history, background and structure of p&i clubs · 50.3% 30.7% 0.8% 0.8% 4.0% 13.5% people...
TRANSCRIPT
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HISTORY, BACKGROUND AND STRUCTURE OF P&I CLUBS
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• Shipowners insurance requirements
• History of P&I insurance
• P&I clubs
• P&I departments and correspondents
• International Group of P&I Clubs
• Other insurance facilities
2
INTRODUCTION
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• Hull and Machinery (H&M)
• Protecting and Indemnity (P&I)
• Freight, Demurrage & Defence (FD&D)
• War Risks
• Strike Insurance
3
SHIPOWNERS INSURANCE REQUIREMENTS
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• P&I provides cover for shipowners’ third party liabilities
• Protection
Term generally used to describe cover for risks arising from people, ships and others
• Indemnity
Term generally used to describe cover for shipowners’ liabilities from the carriage of cargo
4
SHIPOWNERS INSURANCE REQUIREMENTS
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HISTORY OF P&I INSURANCE
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• 1000BC - Phoenicians accredited with rudimentary marine insurance practices
• 1680 - Edward Lloyd opened first coffee house in London
• 1719 - Act of Parliament – restricted marine insurance to two companies until 1825.
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HISTORY OF P&I INSURANCE
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SHIPS
• Hull policies did not cover damage to other vessel
• Other vessel collision liability - limited to 3/4
• Running Down Clause (RDC)
• Remaining 1/4 would be picked up by Mutuals
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HISTORY OF P&I INSURANCE - 1836
De Vaux Versus
Salvador
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PEOPLE
• Act of parliament – Lord Cambell’s Act 1846
Allowed relatives of people killed by wrongdoing of others to recover damages
Crew and passengers carried by ships
HISTORY OF P&I INSURANCE - 1846
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• 1855 - First protecting club formed
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HISTORY OF P&I INSURANCE - 1855
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• North of England P&I Association established
Newcastle
Greece
Hong Kong
Singapore
Japan
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HISTORY OF P&I INSURANCE - 1860
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• Global fleet of 4,000 ships
• 400 member groups
• Providing P&I insurance to 12% of the world’s owned shipping tonnage
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HISTORY OF P&I INSURANCE - 1860
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CARGO
• Common law
• Freedom of contract
• Few cargo claims
• Westerhope incident 1870
• Deviation
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HISTORY OF P&I INSURANCE - 1870
Port
B
Port C
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• Increase in overseas trade and changes in the Law
Workmen's Compensation Act
Factory Acts and Industrial Injuries Act
Merchant Shipping Acts
Hague Rules
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HISTORY OF P&I INSURANCE
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• Ships
• Cargo
• People
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HISTORY OF P&I INSURANCE
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P&I CLUBS
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• An Association of Shipowners
• Providing third party liability insurance cover
• On a mutual basis (sharing of risks)
• Non-profit making
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P&I CLUBS
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• Owned by their shipowner members
• Controlled by their shipowner members
• Exist solely for the benefit of their members
• A service provider as well as providing insurance
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P&I CLUBS
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• Managed Clubs
Thomas R. Miller manage UK P&I Club
• Mutually Owned Club
North of England P&I Association
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P&I CLUBS
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A Member may be a:
• Shipowner
• Ship manager
• Ship operator
• Charterer
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P&I CLUBS
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• P&I policy is a TIME policy:
From Noon GMT on 20 February
To Noon GMT on following 20 February
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P&I CLUBS
20
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P&I DEPARTMENTS AND CORRESPONDENTS
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P&I DEPARTMENTS AND CORRESPONDENTS
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Underwriting Department
P&I Claims Department
FD&D Department
Finance, Accounts, IT & Administration
North of England Ship Owner Directors
North Insurance Management Ltd
Loss Prevention & Survey
P&I DEPARTMENTS AND CORRESPONDENTS
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Underwriting Department
P&I Claims Department
FD&D Department
Finance, Accounts, IT & Administration
North of England Ship Owner Directors
North Insurance Management Ltd
Loss Prevention & Survey
P&I DEPARTMENTS AND CORRESPONDENTS
P&I Correspondents
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Correspondents
• Representatives - not agents
• When to call a correspondent?
