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Marine Insurance and Piracy

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Marine Insurance and Piracy
Onur Yorulmaz, LLM.
 Table of Contents

Table of contents…………………………………………………………...……1
Marine insurance and piracy…………………………………………………….2
Introduction……………………………………………………………….2
Background……………………………………………………………….2
Basics of marine insurance………………………………………………..4
Interaction of Marine Insurance and Piracy……………………………….5

Solutions and the conclusion…………………………………………….11

Bibliography……………………………………………………………………13

Reflective report………………………………………………………………..15

1
Marine Insurance and Piracy
Introduction
Marine insurance is one of the earliest forms of insurance type in the history. Its importance
still continues because of the massive sea trade traffic. Almost %80 of the world trade travels
by sea along with 93.000 vessels.1 In fact, sea trade increases with a faster rate than global
economy.2 While the usage of seaways has not lost its importance, the usage of shipping is
changed in time. Unlike a few decades ago, ships are carrying goods rather than people.3
Additionally air travel and air cargo participate and have a growing share in the international
trade, yet shipping is still indispensable. The fact that ships are carrying goods more than people
affected both the policies and approach for vessels and other insurable subjects. Policies are
more focused on goods and offered solutions for them while crews became as a secondary part
of the insurances.

From the first day through present time, seaways have their distinctive dangers and problems.
Maybe the most important issue is the piracy. This old way of robbery is still popular in these
days especially at African offshore Aden Gulf. By examining the recent cases from Somalia,
what can we say about the relation between marine insurance and risk of piracy? What is the
reaction of insurance companies towards piracy? Some say that piracy is not that dangerous
but media makes it sensational. Is it really dangerous or exaggerated? What are the solutions
offered by standard insurance policies for piracy acts? What is the international community’s
approach and solution upon piracy? These will be discussed in this essay and be concluded with
practical solutions where both ship owners along with their crews and insurance companies can
benefit.

Background

History of marine insurance goes back to even Greek and Roman era where we can see the first
traces of the sea trade. It was in the form of maritime loan back then. It developed and
transformed into contracts as we know today especially in Italy’s commercial states during 12th-
14th centuries. Later on it spread around Europe. It took a few more centuries for England to

1
Anna Bowden, ‘The Economic Costs of Maritime Piracy’ (2010) One Earth Future Foundation Working Paper.
https://www.steamshipmutual.com/Downloads/Piracy/EconomicCostPiracyOEFReport.pdf. Accessed on 22
April
2
Sam Bateman, ‘Sea piracy: some inconvenient truths’ (2010) 2 Maritime Security 13
3
‘Growth through globalization’ http://worldoceanreview.com/en/wor-1/transport/global-shipping/ accessed
on 28 April.

2
adopt this insurance type, yet once they did, they systematically developed it and brought out a
world widely accepted standard clauses. It started as a coffee shop called ‘Edward Lloyd’s
Coffee House’ where ship owners and underwriters negotiate and sign their insurance contracts
in London. From those beginnings in a coffee house in 1688, Lloyd’s has been a pioneer in
insurance and has grown over 325 years to become the world’s leading market for specialist
insurance.4 Today Lloyd’s is known as one of the most important specialist insurance market.
At the end of 90s, Lloyd’s had over 10.000 members and 10.3 billion pounds capacity.5
Developments in United States came after practices in England approximately end of the 18th
century. 6

British Empire was at the time of ‘the empire on which the sun never sets’ that its practices on
marine insurance affected many countries all around the world and therefore set a standard. As
a result of this impact Marine Insurance Act (MIA) was enacted in 1906. Its general terms are
being used for all non-life insurance. Recently a new code ‘The Insurance Act 2015’ is enacted
and will enter into force on August 2016. Hereby, we can say that main principles have stayed
steady however, some implementation changed due to demands.

