A Study On Mortgagees' Interest Insurance

Ship industry is one of the world's most capital-intensive industries. Bothmanufacturing ships and sailing need the support of huge amounts of money. Shipfinancing plays a key role in promoting the development of shipping industry. Shipmortgage is the most traditional and versatile mode of ship financing. Usually, shipowners apply for mortgage to obtain the financial support from banks and otherfinancial institutions, who worry about whether they will obtain the protection for theirship mortgage, considering the high-risk industry characteristics. That make theship industry beset with difficulties in ship financing. Therefore, international shippingindustry needs for risk management tools to protect the interest of ship mortgage andtransfer the risk to guarantee the non-congestion of financing channels.China is the second largest economy in the world, changing from a great shippingcountry to shipping power country. The report of18th CPC National Congressproposed the concept of marine economy and marine power construction. As the basisfor the development of marine economy, our shipping industry should be activelydeveloped in the process of realization of our marine strategy. With the rapiddevelopment of the international shipping market and the financial market, the demandfor ship financing is increasing. However, China's current ship financing70%isBottomry loan, finds itself in a tight corner over its high risk. Therefore, we demand awell-run ship financing guarantee system, not only developing the traditional marineinsurance to protect maritime vessels risk, but also developing the ship mortgageeinsurance to protect the mortgagees' interest.Mortgagees' Interest Insurance is independently designed for the mortgagees'interests, insured by the ship mortgagees, underwriting ship mortgage, covering theexclusions occurred or failed to obtain payment resulted in a total loss of the first lineof marine insurance. MII has taken decades to develop and mature in the westerncountries, being able to simultaneously protect ship mortgagees' interests and transferthe related risks, ensuring the soundness and safety of the ship financing.To this dissertation, MII has decided advantages in protecting the mortgagees' interests over the traditional first-line marine insurance. Firstly, the mortgagees canautonomously arrange insurance, according to their own needs. Secondly, themortgagees can get out of the bind of relying on the behavior of shipmortgages.Thirdly, MII has other relative insurance as its supplement to protect themortgagees' interests better. Then this dissertation reaches the conclusion that thedevelopment of MII can help to optimize the structure of China's current marineinsurance market, enrich our shipping insurance market and promote the developmentof our maritime insurance market.This dissertation adopts three analytical methods of comparison research, literatureresearch, qualitative methodology. This dissertation carefully studies and analyses theMII's concept, feature, subject, major policy provisions and so on, focusing on MII'spolicyholder, the insured, insurable interest and the principal terms. Referring to thetheory and documents associated to MII at home and abroad. Then the dissertationmakes the law and economics analysis on “economic man”,“uncertainty”,“moralhazard”,“adverse selection”,“market failure”,“cost-benefit analysis” and “remediesfor breach of contract”, according to the regulations of Insurance law, Maritime Law,Warranty Law and Property Law. On the basis of the current situation of China's shipfinancing, development of the shipping industry and the current legal system, thisdissertation explore the feasibility of developing MII in China. Finally, after the studyof the status and role of MII in the future development of China, this dissertationpoints out that MII is an inevitable development trend of China's shipping industry andship financing development, giving suggestions on the policy recommendations to theinsurance industry and insurance companies about how to develop MII, advisingpolicy provisions adjustment proposals for insurance companies.This dissertation argues that the introduction and development of MII will meet theneeds of the development of China's ship mortgage, improve our shipping insurancesystem and guarantee the smooth development of our ship financing system, to helppromote China's marine economic development. MII is an inevitable developmenttrend of China's shipping industry and ship financing development, researching on MIIhas the necessity and feasibility of insurance benefits. Although there are still manyissues to study and research in theory and practical level, the good prospects for MII's development in our country can be foreseen. To this dissertation, when the first stephas been taking, the enriched theory and abundant practice will be within sight.The innovation of this dissertation is as follows: Firstly, the research topic is novel,because of the current related researches on MII are relatively less and lack of detailedanalysis and comparative study. Secondly, the research angle is new andcomprehensive, starting a legal point linkage analysis combining law and economicsmethodology, making multi-angle, multi-level study on the necessary and feasibilityfor the development of MII in our country. Thirdly, the dissertation introducesinnovative methods of law and economics analysis, making a study on “economicman”,“uncertainty”,“moral hazard”,“adverse selection”,“market failure” and so on,using law and economics theories and tools, drawing the much more targeted anddetailed conclusion. Finally, this dissertation adopts theoretical analysis?qualitativeresearch?international comparative research methods and quantitative method toreposition the development of MII in China, combined with our current legal systemand shipping insurance market realities, coming to the conclusion that introduce anddevelop MII in China is able to guarantee the safety of our ship financing, after adetailed study of the necessity and practicability of MII in China. This is also anotherinnovation of this dissertation.