The first permanent associations were set up towards the end of the 1830s, during a period of growth in shipping and shipbuilding in the country. Before that time, the usual practice was to insure vessels in foreign cities, but this was an inconvenient and costly practice. The mutual business was largely defined by the insurance philosophy espoused by a man named Jacob Aall: mutual associations should be straightforward and transparent, and local associations should prioritise unity, solidarity and high moral.
All along the coast of Norway local associations emerged. By reducing financial risk and spreading losses among multiple stakeholders, the insurance associations provided a measure of security and assured financial expansion in the shipping sector. The mutual associations seemed to survive despite the emergence of private insurance companies. This is believed to be the fact that they also were seen as local interest organisations. Langesundsfjordens Skibsassurance (later Den Første Norske Assuranceforening) was founded on 10 February 1837.
Norwegian shipping achieved its international breakthrough around 1850. The Norwegian fleet increased in size almost sevenfold in the period 1850–1880, and the sphere of operations expanded from domestic routes or routes between Norwegian and foreign harbours to voyages departing from and arriving at overseas ports. The causes were industrialisation, liberalisation, free trade and The Crimean War. The growth in the industry was also attributable to low Norwegian wages and purchase of old, foreign tonnage.
The growth also presented challenges. Varying quality of the vessels, the increasing value of the objects insured and the fact that numerous ships could sail the seas for years without being checked by ship owners or insurers led to demands for an improved overview of risk, scope and coverage options. As a result, the associations needed to increase their skill level. There were also increasing calls for standardisation and more specialised regulations for assessing the quality of the vessels. This desire was fulfilled with the establishment of Det Norske Veritas in 1864, initiated by representatives of the associations.
The real breakthrough in steamship operation in Bergen came in the 1870s, and Bergen became the leading city in Norway for the conversion from sail to steam with 26 steamers in its fleet. With the steamship one could load cargoes that needed to be transported quickly and reliably – such as herring and other fish. It was soon decided that first-class steamers could be insured. However, most of the first applications to the new association came from young, new shipowners who often felt that their voices were not being heard in the old association. In contrast to the sailing ship associations, the steamship insurance associations were not defined by local affiliations. In 1896, Bergen Assuranceforening stopped providing insurance for sailing ships.
In 1849, Første Norske Assuranceforening decided that insurance against war risks could be discontinued if Norway became actively involved in a war and the ship was moored in a Norwegian or allied harbour. Ships at sea would continue to enjoy coverage until they reached a harbour of this kind. This was the first instance of differentiating war insurance of vessels on the basis of whether Norway was neutral or at war. Up until then, most of the associations had included war risks in their articles.
The turning point was reached in 1914 with the outbreak of the First World War. It transpired that on account of the nature and scope of the conflict, the majority of the Norwegian merchant fleet was not covered against war risks. The result was that insurance against war risk during the two world wars was taken over by separate mutual associations that provided nationwide coverage. Naturally, this period resulted in stagnation for the associations.
Tough competition between Norwegian and foreign insurers was a key reason for the consolidation of the Norwegian mutual association, and it started already in the interwar period. The associations were vulnerable, as they were too small and too numerous to take on international competitors. The amount of associations were reduced to 7 in the 1950s, and in the 1960s when the American competition started to grow, the number was reduced to 4. A direct consequence of the hard competition was a reduction of premium and the beginning of individual pricing based on casualty statistics. By the end of the millennium, Norway was home to two mutual associations; Oslo-based Unitas and Bergen Skibsassuranseforening (Bergen Hull Club).
The early 1970s were a time of economic growth and optimism. Expansion in tanker operations with the advent of giant supertankers carrying crude oil was the main reason for the massive rise in tonnage from the end of the 1960s. The great growth in the tanker fleet that continued throughout the 1970s would prove to be a double-edged sword for the shipowners. The oil crisis that followed in the wake of the hike in oil prices in 1973 hit the shipping industry hard. However, in Norway the discovery of oil led to an optimistic period, and from 1970–1973, Bergen Hull Club increased the volume of insurance policies by 50 per cent. The Norwegian fleet reached its highest tonnage in 1977, when it comprised 27.7 million gross tons.
Since Unitas and Bergen Hull Club merged at the beginning of the new millennium, the world has witnessed severe fluctuations in financial market conditions. The demand for tonnage was very high prior to the financial crisis in 2008. Developing industrial countries – such as China – where raw materials were in great demand, served as the driving forces behind the rapid growth in international shipping. Pirates have started to show in east and west Africa, and their operations have seriously affected world trade and freedom of navigation.
The mutual associations are today to a larger degree, a part of the global economy and environment. However, the digital revolution makes the world come closer - via the web it is possible to track each vessel on the map in real-time, the news feed us with tsunami warnings. At the same time, the mutual business model introduced 175 years ago is very much alive today, catalysed through the one and only mutual association left in Norway, Norwegian Hull Club. NHC has managed to position itself as one of the leading companies in the world within its sector – marine insurance. As of today, Norwegian Hull Club’s portfolio comprises some 8000 vessels.
1837: Langesund Skibsassuranseforening established (later Den Første Norske Assuranceforening)
1850: Bergen Assuranseforening established
1864: Det Norske Veritas established
1871: First Norwegian Marine Insurance plan published
1915: Christianssands Skibsassuranseforening established
1920: 16 mutual insurance companies in Norway
1935: Norwegian war risk insurance for ships
1937: Bg. Assuranse + Bg. Dampskipsassuranse (1879) form Bergen Skibsassuranseforening - (Bergen Skibs), later known as Bergen Hull Club
1951: A merger of Nora (1874) and Vidar (1879) form Skibsassuranseforeningen Unitas
1952: Unitas is the lead underwriter for 150 vessels
1963: 4 mutual insurance companies left in Norway; Arendal & Christiania, Bergen, Christianssand and Unitas
1973: Oil crisis
1973: Norwegian Oil Risk pool established (all 4 Norwegian companies)
1976: Unitas is the lead underwriter for nearly 900 vessels
1978: Bergen Skibs. has 313 vessels in its portfolio
1984: John Wiik replaced Erik Ørvig as Managing Director at Bergen Skibs.
1987: Bergen Skibs. has approximately 25 employees
1996: Unitas acquires the portfolio of Christianssand Skips (1915)
2001: Unitas and Bergen Skibs merge into Norwegian Hull Club
2008: Financial crisis
2011: Norwegian Hull Club’s total change in solvency capital in 2010 was 49 million USD.
2012: 8000 vessels in portfolio. 115 employees in 3 offices; Bergen, Oslo and Kristiansand.
1. Dec. 2012