History of piracy also simultaneously dates back to old ages. Trade and great value on seaway
transportation beat a path for piracy. It starts from antique ages to present time. However it was
seen that different forms of methods, processes and goals took place during piracy acts.
Kidnapping children or royals of that time, direct attacks on vessels for goods and valuable
objects and slave trade can be shown as their practices. However, most of the times nowadays
pirates do not care about the value of the goods or crew. What they aim is to gain a high ransom
from ship owners without getting into getting trouble. By this way, they do not take any risks
in terms of selling the seized goods in the market and therefore the variety of goods does not
affect whether is it saleable or not, because what the pirates care is cash ransom money not the
goods itself.

Nowadays piratical attacks are mainly seen at three spots which are; South East Asia, West
Africa-Nigeria and the most famous one, the Gulf of Aden-Somalia. Especially the Gulf of
Aden is a critical point where one third of international oil trade and almost 20.000 vessels pass

4
‘History of Lloyd’s https://www.lloyds.com/lloyds/about-us/history accessed on 2 May.
5
Christopher M. Dousse, ‘Combating Risk on the High Sea: An Analysis of the Effects of Modem Piratical Acts
on the Marine Insurance Industry’ (2011) 35 Tul. Mar. L. J. 267
6
Solomon Huebner, ‘The Development and Present Status of Marine Insurance in the United States’ (1905) 26
AAPSS 241

3
by from Somalia offshore.7 Therefore it is an attractive place for pirates. According to statistics
from 2006 to 2009, the number of piratical attacks reported as; 241, 282, 306 and 406
respectively.8

Basics of Marine Insurance

One of the main pillars of the international trade is to provide safe delivery. Therefore, the
fundamentals of the marine insurance are; to guarantee a safe journey and to compensate agreed
perils. These principals give strength to the trade and make it fluent.

First of all, marine insurance is contractual relationship where insurer and ship owner agree on
the risks that will be covered. However its coverage could include not just vessels but cargo,
terminals, any transport that property is transposed, obtained or held between two destinations.
Marine insurance is always thought that covers the goods during the shipping but in fact it is
actually called cargo insurance which is a sub-branch of marine insurance. Marine insurance
also covers ships, freight and other interests.

Another acknowledged definition of marine insurance can be found in the MIA 1906. A
contract of marine insurance is a contract whereby the insurer undertakes to indemnify the
assured, in manner and to the extent thereby agreed, against marine losses, that is to say, the
losses incident to marine adventure.9 Marine Insurance Act 1906, is called as ‘marine insurance’
however it covers more than just the marine adventure. Section 2 of the act is expressly remarks
that the act also covers inland risks. Therefore marine insurance covers onshore and offshore at
the same time including hull and any casualty and liability of it.

Scope of the marine insurance contracts is also broad. Every lawful marine adventure may be
the subject of a contract of marine insurance.10 According to s3.2 it is the marine adventure
where ‘any ship goods or other movables are exposed to maritime perils’. Additionally, perils
are listed in s3.2 as; ‘...the perils consequent on, or incidental to, the navigation of the sea, that
is to say, perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seizures, restraints,
and detainments of princes and peoples, jettisons, barratry, and any other perils, either of the
like kind or which may be designated by the policy’. It is a broad list of perils including piracy

7
Rawle O. King, ‘Ocean Piracy and Its Impact on Insurance’ (2008) Congressional Research Service, Report for
Congress.
8
Dousse (n.5)
9
Marine Insurance Act 1906, s 1
10
MIA 1906, s3(1)

4
however, in practice, the usage of the policies and the coverage of these perils are different and
in fact, changed in time.

Underwriters change their policy and premiums according to international demand, sometimes
11
wars and political changes around world. They make specific policies for specific routes.
They separated war and strike risks and divided piratical acts that will be discussed in next
chapter.

