Insurance in International Trade

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Insurance in International Trade

• Dr Vanessa Sims
• University of East Anglia

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I. Introduction

• social and commercial importance of insurance
• huge range of subject-matter
• ships
• goods
• warehouses
• building projects
• oil rigs

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I. Introduction

• huge range of risks
• natural disasters (storms, earthquakes)
• piracy
• non-payment
• exchange rate fluctuations
• strikes
• political changes
• war

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II. Lloyds of London

• insurance market
• origin coffee house(1680s)
• meeting place for captains and insurers

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II. Lloyds of London

• market leaders in many fields
• often first to offer insurance for new risks
• cars 1904
• planes 1911
• satellites 1960s
• almost bankrupt in 1980/90s
• Exxon Valdez hurricane Andrew
• Piper Alpha asbestosis

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II. Lloyds of London

• market profitable again
• capacity 2008 16.1 billion in premiums
• profit 2006 3.7 billion
• money for insurance provided by names
• are grouped together in syndicates
• insurance arranged by brokers and underwriters

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Lloyds Market Structure 2007
Corporation of Lloyds
72 Syndicates 47 Managing Agents (underwriters)
16.1bn Capacity
167 Lloyds Brokers
Members
Policyholders

• Direct

• Corporate (123)
• Individual (1124)

• Reinsurance

BUSINESS FLOW
CAPITAL PROVISION
Source LloydsAll numbers as at 1st August 2007
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III. Contract Formation

• prospective insured proposer
• use of agents (brokers)
• different procedure at Lloyds
• broker fills out slip
• takes slip to underwriters
• they accept percentage of risk by initialling slip

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IV. Insurable Interest

• insurable interest legal or equitable
  relationship with subject-matter
• Laucena v Craufurd (1806) 2 Bos Pul (NR) 269
• Macaura v Northern Assurance Co Ltd 1925 AC 619
• Petrofina (UK) Ltd v Magnaload Ltd 1983 2
  Lloyds Rep 91

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IV. Insurable Interest

• Feasy v Sun Life Assurance Co of Canada 2003
  EWCA Civ 885 It is not a requirement of
  property insurance that the insured must have a
  legal or equitable interest in the property as
  those terms might normally be understood. It is
  sufficient for a sub-contractor to have a
  contract that relates to the property and a
  potential liability for damage to the property to
  have an insurable interest in the property.
  (Per Waller LJ)

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V. Utmost Good Faith

• utmost good faith uberrima fides
• Carter v Boehm (1766) 3 Burr 1905Insurance is
  a contract upon speculation. The special facts,
  upon which the contingent chance is to be
  computed, lie most commonly in the knowledge of
  the insured only... (per Lord Mansfield)

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V. Utmost Good Faith

• s.17 Marine Insurance Act 1906A contract of
  marine insurance is a contract based upon the
  utmost good faith, and, if the utmost good faith
  be not observed by either party, the contract may
  be avoided by the other party.

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V. Utmost Good Faith

• s.18 Marine Insurance ActSubject to the
  provisions of this section, the assured must
  disclose to the insurer, before the contract is
  concluded, every material circumstance which is
  known to the assured If the assured fails to
  make such disclosure, the insurer may avoid the
  contract.

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V. Utmost Good Faith

• Container Transport International Inc v Oceanus
  Mutual Underwriting Association (Bermuda) Ltd
  1984 1 Lloyds Rep 476 rejection of decisive
  influence test
• Pan Atlantic Insurance Co v Pine Top Insurance Co
  1995 1 AC 501 requirement of inducement

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V. Utmost Good Faith

• moral hazard
• Roselodge Ltd v Castle 1966 2 Lloyds Rep 113
• Rehabilitation of Offenders Act 1974
• physical hazard

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V. Utmost Good Faith

• mutual duty of utmost good faith
• Banque Financière de la Cité SA v Westgate
  Insurance Co Ltd 1991 2 AC 249

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VI. Loss and Causation

• peril event insured against
• exception event expressly excluded
• loss total or partial loss
• constructive total loss
• doctrine of abandonment
• causation proximate cause

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VI. Loss and Causation

• Becker, Gray Co v London Assurance Corp 1918
  AC 101
• Marsden v City County Insurance (1865) LR 1 CP
  232
• Leyland Shipping Co v Norwich Union Fire
  Insurance Society Ltd 1918 AC 350

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VII. Subrogation

• indemnity principle
• Castellain v Preston (1883) 11 QBD 380
• two elements
• recovery of money received from third party
• action against third party