Protection & Indemnity Insurance 2003/2004
Protection & Indemnity Insurance 2003/2004
This is the second part of circular P&I 2415/2003 dated January 27th 2003. For easy reference main parts of said circular is included herein.
The Board of Directors decided for the insurance year 2003/2004:
Owner’s Protection & Indemnity
General Increase
The 2003/2004 Estimated Total Call (ETC) shall be increased by 25 % prior to any increase for claims records and/or other adjustments of premium. Any increase in reinsurance cost shall be added to the call.
Premiums
All premiums are debited as advance and supplementary calls. It is anticipated that this policy year will be closed in the year 2005. The Board decided that the premium shall be debited in four instalments: at inception, February 20th, May 20th, August 20th and November 20th. For 2003/2004 the premium will be based on Gross Tons (GT) as per the International Convention on Tonnage Measurements of Ships 1969.
Supplementary Call
The supplementary call for this year will initially be decided upon in 2003. The current estimated supplementary call for 2003/2004 is 0 %.
Release Call
The release call for 2003/2004 is 25 %. Members should be aware that even if a release call has been paid, the Association retains the right to make overspill calls as per the P&I Rules (Rule 23).
Payment of Premium
Premiums are to be paid in accordance with the enclosed “Procedures for Payment of Premium”.
Renewals
The premium for 2003/2004 will be based on the Member’s record for the five year period 1997-2001, including current year if adverse. Records and claims summaries are now available through the Swedish Club extranet, SCOL. The information is updated overnight.
Limit of Liability
The overall liability of the Association for 2003/2004 is, unless otherwise stated in the Policy or in the P&I Rules, limited to a maximum collection of 2.5 % contribution of each entered vessel based on the International Convention on Limitation of Liability for Maritime Claims 1976, property claims Article 6 paragraph 1(b), in excess of reinsurance jointly placed by the International Group. (See also current P&I Rules, “Appendix”.) The limit of liability for Oil Pollution is USD 1,000,000,000.
Lay-up Returns
Members are allowed up to 50 % premium returns for vessels laid up in a safe port for more than 30 consecutive days if the vessel has only watchmen and no cargo onboard. The Association, however, will always retain a minimum premium of USD 0.90 per GT.
Return premium is not granted for vessels less than 396 GT, nor for tugs, barges or passenger ships/ferries in coastal trade.
Claim for lay-up returns should be made to the Association as soon as possible, however, latest 12 months after expiry of the policy year. Sufficient information has to be supplied in order for the Association to calculate the return. A lay-up return application form is enclosed.
Reinsurance
The Association is participating in the International Group of P&I Clubs’ general reinsurance arrangement in excess of USD 30,000,000. The net cost for this cover is distributed as follows:
| Tankers carrying persistent oil as cargo: | USD 0.6724 per GT | |
| Tankers carrying non-persistent oil as cargo: | USD 0.3268 per GT | |
| Passenger vessels: | USD 0.6841 per GT | |
| Other dry cargo vessels: | USD 0.2858 per GT |
The Association has elected to cover part of the retention of USD 5,000,000 to protect Members’ exposure with a cover of USD 3,000,000 in excess of USD 2,000,000.
The reinsurance structure for 2003/2004 is thus:
| Association’s retention | USD 2,000,000 | |
| Reinsurance of retention | USD 3,000,000 excess USD 2,000,000 | |
| Pool | USD 25,000,000 excess USD 5,000,000 | |
| Group Excess Loss | USD 2 billion excess USD 30,000,000 |
Oil Pollution/United States Oil Pollution Surcharge for Tankers
The oil pollution cover provided by the Association for the Policy year 2003/2004 is as follows:
| Limit of Liability | USD 1,000,000,000 | |
| Declarations | Members have to declare all voyages by tankers each quarter in arrears. Forms for declarations will be made available to Members prior to the first declaration. The declarations are to be completed by May 20th 2003, August 20th 2003, November 20th 2003 and February 20th 2004 and returned to the Association. Tankers (including OOs and OBOs) carrying persistent oil any voyage will be regarded as carrying persistent oil for any such quarter. Members are advised to inform the Association immediately if a vessel, declared to the Association as not carrying persistent oil as cargo, is carrying a cargo of persistent oil. Members with OOs and OBOs declared as dry cargo vessels are advised to inform the Association immediately if vessels are carrying oil as cargo whether persistent or non-persistent. |
|
| Persistent Oil | All hydro-carbon mineral oils other than the non-persistent oils. | |
| Non-persistent Oil | Oil which consists of hydro-carbon fractions: | |
| a. | at least 50 % of which, by volume, distils at a temperature of 340°C, and | |
| b. | at least 95 % of which distils at a temperature of 370°C when tested by the ASTM method D 86/87 or any revision thereof. | |
| Trading to the United States | Tankers carrying persistent oil as cargo and calling ports or places within the United States and United States Exclusive Economic Zone (EEZ) as defined by OPA 1990 for loading or discharging are subject to additional premium. The United States/U.S. EEZ includes the District of Columbia, Puerto Rico, Guam, American Samoa, U.S. Virgin Islands and Northern Marianas. | |
| U.S. Voyage | A U.S. voyage is any cargo voyage involving loading or discharging at any port or place in United States/U.S. EEZ as defined above. One cargo voyage involving loading or discharging at more than one U.S. port or place within U.S./U.S. EEZ shall be regarded as a single voyage. Discharging one cargo at a U.S./U.S. EEZ port or place and loading a new cargo at a U.S./U.S. EEZ port or place constitutes two voyages. | |
| Member’s Responsibility | The Member is responsible to report to the Association if any cargo of persistent oil has been loaded, discharged or transhipped in the United States or within the U.S. EEZ. The Member is also responsible to determine whether or not a cargo is persistent. The Association retains its right to ultimately decide whether a cargo is to be considered as persistent. |
|
Additional Premium U.S.
