These days we are developing codes relative to the Law System. We have 3 laws that will be implemented right after - all relative with banks. One of them is loans insurance.

Loan insurance will work like this:
-Countries will choose whether to adopt the Law or not.
-Once adopted, countries will choose 2 variables:
1)Up to which amount the country will insure loan amounts.
2)Up to which percentage the country will insure.

The insurance will be activated only when a player goes inactive. This law is mostly intended for small newcomers where banks hesitate to issue loans to them while they are the ones that need them most.

The insurance will be paid directly to the bank from the national treasury once inactivity period is reached.
The amount insured will only refer to the unpaid capital and not any profit/included fees.
Once the insurance is paid, the debt will be removed from the bank and will be transfered to the bank's nation instead where it will be subject to Debt Amnesty mechanism (search for it in changelog).

This law give us further ideas for more laws or possibly bank contracts.
Some players have proposed before Plunder insurance which was approved and a solution that could work has been later found.

Another idea is the Cargo Insurance which could also work well with the skirmish feature; The insurance will be the gold equivelant for the cargo to save the player from paying from treasury.

However, insurance to players might not be a good idea to be carried by countries. Perhaps banks are better candidates for this kind. Banks could sell insurances to players. This will leave no room for exploitation while we will provide the bankers with another way to make profit. Not something we will put on priority but certainly something worth discussing.

Speaking as a banker, I do tend to avoid newly joined players for loan offers : given the retention rates in the game any I have given have been more out of a sense of public duty and been mentally 'written off' immediately. I don't really see the 'value' of them for new players as, inevitably given the risk factor, the interest rates are set high and the benefit of the cash boost is soon eaten away by the repayments dragging down their expansion beyond that.

So, with that in mind, perhaps the nations involved could also demand a limit on the interest rates charged to get that 'insured' status : perhaps a pre-set 'starter loan' with an amount and rate decided and underwritten by the nation would still allow for some profit for the banker ; in that case, I would be much more eager to open the vaults to such requests. Any player who stays in the game beyond the loan life will then have gained some measure of credit-worthiness and standing which would mean they could then apply for further loans within the current system.

The second type of pre-set loan might be an 'improvement loan', to build and officer a new trade fleet perhaps : the nation could make such insured loans more attractive to the bankers with the aim to build their nations growth with the added security of being a more established player receiving it.

Speaking with me other hat on, as King of a nation, such a set of 'pre-set loan packages' would also make sense as they could be tailored to suit a nations treasury and income, which might favor the rich guys to an extent, but would also allow for 'recruitment campaigns' by small nations to build their citizen base up for future ship tax income.

As for the other insurance options : its a tricky one to figure out as we have no 'actuarial tables' to guide us as to risk factors, which are kinda basic to assessing premiums : I'd go with a system where-in the player can select an 'insure cargo/ship/both' option on trade routes : this would open a dialog with a list of those banks offering such insurances and their current rates for the nation involved (allowing for any current war risk, for example. added in edit: There might also be room to give better terms for 'quiet' trade routes or excess rates for 'hot' ports with higher risk of attack).

added: If no bank will insure a given route or nations citizens, then no offers will appear, or if bank A will not insure that nations citizen, it will not appear in the options offered. I'd also include a percentage insured scale : perhaps a choice of % of loss covered with cheaper cover for less risk giving the player some compensation if attacked for less daily cost.

The player would accept such offer as works for them and agree the deal : it would then stay valid until de-selected at a later date. I'd like a clause which would auto-cancel the insurance should the covered fleet leave port with 2 or more danger on it to stop any chancers using it as a 'free' treasure fleet knowing the insurance will cover any loss from resultant hits.

added : Perhaps any edit of the trade route would also cancel the previous cover and mean getting new coverage for the new conditions: with cover denied if auto-stop on danger is not selected.

I do think banks could/should run such insurance schemes : I also think the nature of them would demand some sort of ring-fenced account as the sums involved in a total loss of fleet, for example, could be considerable. So to operate it, the bank needs enough accessible working capital relative to the risks it is carrying. Perhaps an account within the bank operated by the banker separately to their own funds, with premiums and pay-outs channelled through it so the banker can judge cash flows better and keep the funds liquid.

This could also be a useful system for controlling the loan book : currently its all lost in the 'general funds' and 'transactions' : if I could run a separate account for loans with loan income coming in to it I could judge income and scale up or down future loan offers and rates far better. I think this is a key thing, the easier it is to run it, the more I will loan out at better rates : whilst its all a bit grey and confused and hard to get a grip on the full picture, its easier not to.

Nations could act to under-write insurance risks, especially in times of conflict to keep trade flowing, much the same as they could under-write loan risks, by nominating selected banks as approved insurers for their citizens with consequent rate reduction and assuming coverage of part of the risk. But the banks themselves should be 'neutral' and able to offer coverage to all, otherwise small nation players would be excluded from such insurance schemes and that would not be desirable.

Sorry for the length, but its a long subject