MARINE INSURANCE ACT

Section 18 of the MIA 1906

Section 18 of the MIA 1906

Introduction

Marine insurance, the oldest form of insurance, dates back to ancient Greece or Babylonia, with modern marine insurance contracts appearing in the Italian city-states of the thirteenth and fourteenth centuries. As Britain became a commercial sea power in the seventeenth century, English merchants came to dominate the marine insurance field. Until the nineteenth century, individual merchants, not companies, wrote most British insurance contracts. Compared to marine insurance, fire insurance is a relatively recent innovation. The security it provides only became necessary once a certain level of both urbanization and wealth-holding was achieved (Baur, Donovan, 1997, 39-46). Vast, crowded cities, such as London in the mid- to late-seventeenth century, posed great fire risks. British fire insurance began to develop after the Great Fire of 1666, which burned nearly a square mile of the city and destroyed over 13,000 houses.

Investment income kept many insurers afloat during the periodic business disruptions that accompanied the Napoleonic Wars. Despite the profitability of blockade running, increased war premiums could not always cover the costs that were imposed on insurers when ships were seized. Insurance is, of course, bought by a great many shipping companies. The actual buying, though, is done by only a very limited number of insurance brokers, who represent the ship-owners. The few brokers have their dealings with equally few underwriting agents. The actual risks are shared by numerous insurance companies, principals of the underwriting agents. Marine insurance fraud does not stand in the spotlight of criminological attention, nor does it receive much media-coverage. Few criminologists have ventured into the maritime world, only skimming the surface of maritime fraud. Chambliss and Vagg have written about (contemporary) piracy. Nevertheless, if a ship-owner were to dispose of his ship by scuttling it (somewhere off a West-African coast most likely) chances are that “he will get away with it”.

In marine insurance, traditions - “business the way we know it conducted with people we know and trust” - are preferred to “modernity”. All insurance business is conducted on the explicit basis of “good faith” and the importance of trust is stressed time and again. The (British) marine insurance industry is furthermore riddled with agents, creating numerous conflicts of interest, challenging the various - sometimes rather hastily erected - Chinese walls. The market-structure is agent-controlled (Anderson, 1945, 108-116). These suggestions have never been substantiated. However, they point towards a criminogenic market-structure of the (marine) insurance industry. Such a market-structure would not only facilitate the possible infiltration of organized crime, but would also influence the occurrences of white-collar crime in marine transport and insurance.

Requirement 1

Every type of insurance (be it marine, construction, aviation, etc.) has its own leading underwriters, considered leaders because of their special expertise in the field. In the British (Rotterdam) marine insurance (hull) market, two insurers are considered leaders, some twenty other insurers generally follow. The two leading underwriters have led the field for a considerable length of time and it is upon their judgement that ...