The protection of the banking institution in case of ship-owner's insurance contract cancellation

Abstract

The signature of the insurances between the financial institutions and ship-owners is crucial for the removal of the credit risks in the relationship of the parties. The main principles of the marine insurance legislation stipulate that the vessel serves the role of the collateral under the insurance contracts and can be used for the extensive protection over financial institutions against damage. Today the marine industry is rich for the numerous companies owning from one to several ships. In this regard, it is clear that some companies lack significant resources in case of damage of the ship. Thus, the majority of the business units in the marine sphere rely on the mortgages insurances so as to avoid unnecessary payments for the causation of damage to the vessel. With the end of the financial crisis, the power of the ship-owners’ insurance has been increased. There is a variety of insurances that can be signed between the shipping companies and lending institutions for minimizing credit risks. Meanwhile, the financial institutions today are much more cautious in the conclusion of the insurance contracts with the ship-owners as they pose certain risk for them. Hence, this thesis explores the nature of the insurance contracts and mortgages’ insurances existing under the current marine English legislation of the global scope. The evaluation of the insurance protection evidences that the financial institutions are not given the adequate protection. In this regard, the recommendations for the banking institutions are considered through the thesis in order to have a smooth cover for both parties in the agreement.