Bottomry is a marine financing device where a lender provides funds for a voyage and the ship itself (or its cargo) secures repayment; if the voyage fails due to maritime peril, repayment terms may be extinguished under the contract.
Why it exists
Historically, bottomry allowed trade financing where conventional collateral was not practical. Modern usage is limited, but the concept explains early marine risk transfer and loan-backed insurance logic.
Claims and settlement logic
Loss outcomes are tied to voyage completion risk. In a modern claim analysis, losses are measured by whether the insured event meets the defined peril and contract triggers.