Marine Insurance Term Paper

Pages: 35 (14313 words)  ·  Bibliography Sources: ≈ 23  ·  File: .docx  ·  Level: College Senior  ·  Topic: Economics

SAMPLE EXCERPT . . .
An underwriter, to this day, is the person who undertakes the insurance risk of the company. (Marine Insurance)

Soon the form of marine insurance became extremely popular, and there were many people who entered the field of marine insurance as a profession in itself. This became a great boon to the merchant who could spread out his risks among others. It was thus that the concept of marine insurance came into being. One of the earliest marine insurance companies, the 'Atlantic Mutual Insurance Company', has declared the various aspects and points of the insurance policy that it had undertaken to cover, in the unique charming English of those times. These are, according to that ancient document, fire, and any enemies at sea, the pirates of those days, and thieves of any kind, and rovers. In addition, it declares other risks such as jettisons, arrests, takings at sea, and so on. These were the very real risks of those days, against which merchants had to put up a brave front and carry their cargo across the sea to the other parts of the world.

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The Atlantic Mutual Insurance Company promised the insurer that it would pay him the amount against which he had insured his goods, after due consideration, if there were to occur any losses according to the exhaustive list drawn by the company for the purpose of marine insurance. Any form of marine insurance will always comprise of a set of terms and conditions upon which the insured is served, and the liability of the underwriter is dependant on. These are the conditions that are binding on both parties and, though they are not actually expressed in real terms, are referred to as 'warranties'. These are such conditions that are generally taken for granted that they do exist, like for example, that a particular ship is actually sea-worthy, that the voyage to be undertaken would be made without any sort of detours or deviations, and that the entire undertaking is basically of a legitimate nature, with the ship in question in possession of all the papers pertaining to this issue. (Marine Insurance)

Term Paper on Marine Insurance the Concept of Assignment

Any form of violation on all these aspects of the terms of insurance will result in the insurance becoming null and void, and the insurance company would be able to terminate the insurance. When a marine insurance policy has been undertaken, the terms that occur in the everyday dealings with the company that offers marine insurance are 'general average' and 'particular average'. Interestingly, the term average has evolved from the French word 'aver-age' that actually means 'damage to a ship or to a cargo'. General average refers to the losses that happen when the ship has been on a voyage that has resulted in the sacrifice and loss of cargo or damage to the ship that would have been unavoidable in any case. This was practiced as a normal marine insurance routine whenever a ship undertook a journey, in olden times. Sometimes, a part of the cargo was offered as insurance when the concept of a marine insurance policy was still relatively unknown.

The losses, if any, would be divided among the people who had offered to put up sums of money for the safe travel of the ship in unknown waters. These people were generally the owner of the ship, the owner of the cargo, and the persons who had chartered the ship on its voyage to carry cargo. These three types of people involved in marine insurance were also known as the 'three interests' of the ship, and the names applied to them in terms of insurance are the 'vessel', the 'freight', and the 'shipper'. The losses were divided among these three interests and equally shared by them according to the terms of their interest when there was any loss to the ship, like for example, to the hull, or the mast, or the anchor, or the sails in the course of the journey wherein these items had to be sacrificed for the innate safety of the voyage. An example from a Roman voyage would illustrate this point clearly. If a team of Romans numbering ten in all was to undertake a voyage across the Mediterranean, carrying a cargo of ten sheep each, and a storm were to arise, and it becomes clear to all the members that if they were to survive the storm, a part of the cargo must be compulsorily sacrificed. (Marine Insurance)

Now no one person would want to throw overboard all his cargo of ten sheep. What happens next? A decision must be taken by all the voyagers that would, in effect, result in a lesser amount of loss for all concerned. Therefore the decision would be reached that if one person would throw one of his sheep overboard, then all the others on board would share his loss. Thus it would happen that each person would throw one of his sheep overboard, and therefore ten sheep would be sacrificed at the rate of one each, and there would only be a minimum of loss to all the travelers. Each person on reaching Rome would have for sale nine of the original ten sheep, and thus the one sheep that had been lost would be taken as the contribution to the loss of the cargo by everyone on board the ship, by voluntarily accepting and also acknowledging the fact that this was the amount of cargo that could have possibly been saved under the circumstances.

This, then, is the principle of 'general average' whereby each person, in his own interest, must be willing to share equally the loss that has been suffered as a result of the question of the gaining of benefit for all concerned. In other words, the owner of the ship, and the shippers would have to contribute to the making up of the loss. The 'particular average' of an insurance policy is that which is applicable to the person who, as an individual, has suffered a loss. There is no sacrifice made by anybody in this case, like in the case of general average, and the losses suffered are generally by the interested person. If the previous example of the cargo of sheep traveling to Rome were to be considered, and instead of all persons on board throwing one of their sheep overboard, one person in particular would have been unfortunate enough to have lost all his sheep to the sea when the storm arose, then the loss that had occurred would have to be suffered only by that particular person, and not by all the members of the team of travelers on board the ship. (Marine Insurance)

The loss, therefore, is suffered only by the single individual, and not by all aboard, and is therefore referred to as 'particular average'. The general dangers of any sea voyage against which a person would be able to insure are grouped into four different categories. They are: the general dangers that one would face in the sea, the dangers presented by the very character and the conduct of the person who is in charge of the ship, the dangers that are present in the outside, like for example, pirates, who could loot and plunder an entire cargo of a ship whenever they found occasion to do so, and the last category enlists all those other risks that are general associated with sea voyages and marine travel. The losses that can be suffered by an individual or a company during the process of a sea voyage are grouped under the following categories: total loss of a vessel or ship-constructive or actual, the general average loss, the particular average loss, and the salvage.

The total loss of a ship will occur when a ship is totally lost at sea, due to many reasons. When a ship is actually 'lost', meaning that nobody is aware of its whereabouts, then it will be considered as a loss after a period of waiting of seven years-as in Lloyd's, after which it can be written off as a total loss to the shipping company. In some cases, the ship may return after seven years, or it may be discovered at the site in which it was originally lost after seven years, but, after it has been declared as being legally lost by the insurance company, it is considered as a total loss to the shippers, and the losses would have to be borne by the insurance company with no questions asked. A ship can also be lost and considered as a total loss when it is destroyed by fire or due to any other reason whereby its whereabouts and what actually happened to it are known by the shipping company as well as the insurance company. The type of loss described above is known as the 'actual' loss of the ship. In some cases… [END OF PREVIEW] . . . READ MORE

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