• Clubs eyes and ears
• Report to claims handler
• Protect the shipowners position
Commercial Correspondents
*Legal Correspondents
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P&I DEPARTMENTS AND CORRESPONDENTS
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Correspondents
• Immediate advice to Members and Masters
• Legal representation and advice
• Arrangement of surveys
• Advice on defence and legal aspect of claims
• Negotiation with local interests
• Keeping P&I Club fully informed
• Assisting with release of a vessel under arrest
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P&I DEPARTMENTS AND CORRESPONDENTS
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INTERNATIONAL GROUP OF P&I CLUBS
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• 13 Member Clubs
• Over 90% of world tonnage
• Collective insurance and reinsurance
• Represent view of shipowners
• Exchange information
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INTERNATIONAL GROUP OF P&I CLUBS (IG)
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• North of England
• American
• Gard (Gjensidig)
• Skuld (Gjensidig)
• Britannia
• Japan
• London
• Shipowners Mutual
• Standard
• Steamship Mutual
• Swedish Club
• UK Club
• West of England
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INTERNATIONAL GROUP OF P&I CLUBS (IG)
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• Limit of financial liability
• All claims (except for oil pollution)
Approximately US $6,900 million for a single claim
• Oil Pollution
US $1,000 million for a single claim
• Passenger claim
US $2,000 million
• Passenger and crew claim
US $3,000 million
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INTERNATIONAL GROUP OF P&I CLUBS (IG)
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• Standing Committees
• Bills of Lading
• Personal Injury
• Maritime Security
• Claims Co-Operation
• Pilotage
• Ad hoc Committees
• Asbestosis
• New York Produce Exchange Charterparty
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INTERNATIONAL GROUP OF P&I CLUBS (IG)
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OTHER INSURANCE FACILITIES
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• Clubs and facilities for Shipowners, or others, who do not require the extent of cover provided by International Group Clubs
• Clubs and facilities who may be prepared to take tonnage which the International Group will not accept
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OTHER INSURANCE FACILITIES
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SUMMARY
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• Shipowners insurance requirements
• History of P&I insurance
• P&I clubs
• P&I departments and correspondents
• The International Group of P&I clubs
• Other insurance facilities
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SUMMARY
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P&I Clubs are:
• Owned by their shipowner members
• Controlled by their shipowner members
• Exist solely for the benefit of their members
• Non-profit making
• A service provider as well as providing insurance
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SUMMARY
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THANK YOU
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OUTLINE OF RISKS COVERED
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• Scope of P&I Cover
• Risks not covered
• Underlying principles of marine insurance
INTRODUCTION
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SCOPE OF COVER
•40
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1. Seamen
2. Supernumeraries
3. Passengers
4. Third Parties
5. Stowaways
6. Diversion Expenses
7. Life Salvage
8. Persons in Distress
9. Quarantine
10. Collisions
11. Non-contact Damage
12. Damage to Property
13. Pollution
14. Wreck Removal
15. Towage
16. Contracts, Indemnities & Guarantees
17. Cargo
18. General Average
19. Fines
20. Legal Costs, Sue & Labour
21. Risks Incidental to Shipowning
22. Special Cover (s/c)
23. s/c - Salvors
24. s/c - Containers
25. s/c - Time Charterers.
RISKS COVERED
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• People
• Ships
• Cargo
• Others
RISKS COVERED
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People
22%
21.5%
37.6%
38.3%
2.6%
Value of Claims - 2002 to 2008
People
Cargo
Ships
Others
Total cost of claims
PEOPLE
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PEOPLE
• Seamen
• Supernumeraries
• Passengers
• Third Parties
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Pay damages or compensation for death, personal injury or illness
PEOPLE
Statutory Contractual Duty of Care
Crew
Contract of employment and crew agreement
Supernumeraries Depends
Some jurisdictions?
x Possibly if stowaway put to
work?
Passengers Possibly
Merchant Shipping Act
Passenger ticket
Third Party
Depends
Some jurisdiction?
