“moving forward together”, brazil, november 2009 … · 1 itopf/ transpetro “moving forward...

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1 ITOPF/ Transpetro “Moving Forward Together”, Brazil, November 2009 “The role of the P&I Clubs in pollution prevention and response.” Nigel Carden, Deputy Chairman Thomas Miller P&I, Chairman, IG Ships’ Standards Subcommittee International Group Clubs 13 Clubs in the Group Cover more than 90% of the world oceangoing tonnage Provide insurance coverage, advice, claims handling services Provide input on liability and insurance issues at various intergovernmental and international organisations – Observer status IG P&I Clubs Unique role Insurance companies that are part of the shipping industry more than the insurance industry Not-for-profit (although managers may make Not for profit (although managers may make profit) Risk management advisors Liability experts Financial guarantors International Group principal members American Steamship Owners Mutual Protection and Indemnity Association, Inc Assuranceforeningen Gard Assuranceforeningen Skuld The Britannia Steam Ship Insurance Association Limited The Japan Ship Owners' Mutual Protection & Indemnity Association The London Steam-Ship Owners’ Mutual Insurance Association Limited The North of England Protection and Indemnity Association Limited The Shipowners' Mutual Protection and Indemnity Association (Luxembourg) The Standard Steamship Owners’ Protection and Indemnity Association (Bermuda) Limited The Steamship Mutual Underwriting Association (Bermuda) Limited The Swedish Club United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited The West of England Ship Owners Mutual Insurance Association (Luxembourg) Underlying Agreements Constitution International Group Agreement (IGA) Pooling Agreement IG Structure Club Members (Shipowners and Charterers) Club Boards elected from Club Members Club Managers IG Secretariat IG sub committees and working groups IG meetings

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ITOPF/ Transpetro“Moving Forward Together”, Brazil, November 2009

“The role of the P&I Clubs in pollution prevention and response.”p p p

Nigel Carden, Deputy Chairman Thomas Miller P&I,

Chairman, IG Ships’ Standards Subcommittee

International Group Clubs

• 13 Clubs in the Group• Cover more than 90% of the world oceangoing

tonnage• Provide insurance coverage, advice, claims

handling services• Provide input on liability and insurance issues

at various intergovernmental and international organisations – Observer status

IG P&I Clubs

• Unique role• Insurance companies that are part of the shipping

industry more than the insurance industry• Not-for-profit (although managers may makeNot for profit (although managers may make

profit)• Risk management advisors • Liability experts • Financial guarantors

International Group principal members

• American Steamship Owners Mutual Protection and Indemnity Association, Inc • Assuranceforeningen Gard • Assuranceforeningen Skuld • The Britannia Steam Ship Insurance Association Limited • The Japan Ship Owners' Mutual Protection & Indemnity Association • The London Steam-Ship Owners’ Mutual Insurance Association Limited• The North of England Protection and Indemnity Association Limited• The Shipowners' Mutual Protection and Indemnity Association (Luxembourg) • The Standard Steamship Owners’ Protection and Indemnity Association

(Bermuda) Limited • The Steamship Mutual Underwriting Association (Bermuda) Limited • The Swedish Club • United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited• The West of England Ship Owners Mutual Insurance Association (Luxembourg)

Underlying Agreements

• Constitution

• International Group Agreement (IGA)

• Pooling Agreement

IG Structure

Club Members (Shipowners and Charterers)

Club Boards elected from Club Members

Club Managers

IG Secretariat

IG sub committees and working groupsIG meetings

2

IG Function

• to co-ordinate the operation of the claims pooling agreement and the collective reinsurance arrangements of the Group clubs

• to represent the view of clubs’ shipowner members on matters of concern to the shipping industry in relation to insurance and liability issues

• to provide a forum for the exchange of information between clubs

2009 Reinsurance arrangements

US$ 1,000m

Collective Overspill Protection

Third General Excess

US$ 3,050m

US$ 2,050m

One Reinstatement

Changes on 2008 arrangements

The Group Pool has combined the previous two layers into one to permit a single formula for allocating contributions.