The insurance market used the ship and goods (SG) policy as a standard contract until 1982.12
SG policy was criticised in many ways and after the report of United Nations Conference on
Trade and Development (UNCTAD) in 1978, these criticisms led the introduction of the
Institute Cargo Clauses (A), (B) and (C) in 1982. They were also amended in 2009 with minor
changes. They have been widely used at the marine insurance market since they were first
presented. Some of the terms in these clauses modify the Marine Insurance Act, for instance,
availability of cover during deviation and the extent of causal connection.13

Fundamentally, standard clauses provide two things; they point out the covered risks and they
limit the risks and draw the boundaries of the exclusions.

Clause (A) provides the widest cover. It covers all risks of loss or damage to the subject matter
insured, yet it has a long list of exceptions in article 4. Some of those exceptions like; wilful
misconduct, delay, wear and tear and inherent vice are also found in the MIA.

Unlike to Clause (A), the risks are listed in Clause (B) and (C) along with exclusions. They
have less coverage respectively. None of the clauses includes war risks or strike risks. For those
risks Institute War Clause or Institute Strike Clause are available.

Interaction of Marine Insurance and Piracy

The relation between piracy and marine insurance starts with the definition of the piracy. There
is no binding piracy definition in international law.14 Piracy is defined as ‘hostis humani
generis’ in early ages, means enemies of mankind. Today, piracy is considered as an
international crime. However, modern definition of piracy causes problems in terms of
international law and also insurance policies.

11
Dousse (n.5)
12
Indira Carr, International Trade Law (5th edn. Routledge 2014)
13
Ibid.
14
Dousse (n.5)

5
United Nations Convention on the Law of the Sea (UNCLOS) article 101 provides a detailed
piracy definition. 15 However, this definition seems deficient and unsatisfactory. It only
mentions high seas yet, most of the recent cases had occurred in territorial waters and ports.
Therefore countries are obliged to police their inland water because UNCLOS art. 101 does not
cover inland waters, ports or territorial waters. This unexpected restriction caused some piratical
activities where there is a weak state that cannot enforce appropriate law and protect their ports
and inland water. Same definition problem occurs in US. The constitution of US gives the
Congress authority ‘to define and punish piracies and felonies committed on the high seas and
offences against the law of the nations’. US federal courts also have the same understanding
that considers piracy only at the high seas.16 In conclusion, high seas are covered by definitions
and international law but low-waters, ports and inland waters are left out of scope.

UNCLOS, provides some powers to international community, yet effectiveness of these powers
is debateable. Article 105 of UNCLOS gives authority to every state in order to seize a pirate
ship on the high seas or any place outside the jurisdiction of any state. Also, UNCLOS art. 110
capacitates warships to board any vessel which they see suspicious including piracy on the high
seas. However, there has been some struggles while dealing with pirates on the high seas. Some
naval powers are reported that they release pirates in return of weapon and ammo. Additionally,
in some cases, pirates ask immigration therefore, the process completely turns into a different
way.17 In 2010, Kenya opened an anti-piracy court which is funded and supported by
international community.18 Unfortunately because of the ineffective enforcement of states and
restriction by international law, pirates cannot be caught in inland waters and the issue rises
against ship owners and marine insurance industry.

15
Piracy consists of any of the following acts:
(a) any illegal acts of violence or detention, or any act of depredation, committed for private ends by the crew
or the passengers of a private ship or a private aircraft, and directed:
(i) on the high seas, against another ship or aircraft, or against persons or property on board such ship or
aircraft;
(ii) against a ship, aircraft, persons or property in a place outside the jurisdiction of any State;
(b) any act of voluntary participation in the operation of a ship or of an aircraft with knowledge of facts making
it a pirate ship or aircraft;
(c) any act of inciting or of intentionally facilitating an act described in subparagraph (a) or (b).

16
Dousse (n.5)
17
Gotthard Gauci, ‘Piracy and its Legal Problems: With Specific Reference to the English Law of Marine
Insurance’ (2010) 41 J. Mar. L. & Com. 541
18
Dapo Akande, ‘Anti-Piracy Court Opens in Kenya’ http://www.ejiltalk.org/anti-piracy-court-opens-in-kenya/
accessed on 4 May.