x
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Crew
81%
50.3%
30.7%
0.8%0.8% 4.0%
13.5%
People Claims Value - 2002 to 2008
Crew - injury
Crew - illness
Crew - other
Supernumerary
Passenger
Third party
Total cost of people claims
PEOPLE
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STOWAWAYS
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PERSONS IN DISTRESS
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Expenses for:
• Landing injured or sick
persons
• Assisting persons in
distress
• Landing stowaways or
refugees
DIVERSION EXPENSES
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SHIPS
50
Ships
38%
21.5%
37.6%
38.3%
2.6%
Value of Claims - 2002 to 2008
People
Cargo
Ships
Others
Total cost of claims
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COLLISIONS
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Institute time clauses hulls 1/10/83
COLLISIONS
3/4 Hull and machinery
1/4 P&I
Damage to the OTHER ship (includes property/cargo on OTHER ship)
Delay or loss of use of the OTHER ship
General average or salvage of the OTHER ship
Clause 8 3/4 Collision Liability - Running down clause (RDC)
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Institute time clauses hulls 1/10/83
COLLISIONS
3/4 Hull and machinery
4/4 P&I
Wreck removal
Property not on the OTHER ship
Cargo on own ship
Loss of life, personal injury or illness
Pollution
Clause 8 EXCLUSIONS 3/4 Collision Liability - Running down clause (RDC)
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NON-CONTACT DAMAGE TO SHIPS
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DAMAGE TO PROPERTY
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POLLUTION
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WRECK REMOVAL
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DURING TOWAGE
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59
Cargo
38%
21.5%
37.6%
38.3%
2.6%
Value of Claims - 2002 to 2008
People
Cargo
Ships
Others
Total cost of claims
CARGO
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• Loss, shortage or damage arising from any breach of the contract of carriage
• Hague Visby Rules
• care for the cargo
Load, Handle
Stow, Carry
Keep, care for
Discharge
• Due diligence to make the
• ship seaworthy
CARGO
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• Additional costs
• Discharging or disposing
Damaged cargo
Worthless cargo
CARGO
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OTHERS
62
Others
3%
21.5%
37.6%
38.3%
2.6%
Value of Claims - 2002 to 2008
People
Cargo
Ships
Others
Total cost of claims
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• General Average
• Salvage
GENERAL AVERAGE
• Who contributes?
Cargo Ship
H&M
Value of ship
Cannot pay!
Bad debt
Will not pay!
Unseaworthy
Bunkers
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• Manager’s approval:
Short or overlanded cargo
Smuggling
Immigration laws
Accidental pollution
• Director’s discretion:
Others
May compensate for confiscation of ship
FINES
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LEGAL COSTS
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RISKS INCIDENTAL TO SHIPOWNING
The Omnibus Rule
? ?
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• P&I - Cargo
• Hull Damage
• Bunkers
• Freight or Hire
SPECIAL COVER FOR TIME CHARTERERS
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• The first part of each claim paid by the Member
• Effect on premium
• Claims below deductible
• See Rule 21
DEDUCTIBLES
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Crew
Claim paid by P&I insurer
US $85,000
Third party
claim
US $100,000
Deductible paid by Member
US $ 15,000
DEDUCTIBLES
Cargo
Claim paid by P&I insurer
US $75,000
Deductible paid by Member
US $ 25,000
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RISKS NOT COVERED
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• Risks covered under Hull Policy
• War Risks
• Radioactive Materials
• Imprudent or Hazardous Operations
PRIMARY EXCLUSIONS
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• Damage to entered ship
• Equipment
• Repairs to entered ship
• Freight
• Salvage
RISKS SPECIFICALLY EXCLUDED
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• Charterparties
• Bad Debts
• Demurrage
• Towage
• Members’ other interests
RISKS SPECIFICALLY EXCLUDED
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• Blasting • pile-driving • well stimulation • dredging • cable or pipe-laying • construction • installation or maintenance work • core sampling • depositing of spoil • professional oil spill response
SPECIALIST OPERATIONS EXCLUSIONS
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UNDERLYING PRINCIPLES OF MARINE INSURANCE
![Page 76: HISTORY, BACKGROUND AND STRUCTURE OF P&I CLUBS · 50.3% 30.7% 0.8% 0.8% 4.0% 13.5% People Claims Value - 2002 to 2008 Crew - injury Crew - illness Crew - other Supernumerary Passenger](https://reader031.vdocuments.us/reader031/viewer/2022022717/5c36245109d3f27c1f8b921e/html5/thumbnails/76.jpg)
• Marine Insurance Act
• Seaworthiness
• Payment first by Member
• Provision of security
INTRODUCTION
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All contracts of insurance made by the Association are subject to the Marine Insurance Act, 1906.
P&I Rule 6
THE MARINE INSURANCE ACT 1906
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• MSA Section 39(5) - Warranties of Seaworthiness
• In a time policy:
There is no implied warranty that the ship shall be seaworthy at any stage of the adventure.
