Insurance in
International Trade
Dr Vanessa Sims
University of East Anglia
I. Introduction
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social and commercial importance of
insurance
huge range of subject-matter:
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ships
goods
warehouses
building projects
oil rigs
I. Introduction
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huge range of risks:
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natural disasters (storms, earthquakes…)
piracy
non-payment
exchange rate fluctuations
strikes
political changes
war
II. Lloyd’s of London
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insurance market
origin:
coffee house
(1680s)
meeting place
for captains
and insurers
II. Lloyd’s of London
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market leaders in many fields
often first to offer insurance for new risks:
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cars: 1904
planes: 1911
satellites: 1960s
almost bankrupt in 1980/90s:
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Exxon Valdez
Piper Alpha
– hurricane Andrew
– asbestosis
II. Lloyd’s of London
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market profitable again
capacity 2008: £16.1 billion in premiums
profit 2006: £3.7 billion
money for insurance provided by ‘names’
are grouped together in syndicates
insurance arranged by brokers and
underwriters
Lloyd’s Market Structure 2007
Corporation of Lloyd’s
72 Syndicates
Policyholders
167
Lloyd’s
Brokers
• Direct
• Reinsurance
BUSINESS FLOW
Source: Lloyd’s
All numbers as at 1st August 2007
47 Managing Agents
(underwriters)
Members
£16.1bn Capacity
• Corporate
(123)
• Individual
(1124)
CAPITAL PROVISION
III. Contract Formation
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prospective insured = proposer
use of agents (brokers)
different procedure at Lloyd’s:
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broker fills out slip
takes slip to underwriters
they accept percentage of risk by initialling slip
IV. Insurable Interest
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insurable interest: legal or equitable
relationship with subject-matter
 Laucena
v Craufurd (1806) 2 Bos & Pul
(NR) 269
 Macaura v Northern Assurance Co Ltd
[1925] AC 619
 Petrofina (UK) Ltd v Magnaload Ltd [1983]
2 Lloyd’s Rep 91
IV. Insurable Interest

Feasy v Sun Life Assurance Co of Canada
[2003] EWCA Civ 885:
“It is not a requirement of property insurance that
the insured must have a ‘legal or equitable’
interest in the property as those terms might
normally be understood. It is sufficient for a subcontractor to have a contract that relates to the
property and a potential liability for damage to
the property to have an insurable interest in the
property.” (Per Waller LJ)
V. Utmost Good Faith

utmost good faith = uberrima fides
 Carter
v Boehm (1766) 3 Burr 1905:
“Insurance is a contract upon speculation.
The special facts, upon which the
contingent chance is to be computed, lie
most commonly in the knowledge of the
insured only...” (per Lord Mansfield)
V. Utmost Good Faith

s.17 Marine Insurance Act 1906:
“A contract of marine insurance is a
contract based upon the utmost good faith,
and, if the utmost good faith be not
observed by either party, the contract may
be avoided by the other party.”
V. Utmost Good Faith

s.18 Marine Insurance Act:
“Subject to the provisions of this section,
the assured must disclose to the insurer,
before the contract is concluded, every
material circumstance which is known to
the assured… If the assured fails to make
such disclosure, the insurer may avoid the
contract.”
V. Utmost Good Faith
 Container
Transport International Inc v
Oceanus Mutual Underwriting Association
(Bermuda) Ltd [1984] 1 Lloyd’s Rep 476:
rejection of “decisive influence test”
 Pan
Atlantic Insurance Co v Pine Top
Insurance Co [1995] 1 AC 501:
requirement of “inducement”
V. Utmost Good Faith

moral hazard
 Roselodge
Ltd v Castle [1966] 2 Lloyd’s
Rep 113
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Rehabilitation of Offenders Act 1974
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physical hazard
V. Utmost Good Faith
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mutual duty of utmost good faith
 Banque
Financière de la Cité SA v
Westgate Insurance Co Ltd [1991] 2 AC
249
VI. Loss and Causation
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peril: event insured against
exception: event expressly excluded
loss: total or partial loss
constructive total loss
doctrine of abandonment
causation: “proximate cause”
VI. Loss and Causation
 Becker,
Gray & Co v London Assurance
Corp [1918] AC 101
 Marsden
v City & County Insurance (1865)
LR 1 CP 232
 Leyland
Shipping Co v Norwich Union Fire
Insurance Society Ltd [1918] AC 350
VII. Subrogation
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indemnity principle
 Castellain
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v Preston (1883) 11 QBD 380
two elements:
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recovery of money received from third party
action against third party