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Research London Marine Insurance Market and Structure (Essay Sample)


ASSIGNMENT QUESTION a) Discuss the structure of the London Marine Insurance Market and explain the functions and responsibilities of insurance brokers within the market. b) What is the legal value of the original slip? What is the leading underwriter? Why does the broker frequently overplace the risk?


Marine insurance
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London Marine Insurance Market and structure
London is considered the leading marine insurance center of the globe, specializing in the insurance of risks related to shipping operations (Douse 2010). The insurers in this market are capable of handling various insurance needs of the shipping community covering different physical risks in the shipping industry. This market, has its origin tracing back to over 300 years ago. The London marine insurance market is split between Lloyds and insurance companies at approximately 50% (Mills 2012). The Lloyds in the market  represented by the Lloyds Market association whereas the other contributing insurance companies is represented by the International Underwriting Association (IUA) of London (Douse 2010). Therefore, the London market is composed of the two bodies as the main players.
Lloyd's market, which covers a significant proportion of the marine insurance market is administered by a body known as the corporation of Lloyds (Llorca-Jaña 2010). Though the corporation of Lloyds does not provide insurance to clients, it provides the infrastructure on which the operation of the brokers and the underwriters are undertaken. It thus supervises the operations of the market by ensuring that those involved meet certain specified standards. This further is what results in efficient and effective operations, creating the confidence to prospective clients which keeps it expanding the services globally (Kader et al. 2010).
The marine insurance market of London is characterized by a structure comprising of individual insurers situated in major cities of the United Kingdom. The individual insurers are groups regarded as syndicates which may comprise of as many as 300 individual insurers. The affairs of a syndicate are put under the management of an underwriting agency that appoints representative specialist underwriter to act on behalf of the rest of the members, considered to be non-active members. An underwriter works closely with a broker in the calculation of the premiums which are based on the probability of the risk covered occurring. Depending on the size of the risk to be covered, the broker may approach several syndicates to cover a single risk with each covering a given percentage of the risk. The representative underwriter accepts the contract on behalf of the entire syndicate.  Thus, the market structure is founded on a principle of spreading risks where a single risk is underwritten by a number of syndicates.
Functions and responsibilities of insurance brokers
According to Shiu (2011), the marine insurance market comprises of more than one hundred brokers who have well-defined roles and responsibilities. Among the responsibilities of the brokers include representing their clients in the market, choosing the most suitable cover that meets the client's needs as well as ensuring the best and competitive prices for the represented clients (Kingston 2007). The brokerage firms also ensure attainment of the best money value. These roles are discussed in details in this essay (Thomas 2015). First of all, the brokers represent the client's in the market owing the valuable information and knowledge they possess regarding marine insurance policies and requirements. This is because most of them have worked in the industry, adding significantly to their expertise in negotiating with the underwriters. If the task was to be left to the client's themselves, it would have otherwise caused challenges due to the ignorance about the market (Thomas 2015).
Secondly, the broker ensures that the cover offered by the underwriter meets the requirements of the client (Kader et al. 2010). Among the covers provided includes hull, loss of freight, uninsured legal expenses as well as detention insurance (king 2008). Thus, most of the times, it is very challenging for a client to comprehend which cover suits them best. This is caused by many covers that may sound the same while in the real sense represent totally different risks (Kader et al. 2010). It is for this reason that the intermediary/ broker steps in as an advisor on the best cover as per specifications of the client. The broker will, hence, suggest the various strategies for the management of risk to their client's.
The brokers will also have a responsibility in looking for a competitive price in the marine insurance market. Since there are numerous syndicates in the insurance market, the prices for the contracts will be as many as the number of these syndicates. It is for this reason that the broker sets out to look for the most competitive price for their respective clients. They will not only arrange for covers, but will also help in adjusting the premiums of the contract as per the requirements of their clients. This ensures fair treatment of these clients in the market, thus avoiding exploitation. In order for a broker to market himself, he must prove his knowledge on the operations of the market so as to win as many clients as possible (Thomas 2015).
The brokers are, therefore, the bridge between the underwriters and the clients, helping the service providers reach a good number of potential clients (Shiu 2011). They play a great role also in ensuring that the value of the policy/ cover provided by the underwriters matches the amount of the premiums they pay.  This translates to fair treatment of t

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