chapter  6
15 Pages

Insurance and the securitization of global maritime circulation

On 6 August 2001, the Joint War Committee (JWC) of the Lloyd’s Market Association (LMA), together with the War Risks Rating Committee (WRRC) – another LMA committee looking after the interest of cargo – announced a decision to include Sri Lanka in its circular of listed areas of heightened maritime risk related to war (the War List). The announcement followed an attack on 24 July 2001 on Colombo’s Bandaranaike International Airport by the Liberation Tigers of Tamil Eelam. The attack resulted in the destruction of three airliners and eight military aircraft and damage to a further three aeroplanes with a total insured value of around $US576 million. This was not an isolated case. By the time of the attack, Sri Lanka, along with Iraq, Angola, Israel, Lebanon, Libya, Eritrea, Somalia, Congo, Sierra Leone and Yugoslavia, was already on the Lloyd’s Market War Risk Trading Warranties list of countries posing heightened security risks for insurers. The JWC-WRRC decision, however, had as a consequence the imposition of war risk surcharges on all air and seaborne shipping to Sri Lana, which presented serious economic implications for the country. The additional war surcharge was payable by exporters/importers and led to a reduction in the traffic of vessels, increased freight rates, a reduction in container transhipment, uncompetitive exports and general economic compromise.2 Owing to the gravity of the situation, Sri Lankan shipping agents asked their principals to inform marine underwriters that the additional premium was totally unjustifiable as the security of the port was not compromised by the attack on the airport.3 The government of Sri Lanka made representations against the decision to the JWC in London on 11 August.4 Six days later, a meeting between the Sri Lankan High Commission in London and the Lloyd’s Market Association followed and a statement was made to the effect that ‘rating improvements may become available to ship-owners in respect of vessels calling at Sri Lankan ports’.5 That same day it was announced that ‘the Sri Lankan government agreed to pay a bond of $US50 million against any claims that might be lodged for damage to vessels heading for or in Sri Lankan waters’.6