Final answer:
Ship owners protect themselves from financial losses, including the negligent acts of their agents, through insurance policies. These policies ensure compensation for covered losses, spreading out the risk among all the insured parties. The insurance system is integral in maritime industries for mitigating the financial consequences of various risks.
Step-by-step explanation:
The insurance system is designed to protect ship owners from financial loss due to various risks, including the negligence of their agents. For instance, in the historical context of African and North American Slavery, ship voyages were often heavily insured. In the case of the Zong in 1781, the captain leveraged this insurance method to minimize financial losses by throwing enslaved people overboard in response to illness among the crew and enslaved cargo, due to the insurance policy covering losses at sea but not sickness.
Insurance provides a way of sharing risk among a group of people who pay premiums for coverage against unpleasant events. When members of the insured group suffer a loss, they receive compensation, which helps to mitigate the financial damage. This system can lead to moral hazard, where individuals become less inclined to prevent risks because they know they are covered by insurance.
In the maritime industry, specifically, ship owners can obtain various types of insurance policies to cover the liability for their agents' actions, which is fundamental in ensuring that the ship owner does not personally absorb the financial repercussions of negligence on the part of their agents.