Marine Insurance In Murky Waters

Newsworthy events in the Middle East usually find a captive audience among the global insurance community. Due to the relatively insignificant reinsurance capacity in the Middle East insurance markets, it is not unusual to see reinsurers from around the world participating in regional risks. This is particularly true of marine insurance.

Marine risks in the region tend to have more international linkages compared with other parts of the world. It is fairly commonplace to see reinsurers from five or six different markets on one slip. This broad exposure to the international markets creates interesting challenges.

On the underwriting side, regional insurers find themselves faced with varying expectations when it comes to risk assessment and forms of wording. On the claims side, insurers face mixed expectations in relation to claims handling and investigation. However, the impact of the extensive international linkages is felt most acutely when any event causes the international media to focus on the region. Such focus also makes marine insurance lawyers' lives that much more exciting (although, one should add, the lives of marine insurance lawyers generally tend to be exciting any way).

It has to be commented that we have not seen as many fraudulent claims or scuttlings as many had anticipated at the start of the financial crisis. Personally, we have only been involved in one yacht-scuttling policy claim. For marine insurers, the effect on claims resulting from the economic crisis has not, therefore, been as bad as anticipated, but premium income certainly has suffered, particularly in the case of the cargo market.

Piracy still a danger Before the recent political events took the world by storm, piracy was the major worry in marine insurance circles. Indeed, piracy remains a live danger to shipping and trade, and pirates do not seem to be mourning the loss of publicity to the political situation elsewhere in the region.

The effect of piracy in the region has kept H&M, P&I and cargo insurers and marine lawyers busy for some time now with interesting issues such as liability to contribute in General Average; off hire; sanctions issues, etc. It has also led to an increased demand for Kidnap & Ransom cover and one broker even being at the forefront of the establishment of "convoy support/security" operations.

Insurers also have to consider the stance they will take on certain owners arming their crew and/or having security personnel on board...