11

Ocean Marine Reinsurance

by John K. Witherspoon, Jr.*

BACKGROUND AND DEVELOPMENT OF

OCEAN MARINE BUSINESS

     Ocean marine insurance is the oldest form of insurance, developing from early attempts to distribute risk. Insurance writers and scholars believe that Greeks, Phoenicians, and other ancient civilizations created and practiced methods of distributing risk, but marine insurance as we know it is a true transfer of risk. Early ocean voyages were exceedingly hazardous. As overseas trade grew, it became necessary to reduce the risks of shipping abroad. With insurance, shipowners and shippers of goods could transfer to underwriters the risks inherent in ocean transportation. Growth in foreign commerce was enhanced by the availability of ocean marine insurance.

     The market most responsible for the evolution and growth of marine business is that created by the Underwriters at Lloyd's of London. Although marine insurance was invented by others, Lloyd's built its worldwide reputation by successfully applying over a long period of time this form of insurance to foreign trade.

     The business began with a simple policy form covering physical damages arising out of loss due to a few perils named in the form. Over the years, however, a broad spectrum of coverages has evolved, many of which are similar to those in nonmarine business. For example, a shipowner will purchase a hull policy for protection against fire, heavy weather and explosion in much the same manner as a homeowner would purchase a policy on dwelling and contents. Or a protection and indemnity policy to protect against third-party lawsuits, as a storeowner will purchase a general liability policy.

     A cargo policy typically protects the shipper's interest in goods in transit whether by land, sea, or air. The coverage is similar to that in inland marine: the goods are normally out of control of the shipper, increasing the need for comprehensive coverage. Ocean marine also . . .


*CPCU, Director of Marine Reinsurance, Global Capital Reinsurance Limited, P.O. Box HM 762, 48 Church Street, Hamilton HM 12, Bermuda. An autobiography follows the chapter.

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