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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 –

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Marine Insurance in the Historic Perspective – A Review

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  1. Marine Insurance in the Historic Perspective – A Review The Nordic Association of Marine Insurers

  2. Introduction • The lecturer • Administrative issues The Nordic Association of Marine Insurers

  3. 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

  4. 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

  5. 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

  6. 4000 BC The Nordic Association of Marine Insurers

  7. 2000 BC The Nordic Association of Marine Insurers

  8. The Roman Empire The Nordic Association of Marine Insurers

  9. The Nordic Association of Marine Insurers

  10. The Lombards The Nordic Association of Marine Insurers

  11. The Nordic Association of Marine Insurers

  12. The Nordic Association of Marine Insurers

  13. The Venecians The Nordic Association of Marine Insurers

  14. Indo China The Nordic Association of Marine Insurers

  15. The Hansa Merchants The Nordic Association of Marine Insurers

  16. 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

  17. 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 interestif the voyage succeeded, - and forgiven if the vessel is lost The Nordic Association of Marine Insurers

  18. 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) The Nordic Association of Marine Insurers

  19. 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) The Nordic Association of Marine Insurers

  20. Marine Insurance – Historic Background • Insurance as known today starts when exchange of risk becomes law • Law developed from describing accepted conductsand forbidding obviously unfair behaviour to reflect complains from the various interested trading parties The Nordic Association of Marine Insurers

  21. 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 The Nordic Association of Marine Insurers

  22. 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 The Nordic Association of Marine Insurers

  23. 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 The Nordic Association of Marine Insurers

  24. Marine Insurance - Modern trade The Nordic Association of Marine Insurers

  25. Trade • Exchange of capital, goods and services across international borders or territories • Crucial to globalization The Nordic Association of Marine Insurers

  26. 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? The Nordic Association of Marine Insurers

  27. Internationaltrade - goods The Nordic Association of Marine Insurers

  28. International trade - goods The Nordic Association of Marine Insurers

  29. The Nordic Association of Marine Insurers

  30. The Nordic Association of Marine Insurers

  31. Types of ships The Nordic Association of Marine Insurers

  32. The Nordic Association of Marine Insurers

  33. The Nordic Association of Marine Insurers

  34. Types of ships • Tankers • Gas carriers • Bulker carriers • Container ships • RoRos • Passenger vessels • Reefers • Offshore Service vessels • Tugs & barges • Fishing vessels • Inland / river vessels The Nordic Association of Marine Insurers

  35. 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 The Nordic Association of Marine Insurers

  36. Tankers The Nordic Association of Marine Insurers

  37. Tankers • Overseas Everglade / 2008 / 63,000grt / 114,000dwt / ABS The Nordic Association of Marine Insurers

  38. Tankers • Petrokrepost / 1999 / 59,731grt / 105,657dwt / ABS The Nordic Association of Marine Insurers

  39. 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 The Nordic Association of Marine Insurers

  40. Tankers • Chemical – • Brovig Fjord / 2008 / 5,400grt / 7,950dwt / GL The Nordic Association of Marine Insurers

  41. Gas Carriers • LNG – • Margaret Hill / 1974 / 71,804grt / 50,746dwt / DNV The Nordic Association of Marine Insurers

  42. Gas Carriers • LNG – • LNG Kano / 2007 / 98,798grt / 83,961dwt / DNV The Nordic Association of Marine Insurers

  43. Gas Carriers • LPG – • Lady Hilde / 1998 / 2,998grt / 3,183dwt / GL The Nordic Association of Marine Insurers

  44. Gas Carriers • LPG – • Baltic Gas / 1994 / 18,360grt / 23,267dwt / LR The Nordic Association of Marine Insurers

  45. Bulk Carriers • G. B. Corrado / 2008 / 40,154grt / 77,061dwt / ABS The Nordic Association of Marine Insurers

  46. Bulk Carriers • Nord Empathy / 2006 / 30,822grt / 55,803dwt / LR The Nordic Association of Marine Insurers

  47. Bulk Carriers • Shinwa-Maru / 2008 / 151,094grt / 297,541dwt / NK The Nordic Association of Marine Insurers

  48. 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 The Nordic Association of Marine Insurers

  49. Container vessels The Nordic Association of Marine Insurers

  50. Container vessels • Emma Maersk / 2006 / 170,794grt / 156,907 dwt / ABS The Nordic Association of Marine Insurers

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