Page 177 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes
“Imagine an accident involving a cruise ship with 8,000 people and a tanker in the dead of
night in the middle of the ocean.”
He added: “It’s a big shock for the market. The alarm clocks of marine insurers are ringing
at the moment.”

So-called hull insurance, which covers physical damage to vessels, has failed overall to
produce an underwriting profit for 15 consecutive years, according to the International
Union of Marine Insurance. Cargo insurance has fared better but it too suffered an overall
underwriting loss in 2010.
Analysts estimate that once environmental damage and injuries are included, losses from
the Costa Concordia could amount to as much as $1bn. In absolute terms, that would make
the sunken cruise ship the biggest ever marine loss.
Duncan Southcott, head of marine UK at Allianz, Europe’s biggest insurer by market
capitalisation, said the increasing size of ships “must be a concern ... This is the first
example of one of these very large [passenger] vessels gone wrong”.
Two senior underwriters, who declined to be named, said insurers were hopeful of pushing
through price increases of up to 20 per cent following the accident. However, brokers said
the competitive nature of the marine insurance market made a significant rise in premiums
unlikely.
Losses from the Costa Concordia are spread widely among several insurance and
reinsurance companies including Generali, RSA Insurance Group and XL Group.
“Will this one loss have an impact? It might be the straw that breaks the camel’s back for
some people – we may see some capacity withdraw,” said Marcus Baker, chairman of the
marine practice at Marsh, the broker.

But he added that the cruise industry was still relatively safe. “The number of injuries and
incidents has historically been low. Relatively speaking the risks have been seen by many
underwriters to be quite good.”

Questions:
1. What is the prime reason for the marine insurance market shake-up? Discuss.
2. Discuss the factors affecting premiums in marine insurance market.

Source: http://www.ft.com/cms/s/0/a06ced40-48e9-11e1-974a-00144feabdc0.html#axzz2oSa8yreR

9.7 Summary

In case of insurance contracts, premium is the consideration from the side of the insured
and the promise to indemnify is the consideration from the insurer.
If insurance is affected on say for example smuggled goods, and the insurer comes to
know after some time of signing the contract, he may avoid the contract.

In personal accident insurance, it is deemed that a person has unlimited financial interest
on his own life.

The objective of insurance is to indemnify i.e., to place the insured in the same financial
position as he was just before the occurrence of loss.
Subrogation is the right which an insurer gets, after he has indemnified the loss, to step
into the shoes of the insured and avail himself all the rights and remedies which the
insured may have in respect of the loss indemnified.

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