If the ship is sent to sea in an unseaworthy state, with the knowledge of the assured, the insurer is not liable for any loss attributable to unseaworthiness
See Rule 26(4)
THE MARINE INSURANCE ACT 1906
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• Condition precedent
• No direct action
• P&I Rule 20
PAYMENT FIRST BY THE MEMBER
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• Intended to give a right of direct action against insurer where insured becomes bankrupt or insolvent
• Third party only takes same rights as insured
• No rights for persons not party to the contract (Contracts (Rights of Third Parties) Act 1999)
• Club’s Rules specify “Pay to be Paid”
• Therefore no direct action
THIRD PARTIES RIGHTS AGAINST INSURERS
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SECURITY
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• Discretionary
• Club Letters of Undertaking (CLU)
• Bank Guarantees
• No cash deposits (unless Directors authorise)
• Rule 34(5) Bail
SECURITY
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• Scope of P&I Cover
People
Cargo
Ships
Others
• Risks not covered
• Underlying principles of marine insurance
• Security
SUMMARY
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ANY QUESTIONS?
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HULL AND MACHINERY INSURANCE
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• Standard clauses
• Insured perils
• Partial losses
• Total losses
• Owner's obligations
86
INTRODUCTION
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87
STANDARD CLAUSES
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Markets:
• London
• Scandinavia
• Europe
• USA
• Others
88
STANDARD CLAUSES
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Institute of London Underwriters (ILU) Institute Time Clauses (ITC) - Hulls
• 1983
• 1995
International Underwriting Association of London (IUA) International Hull Clauses (IHC)
• 2002
• 2003
89
STANDARD CLAUSES –
LONDON MARKET
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90
INSURED PERILS
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• Traditional perils
• ‘Inchmaree’ perils
91
INSURED PERILS
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Loss or damage caused by:
• Perils of the seas rivers lakes or other navigable waters
• Fire, explosion
• Violent theft by persons from outside the Vessel
• Jettison
• Piracy
ITC – Hulls Clause 6.1 - 1 October 1983
92
TRADITIONAL PERILS
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Loss or damage caused by:
• Breakdown of or accident to nuclear installation or reactors
• Contact with aircraft or similar objects, or objects falling therefrom, land conveyance, dock or harbour equipment or installation
• Earthquake volcanic eruption or lightning
ITC – Hulls Clause 6.1 - 1 October 1983
93
TRADITIONAL PERILS
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Loss or damage caused by:
• Accidents in loading discharging or shifting cargo or fuel
• Bursting of boilers, breakage of shafts or any latent defects in the machinery or hull
• Negligence of Master Officers Crew or Pilots
ITC – Hulls Clause 6.2 - 1 October 1983
94
INCHMAREE PERILS
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Loss or damage caused by:
• Negligence of repairers or charterers, provided such repairers are not an Assured hereunder
• Barratry of Master, Officers, or Crew
ITC – Hulls Clause 6.2
95
INCHMAREE PERILS
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96
PARTIAL LOSS
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Partial loss (particular average)
• Loss other than a total loss
• Damage caused by a “peril”
97
PARTIAL LOSS
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• Cover includes reasonable costs for:
Repair
Removing ship to place of repair
• Cover does not include:
Wear and tear
Ordinary use
98
PARTICULAR AVERAGE
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99
OTHER PARTIAL LOSSES
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There is a general average act when, and only when, an extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.
