With war drums beating ever more loudly in the Middle East, marine insurers have to make some tricky underwriting decisions as to where the greatest perils lie.

As the new head of the Joint War Committee, Beazley's chief marine underwriter, Clive Washbourn, and his fellow panelists will help guide marine underwriters in making a profit where political turbulence makes that goal all the more difficult to achieve.

Marine insurance has traditionally been written in the London market. Thus, the Joint War Committee is made up of underwriters from both the Lloyd's Market Association and the London-based International Underwriting Association.

Both Lloyd's and the London insurance market in general continue to take lead roles in the sensitive area of war risk exclusions.

"Clearly, any country which has been placed on our exclusion list can be frustrated because there is an economic impact in terms of the cost of shipments to and from those countries," Mr. Washbourn noted.

The alternative, he asserted, was to make no differential at all and then charge a higher premium to everyone.

Two years ago, the JWC revamped its procedures to enter into an agreement with a separate third-party security consultant to publish periodically a list of areas of perceived enhanced risk in relation to war, strikes, terrorism and related perils.

Neil Smith--marine, aviation and transport manager at the Lloyd's Market Association--noted governments often say increased shipping costs that come with inclusion on the list will hamper their trading in the international market.

But while the list plays an important role in underwriting decisions, it is difficult to determine in dollars and cents what inclusion on the list means, since all underwriting agreements are private contracts between the insurer and insured.

"The application of the list on individual contracts is a matter for specific negotiation, and responsibility for use of the list rests entirely with individual underwriters, brokers and assureds," according to Mr. Smith.

Mr. Washbourn said there are underwriters who choose not to follow JWC recommendations, "which is the sure sign of a free market."

Last year, the inclusion of the Malacca Straits to the JWC list created quite a reaction, recalled Mr. Smith.

"In the case of Malacca, it is interesting to note the high-profile efforts which have subsequently been taken by the littoral states and other affected governments to address the situation, and the positive impact this has had on the overall security situation," according to Mr. Smith.

The straits are located between Thailand, Malaysia, Singapore and the Indonesian island of Sumatra to the west. The United States has expressed concern in the past as to the vulnerability of the area to the shipment of material related to weapons of mass destruction and other terrorist threats.

In addition, while the spotlight shone on the battle between Israel and terrorist forces in Lebanon this summer, the eastern Mediterranean was already on the JWC list.

Special Reports /

Marine Insurers Navigate Wartime Perils

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