6
The definition problem and the rise of piratical attacks also affected the policies in time. In the
old S&G policy, pirates accompanied with rovers19 and the policy used to cover the risk of
piracy and all related perils in accordance with MIA. Definition was simpler, ‘takings at sea’
would be sufficient in a policy and conflicts were less between ship owners and insurers.
However, piracy has risen during 80s and the concern of ship owners and governments has been
voiced again. International Chamber of Commerce (ICC), has published a report in 1986,
pointed out that 300 pirate attacks had happened from 1961 to 1986. 3 years later in 1989,
another report revealed that over 700 attacks had happened from 1981 to 1987.20 This rise
forced the marine insurance industry to give a reply and change some politics.

The biggest change was that piracy is taken out from standard policies. Keeping piracy away
caused additional expense to ship owners and consequently raised the premiums. Moreover,
insurers composed new policies and standard clauses. For instance, Lloyd’s declared the Gulf
of Aden as a dangerous zone and determined a special and expensive premium.21 As explained
above, Institute Cargo Clauses do not cover war or strike risks because the marine industry
wants to separate the war risks and the marine perils. Therefore, underwriters created different
types of Institute War and Strikes Clauses. Actually, the war risk policy originally considered
during the world wars but not for piracy22 yet then it is considered to be used in piracy. England
based Lloyd’s presented; Institute War Clauses and Institute Strike Clauses for cargo. Both
clauses were presented in 1982 and amended in 2009. Neither of them mentions piracy in their
coverage and exclusions articles. Yet, some of those situations explained in ‘risks covered’
clause intersects with piratical acts. On the other hand, Institute War and Strikes Clauses Hulls-
Time (1983) expressly excludes piracy in clause 4.1.7 however, remarks that this exclusion
shall not affect the coverage under clause 1.4 which says; ‘strikers, locked-out workmen, or
persons taking part in labour disturbances, riots or civil commotions.’ On the other hand,
Institute Time Clauses – Hulls (1995) cover piracy as one of the perils in article 6.1.5. Finally,
Kidnap and Ransom (K&R) clause has been presented in 2008. As explained above, asking
ransom is the new method of pirates which provides cash money and they do not have to deal
with the goods and market. Consequently, ship owners raised this demand and the marine
industry replied with the new coverage. However, there is a side effect of this coverage that

19
Gauci (n.17)
20
Dousse (n.5)
21
King (n.7)
22
Dousse (n.5)

7
what if the crew abuse protection since they know about K&R and try to defraud insurance
companies.
There has been some changes in US in parallel to UK as a response to the piracy. American
Institute of Marine Underwriters (AIMU) unlike to Lloyd’s is not a market but gives service to
marine insurance industry in US. They also promote and publish standard clauses for American
insurers. War Risk Insurance (1971) and Hull War Risks and Strikes Clauses (2009) mention
and cover piracy in their clauses 1 and 3 respectively. Therefore we can say that American
approach keeps piracy covered with standard clauses. However, American underwriters offer
additional clauses for the parties in order to serve different demands. One of them is the Free
of Capture and Seizure (FC&S, 1959) clause which essentially excludes war risks including
piracy, capture and seizure from hull insurance. FC&S clause has another consequence that,
because it excludes piracy from coverage, saves insurers not to pay ransom expenses when ship
owners ask for recourse.23 Another clause is the Sue and Labour (S&L, 1976) clause which is
an additional and independent contract that covers the expenses of assured in order to minimize
or forestall possible and reasonable covered damages. It is also directly related with ransom
payments which will be discussed later.