York-Antwerp Rules 2004
100
GENERAL AVERAGE
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Contributing parties:
• The ship
H&M underwriters
• The cargo
Cargo underwriters
• The bunkers
Time charterers
101
GENERAL AVERAGE
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Third party liabilities covered under standard
collision clause (RDC):
• ¾ damage to other ship
• ¾ damage to cargo and property
on other ship
• ¾ detention of other ship
• ¾ general average and salvage
of other ship
10
2
COLLISION LIABILITIES
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Third party liabilities not covered under standard collision (RDC) clause:
• Loss of life or personal injury
• Pollution
• Wreck removal
10
3
COLLISION LIABILITIES
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10
4
TOTAL LOSS
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• Shipowner permanently deprived of use of ship
• Actual total loss or constructive total loss
10
5
TOTAL LOSS
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• Ship is lost and cannot be salvaged
10
6
ACTUAL TOTAL LOSS
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• Recovery and repair would exceed the ships insured value
• Recovery is unlikely
10
7
CONSTRUCTIVE TOTAL
LOSS
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10
8
OWNERS OBLIGATIONS
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Proviso to clauses describing perils:
• Loss or damage has not resulted from want of due diligence by the assured, owners or managers
ITC – Hulls dated 1 October 1983
IHC - dated 1 November 2003
10
9
DUE DILIGENCE
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Proviso to clauses describing perils:
• Loss or damage has not resulted from want of due diligence by the assured, owners or managers or superintendents or any of their onshore management
ITC – Hulls dated 1 November 1995
11
0
DUE DILIGENCE
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11
1
SUMMARY
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• Standard clauses
• Insured perils
• Partial losses
• Total losses
• Owner's obligations
11
2
SUMMARY
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• Standard clauses
• Total and partial losses
• Insured perils
• Owner’s obligations
11
3
SUMMARY
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11
4
THANK YOU
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• Introduction
• Underwriter’s role
• Premiums
• Loss ratio
• Reinsurance
INTRODUCTION
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• P&I
• FD&D
• Extended and ancillary covers
• Offshore oil and gas exploration and production cover
• War
• Newbuilding cover
WHAT WE DO?
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105 123 127 131 127 131
140
45
39 43
49 43
54 50
0
20
40
60
80
100
120
140
160
180
200
2011 2012 2013 2014 2015 2016 2017
TONNAGE DEVELOPMENT G
T (M
illio
ns)
Year Ending 20 February
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200
142 139
108 101
91 88 85
81
47 43
18 16
0
50
100
150
200
250
IG CLUB TONNAGE COMPARISON AT 20 FEBRUARY 2017
GT
(Mill
ion
s)
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• Premium Levels
Cost of Claims
Cost of Reinsurance
Cost of Running the Club
Reserves
• Terms of Cover
Rules
International Group Pooling Agreement
Reinsurance Terms
THE UNDERWRITER’S ROLE
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• New Business
New Owners – KYC
New Members – IGA Business
• Existing Business
Addition to Fleet
Renewal 20 February
THE UNDERWRITER’S ROLE – DAY TO DAY
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• Vessel details Age, GT, Type, Flag, Class
(IACS)
• Member details
• Owner, Operator, Manager, Charterer
• Trade and crew
• Compatibility
• Trade references
• Financial standing
• Condition of vessel
• Ship type / Member Information
• Claims experience
Club wide record
Member specific record
• Reinsurance costs
• Administration costs
THE UNDERWRITER’S ROLE – QUOTING
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Premium:
Amount that can be quantified prior to entry
MUTUAL PREMIUM
FIXED PREMIUM
PREMIUM – DEFINITIONS RULE 2
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Call:
Amount that cannot be quantified, but which member may become liable
to pay as mutual member
ADDITIONAL CALL
OVERSPILL CALL
RELEASE CALL
PREMIUM – DEFINITIONS RULE 2
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PREMIUM – STRUCTURE Traditional Structure
Additional Call
4th Instalment
3rd Instalment
2nd Instalment
1st Instalment 01 Apr
01 Jun
01 Sep
01 Dec
Mu
tual P
remiu
m
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Loss Ratio = Level of Claims x 100% Premium
LOSS RATIO
Fleet Example:
Claims = US$300,000
Premium = US$500,000
Loss Ratio = 60%
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LOSS RATIO
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POLICY YEAR
NET PREMIUM
IG RI COSTS¹
POOL COSTS²
ABATEMENT
COSTS³
NET NET PREMIUM
⁴
CLAIMS PAID
CLAIMS OUTSTANDIN
G
CLAIMS TOTAL
CLAIMS NET OF
ABATEMENT⁵
LOSS RATIO
%
PRO RATA
GT
View Claims
USD USD USD USD USD USD USD USD USD
2012 620,595 104,811 56,432 85,055 374,297 10,636 0 10,636 10,636 2.8 294,415
2013 1,335,412 397,181 158,076 161,296 618,859 324,072 16,501 340,573 340,573 55.0 804,012
2014 1,460,046 443,064 86,544 227,566 702,872 31,472 10,000 41,472 41,472 5.9 852,048
