Marine Insurance Report

Marine Insurance Report Assignment

You are required to write a report within which you will consider ‘What is the impact made by captive insurance companies on the traditional Hull and Machinery insurance market in the United Kingdom and how can the Protection and Indemnity clubs have better interface than just filling the gaps in the standard hull policy.’

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As ships of different types and trades need differing H&M cover, you are to help the shipowner to arrange new solutions for a systematic risk over the short, medium and long term and propose new insurance structures. The shipowner (from the UK) has a fleet of 550 ships of various type and trade and is thinking to start their own captive insurance company. They are presently with a high-profile Hull and machinery insurance company who have their base in London and are also insured by a Protection Indemnity club which is a part of the International club.

The average age of the fleet is less than 5 years and all of them are on a minimum 5-year time charter with Quinin chie co. and managed by a top management company from Hong Kong. The vessels are trading worldwide with various cargoes without exclusion of radioactive and explosive cargoes.

You need to advise what is best suited way to ensure solutions for a systematic risk over the short, medium and long term and propose new insurance structures. This will include drafting your own policy with insertion of clauses from various forms (Such as Institute Time Clauses (Hulls) 1983 or the Norwegian Plan) in conjunction with standard H&M terms and conditions.

Include within your report coverage on:

1. The key reasons why the captive insurance industry is developing?

2. The need of amendments to the traditional Hull and Machinery covers.

3. Why it took more than 200 years for the captive insurance market to surface?

4. What are the challenges faced by the Hull and Machinery Insurance clubs (statistical data)?

5. What are the short, medium and long-term risks and how will you combat them?

6. The future of the traditional Hull and Machinery clubs.

7. Which are the best suited forms for better coverage of the risks and why?

8. How to create the right balance between insured and insurer.

9. Which clauses in the Hull and Machinery insurance needs amendments.

10. The present interface of Protection and Indemnity club with the Hull and Machinery club

11. The changes required in the structure and roles of Protection and Indemnity club.

12. Sighting of cases and statistical data is extremely important to support your ideology process.

Report Format

· The information of student ID and word count must be clearly indicated on the first page of your work.

· References list /Bibliography should be excluded from word count.

· The report should be word processed in size 12 font, line spacing 1.5, justified to both margins and should consist of the following:

Title page, student ID, word count, contents page, introduction, findings, conclusion, reference list, appendices (if necessary)

· The report MUST be referenced using the Harvard system.

Demonstrate clear knowledge and understanding of the differences between H&M and P&I in relation to the insurance cover they provide to their ship-owning clients.

Consider how H&M and P&I insurers are formed – i.e. who owns them?

Consider how any insurance company operates – the investments/reserves they must have and re-insurance so they can provide indemnity.

H&M – stock market listed companies or private ltd companies owned by their investors and shareholders – resultant duty to manage business and provide a dividend.

P&I – mutual insurers – owned by the assureds (ship owners) and managed by employed professionals.

Changes in the insurance market since the “Financial Crash of 2008” – don’t go too deep in your research here but be aware that there have been corporate regulatory changes, and there has been in an increase in entrants to the H&M market (where else can you get a return on your capital?) The increased competition has had an impact on premiums with some long-established insurers deciding that the marine market doesn’t offer them enough return v the risk.

The captive insurance market has emerged. What is it? How does it operate?

A good brief and associated information can be found at:

https://www.captive.com/captives-101/what-is-captive-insurance

It is essentially the first chapter of Captives and the Management of Risk , Third Edition, by Kathryn A. Westover, published by International Risk Management Institute, Inc., Dallas, TX, 2014.

An example of a large multi-national company involved in the captive insurance field is my old employer A P Moller – see Maersk Insurance A/S

https://investor.maersk.com/captive

With regard to the “Nordic Plan” see:

http://www.nordicplan.org

This is written by Cefor – the Nordic Association of Marine Insurers. So, for true academic impartiality you must presume bias.

https://www.cefor.no

I’ve been asked about the Institute Time Clauses Hulls 1995 (ITCH), but I am sure you meant the Institute Time Clauses Hulls 1983 (ITCH). Both exist but it is the latter that is worth noting in respect to the Nordic Plan. 1983 IS MENTIONED in the final paragraph of the brief. Here you must exercise your own academic judgement.

There is coverage of both ITCH ’83 & ITCH ’95 in any reputable academic textbook on Marine Insurance – check your directed reading list although this is what I would recommend for an online source:

Hudson, N. G. & Madge, Tim. (2012), Marine Insurance Clauses 5th ed., London : Informa

This textbook is available in Solent’s Library – available electronically via iLaw.

GARD have a good article which gives a comparison and commentary of both the Nordic Plan and Institute Time Clauses (Hulls) 1983 (ITCH), available at:

http://www.gard.no/web/updates/content/20739836/brief-overview-of-the-nordic-plan-and-institute-time-clauses-hulls-itch

Please make sure that you are being asked about the Nordic Plan v ITCH. My reading of the assignment INITIALLY is that you are tasked with writing about captive insurance generally, but the queries I have received from a number of different students have led me to consider whether the second sentence should be interpreted more specifically.

It seems from the following paragraphs that you are REQUIRED to consider this from the perspective of a particular company. With that in mind your report REQUIRES you to know all about the above BUT apply it to the scenario given. 

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