Another interesting distinction that affects the tort and the coverage is the motivation of the
attackers. It directly affects consequences of the action therefore the insurance policies. If the
motive of the action is political then it is not considered as piratical act.24 This approach was
adopted for the first time in the case of Republic of Bolivia V. Indemnity Mutual Marine
Assurance Company, Limited25 where Brazilian attackers seized Bolivian Government’s goods
in order to resist their new governmental formation and the court held that the action was
motivated with political reasons. In order to be considered as a piratical act, courts are looking
for a loss in a result of an individual greed or vengeance but not for a political cause. Another
significant case is the Banque Monetaca & Carystuiaki and Another V. Motor Union Insurance
Co., Ltd.26 where Turkish nationalist seized Greek ship at the Black Sea during independence
war. The judge held that the seizure is more of a military and cannot be considered as piracy.
However, according to UNCLOS article 102, piracy can be done by a warship or government
ship whose crew has mutinied.

23
Dousse (n.5)
24
Gauci (n.17)
25
[1909] 1 KB 785
26
(1923) 14 Ll.L.Rep. 48

8
In some instances, riots and piratical actions gets mixed and deciding one of them may change
the policy, therefore the coverage. Athens Maritime Enterprises Corporation V. Hellenic
Mutual War Risks Association (Bermuda) Ltd. (The "Andreas Lemos" case)27 is a famous case
that some equipment are taken away from the ship by armed men, meantime the ship were
insured by both marine risks and war risks. The question was whether it was caused by riots or
pirates and which coverage should compensate the loss. The judge held that any theft without
violence, threat or force should not be called as piracy. The theft was done clandestinely and
without any harm given to the crew. In order to talk about piracy, the loss for ship owner should
occur as a result of that the crew were overpowered. Besides, riot is also under the coverage of
Institute War and Strike Clauses.

As mentioned above, pirates are no more chasing goods or cargos from vessels, what they do
is, seizing the vessels and demanding ransom for release. Most of the times the ransom that
pirates requests is less than the ship’s and cargo’s value, approximately from $500.000 to $2
million.28 Therefore, most of the ship owners and insurance companies pay the ransom in order
to save the vessel, cargo and the crew. If the crew is in danger and paying ransom in order to
save their lives should be rewarded. However, what is the legal context for ransom payments?
Is it in accordance with public policies or is it incentive for pirates?

The first debate on ransom payment is whether it is lawful. Payment of ransom is not
automatically illegal in English law. It may be considered as illegal if the attackers rather called
terrorist but not pirates. 29 An assertion offers that MIA 1906 section 65(1) ‘salvage charges’
provides recover for a possible ransom. However, section 65(2) narrows the salvage operations
and makes impossible to compensate any ransom. Only solution would be adopting the
definition of ‘salvage operation’ from article 1 of the Salvage Convention 198930 to insurance
policies, which renders possible to cover ransom with its broad scope.

Another evidence from MIA 1906 is the section 78 which regulates the ‘suing and labouring
clauses’ so if parties agree on S&L, ransom would be covered under sue and labour expense.
Additionally, section 78(4) encourages the assured and his agents in order to take measure to
avert or minimize a loss. From this point of view, ransom may be considered as a measure in
order to avert or minimize the loss and compensate the ship owners even though there is no

27
[1982] 2 Lloyd's Rep. 483
28
King (n.7)
29
Gauci (n.17)
30
Art. 1(a)-Salvage operation means any act or activity undertaken to assist a vessel or any other property in
danger in navigable waters or in any other waters whatsoever.

9
agreement on sue and labour clause. However, these expenses which are made to prevent any
loss should be reasonable. For example, hiring security guards to keep the vessel safe and asking
the expense, would not be satisfied because in this case expenditure is done while there was no
danger. In order to ask any compensation, expenditure needs to be done at least for an expected
peril. Also York Antwerp Rules 2004, Rule A can be considered as a strong argument for
ransom payments which has a similar perspective with S&L clause.31

Moreover, section 49 of MIA 1906 which regulates ‘excuses deviation or delay’ may be used
in order to make a defence for ransom.32 Additionally, subheadings of section 66 ‘general
average loss’ could be asserted for such payments.33 Those provisions provide a strong base in
favour of ship owners in case of asking compensation from insurance companies. However,
statistically only %25-30 of the total cost of a ransom is compensated by insurance companies.34

The question whether paying ransom is in accordance with public policies may be answered
through a recent case, Masefield AG v Amlin Corporate Member Ltd35 where English High
Court held that ransom payments are not against public policies. In a case of refusing the ransom
may jeopardize the crew’s lives that such a risk cannot be taken. Although these payments
would seem as an incentive for pirates, yet the solution is not refusing the payment and
jeopardize the lives and goods.