2015 1,289,630 416,651 99,851 89,328 683,800 6,668 2 6,670 6,670 1.0 852,046
2016 1,044,418 386,829 41,981 233,791 381,817 0 27,002 27,002 27,002 7.1 852,048
Total 9,101,145 2,152,454
662,115 1,131,443 5,155,133 726,922 53,505 780,427 780,426 15.1
2017 987,351 350,191 108,428 152,020 376,712 0 35,000 35,000 35,000 9.3 852,046
P&I LOSS RATIO
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LOSS RATIO
POLICY YEAR
NET PREMIUM
IG RI COSTS¹
POOL COSTS²
ABATEMENT COSTS³
NET NET PREMIUM⁴
CLAIMS PAID
CLAIMS OUTSTANDING
CLAIMS TOTAL
CLAIMS NET OF
ABATEMENT⁵
LOSS RATIO
%
PRO RATA
GT
View Claims USD USD USD USD USD USD USD USD USD
2015 72,593 8,157 3,473 3,107 57,856 30,660 0 30,660 30,660 53.0 16,681
2016 386,493 40,220 8,824 49,139 288,310 166,228 9,622,987 9,789,215 3,002,679 1041.5 88,592
Total 459,086 48,377 12,297 52,246 346,166 196,888 9,622,987 9,819,875 3,033,339 876.3
2017 421,336 36,411 25,307 35,488 324,130 0 46,501 46,501 46,501 14.3 88,591
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POLICY YEAR
NET PREMIUM
IG RI COSTS¹
POOL COSTS²
ABATEMENT COSTS³
NET NET PREMIUM⁴
CLAIMS PAID
CLAIMS OUTSTANDING
CLAIMS TOTAL
CLAIMS NET OF ABATEMENT⁵
LOSS RATIO
%
PRO RATA GT
View Claims USD USD USD USD USD USD USD USD USD
2013 745,123 79,951 65,704 67,043 532,425 443,895 351,000 794,895 794,895 149.3 246,003
2014 896,310 92,710 38,858 102,176 662,566 836,038 129,700 965,738 965,738 145.8 271,082
2015 1,079,882 96,974 55,832 49,948 877,128 50,220 141,501 191,721 191,721 21.9 308,834
2016 1,221,619 107,167 30,669 170,791 912,992 1,472,147 827,175 2,299,322 2,299,322 251.8 373,886
Total 4,952,917 496,657 266,094 506,161 3,684,005 3,480,262 1,626,716 5,106,978 5,106,978 138.6
2017 1,272,026 98,034 83,831 117,553 972,608 42,447 2,079,379 2,121,826 2,121,826 218.2 364,916
P&I LOSS RATIO REPORT
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• Re-insurance is passing risk to another insurer
Pooling with other Clubs
Market Reinsurance
• Purpose of Reinsurance
Avoids excessive fluctuation between years and provides stability
Provides higher limits of cover
Cost effective and efficient use of funds
REINSURANCE
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• 90 – 95% world’s ship owners enter ships in an IG Club
• 13 International Group Clubs
• Levels of cover provided are vast but not defined
• Estimated to be approx US$7 Billion
• All 13 IG Clubs pool claims
• All 13 buy re-insurance
• RI policy - largest marine policy in the world
• Pooling agreement & International Group Agreement foundation of P&I
• Sharing of risk then some control of rating required
• TradeWinds “Cartel” - but most efficient system and proven
IG REINSURANCE – CONTRACT
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• Independent reinsurance vehicle/segregated cell company
• Based in Bermuda
• Reinsures each IG Club’s liability to the pool within the Lower and Upper Pools - US$50 xs $30 million BUT
Individual Claiming Club Retentions in the Upper Pools
• Reinsures 30% - 60% of each claim within the First General Excess Layer - US$80 to US$580 million
IG REINSURANCE – HYDRA
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IG REINSURANCE – STRUCTURE
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Category 2016/17 2017/18 Difference % % Difference
Dry Cargo 0.454 0.411 0.043 -9.5
Dirty Tanker 0.657 0.596 0.061 -9.3
Other Tanker 0.282 0.268 0.014 -5.0
Passenger 3.507 3.332 0.175 -5.0
IG REINSURANCE – COST
USD
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• Claims up to US$10 million (currently)
• Maintains underwriting discipline
• Cost Effective
• Retention Reinsurance
Excess of Loss
Stop Loss
IG REINSURANCE – CLUB RETENTION
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• Claims from US$10 million to US$30 million
Each Club contributes in relation to:
– Entered tonnage
– Total mutual premiums
– Pool claims record
• Claims from US$30 – US$45 million
Reinsured by Hydra
IG REINSURANCE – LOWER POOL
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• Reinsured by Hydra
• “Upper” Pool Claims
from US$45m to US$80m
7.5% Back to individual club responsible for claim
IG REINSURANCE – UPPER POOL
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• Reinsured by Hydra
• Claims from US$80m to US$100m
IG REINSURANCE – HYDRA LAYER
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• The General Excess of Loss Contract
• Multi-Year Fixed Contract
• First GXL Layer (US$100m to US$600m)
• Second GXL Layer (US$600m to US$1.1b)
• Third GXL Layer (US$1.1b to US$2.1b)
• Lloyds and world markets
• Costs apportioned on record and exposure
IG REINSURANCE – EXCESS OF LOSS REINSURANCE
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• Further US$1b of protection (US$2.1b to US$3.1b) above Hydra pool/GXL participation
• Upper limit not fixed precisely
• Currently approximately US$7 billion
IG REINSURANCE – OVERSPILL PROTECTION
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• Back to individual Clubs
• Upper limit not fixed precisely
• Currently approximately US$7 billion
IG REINSURANCE – EXCESS OF OVERSPILL
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• The pool and GXL layer and participation structures for the separate Oil Pollution cover mirrors the main (P&I) placement up to the Oil Pollution cover limit (US $1 billion).
