MARINE INSURANCE

Ever since 1575, when a Chamber of Assurance was set up in the Royal Exchange of the City of London, there has been a recognized centre for the registration of marine–insurance policies. Registration is evidence of the terms of the contract and is helpful in settling disputes. The 1601 Act already referred to set up a Court of Arbitration to settle disputes over policies.

The insurance of ships and their cargoes is perhaps the oldest form of insurance , for there is evidence that it existed some 2000 years ago. Marine insurance, as this branch of insurance is called, is undertaken by underwriters who are members of Lloyd’s and by marine-insurance companies. Lloyd’s underwriters are the most widely known and the most important insurers in the world. They undertake all kinds of insurance business, but they are best known for marine insurance. Lloyd’s itself does not do insurance business; this is undertaken by its members, either as individuals or working in small syndicates. Lloyd’s as an institution dates from the eighteenth century, when business was transacted in a coffee-house run by Edward Lloyd which was much frequented by merchants engaged in foreign trade. In those days coffee-house were more in the nature of clubs, some being the resort of men of learning and others of businessmen. Today Lloyd’s has its own large premise.

The members of Lloyd’s are underwriters, so called because of the custom of writing their names under any risk a portion of which they were prepared to cover. At the same time they indicated the amount of risk they were prepared to undertake. If a cargo worth $80,000 is to be insured one underwriter may be willing to cover (say) $4000, and if so he will attach his name to group amount. Another underwriter or a syndicate (that is, a small group working together) may choose to cover $6000. The broker who acts between the shipper and the underwriters will go from one to another until the full $80.000 has been covered. In this way the risk is spread over a number of members. A marine insurance company generally covers an entire risk itself.