Lastly, before presenting some solutions, there are some overestimated points on piracy that
needs to be taken attention to. First of all, piracy incidents are often exaggerated and dramatized
by press in order to sell a good story. Except few cases,36 generally pirates attack to smaller,
old, low-freeboard and/or slow vessels which they mostly fail in terms of security standards. 37

31
Rule A(1) There is a general average act when, and only when, any extraordinary sacrifice or expenditure is
intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril
the property involved in a common maritime adventure.
32
Section 49(1)(b);Where caused by circumstances beyond the control of the master and his employer; or
33
Section 66(2) There is a general average act where any extraordinary sacrifice or expenditure is voluntarily
and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the
common adventure.
66(4) Subject to any express provision in the policy, where the assured has incurred a general average
expenditure, he may recover from the insurer in respect of the proportion of the loss which falls upon him;
and, in the case of a general average sacrifice, he may recover from the insurer in respect of the whole loss
without having enforced his right of contribution from the other parties liable to contribute.
66(6) In the absence of express stipulation, the insurer is not liable for any general average loss or
contribution where the loss was not incurred for the purpose of avoiding, or in connexion with the avoidance
of, a peril insured against.
34
Dousse (n.5)
35
[2011] EWCA Civ 24
36
Sirius Star and Maran Centaurus
37
Bateman (n.2)

10
Apart from that fact, many organization including the marine insurance industry benefit from
piracy. This unexpected ‘help’ from piracy allows insurance companies to raise their premiums
with an enormous increment. Consequently, the more insurance premiums increase, the more
transportation expenses increase. While the average transportation fee was $900 in 2007, it
became $9000 in 2008.38

Piracy also led a new business area for private security. They became an important actor during
the ransom negotiations and payment proceedings, as well as they earn a great deal of money.39

Solutions and the Conclusion

First of all, the roots of piracy originate from social misery and poverty. Most of the pirates feel
forced to do so in order to survive. Therefore, if countries like Somalia are supported by
international community, the social injustice may decrease and piracy would be unneeded. Also
in some countries corruption and false economic policies encourage these attacks. United
Nations must be more effective in these cases.

As mentioned above, states with ineffective enforcement unfortunately let piracy grow.
Additionally, UNCLOS cannot help them in order to keep their inland waters safe because of
definitional restrictions. In this regard, United Nations needs to review the provisions and
amend them in order to answer actual problems of states against piracy. For instance, European
Union Naval Force (EUNAVFOR) patrols at the Somalia offshore by name ‘Operation
Atalanta’, however they are restricted by UNCLOS. Piracy reminded us the importance of naval
powers. Another idea including naval forces is, creating safe passages with the escort of
warships through dangerous routes.40 Additionally, sea patrolling and information sharing
between naval forces would be effective in the battle with piracy. However, both warships and
any kind of naval power need to be authorized with enough competence in order to gain
effective and successful consequences from this struggle. Also, international organizations like
International Maritime Organization (IMO) should take the initiative in order to assert sectoral
issues. Premiums will rise and different types of clauses be insisted on ship owners unless these
dangerous waters become safe.

The marine insurance industry and the ship owners who suffer the most from piracy should act
with solidarity. Insurers should not take advantage of this situation in order to raise the

38
King (n.7)
39
Bateman (n.2)
40
Ibid.

11
premiums. There are even some conspiracy theories that insurance industry secretly supports
piracy in order to increase their premiums. Instead of raising premiums, insurers could ask and
put clauses in the contract that the ship owners should modify their ships and supply the
minimum security standards to their ships in order to prevent attacks.41 In conclusion, they need
work together and develop their standard policies. They may request from the United Nations
to fulfil their requests for the purpose of preventing piracy.