First General Excess

Unlimited Reinstatements

US$ 20mUS$ 23mUS$ 7m

Upper Pool – Reinsured by Hydra

Excess

Unlimited Reinstatements

Oil Pollution

Second General Excess

First General Excess

Unlimited Reinstatements C

oins

uran

ce 2

5%

Rei

nsur

ed b

y H

ydra

Coi

nsur

ance

25%

R

eins

ured

by

Hyd

ra

Second General Excess

Unlimited Reinstatements

Individual Club Retention

US$ 1,050m

US$ 550m

US$ 7mUS$ 30mUS$ 50m

US$ 1,000m

US$ 500m

US$ 500m

Unlimited Reinstatements

Individual club retention

Reinsured by Hydra $20m XS $30m

The reinsurance of the Pool by Hydra continues to operate for claims in excess of $30 million up to a limit of $50 million and the 25% coinsurance of the first layer of the reinsurance contract.

The upper pool layer although folded into the lower pool, continues to be pre-funded and the cost included in the reinsurance rates.

Individual club retention limit is maintained at $7 million.

Club Cover for Pollution Risks

• Typical rule for pollution cover: “liabilities, losses, damages, costs and expenses incurred in consequence of the discharge or escape from an entered ship of oil or any other substance or the threat of such discharge or escape…”

• Also cover for liabilities incurred under approved agreements, such as STOPIA and TOPIA (and in the past TOVALOP)

• Also cover for fines imposed for accidental discharges

Usual conditions applying to Club Cover

• Marine Insurance Act of 1906, or broad equivalent• Requirement to maintain ship in class, to observe

statutory requirements, etc • Requirement to pay insurance premiumsRequirement to pay insurance premiums• Requirement that shipowner discharges liability

first, before Club indemnifies

Position of Clubs under the CLC Conventions

• CLC/FC: a most successful regime in compensating pollution claims

• Success due in large part to a special requirement for compulsory insurance of first tier of compensation (and available fund for second tier).

• Clubs provide the evidence of financial responsibility of the shipowner

• But Clubs also act as guarantors of compensation to third parties under CLC

Clubs are indemnity insurers

• Principle of “pay to be paid”• So if Owner bankrupt and can’t pay, usually

nothing for Club to pay • BUT….BUT….• CLC is an exception to “pay to be paid”• Claim can be made directly by third party against

insurer (Club) without going through owner

3

Clubs’ guarantor liability under CLCs

• Insurer’s liability has unbreakable limit• Insurer has Owner’s defences, plus defence

where loss caused by owner’s wilful misconduct• BUT……BUT……• Policy defences of Clubs are abandoned under

the Convention’s compulsory insurance requirement

• Including policy defences based on fact that loss is caused by excepted war risks, terrorist risk, or nuclear risk.

CLC certificates v “Blue cards”

• Two types of CLC certificates, but all States have accepted 92 CLC certificate

• Certificates are issued by flag States to owners• Blue Card issued to flag States by ClubsBlue Card issued to flag States by Clubs• Some current issues about signatures

Position of Clubs under US OPA 90

• Clubs acted as guarantors under FWPCA• But Clubs have refused to act guarantors under

OPA 90, because limitation rights not secure

Pollution Cover

• Examples of risks covered under pollution rules:• Property damage• Consequential damage• Pure economic loss• Preventive measures• Damage by preventive measures

2003 Fund = SDR 203 million

1992 Fund = SDR 135 million

SDR

SD

R

200200

175175

150150

125125

‘STOPIA’ increase in small ships’ limit,‘STOPIA’ increase in small ships’ limit,with 1992 and 2003 limits with 1992 and 2003 limits

1992 CLC = Min/Max SDR 3/59.7 million

2003 CLC = Min/Max SDR 4.51/89.7 million

Voluntary scheme

0 20 40 60 80 100 120 140 1600 20 40 60 80 100 120 140 160tonnage ‘000stonnage ‘000s

millions

millions

33

100100

7575

5050

252520 m

SDR

SD

R

750750

350350

300300

250250

TOPIA (Tanker Oil Pollution Indemnity Agreement)TOPIA (Tanker Oil Pollution Indemnity Agreement)

Supplementary Fund shared 50/50, limited to SDR 750 million

50 cents per $ from owner of spilling ship

50 cents per $ from oil receiver

2003 Fund = SDR 203 million

1992 Fund = SDR 135 million

0 20 40 60 80 100 120 140 1600 20 40 60 80 100 120 140 160tonnage ‘000stonnage ‘000s

millions

millions

33

250250

200200

150150

100100

5050

4

SDR

SDR

375375

350350

325325

300300

275275

250250

225225

OPA vs CLC/FC (OPA vs CLC/FC (including STOPIA/TOPIAincluding STOPIA/TOPIA) ) 1 SDR = 1.5 US$1 SDR = 1.5 US$

562.562.

525525

487.487.

450450

412.412.

375375

337.337.

