Financial History Issue 124 (Winter 2018) | Page 33

Thanks to the haunting ballad by Canadian songwriter Gordon Lightfoot, the wreck of the Great Lakes ore carrier Edmund Fitzgerald may be the most famous shipwreck in North America, after the Titanic. Many are surprised that a steel vessel, with radar and modern navigation, could founder in a storm, but the Fitz went down November 10, 1975. “She may have split up or she may have capsized, she may have broke deep and took water. And all that remains are the faces and the names of the wives and the sons and the daughters.” “Today the P&I clubs, including 13 international groups, represent about 90% of the world’s P&I business,” said Nick Tonge, deputy director of correspondents at North P&I. “There are a few commer- cial underwriters that get into P&I, and the business is still growing. Vessels are growing in size.” The most recent set of broad maritime laws pertaining to responsibilities of own- ers, masters and shippers is the Interna- tional Convention for the Unification of Certain Rules of Law relating to Bills of Lading, universally known as the Hague- Visby Rules. The original Hague Rules were adopted in 1924, then updated in 1968 and 1979. Interestingly, several major maritime nations “denounced” the original 1924 treaty; notably the UK, the Netherlands, Finland, Sweden, Denmark, Japan, Aus- tralia and Hong Kong. All subsequently accepted the conventions. Today only four nations refuse to acknowledge Hague-Visby: Paraguay and St. Vincent & the Grenadines stand by their 1924 refusal; Lebanon declined in 1924 and again in 1968; Egypt accepted in 1924 then denounced in 1968. To be clear, Hague-Visby does not set insurance policy or practice. They are international conventions upon which individual insurance companies or clubs base their policy terms and conditions. Marine insurance has now developed into about half a dozen distinct lines, some reflecting the original and timeless need to transfer risk for vessel and cargo, and some reflecting very modern perils. Tonge explained that P&I insurance cov- ers primarily liability: crew claims, pas- senger claims, pollution, cargo damage and some collision. The other elemental form of marine insurance is hull and machinery (H&M), the vessel itself. That is handled largely by brokers in the com- mercial market. The third line is freight, demurrage and defense that primarily protects charterers. Today vessel owners tend to be investors that lease to operators on various types of time charters. “FD&D indicates what the owner is responsible for, and what the charterer is responsible for, but a lot of disputes still arise,” said Tonge. The other three major forms of modern marine insurance are specialized. There is war-risk cover because acts of war are specifically excluded by both P&I and by H&M. There is also strike cover, to offset expenses arising out of labor disputes by stevedores, pilots and other trades essen- tial to getting vessels loaded and unloaded. And, sadly, there is kidnap and ransom insurance. For a business practice that dates back millennia, marine insurance continues to develop. The latest element is the newest in all of business: distributed-ledger sys- tems, also known as blockchain technol- ogy. While the systems arose out of dodgy crypto-currencies, it is just this year being put to legitimate commercial use by sev- eral consortia of steamship lines, under- writers and brokers. For example, a vessel is supposed to have war-risk cover if it will be passing through a designated war zone. Often insureds choose not to take on that c ost, which can be considerable. With satellite navigation and “smart” contracts using a blockchain, a vessel can effectively go on-risk if it enters a danger zone and off-risk when it leaves, with the premium pro-rated for only the actual on-risk time rather than the whole voyage. But even with such digital develop- ments, marine insurance retains its his- tory. P&I contracts are still renewed on February 20 because that was the earliest date on which Tyneside traders could leave port and cross the North Sea to the Baltic and find it free of ice. The Lutine bell is still run at Lloyd’s to herald news of an overdue vessel. And even on the inland seas of North America, “The legend lives on from the Chippewa on down, of the big lake they called ‘Gitche Gumee.’ …And the iron boats go, as the mariners all know, with the gales of November remembered.” The author thanks Taryn L. Rucinski, super- visory librarian at the U.S. Court of Interna- tional Trade, for her insight, diligence and cheerful support in finding and providing research materials.  Gregory DL Morris is an independent business journalist, principal of Enter- prise & Industry Historic Research (www.enterpriseandindustry.com) and an active member of the Museum’s edito- rial board. www.MoAF.org  |  Winter 2018  |  FINANCIAL HISTORY  31