Quantitative analysis of materiality in marine insurance

Kevin X. Li, Yulan Wang, Jie Min

Research output: Journal article publicationJournal articleAcademic researchpeer-review

15 Citations (Scopus)

Abstract

The ex post test of materiality is the traditional approach for a court to examine whether the non-disclosed information of the policyholder is material for a prudent underwriter. The approach of the ex post test has been questioned by the shipping industry, and amendments to the relevant clauses of the Marine Insurance Act 1906 are under discussion. In this research, the factors that significantly relate to marine incidents are determined based on the panel data through the step-wise random intercept model. The materiality of each factor can be reflected by constructing a factor-weighted risk indicator, which can be applied in the ex ante risk assessment of insured vessels. It endeavors to establish a risk index system for measuring the risk level of a ship, which can help both the underwriter and the policyholder in effective assessment of the materiality of information when they conclude the contract. A panel data of total loss incidents during the period 1999-2007 has been collected for verification of the methodology.
Original languageEnglish
Pages (from-to)437-455
Number of pages19
JournalMaritime Policy and Management
Volume36
Issue number5
DOIs
Publication statusPublished - 1 Dec 2009

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Transportation
  • Ocean Engineering
  • Management, Monitoring, Policy and Law

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