marine insurance in the historic perspective – a review

Marine Insurance in the Historic Perspective – A Review

The Nordic Association of Marine Insurers

Introduction

• The lecturer

• Administrative issues


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



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



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;


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



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



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)



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)



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



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



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


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


Marine Insurance - Modern trade


Trade

• Exchange of capital, goods and services across international borders or territories

• Crucial to globalization


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?


Internationaltrade - goods


International trade - goods


TYPES OF SHIPS


Types of ships

• Tankers• Gas carriers• Bulker carriers• Container ships• RoRos• Passenger vessels• Reefers• Offshore Service vessels• Tugs & barges• Fishing vessels• Inland / river vessels


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


Tankers


Tankers


Overseas Everglade / 2008 / 63,000grt / 114,000dwt / ABS

Tankers


Petrokrepost / 1999 / 59,731grt / 105,657dwt / ABS

Tankers


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

Tankers


Chemical –

Brovig Fjord / 2008 / 5,400grt / 7,950dwt / GL

Gas Carriers


LNG –

Margaret Hill / 1974 / 71,804grt / 50,746dwt / DNV

Gas Carriers


LNG –

LNG Kano / 2007 / 98,798grt / 83,961dwt / DNV

Gas Carriers


LPG –

Lady Hilde / 1998 / 2,998grt / 3,183dwt / GL

Gas Carriers


LPG –

Baltic Gas / 1994 / 18,360grt / 23,267dwt / LR

Bulk Carriers


G. B. Corrado / 2008 / 40,154grt / 77,061dwt / ABS

Bulk Carriers


Nord Empathy / 2006 / 30,822grt / 55,803dwt / LR

Bulk Carriers


Shinwa-Maru / 2008 / 151,094grt / 297,541dwt / NK

Bulk Carriers


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

Container vessels


Container vessels

Emma Maersk / 2006 / 170,794grt / 156,907 dwt / ABS


Container vessels


Charlotte Mærsk / 2002 / 91,560grt / 109,400dwt / ABS

Container vessels


Cepheus J / 2003 / 6,454grt / 8,505dwt / GL

RoRo vessels


Tor Botnia / 2000 / 11,530grt / 8,050dwt / LR

RoRo vessels – Car Carriers


Torino / 2009 / 61,328grt / 23,559dwt / DNV

RoRo vessels – Ferries


Loch Portain / 2003 / 600grt / - dwt / LR

Passenger vessels


Ventura / 2007 / 116,017grt / 85,676 dwt / LR

Passenger vessels


Anita / - / - / - / -

Reefers


Wind Frost / 1989 / 9,072grt / 11,438dwt / LR

Reefers


Offshore Service Vessels


Tugs and barges



Fishing vessels

Inland / river vessels


The Nordic Association of Marine Insurers64

marine insurance in the historic perspective – a review

Documents

specificnot pure insurance

historic perspective

cargowar risk

pure loan

development of trade

specific voyage

constant change of perils

moneya conditional loan