In respect of tankers carrying persistent oil in bulk as cargo, following additional premiums will apply 2003/2004:
| 1. | per voyage: | USD 0.1428/GT (SBT: USD 0.126/GT) 50 % less if lightering in designated areas or calling at Louisiana Offshore Oil Port (0.0714/0.063). |
| minimum GT: | 1,000 for calculation purposes. | |
| max voyages: | no tanker will have to pay for more than 20 voyages. | |
| 2. | small tankers: | Tankers of 1,000 GT or less may opt to pay per voyage as (1) above or a fixed annual premium of USD 2,856 (SBT: USD 2,520). |
| 3. | parcel tankers: | A parcel tanker is a tanker which is constructed or adopted primarily to carry cargoes of noxious liquid substances in bulk and which is capable of carrying at least ten grades of cargoes simultaneously, having been issued with an international certificate of fitness for the carriage of dangerous chemicals in bulk. |
| a. | parcel tankers carrying 5,000 MT or less of persistent oil on any voyage may opt to pay an annual premium of USD 8,560 (SBT: USD 7,560) or pay per voyage as (1) above. The voyage additional premium will be calculated on 3,000 GT equalling USD 428 (SBT: USD 378). | |
| b. | parcel tankers carrying between 5,001 and 10,000 MT of persistent oil will pay per voyage USD 1,075 (SBT: USD 941). | |
| c. | parcel tankers carry 10,001 MT or more of persistent oil, the voyage additional premium as (1) above will be used (USD/GT 0.1428/0.126). | |
| 4. | SBT-tankers: | Tankers equipped with segregated ballast tanks in accordance with the requirements of Regulation 13 of Annex 1 to MARPOL 73/78 will get a 10 per cent differentiation on above additional premiums. Thus, a call to the United States as per (1) above will be USD 0.126/GT, an annual premium as per (2) will be USD 2,520 and (3a) above will be USD 7,560. |
Summary
| Non SBT | SBT | ||
| USD and voy | USD and voy | ||
| 1 | Tankers > 1,000 GT LOOP / Lightering |
0.1428/ GT
0.0714 / GT |
0.126 / GT
0.063 / GT |
| 2 | Tankers 1,000 GT or less (or per annum |
143
2,856 p.a. |
126
2,520 p.a.) |
| 3a | Parcel tankers < 5,000 MT of cargo |
428
|
378
|
| 3b | Parcel tankers 5,001 – 10,000 MT of cargo |
1,075
|
941
|
| 3c | Parcel tankers 10,001 MT of cargo or more LOOP / Lightering |
0.1428/ GT 0.0714 / GT |
0.126 GT 0.063 / GT |
War Clause
All Swedish flagged vessels are subject to the “The Swedish Club Outbreak of War Clause (P&I)”, (P.9), as enclosed.
Certificates
The Association will assist Members to obtain required certificates. It should however be noted that the Association’s undertakings are always limited to the Civil Liability Convention 1969 (CLC). Please contact us for information and for forms of application.
U.S. Terrorist Insurance Act of 2002
Reference is made to letter and circular P&I 2413/2002 dated November 22nd 2002 and the cover described under the heading “P&I – War Risks”.
Policy Endorsement
All policies and certificates of entry issued by the Association will include the following endorsement:-
This certificate policy is evidence only of the contract of indemnity insurance between the above named Member(s) and the Association and shall not be construed as evidence of any undertaking, financial or otherwise, on the part of the Association to any other party.
If a Member tenders this certificate as evidence of insurance under any applicable law relating to financial responsibility, or otherwise shows or offers it to any other party as evidence of insurance, such use of this certificate by the Member is not to be taken as any indication that the Association thereby consents to act as guarantor or to be sued directly in any jurisdiction whatsoever. The Association does not so consent.
