Loss of hire insurance does not have a very long history and tradition. Such insurance was rarely taken out by shipowners before the Suez Canal crisis in 1956. Air strikes by the British and French forces aimed at preventing President Nasser of Egypt from taking control of the Suez Canal resulted in the demobilisation of several vessels and the closing of the Canal. Because of the ensuing international crisis, the Canal remained closed for a number of years. The pattern of commercial shipping routes changed overnight, and vessels trading from Asia to Europe or vice versa had to sail around Africa. The demand for tonnage increased correspondingly without any possibility to increase the supply. Charter rates soared until the supply of vessels adjusted to the new demand.
Shipowners felt the need to insure their interest in their vessels' earning capability in addition to traditional hull- and P & I insurance. Initially, the owners insured loss of hire in the literal sense, namely their loss of charter hire as opposed to their loss of earnings in general. As will be explained in 5.4, this distinction is relevant in current loss of hire conditions, but development has made the significance of the distinction less important. Today, it is possible to insure both types of losses. It would be more precise to call it "loss of earnings insurance" rather than "loss of hire insurance", but the Plan has maintained the latter terminology, and it is therefore also adopted in this book.