IG REINSURANCE – OIL POLLUTION
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• Introduction
• Underwriter’s Role
• Premiums
• Loss Ratio
• Reinsurance
SUMMARY
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THANK YOU
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LOSS PREVENTION & SURVEY
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North of England’s loss prevention strategy
• Provision of information
General
Targeted
Bespoke
• Risk based assessment
• Condition survey
149
INTRODUCTION
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PUBLICATIONS
http://www.nepia.com/publications/loss-prevention-publications/
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25 YEARS AND COUNTING
In the 25 years since the Loss Prevention Department was founded, we have produced numerous publications on a wide range of topics.
http://www.nepia.com/media/277812/NORTH-Loss-Prevention-
Publications.pdf
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• Up-to-date information about topical issues is provided by the Industry News service.
INDUSTRY NEWS
http://www.nepia.com/news/industry-news/
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• The Maritime Threats and Incidents Picture, brought to you by Gray Page in partnership with North, globally monitors maritime incidents, casualties and threats to shipping
MTI
http://www.nepia.com/maritime-alerts/
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Bespoke loss prevention • Enquiries
2,500+ in 2016 • Training for Members’
staff at North • Seminars at Members’
offices • Residential courses
UK Singapore Dubai
154
INFORMATION
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Risk and claims avoidance
• Proactive approach to identify
and reduce exposure to risk
factors
• Internal benchmark and review
evaluates exposure to risk
• External “loss prevention review”
works with Members particularly
exposed to risk factors
15
5
RISK BASED APPROACH
PSC Performance for 2016 Policy Year
Number of PSC inspections 7859
Number of PSC detentions 95
Percentage of PSC detentions 1.21
Average number of deficiencies 1.32
RightShip Star Ratings on 01 June 2016
Number of vessels above 3 star rating 2,601
Number of vessels with 2 star rating 362
Number of vessels with 1 star rating 19
Average vessel star rating 4.4
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• In April 2002 the OECD (Organisation for Economic Cooperation and Development) released a policy statement on action needed to combat sub-standard ships.
• The OECD statement required the marine insurance industry to co-operate and to be in a position to identify deficiencies on insured ships that rendered those ships unsafe.
• As a result the IG P&I clubs set up a ship condition survey programme.
156
CONDITION SURVEYS
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Responsibility for the condition of a ship?
• Owners and managers
Responsibility for monitoring condition?
• Flag State
• Recognised Organisation
• Port State
• Classification society
157
CONDITION SURVEYS
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Role of the P&I Club
• Third party liability insurer
• Assess the risk posed by the ships condition for insurance purposes
158
CONDITION SURVEYS
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Routine
• Entry surveys – 12 year old or more on entry
• HFO tankers
Non-routine
• Defects surveys
• PSC surveys – following detention
• Follow-up surveys
159
CONDITION SURVEYS
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160
CONDITION SURVEYS
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161
CONDITION SURVEYS
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162
CONDITION SURVEYS
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163
CONDITION SURVEYS
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164
CONDITION SURVEYS
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North of England’s loss prevention strategy
• Provision of information
General
Targeted
Bespoke
• Risk based assessment
• Condition survey
165
SUMMARY
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THANK YOU
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OUTLINE OF FD&D INSURANCE
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• Introduction – What is FD&D Cover?