Certificate of Financial Responsibility (COFR) – U.S. Trading
Members are reminded that trading to the United States requires a COFR in advance. The Association does not issue such certificates. A COFR may be obtained through specialised institutes issuing such certificates. The Association will provide necessary documents to such approved institutes as may be required for obtaining a COFR.
California and Alaska
All vessels trading to California and/or Alaska are required to have a California COFR. Members are required to provide a Certificate of Entry or a copy of the P&I Policy. Members shall be aware of the increased levels for COFRs for nontank vessels in Alaska and may visit the officila website for further information: www.state.ak.us/local/akpages/ENV.CONSERV/dspar/nontank
P&I Rule changes and additions valid from February 20th 2003
Rule 3 section 4:4 – amendment
Rule 11 section 2(h) – amendment
Rule 11 section 5 (a) – amendment
Rule 24 – new rule
BOLERO
See circular P.2384/1999. Any member involved in trading using Bolero shall inform the Association before comencing the use of Bolero in order to benefit from the additional cover arranged. Following endorsement deemed to be included in all P&I Policies:
Paperless Trading Endorsement
| 1. | There shall be no recovery from the Association in respect of any liability, cost or expense whatsoever or howsoever arising, whether directly or indirectly, out of or in consequence of: | |
| (a) | the Member’s participation in or use of any system or contractual arrangement the predominant purpose of which is to replace paper-based documentation in shipping and/or international trade with electronic messages, including, without limitation, the Bolero system (any such system or arrangement being referred to in this endorsement as a “paperless system”), or | |
| (b) | a document which is created or transmitted under a paperless system which document contains or evidences a contract of carriage, or | |
| (c) | the carriage of goods pursuant to such a contract of carriage, save to the extent that the Association in its sole discretion may determine that such liability, cost or expense would have arisen and would have been covered by the Association if the Member had not participated in or used a paperless system and any contract of carriage had been contained in or evidenced by a paper document. | |
| 2. | For the purpose of this endorsement a “document” shall mean anything in which information of any description is recorded, including, but not limited to, computer or other electronically generated information. | |
Old Years
The current position on the old years is as follows:
|
Year
|
Status
|
Estimated Additional Call
|
Release Call
|
| 1999/2000 and earlier | Closed |
–
|
–
|
| 2000/2001 | Open |
0 %
|
25 %
|
| 2001/2002 | Open |
0 %
|
25 %
|
| 2002/2003 | Open |
0 %
|
25 %
|
| 2003/2004 | Open |
0 %
|
25 %
|
Charterers’ Liability Cover
Premiums
The premium for Charterers’ P&I is fixed and thus not subject to any supplementary calls. The minimum premium for all vessels is USD 1,000 but always minimum two months premium.
Payment of Premium
Premiums are to be paid in accordance with the enclosed “Procedures for Payment of Premium”.
Renewals
The premium for 2003/2004 will be based on the records for the five year period 1997-2001, including current year if adverse. Records and updated claims summaries are available from the Swedish Club’s extranet, SCOL. Information is updated every night.
Limit of Liability
The Association’s maximum liability is limited to USD 300,000,000 for each chartered entry and in addition a separate limit of USD 100,000,000 for Oil Pollution claims each entry, subject to an aggregate in respect of Oil Pollution claims of USD 300,000,000 each vessel, any one accident.
The limit of liability per entry is as per Rule 9 of the Association’s Rules for P&I Insurance.
Charterers’ Limited Liability Cover
For 2003/2004 the Association also offers a limited cover for Charterers including Charterers Liabilty to Hull. The overall limit is limited but may be arranged up to USD 396,000,000 any claim or occurance. For further details, please contact the Underwriting & Marketing Department.
Additional Covers
P&I – Deviation cover
The Association has a general cover for deviation in favour of the Members.
| Cover: | The cover includes those deviations not covered by the ordinary P&I Rules, such as ordered deviations by the Shipowner. Such deviations shall be reported to the Association and the Association will determine the additional premium depending on the circumstances. The cover may be extended to include Ad Valorem Cargo and Specie and other Valuable Cargo. It may, furthermore, include Feeder/Lightering, Transhipment/Storage, Drydocking with cargo on board. In respect of War, cover in excluded areas subject to agreement. |
| Information: | When advising the Association, include amount and value of cargo under B/Ls exposed. |
| Limit: | Value of cargo exposed, however, not exceeding USD 50,000,000 any one accident each vessel. |
| Declarations: | All voyages shall be declared stipulating the type of cargo and the value of the cargo exposed. |
P&I – War Risks
U.S. Terrorism Risk Insurance Act of 2002 (“TRIA”), Special War Risk P&I Cover for Owner’s and Charterer’s under the Group cover.