300300

UU

50 cents per $ from owner of spilling ship

50 cents per $ from oil receiver

Supplementary Fund shared 50/50, limited to SDR 750 million

2003 Fund = SDR 203 million

0 0 2 3 52 3 5 20 40 60 80 100 120 140 16020 40 60 80 100 120 140 160tonnage ‘000stonnage ‘000s

R m

illionsR

millions

200200

175175

150150

125125

100100

7575

5050

2525STOPIA

20m

300300

252.252.

225225

187.187.

150150

112.112.

7575

37.537.5

US$ m

illionsU

S$ millions

See next slide

US

US

3030

2828

2626

2424

2222

2020

1818

OPA vs CLC (tonnage below 30,000) OPA vs CLC (tonnage below 30,000) 1 SDR = 1.5 US$1 SDR = 1.5 US$

2020

18.618.6

17.317.3

1616

14.614.6

13.313.3

1212SDR

SDR

STOPIA 20m

S$ millions

S$ millions

1616

1414

1212

1010

88

66

44

22

10.610.6

9.39.3

88

6.66.6

5.35.3

44

2.62.6

1.31.3

R m

illionsR

millions

0 3000 6000 9000 12000 15000 18000 21000 24000 27000 30 3000 6000 9000 12000 15000 18000 21000 24000 27000 300000000tonnagetonnage

Club’s role in spill response – post spill functions Initial Contact

• Shipowners representative• Club correspondent• ITOPF• Salvor• Salvor• IOPC Fund

Priorities

• Safety of crew• Salvage• Pollution response• Establish expert team• Establish expert team

TourismFishery

Leisure

Cooling intakesAquaculture

Environment

5

Expert team:

• Lawyers:• prima facie position under Conventions• local law (includes OPA 90 and State law in USA)• criminal proceedings

• Local Club correspondent• ITOPF• Other technical experts and surveyors• SMT (and OSRO) in USA• Public relations and media assistance

Claims handling

• In the US• Owners obligation to clean up• Private contractors, spill managers, OSROs, etc

• In CLC countries• Affected parties clean up, but cost claimed back under

CLC and IOPC Fund

Claims investigation

• Club and Fund co-operate if both involved• Technical expertise from ITOPF, to assist

and guide local experts• Good record keeping is important, to have p g p

evidence to support claims• Appointing a financial controller can help• Necessary to investigate admissibility and

‘reasonableness’ of claimed costs.

Admissible claims

• Reasonable pollution prevention and clean-up measures (e.g. skimmers, dispersants, booms and shoreline clean-up)

• Damage to property (e.g. oiling of fishing boats and gear)

• Economic losses (e.g. lost income by fishermen, hotel operators)

• Costs of reasonable measures to reinstate damaged environment.

Claims that may not be admissible

• Claims for damage to the environment which….• are made on the basis of an abstract quantification a e ade o t e bas s o a abst act qua t cat o

of damage, and • are calculated in accordance with theoretical

models

Other issues in a big spill

• Review with Funds, ship owner and government whether local claims office is required

• Staffing of claims officeStaffing of claims office• Computer database; standard forms for

recording details; standard receipt/release wordings

6

Future Trends

• Expansion of damages claimed – more NRDA.• NRDA – a philosophical challenge. • Use of criminal sanctions for environmental

ddamage.• Restrictions on navigation / places of refuge.• Other environmental liability: ballast water, air

pollution, anti-fouling paints, effects of ship-scrapping, etc.

IG contribution to ship safety and standards

Involvement of the International Group in ship quality initiatives:

• International Group involvement – joint and co-ordinated action – effective but measured

• Co operation with Governments IOPC Funds EU IMO Classification Societies• Co-operation with Governments, IOPC Funds, EU, IMO, Classification Societies, Port State Control, shipowner and cargo industry organisations, other insurers

• Ships’ Standards Subcommittee, and Ship Technical Committee

• Initiatives of individual Group clubs – competition to develop lead industry positions – less co-ordinated but more agile