One final warning needs to be given to ship owners. Because of the economic crises they took
some measures and cut their budgets which resulted as poor quality vessels with low security
standards including unqualified crews. Such vessels encourage and invite pirates to attack on.
Qualified and periodically maintained vessels and experienced crew could decrease pirate
attacks.

In conclusion, some amendments in international law will empower both naval powers
physically and states legally. Undeveloped countries who cannot prevent piracy should be
supported by international community. Insurance industry instead of taking advantage of the
situation, needs to be more cooperative with ship owners and respond their requests. Meanwhile
ship owners should follow minimum quality and security standards.

41
Dousse (n.5)

12
 Bibliography

List of Cases

Athens Maritime Enterprises Corporation V. Hellenic Mutual War Risks Association

(Bermuda) Ltd. [1982] 2 Lloyd's Rep. 483

Banque Monetaca & Carystuiaki and Another V. Motor Union Insurance Co. Ltd (1923) 14
Ll.L.Rep. 48

Masefield AG v Amlin Corporate Member Ltd [2011] EWCA Civ 24

Republic of Bolivia V. Indemnity Mutual Marine Assurance Company, Limited [1909] 1 KB

785

Legislation
Marine Insurance Act 1906

Salvage Convention 1989

United Nations Convention on the Law of the Sea 1982

York Antwerp Rules 2004

Articles and Books

Bateman S, ‘Sea piracy: some inconvenient truths’ (2010) 2 Maritime Security 13

Bowden A, ‘The Economic Costs of Maritime Piracy’ (2010) One Earth Future Foundation
Working Paper.
https://www.steamshipmutual.com/Downloads/Piracy/EconomicCostPiracyOEFReport.pdf.
Accessed on 22 April

Carr I, International Trade Law (5th edn. Routledge 2014)

Dousse C, ‘Combating Risk on the High Sea: An Analysis of the Effects of Modem Piratical
Acts on the Marine Insurance Industry’ (2011) 35 Tul. Mar. L. J. 267

Gauci G, ‘Piracy and its Legal Problems: With Specific Reference to the English Law of
Marine Insurance’ (2010) 41 J. Mar. L. & Com. 541

Huebner S, ‘The Development and Present Status of Marine Insurance in the United States’
(1905) 26 AAPSS 241

King R, ‘Ocean Piracy and Its Impact on Insurance’ (2008) Congressional Research Service,
Report for Congress.

13
Websites

Akande D, ‘Anti-Piracy Court Opens in Kenya’ http://www.ejiltalk.org/anti-piracy-court-

opens-in-kenya/ accessed on 4 May.

‘Growth through globalization’ http://worldoceanreview.com/en/wor-1/transport/global-

shipping/ accessed on 28 April.

‘History of Lloyd’s https://www.lloyds.com/lloyds/about-us/history accessed on 2 May.

14
Reflective Report
For the second semester of International Business Transactions I chose the Marine Insurance
as my presentation topic. It is one of the earliest form of insurance and it is still in use all over
the world. Also I find it as an important part of the international trade, since a significant percent
of goods are still being carried via seaways. I live in Turkey where is surrounded by sea and
has an important role on transportation at the Mediterranean and the Black Sea. Therefore it
will be a valuable project to work on this topic and explore some useful aspects to apply in real
life.

As a starting point I used the textbook ‘International Trade Law’ by Indira Carr. She explains
the marine insurance contracts in terms of their scope and principles. She also mentions the
issue of liability and Institute Cargo Clauses. It was an adequate source to start to the search.
By reading the textbook, I generally had an idea about the general principals and the framework
of the marine insurance concept. Other than Carr’s textbook, I also used ‘The Law of
International Trade’ by Day & Griffin, ‘Commercial Law’ by Eric Baskin and ‘Carriage of
Goods by Sea’ by Martin Dockray.

