London Market Insurance: Main Classes of Business

Main Classes of Business in the London Market

• The chapter reviews the key features of the main classes of business written in the London Insurance Market.

Introduction

• Various types of insurance can be described as both marine and non-marine.

Key Terms

• Key terms in this chapter:
  • Advanced Loss of Profits (ALOP)
  • Aviation Insurance
  • Business Interruption (BI) Insurance
  • Cargo Insurance
  • Contractors All Risks (CAR) Insurance
  • Delay in Start-Up (DSU) Insurance
  • Erection All Risks (EAR)
  • Goods in Transit Insurance
  • Long-Tail Insurance
  • Marine Insurance
  • Mutuals
  • Non-Marine Insurance
  • Motor Liability Insurance
  • Personal Accident Insurance
  • Personal Illness or Sickness Insurance
  • Political Risks Insurance
  • Products Liability
  • Professional Liability Insurance
  • Property Insurance
  • Public Liability Insurance
  • Reinsurance
  • Short-Tail Insurance

Marine Insurance

• Marine coverage generally connects to the sea and often extends beyond marine-related risks.
• There's an unusual practice of writing insurance without clear insurable interest, called honor policies or Policy Proof of Interest (PPI).

Hull and Yacht/Recreational Vessel Insurance

• Hull / yacht covers vessels of all sizes, facing similar perils on the water.
• Types include sailing, motor, and inland vessels.
• Covers damage to the insured ship, also known as first party or short-tail coverage.
• A special term for physical damage in marine insurance = Particular Average.
• Most policies cover liabilities arising from collisions.
• Maritime law dictates that each party pays damages to the other ship based on their share of the blame in an accident.
• Insurance claims are handled according to policy wording, with deductibles applying.

Builder's Risk Insurance

• Builder's risk protects the construction of a vessel, covering physical damage and liability.
• Key aspects = length of the process and increasing values as construction progresses.

Loss of Earnings Insurance

• The loss of earnings insurances covers income loss if a ship can't be used.
• It requires physical damage to have occurred and does not cover losses due to lack of work.
• Policy limits are expressed as a period of days, deductibles are waiting periods, and there might be a maximum indemnity payable per day.

Cargo and Goods in Transit Insurance

• Cargo ins covers physical damage to moved items.
• Goods in transit = liability coverage.
• Marine cargo insurance covers journeys by sea, road, rail, and air, insuring physical damage to goods in transit, but not liabilities for cargo damage to third parties or their property.
• Insurers prefer continuous movement during transit but understand brief port stops.

Stock Throughput Insurance

• Stock through combines transit and storage policies, eliminating coverage gaps.
• It offers benefits to businesses needing to move and store goods.

Jeweller's Block Insurance

• Jewel covers the jewellery trade and includes transit risks.

Specie Insurance

• Specie covers loose gemstones, precious metals, and valuable documents.
• For documents, it covers the cost of reconstruction if lost or damaged.

Fine Art Insurance

• Fine art covers paintings, sculptures, and installations, covering repair costs and value depreciation due to damage.
• It covers static risks in galleries/museums as well as transit risks for collections and exhibitions.
• Valuation disagreements between insurer and insureds are common since art valuation is quite subjective.

Satellite Pre-Launch Insurance

• Cargo insurers cover satellites for physical loss or damage until the launch insurer takes over when the engines are ignited.

Cash in Transit Insurance

• Insures movement of money between locations, imposing risk prevention criteria
  • varying routes
  • mixing up track crews
  • armed truck crews
  • GPS and other sensors
  • safety measures for rendering money useless if cases are broken into
  • warranties in respect of (not) leaving vehicles unattended

Goods in Transit Insurance

• Goods insurance covers the carrier's liability for the goods being carried.
• It covers loss/damage and releasing cargo to the wrong party at destination.
• Liability claims are third-party claims.

Parties Involved in Insurance

• Key facts:
  • the insured is the first party
  • the insurer is the second party
  • anyone else is a third party
• In liability situations, the policy compensates claims on the insured by a third party.
• Insurers consider
  • nature of the insured's business
  • controls for ensuring cargo is well-looked after during transit
  • maintained fleet of the vehicles the insured owns

War and Strikes Insurance

• Both war and strikes are excluded from hull/cargo policies.
• Available in the London Market, covering war/civil war type risks and damage from abandoned mines/weapons.
• Piracy is not a war risk in main London Market wordings but is covered as a main peril in hull and cargo wordings.
• Hull insurers may move piracy under war insurance.
• Strikes covers strikes and terrorist-caused damage.

Definition of a Strike

• A strike is defined as a 'concerted stoppage of work' that requires both planning and action.

Marine Liabilities

• Shipowners should purchase insurance against legal liabilities from injury/property damage.
• Is known as 'Third-party' insurance.
• Third-party insurance is a long-tail insurance.
• Hull insurers include liability coverage for collisions, but other liability insurance is prudent.
• Vessel owners/operators need insurance for liabilities like
  • crew injury/death
  • visitor injury/death
  • pollution
  • cargo damage
  • property damage

Collision Liability

• Collision only applies to contact with another ship.
• Other needs for insurance:
  • removing the wreck after an incident
  • vessel damage after a hire

Port Authrorities

• Port authorities need insurance for:
  • vessels damaged by harbour obstructions / insecure docks
  • damage by shore cranes / tug boats
  • wrongly released cargo and pollution
  • damage from substandard bunkers

Shipbuilders/Ship Repairers

• The insurance should provide liability for:
  • improper vessel repairs / building
  • damage to ships after accidents like a fire / explosion
  • injuries to personnel / visitors

Marina Owners

• The insurance should provide liability for:
  • pleasure vessels damaged in the marina
  • waterfront park / business injuries to individuals
  • bars/catering, any marina-related accident

Political Risks Insurance (PRI)

• Political risks offer a means for investors and businesses to mitigate and manage those risks
• Risks arising from hostile or unconstitutional governmental actions that help foster a more stable environment for trade and investments into emerging markets.

