History And Importance Of Marine Insurance Incidents

History and Importance of Marine Insurance Incidents

Insurance is referred to an arrangement which is represented by a policy in which an individual or entity receives financial protection or reimbursement against any loss which they suffer from the insurance company. Marine insurance is one of the older forms of insurance which provides protection against loss by damage or destruction of cargo, merchandise, and freight (Hodges, 2013). This paper will evaluate the history and importance of marine insurance incidents and their effects on the business, economy, and country. Various environmental issues relating to marine will be analysed in this paper along with its cost and loss. The role of the government in marine insurance will be evaluated along with international relations between different countries. The laws applicable in Australia regarding marine insurance will be compared with global laws and case laws will be referred in this paper as well. Recent law changes in the field of marine insurance and the role of regulatory authority in Australia in relation to marine insurance will be analysed in this report as well.

Insurance connects with the risk of transportation of goods and marine insurance – hull and cargo especially – is one of the oldest insurance. It is origins in the Greek and Roman marine loan and the first formal marine insurance policy was created around 1350 (Leonard, 2016). It was the oldest risk hedging which was used by parties in order to mitigate risk during medieval times. In 1347, the very first actual insurance contract was signed called ‘the Santa Clara’ in Genoa. It is believed that marine insurance was originated in England due to frequent movement and transportation of goods through ships. During these times, the commerce and trade through seas were popular which leads to many accidents in which organisations suffer significant loss due to damage and loss of their goods. These incidents were important for the history of marine insurance since they enforced insurance companies to improve their policies to reach the demand of a wider number (Hodges, 2013). Therefore, the history of marine insurance is linked with the popularity of commerce and trade practices through ships. A good incident is when London become a hub for commerce and trade through seas based on which the concept of marine insurance become popular in the country. With the growing demand and popularity of marine insurance, provisions regarding governance of these policies were started to introduce in the English legal system. In 1906, the English Marine Insurance Act was passed and this incident resulted in codifying that law (Soyer, 2012). The number of marine insurance companies was starting to grow; therefore, the importance of their governance started to grow as well. In the case of Australia, the concept of the marine insurance was brought by British.

Trading through voyages involve many risks which are higher than local trade, terrestrial or maritime. Therefore, it is important for organisations to get marine insurance because the value of the goods which is transported through ships is considerably high. The goods transported through ships are exposed to damage or loss from numerous perils which are related to this form of transportation (Hodges, 2012). These damages incidents highlighted the importance of marine insurance based on which they become a key part of maritime transportation. A contract with the insurance agencies assists in protecting corporations from significant loss caused due to damage or loss of goods during transportation. In Consort Shipping Line Ltd v FAI Insurance (Fiji) Ltd [1999] FJCA 10 case, the court provided that the mandatory arbitration provision in a marine insurance contract is valid and this right is not waived by commencement of proceedings (Judiciary, 2015). It is considered a safe haven for shipping corporations and transporters. These parties are able to reduce the aspect of financial loss which occurs due to the loss of their important cargo. It also resulted in bring together the transportation companies and receiving parties which increase imports and exports across the globe. The duty, dedication, and straightforwardness of insurance corporations resulted in connecting different countries through the medium of ships.

Impact on Marine Insurance on Business, Country, and Economy

Marine insurance has a significant impact on businesses around the world since it has open new business opportunities by removing risks from the transit. The international moving industry has benefited significantly from the popularity of marine insurance by making it easier for them to provide cover for their clients’ possessions (Thomas, 2015). One of the biggest challenges related to importing and exporting goods through ships was that businesses lost goods due to various factors. The challenges which businesses face while shipping goods by sea include adverse weather and geographical hazards. The transportation has to face hazards such as sandbars, icebergs or others. There are many man-made hazards faced by businesses as well while loading or unloading goods in the ship. All these factors make it difficult for businesses to ensure that they sustain their growth in the market while importing and exporting its products.

In the case of countries, maritime transport is the backbone of global trade and global economy. Shipping is significant for countries since they ship food, technology, medicines, and others to other nations. Maritime transportation resulted in increasing trade relationship between nations and build strong ties between them which enable them to share relevant data and information with each other (Templeman, 2013). A good example is the global expansion of the United Kingdom, especially London which becomes the hub of shipping. Many countries which include European Nations, Sri Lanka, India and others started to export products to London and other major hubs which resulted in increasing the economy of the nations (Leonard, 2016). Many countries such as China, Middle Eastern nations and others still on imports and exports through ships in order to bring foreign currency into their country which builds strong ties between them.

These trading ties open ups new opportunities for countries from amicable relationships through which developed nations started providing medical, military, and other facilities to developing nations as well. All these elements were possible because countries were ensured that their loss will be compensated or reimbursed through marine insurance companies. Therefore, marine insurance has a significant impact on supporting and promoting global trade and the global economy. In the case of Australia, the economy of the country is supported through imports and exports made through shipping. Marine insurance assists businesses in ensuring that they remain safe from facing any losses which makes it easier for them to expand their operations overseas. In total, Australia had made exports of 189,629,974 in thousands of US$ and imports of 189,406,027 in thousands of US$ (WITS, 2016). It shows a positive trade balance which supports the growth of the economy of the country which has been achieved through improvements in the marine insurance policies over time.