MSC NAPOLI Grounding

English ChannelLondon

YOUNG LADYDamage to

Pipeline Slipped Anchor

TeessideBritannia

SHANGHAI BRIDGE

Damage to Gantry Crane

Japan

SIERRA

REPUBBLICA DI GENOVA

CapsizingGard

GIANT STEPGrounding

Japan

OCEAN VICTORYGrounding

WOE

ROKIA DELMAS

GroundingSwedish

SERVERGrounding

Gard

KIRAN ATLANTICDragged AnchorSkuld

KRITI FILOXENIA

Contact Terminal

NOE

GOLDEN SKYGrounding

WOE

QUEEN OF THE NORTH

GroundingStandard

COUGAR ACEDamage to

CargoJapan

FINNBIRCHCapsized

Gard

2006 and 2007 Pool Claims

MILLENNIUM Cruise curtailment UK Club

SIERRA NAVA

Pollution/Wreck

standard

MAIN OREDolphin Damage

Standard

CMA CGM AEGEAN

Oil PollutionSwedish

SEA DIAMONDSinking following

groundingWOE

CALIFORNIACollision with

SINOKOR SEOUL

American

HYUNDAI FORTUNE

FireBritanniaSOLAR I

Pollution/Sank

Shipowners

ANNA PC

PollutionLondon

GRIGOROUSSA ITouched bottom of

SuezWOE

NOE

OOCL FAITHInjury to Deck

CadetSteamship CROWN

PRINCESSMultiple

Passenger Injuries

UK Club 40%

PACIFIC ADVENTURER

CollisionStandard

STAR PRINCESS

Fire onboardUK

MMM GALVESTON

Grounding WOE

CAPE BIRDDock DamageSteamship

ZHI QIANGGrounding off Long

ReefUK

MSC JOANNACollision

UK

HYUNDAI INDEPENDENCE

PollutionNOE

MIGHTY SERVANT 3BV

SankStandard

ALEXANDROS TSinkingLondon SAFMARINE

AGHULASGrounding

Gard

Club procedures to identify risk

• Clubs assess risk by desk based procedures and by physical surveys of ships

• …as precondition for entry of older ships, and at any time for ships identified as higher risk y p g

• Clubs suspend or limit cover when required repairs are not made

• Clubs use common Rules to link cover to compliance with flag state and class requirements

• And run extensive loss prevention programmes

Club Rules and shipping standards

• Insured must:• Promptly report to Class any matters in respect of

which Class might make recommendations • Comply in timely fashion with Class Rules• Authorise Class to disclose information to Club• Advise Club if Class Society is changed

• IG policy no insurance without valid ISM/ISPS • IG Clubs policy to deny rights of recovery for

claims arising from failure to comply with Flag State requirements

7

Loss prevention examples

• Newsletters, circulars, books, posters, videos…. • Close co-operation with other institutions with

maritime expertise• Websites – with ‘fresh’ advice, eg. Weekly lossWebsites with fresh advice, eg. Weekly loss

prevention bulletins• Practical help in compliance with

• International law - eg. ISM, STCW, ISPS.• National law - eg. US federal and State law

• Distance learning• Tools and statistics to help focus on risks

IG additional measures to combat substandard shipping

• Submission made to 3rd IOPC Fund Working Group in 2005 reported on:

i. risk selection - checklist of common standards ii. common scope of P&I club surveys,ii. common scope of P&I club surveys, iii. agreed 12 year trigger for entry surveys, and new

surveys for ships that carried HFOiv. process to record and share information regarding

condition of ships, v. introduction of a financial consequence – “Double

retention procedure” – if a Club knowingly underwrites substandard ship.

‘Double retention’

Concept of ‘designated vessels’ included in Pooling Agreement with effect from 20 February 2007

•Can be used where ship confirmed to be in unacceptable “condition”

•Wide meaning of “condition” . Agreed way to determine “unacceptability”.

•Mechanism to apply “double retention” to risks of a designated vessel included in Pooling Agreement from Feb 2007, which means….

•… for each claim, insuring Club takes $14 million for its own account before it can pool (instead of $7 million)

•Mechanism to deny all pooling for risks of “proscribed vessel” – a vessel continuously designated for more than 12 months

•Mechanism for owner to reverse designation and its effects by making demonstrable changes to condition of ship

Future safety issues for P&I…..

• Some disturbing trends in 2008

• Supply of experienced and capable officers unable to keep up with demand arising from new ship building

• Supply of experienced and capable ship designers and builders unable to keep up with demand for new ship building

• Ships from yards that don’t know how to build them, run by crews that are unfamiliar with operating them……

Future safety issues for P&I…..

• Some disturbing trends

• Supply of experienced and capable officers unable to keep up with demand arising from new ship building

• Supply of experienced and capable ship designers and builders unable to keep up with demand for new ship building

• Ships from yards that don’t know how to build them, run by crews that are unfamiliar with operating them……

• But perhaps some relief in 2009 from downturn in shipping market, reversing interest in building, and lessening (not solving) officer shortage...?

Thank you for listening