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