Marine insurance is heavily influenced by the environment since it is one of the key reasons due to which the products and ships are damaged or lost. Adverse environmental conditions resulted in making it difficult for companies to safely ship their products through seas which increases challenges for marine insurance companies as well. The costs of marine insurance companies go up as they are more likely to suffer damages during maritime transportation. The companies started to suffer more loss than compared to earn profits in case the environmental conditions are not in favour of the corporations. In a recent incident occurred in December 2014, empty containers were toppled by wind in Durban Harbour, Cape Town which resulted in adversely affecting the shipping schedule causing delays (Santam, 2015). Another incident took place in November 2014 in which a container ship lost 23 containers in strong winds, most of which were not recovered. These containers cause pollution, and they damage the cargos as well. It poses new threats for marine insurance companies since it increases potential threat of passengers and third parties liability claims who suffer any loss due to those containers.

Environmental issue relating to Marine

The increased risks associated with climate change have given rise to greater need for marine insurance companies to re-evaluate their risk which is associated with maritime shipping (Nnandi et al., 2013). They should invest in technologies which assist them in detecting the risk and develop the underwriting skills and knowledge to mitigate them in order to avoid incurring huge costs or losses. Environmental change has the potential to severely damage the global economy; however, this risk can be mitigated if appropriate actions are taken. Managing insurance risk has often added benefit of reducing environmental risk which also means that it will create new opportunities for marine insurance companies (Rose, 2013). As the threat of climate change becomes more prominent, the number of insurance claims taken by businesses during transportation of their products through ships increases. It will result in increased profits for marine insurance companies, and they will be able to charge higher premium from businesses.

The popularity of marine insurance resulted in building new trading ties between countries which improve their international relations. A good example is the growing e-commerce sector which has increased the demand for marine insurance. Many corporations such as Amazon ship their products across the globe to deliver goods to their customers. It has also become easier for smaller companies to export their products to other countries through ships as their prices get low because they get security from marine insurance (Kingston, 2014). It resulted in building strong international relationship between countries in which the government plays a crucial role. In the case of Australia, the government regulates marine insurance companies by establishing authorities such as the Australian Maritime Safety Authority (AMSA). AMSA represents the Australian Government at the International Maritime Organisation (IMO). Through these regulators, the government focuses on governing the marine insurance industry to ensure that companies did not charge higher prices from their clients (Knapp and Heij, 2017).

They also handle disputes between marine insurance companies and their clients regarding settlement of disputes. In Australia, the key laws which govern marine insurance companies include the Maritime Safety (Domestic Commercial Vessel) National Law Act 2012 and the Australian Maritime Safety Authority Act 1990. Moreover, the Marine Insurance Act 1909 (MIA) is also used by courts in order to manage disputes relating to marine insurance in Australia. It provides key regulations which govern the operations of marine insurance companies in Australia. For example, in Pantaenius Australia Pty Ltd v Watkins Syndicate 0457 at Lloyds [2016] FCA 1 case, the court rejected the argument of insurer which relied on an exclusion clause to reject the claim by providing the section 54 provides provision for delay in voyage based on which the exclusion clause cannot apply (Austlii, 2016).

Recently, 44 recommendations were made by the Australia Law Reform Commission (ALRC) in order to improve the MIA. The recommendations were focused on harmonising the Insurance Contracts Act 1984 (ICA) with the MIA because ICA does not apply to insurance risks relating to maritime transportation (Tarr, 2017). Moreover, proposals were made to incorporate federal and state schemes with the MIA to incorporate health insurance, worker compensation, and third-party motor vehicle insurance as well. All these changes resulted in improving MIA to cover more aspects of risks relating to maritime transportation. In 2016, a proposal was made by the Marine Law Association of Australia and New Zealand (MLAANZ) to made changes in MIA in order to incorporate it with the Marine Insurance Act 1906 (UK) (Dunt, 2013). These changes are more restrictive for logistics providers, and they are focused on providing more benefits to customers. All these changes are brought by different regulatory such as ALRC, MLAANZ and AMSA play a crucial role in supporting marine insurance in Australia. There are many similarities between marine insurance laws implemented by Australia with New Zealand, the United Kingdom, and India. In the case of the United States and China, laws different since they are stricter for marine insurance companies to ensure that they focus on customers’ demands.

Conclusion

In conclusion, marine insurance is significant because it assists ship-owners and transporters to ensure that they claim damages for considering the mode of transportation used in case any mishap happened during transport. People who are importing goods from other countries wanted to ensure the safe arrival of those goods. The shipping companies that are responsible for transporting the goods wanted to ensure that their ships are protected from damages. Therefore, marine insurance plays a crucial role in covering all types of risks which are involved during the transit of goods through seas. Development in laws resulted in improving implementation of marine insurance on companies and these policies continue to improve. Impact of marine insurance of countries, economy, business, and international relations are discussed in this report. In Australia, regulators such as ALRC, MLAANZ, and AMSA manage the MIA and provide recommendations for changes. Therefore, marine insurance is important to support the growth of the country and ensure that goods are safely transported overseas.

References

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