• Features of FD&D
• Scope of cover
• Limitations to cover
• North of England FD&D Department
INTRODUCTION
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INTRODUCTION – WHAT IS FD&D COVER?
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INTRODUCTION - WHAT IS FD&D COVER?
“… A form of optional mutual
insurance for legal costs in
relation to enforcing or
defending certain types of
shipowning risks …”
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• Additional Class of optional insurance
• Legal costs insurance
• To cover legal costs outside P&I and H&M
• Does NOT cover substantive liabilities
INTRODUCTION - WHAT IS FD&D COVER?
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FEATURES OF FD&D
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“The business of this class is the enforcement of all proper claims and the defence of all claims improperly brought…”
FEATURES
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• Discretionary cover:
Prudent uninsured
Reviewed throughout claim
Members Board have absolute discretion with regard to support
FEATURES
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• Double insurance:
Rule 23
No cover for costs / expenses recoverable under other insurances
Claim not covered by P&I or H&M
P&I and H&M liabilities not covered
FEATURES
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• Security:
For claims
For costs
FEATURES
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• Duty to notify the Club:
Time limit for notification of claims
3 months after Member becomes aware of the existence of claim
Rule 25(4)
No legal steps to be taken / lawyers appointed without approval
Rule 26(2)
FEATURES
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• Deductible – 2016/2017
25% deductible
Minimum deductible $10,000
Maximum deductible $150,000
• No costs if no external parties appointed
FEATURES
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SCOPE OF COVER
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SCOPE OF COVER
Types of disputes - May 2016-May 2017
C/P DISPUTES 94%
DISPUTES WITH OTHERS 3%
DISPUTES WITH SUPPLIERS 1%
OTHERS 2%
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• Lawful deduction?
• No right of set off against freight
• Off-hire?
• Withdrawal for non-payment of hire
• Lien for non-payment of hire/freight
SCOPE OF COVER – HIRE/FREIGHT/DEADFREIGHT
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SCOPE OF COVER UNSAFE PORT CASES
“where she may safely lie, …..
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SCOPE OF COVER UNSAFE PORT CASES
…,always afloat….”
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SCOPE OF COVER BUNKER DISPUTES
Bunker quality/quantity
Quantities on
delivery/redelivery
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• Stevedore damage
• Liaise with H&M underwriters
SCOPE OF COVER STEVEDORE DAMAGE
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SCOPE OF COVER NEWBUILD/MOA
• Newbuilding disputes
• Sale and purchase disputes (MOA)
• Review of contracts
• Limit on cover – US$250,000
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• Disputes with underwriters (H&M/war risk/loss of hire)
• Disputes with suppliers (bunker suppliers/port agents)
• Disputes with mortgagees / managers / operators
Note: No cover for disputes between Insured Parties
Rule 9(3)(G)
• Bill of lading disputes
Note: Not cargo loss or damage
SCOPE OF COVER OTHER
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• Check before fixing
• International Maritime Bureau (IMB)
• Baltic and International Maritime Council (BIMCO)
• Internal Enquiries
SCOPE OF COVER
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LIMITATIONS TO COVER
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• Classification society requirements
• Statutory requirements
• Rule 22
LIMITATIONS ON COVER
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NORTH OF ENGLAND FD&D DEPARTMENT
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• As of 20 February 2017
About 3,300 Owned and Chartered vessels
About 200 Members
122 million GT
FD&D DEPARTMENT
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• In-house team of 34 dedicated lawyers.
• Specialists in handling disputes falling within the scope of FD&D cover.
• Majority of North’s “in-house” team are English solicitors or barristers.
A large number of FD&D Class disputes arise under charterparties or other contracts containing London arbitration clauses.
• Routinely handle London arbitrations “in-house”
FD&D DEPARTMENT
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• UK Office
24 lawyers including a US Attorney
• Singapore Office
6 lawyers including 3 Singaporean solicitors and 2 Hong Kong solicitors
• Greek Office: 4 lawyers
FD&D DEPARTMENT
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FD&D DEPARTMENT
• FD&D Guide Online • www.nepia.com • FD&D Class
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• Introduction – What is FD&D Cover?
• Features of FD&D
• Scope of cover
• Limitations to cover
• North of England FD&D Department
SUMMARY
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THANK YOU