence: Pisa to Savona April 24, 1384 – four bales of textiles
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Marine Insurance – Historic Background
London Market
◦ The Royal Exchange
◦ The coffee house of Edward Lloyd 1688
◦ The New Lloyd’s 1774
◦ Insurance companies from ca 1720
◦ State schemes during wars
◦ Marine Insurance Act 1906
Liverpool
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Marine Insurance History - summary
• Developed with trade• Fully developed by the Lombardi and Hansa cultures
and practices• Fully developed when insurance became law and
enforced • Germany, Holland, Belgium and London centers for
marine insurance in 14th – 18th centuries• Lloyd’s• Scandinavia developed own markets in 18th century, -
retaining strong links to the main markets, - especially Antwerp, Hamburg and London
• Modern market structure from late 18th century
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Marine Insurance - Modern trade
The Nordic Association of Marine Insurers
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Trade
• Exchange of capital, goods and services across international borders or territories
• Crucial to globalization
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Modern Trade
• Goods move (manufacturers to consumers)• Free trade / flat world vs. trading barriers• Transporters adapting to the needs of the trades• Financial services adapting to the needs of traders
• Main exchange of goods / Who are the main traders?
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Internationaltrade - goods
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International trade - goods
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The Nordic Association of Marine Insurers
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The Nordic Association of Marine Insurers
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TYPES OF SHIPS
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The Nordic Association of Marine Insurers
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Types of ships
• Tankers• Gas carriers• Bulker carriers• Container ships• RoRos• Passenger vessels• Reefers• Offshore Service vessels• Tugs & barges• Fishing vessels• Inland / river vessels
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Definitions
• Grt – gross register tons: Internal volume of a vessel• Dwt – dead weight tons: Carrying capacity• Class – classification society
• DNV – Det Norske Veritas
• LR – Lloyd’s Register
• ABS – American Bureau of Shipping
• GL – Germanischer Lloyd
• BV – Bureau Veritas
• NK – Nippon Kaiji Kyokai
• others
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Tankers
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Tankers
The Nordic Association of Marine Insurers
Overseas Everglade / 2008 / 63,000grt / 114,000dwt / ABS
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Tankers
The Nordic Association of Marine Insurers
Petrokrepost / 1999 / 59,731grt / 105,657dwt / ABS
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Tankers
The Nordic Association of Marine Insurers
Categories –• Handysize 20 – 30,000 dwt• Handymax approx 45,000 dwt• Panamax approx 79,000 dwt• Aframax 79 - 120,000 dwt• Suezmax 120 – 180,000 dwt• VLCC 200 – 300,000 dwt• ULCC over 300,000 dwt
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Tankers
The Nordic Association of Marine Insurers
Chemical –
Brovig Fjord / 2008 / 5,400grt / 7,950dwt / GL
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Gas Carriers
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LNG –
Margaret Hill / 1974 / 71,804grt / 50,746dwt / DNV
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Gas Carriers
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LNG –
LNG Kano / 2007 / 98,798grt / 83,961dwt / DNV
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Gas Carriers
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LPG –
Lady Hilde / 1998 / 2,998grt / 3,183dwt / GL
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Gas Carriers
The Nordic Association of Marine Insurers
LPG –
Baltic Gas / 1994 / 18,360grt / 23,267dwt / LR
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Bulk Carriers
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G. B. Corrado / 2008 / 40,154grt / 77,061dwt / ABS
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Bulk Carriers
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Nord Empathy / 2006 / 30,822grt / 55,803dwt / LR
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Bulk Carriers
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Shinwa-Maru / 2008 / 151,094grt / 297,541dwt / NK
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Bulk Carriers
The Nordic Association of Marine Insurers
Categories –• Handysize 20 – 30,000 dwt• Handymax approx 45,000 dwt• Supramax approx 60,000 dwt
• Ultramax• Panamax approx 79,000 dwt
• Kamsarmax
• Postpanamax• Capesize 100 - 250,000 dwt• VLOC 250 – 300,000 dwt• Chinamax 400,000 dwt
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Container vessels
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Container vessels
Emma Maersk / 2006 / 170,794grt / 156,907 dwt / ABS
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Container vessels
The Nordic Association of Marine Insurers
Charlotte Mærsk / 2002 / 91,560grt / 109,400dwt / ABS
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Container vessels
The Nordic Association of Marine Insurers
Cepheus J / 2003 / 6,454grt / 8,505dwt / GL
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RoRo vessels
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Tor Botnia / 2000 / 11,530grt / 8,050dwt / LR
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RoRo vessels – Car Carriers
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Torino / 2009 / 61,328grt / 23,559dwt / DNV
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RoRo vessels – Ferries
The Nordic Association of Marine Insurers
Loch Portain / 2003 / 600grt / - dwt / LR
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Passenger vessels
The Nordic Association of Marine Insurers
Ventura / 2007 / 116,017grt / 85,676 dwt / LR
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Passenger vessels
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Anita / - / - / - / -
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Reefers
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Wind Frost / 1989 / 9,072grt / 11,438dwt / LR
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Reefers
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Offshore Service Vessels
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Tugs and barges
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The Nordic Association of Marine Insurers
Fishing vessels
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Inland / river vessels
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The Nordic Association of Marine Insurers64