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Wednesday, July 1, 2020

London market introduces new clause in Marine policy - modern slavery !

Sec 5 of MI Act 1963 -  Lawful marine adventure : Subject to the provisions of this Act, every lawful marine adventure may be the subject of a contract of marine insurance
Sec 43 of MI Act 1963 - Warranty of legality.—There is an implied warranty that the adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner.

There was a time when one would find small children cleaning the food table and doing other sundry work in hotels – now in most establishments we see a board ‘No Child labour’ – because of the law banning employment of children in eateries. When you order food, or buy food from any famous branded outlet, can one seek to know that ‘no children were employed in producing or in manner’.  Ever heard of a clause in Marine Insurance policy designed to keep the products of modern slavery out of the export supply chain. Understand that such clause has been introduced in London market !  My understanding of this clause is that it is not directly connected to ‘slave trade’ and dark  days when human slaves were insured as cargo.

pic of illegal boat migrants

Burnley Football Club is an English association football club based in Burnley, Lancashire. Founded on 18 May 1882, it was one of the first to become professional (in 1883) and now competes in the Premier League, the top tier of English football.  Burnley was in news  for wrong reasons  a banner reading "White Lives Matter Burnley"  was towed by an aeroplane over Etihad Stadium during Monday's match against Manchester City. The aircraft circled over the stadium just after kick-off in City's 5-0 win. Burnley and City players and staff had taken a knee in support of the Black Lives Matter movement moments earlier.  The incident “caused offence to many people in Lancashire and beyond”, a Police  officer said on Tuesday, as the stunt was blamed on individuals from a group of football hooligans connected with Burnley. However, Lancashire police said that after assessing all the information available surrounding the incident, the force had concluded “that there are no criminal offences that have been disclosed at this time”.

There are increasing instances of statues sought to be downed and Companies made to apologise for their role in slave trade in past centuries.  One important, but overlooked, risk mitigation device that facilitated the growth of the slave trade in the eighteenth century was the increasing availability of insurance for ships and their human cargoes.  In 1856, just five years before the outbreak of the Civil War, the Charter Oak Life Insurance Company printed a pamphlet offering slave owners in six Southern states the option of insuring the lives of their slaves.

For just $2, Kentucky, Missouri and Tennessee residents, for example, could purchase a 12-month policy from the Hartford-based insurer on a 10-year-old domestic servant that would yield $100 if the slave died. Policies for older slaves, like a 45-year-old, were more expensive, costing the slave owner $5.50 a year.

Though the company no longer exists, these policies are drawing increasing attention nearly 150 years later because of a lawsuit that was filed in United States District Court in Brooklyn, in late March against Aetna Inc. and two other companies, claiming that they profited from the slave trade.  It's not pleasant to talk about it today, to put it mildly, but slaves were insured just like any other thing that the farmers owned, that the slave owners owned,'' said an Insurance analyst ''If you were selling insurance in slave states to people who had plantations, that was one of the things that you sold. ''It was very common,'' he added. ''Basically, insurance and slavery go all the way back in history of Nations and Insurance”.

Recently, Insurance and reinsurance marketplace Lloyd’s of London  apologised for its links to the slave trade in the 18th and 19th centuries, and announced that it plans to pay reparations via donations to BAME charities. Lloyd’s grew to dominate the shipping insurance market, a key element of Europe’s global scramble for empire, treasure and slaves, who were usually in the 18th Century included in insurance policies in the general rate for ship cargo. Weapons and gunpowder from Europe were swapped for African slaves who were shipped across the Atlantic to the Americas. Those who survived endured a life of subjugation on plantations, while the ships returned to Europe laden with sugar, cotton and tobacco.

The history of insurance begins with the sea.  Lloyd’s released a statement condemning “the indefensible wrongdoing that occurred during this period” after its role in the slave trade was highlighted in a major academic database. Many companies in the financial sector are currently facing intense scrutiny over racial issues, after the police killing of African American George Floyd in the US sparked a wave of global protests. The UK in particular has seen its historical links to the slave trade spotlighted after a statue of slave trader Edward Colston was torn down by protestors in Bristol, prompting the removal of similar statues across the nation.

Lloyd’s was founded in 1688 and has its roots in maritime insurance, meaning many of the ships it insured during its early years were involved in the trans-Atlantic slave trade. “Lloyd’s has a long and rich history dating back over 330 years, but there are some aspects of our history that we are not proud of,” the firm stated.  In addition to these apologies, Lloyd’s has pledged to provide financial support to charities and organisations promoting opportunity and inclusion for black and minority ethnic (BAME) groups.

         It is perhaps unsurprising that Lloyd’s has been quick to acknowledge and apologise for this particular controversy, given its recent push for stronger inclusivity measures. These measures were introduced last year as part of the Future at Lloyd’s program, in response to reports of widespread sexual harassment and employee wellbeing issues in the marketplace.

Fidelis, Aon and Marsh have developed a new marine cargo clause for the London Market that is designed to keep the products of modern slavery out of the export supply chain.   The group of brokers and insurers say the clause will make it a condition of marine cargo policies that the insured complies with applicable legal and regulatory obligations in respect of forced and child labour. “Forced labour in all its forms is an extreme expression of inequality and injustice,” said Charles Mathias, Group Executive Director & Group Chief Risk Officer, Fidelis Insurance.

“We sometimes think that slavery is a thing of the past, but it is not – it is real and present in all societies and we want to do our part to root it out.” The clause makes it a condition of marine cargo policies that the insured complies with applicable legal and regulatory obligations concerning forced and child labour. The announcement of the new clause comes amid the international outcry against the systemic racism following the police killing of African American George Floyd in the US.

Quite curious to think on the interpretation and imposition of such a clause when there is a cargo claim – would that mean that in a claim on  insured products produced by forced or child labour would be construed as outside purview of a claim under Marine Policy ! (though otherwise legal transit and a tenable claim arising out of a maritime peril).

With regards – S. Sampathkumar

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