At the same time, I wanted to find out about its background and historical development. So I
searched for its history and realized that marine insurance has started earlier than I expected. It
has origins back in the Greek-Roman maritime loan. Then marine insurance contracts spread
all around Europe from Italian cities at 14th century. And finally an important milestone for
marine insurance was the Lloyd’s Coffee House today known as Lloyd’s Market in London,
which is the biggest marine insurance market in world with its over 10.000 members.

Another important source for the presentation was Marine Insurance Act 1906. It regulates more
than just marine insurance. It was useful in order to find some definitions and basic principles.
I cited the definition (section 1), subject to this act (section 3.1), insurable property (section
3.2a) and maritime perils (section 3.2). While I was doing my research about Marine Insurance
Act 1906, I realized that there is new version of the act called ‘the Insurance Act 2015’.
However, it will enter into force in August this year. Therefore, I focused on the previous
version.

In order to design our presentation, we split our topic into two and I was responsible for the
introduction, historical background, the scope of the marine insurance contracts, legislation,
institute cargo clauses and types of policies. On the other hand, my partner was responsible for

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the liability of the insurer, duty of good faith, disclosure, misrepresentation, materiality,
inducement, waiver and remedy.

During the research process, I also used some websites including; American Institute of Marine
Underwriters (http://www.aimu.org/) and International Union of Marine Insurance (IUMI)
(http://www.iumi.com/).

Moreover, I found a useful website that provides short cuts to almost every national and
international legislation in the world. (http://www.admiraltylawguide.com/insurance.html)

We also thought that making the presentation as interactive as possible will make it more
effective and remarkable. Consequently, we decided to print the Institute Cargo Clauses and
hand out in the class in order to take attention to presentation and also raise awareness for such
an important document for the marine insurance market. We actually found a comparative table
in Indira Carr’s textbook about the Institute Cargo Clauses however book was thick and it was
so hard to scan it. Otherwise, we were going to hand out the Institute Cargo Clauses with an
additional comparison document. In addition, we designed a seminar including two fictional
incidents and related questions. In the process of creating the cases, we were inspired by a few
famous cases and we adopted similar situations. Those cases were; the Game Boy, Pan Atlantic
Insurance Co Ltd v Pine Top Insurance Co Ltd, Inducement in Lewis v Norwich Union
Healthcare Ltd, Marc Rich & Co. v. Portman, Banque Keyser Ullmann v Skandia, HIH v Chase
Manhattan and WISE v Grupo.

We did not want to focus on a specific issue on marine insurance. Because explaining the
general principals and the framework of the marine insurance rather than presenting a specific
issue would be more beneficial for our classmates. Our initial plan was presenting the general
ideas of the marine insurance in the class but focusing a different area of the marine insurance
for the coursework.

Consequently, I decided to study on the relationship between the marine insurance and piracy.
Because as we know, piracy is an old concept, however it became popular again in recent years.
Especially the piratical acts happened in Somalia offshore was very considerable. After those
incidents, international community gave a remarkable attention to this problem. Moreover,
some Hollywood movies were shot about these incidents. In this regard, the movie ‘Captain
Phillips’ is a great production which is based on the true story of hijacking U.S. containership
Maersk Alabama in 2009.

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 For the research process of the coursework, I did not use any textbooks because I could not find
any books considering marine insurance and piracy at the same time. Therefore, I focused on
peer reviewed articles. I found more than 10 related articles and tried to read all of them and
just skimmed a few of them. Other than the articles, I also used some international legislation,
convention and reports in order to discuss the international perspective on piracy. In this regard,
I studied on the United Nations Convention on the Law of the Sea (UNCLOS), various standard
clauses from Lloyd’s and American Institute, York Antwerp Rules (2004), Protocol of 2005 To
the Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation
(Sua Convention) and reports from International Maritime Organization (IMO).

In the coursework, I strived to discuss different aspects of piracy and tried to find some possible
solutions in order to avoid or at least reduce piracy.

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