Offshore Energy Insurance

• Offshore energy insurance developed from the marine market, covering oil and gas extraction under the seabed.
• Known as upstream, onshore energy is downstream.
• Midstream is the middle ground.

What does offshore energy business entails?

• The offshore energy business operates in three phases:
  • Exploration uses rigs moved between locations, facing physical and liability risks.
  • Construction involves building permanent rigs, covering physical damage and liability.
  • Operational phase combines physical damage, liability, war, and terrorism risks.

Windstorm Risks

• All aspects of the offshore energy face risks from windstorms, posing an issue of mobility for insured items.

Non-Marine Insurance

• In this, we will look at the groups of London Market business that can be grouped together as non-marine.
• Property/physical damage is first party and short tail.
• Liability classes are third-party and long tail.

Property Insurance

• As the name suggests this is a physical damage insurance for buildings
• Covers
  • office buildings
  • industrial buildings
  • public buildings
  • retail units
  • agricultural buildings
  • houses
• Basic type of property can also cover machinery, fixtures and fittings within the building
• Insured can also be indemnified with reinstatement, which is not found in marine policies in general

Stock Insurance

• This is a physical damage insurance covering stock at the insured's premises. Regular declarations of stock levels need to be made.

Theft Insurance

• Theft insurance deals with theft involving forcible entry but is not available if it is not apparant.

Glass Insurance

• Glass insurance covers the glass elements of a building
• Covers aspects such as boarding up properties for security purposes after an incident

Goods in Transit Insurance

• Goods in transit insurance covers goods in the marine and cannot be reviewed again.

Pecuniary Insurances

• Pecuniary insurances cover the monetary loss and can be purchased arising from a wide range of perils that are internal and external.

Money Insurances

• As with theft insurances, money insurances do not respond if there is an 'inside job'.
• Includes requirements for vehicles to remain attended

Fidelity Guarantee Insurance

• Responds to fraudulent acts during the policy period.
• One activity could be an employee in a responsible position diverting funds into their own accounts.

Construction Insurance

• Construction of building is lengthy and involves different parties
• Construction policies commence at the start of work and terminate once it is handed over

CAR / EAR Policies

• Contractor all risks and erection all risks policies are commonly bought combinations of physical damage and liability
• CAR policies are bought by the main contractor on behalf of any other sub-contractors.
• EAR policies are bought by the main contactor responsible for putting of machinary or steel structure of any type.

Cyber Insurance

• Cyber insurance has solutions that are being developed to meet needs
• Protects businesses by:
  • network security (compromised in some way)
  • privacy breaches (where customer data is lost)
• Cyber policies aim to cover:
  • business interruption
  • reputation protection
  • payment of ransoms

Business Interruption (BI) Insurance

• Replaces lost income after a waiting period.

Advanced Loss of Profits (ALOP) and Delay In Start-Up Insurance

• In any major construction project, time is of the essence, therefore, leading to penalty clauses for sub-contractors
• Insurance addresses risks to loss of profit and debt service

Non-Marine Liabilities

• Consider obtaining insurances to cover legal liabilities

Key points of the Non-Marine Liabilities

• Employer's liability (the employer is liable should an employee become injured and make a claim )
• Public liability (party is liable for the damages caused to any members of the public visiting their properties)
• Professionals liability (professional such as doctors, accountants or lawyers are at risk of a claim against them for something they have done)

Bloodstock and Livestock Insurance

• This is insurance of animals that used for business.
• Bloodstock insurance is for horses, such as showjumpers and racehorses
• Livestock insurance can cover any other animals such as alpacas and fish farms.

Contingency Insurance

• There is specific group of Contingency Insurances that cover event cancellation , weather-related insurances, prize indemnity, death.

Personal Accident Insurance

• Insurances that fall under the general title include:
  • Personal accident (in the event of an accident)
  • Personal illness or sickness (if the person falls sick)
  • Death in service (employer has to pay 'death in service benefit')

Kidnap and Ransom Insurance

• Insures the capturing of a person and then demanding payment or ransom for their release.

Malicious Product Tamper, Extortion and Product Recall Insurance

• The insurances assists with the action taken money after receiving the message after the potential tampered food.

Intellectual Property Insurance

• Intellectual Insurance primarily covers legal costs defending in court.

Aviation Insurance

• Coverage = physical damage and liability

Common type of aircrafts and flying objects

- Private pleasure fixed wing aircraft
 - Commercial fixed wing aircraft
 - Rotary aircraft 
 - Gliders
 - Microlights
 - Hot air balloons 
 - Unmanned aerial vehicles or drones

Aviation Liabilities

• Under standard aviation policies:
  • covers passengers, third parties other than passengers and products-related liabilities.

Loss of Licence / Loss of Use Insurance

• Loss of used insurance provides a replacement income stream.
• Loss of licence insurance is available in an event to aircrew and traffic controller.

Airport Operations Policies

• Insurances provide the protection that is combined of both physical damage and liability insurances.
• Divided into 3 coverages: - Premise Liability - Product Liability - Hangar-keepers liability

Reinsurance

• Buying reinsurance can increase capacity of an insurer.