All Members entered for P&I, or Charterers’ entries under the Group Cover, are automatically covered for P&I War Risks, including acts of terrorism as defined in the U.S. Terrorism Risk Insurance Act of 2002 (“TRIA”). This cover, subject to the definitions in TRIA and acts of terrorism defined by TRIA, will be partly reimbursed by the United States under a formulae established by federal law. Under this formulae, the United States will pay 90 per cent of covered losses exceeding a statutorily established deductible to be paid by the insurer providing coverage. The proportion of the premium attributable to coverage for certified acts of terrorism as defiend in TRIA is identified under “Premium” below. The War Risk cover is subject to the following conditions:
| Reinsurance: | This contract is a reinsurance of the Association. |
| Premium: | For Owner’s entries a premium of USD 0.0225 per GT is included in the reinsurance rates quoted including USD 0.0025 per GT for coverage of acts of terrorism as per the terms of TRIA. For Charterers’ entries under the Group Cover, the corresponding premiums are USD 0.0075 per GT and USD 0.0025 per GT respectively. |
| Conditions: | This policy is to pay claims for P&I risks as defined in the Rules of the Swedish Club, for which cover is excluded from vessel’s entry by reason of the War Exclusion clause contained therein, Rule 11 section 5, but including the following clauses: Notice of Cancellation, Automatic Termination of Cover and War and Nuclear Exclusion Clause – Hulls, etc. Chemical, Bio-Chemical, Electromagnetic Weapons and Computer Virus Exclusion Clause 2002-12-18. Cover may be terminated by the Association giving seven days notice. |
| Trading: | Worldwide but liberty to cancel giving seven days notice. |
| Deductible: | USD 50,000 any one accident each vessel. |
| Limit: |
Special Limit for Owners Where the Member and another party or other parties interested in the operation of the ship are insured under more than one owner’s and/or charterer’s entry with the Association or with the Association and any other association(s) which participates in the Pooling Agreement and the General Excess Loss Reinsurance Contract, the aggregate of claims brought against the Association and such other association(s) in respect of losses, liabilities, costs and expenses covered under this special war risk P&I cover for owners and/or charterers, shall be limited to USD 400 million any one incident or occurrence each vessel. If such claims exceed this limit, the liability of the Association in respect of each certificate of entry shall be limited to that proportion of that limit that claims recoverable from the Association under that certificate of entry bear to the aggregate of the said claims recoverable from the Association and from such other association(s), if any. Special limit for charterers |
| Excess: | This policy to pay claims only in excess of amount recoverable under vessels’ Hull and Machinery and Crew Marine or War Risks policies, and any P&I inclusion clauses attached thereto and any other War Risk Cover arranged by the Member. Such a War Risk Policy shall cover the vessel’s proper value for hull and include a separate cover for liability up to the same amount or maximum USD 100,000,000. |
Information:
After inclusion of the cover described above, a number of question have arisen. These have been addressed by the International Group in the following document which is quoted below:
Quote
Due to changes in the available reinsurance the terms of the cover were changed for 2003/04. The reinsurance changes were notified to the International Group only shortly before the renewal and the International Group has been seeking to clarify two issues.
1. Chemical, Bio-Chemical, Electromagnetic Weapons and Computer Virus Exclusion Clause
This clause is new for 2003/04 and has been introduced as a result of the introduction of similar clauses in almost all reinsurance policies to avoid undue aggregation of risk.
The clause reads as follows:-
This clause shall be paramount and shall override anything contained in this insurance inconsistent therewith
1. In no case shall this insurance cover loss damage liability or expense directly or indirectly caused by or contributed to by or arising from
1.1 any chemical, bio-chemical or electromagnetic weapon.
1.2 the use or operation, as a means for inflicting harm, of any computer virus.
Problems have arisen with the interpretation of this clause and it is potentially much too wide. Following discussions between the International Group, its brokers and reinsuring underwriters, the brokers have issued the following statement with the approval of reinsuring underwriters:-
“The Chemical etc., Exclusion Clause (MM Clause No. 2249(a)) was introduced to this placement for the first time at 20th February 2003.
It is our understanding that the phrase ‘any chemical, bio-chemical ………… weapon’ was intended by Underwriters to exclude neurological or viral agents such as sarin, mustard gas, anthrax, smallpox etc. It is not intended to refer to explosives, or methods of their detonation or attachment. Nor does it refer to the use of a vessel or its cargo as a means of inflicting harm, unless such cargo is itself a chemical or biochemical weapon within the scope of the clause. We understand the phrase ‘electromagnetic weapon’ to refer to highly sophisticated devices designed to disable computer software, and not to methods of detonation or attachment of explosives.
The exclusion of ‘the use or operation, as a means for inflicting harm, of any computer virus’ is relevant in the context of this policy only if it is used as an act of war or terrorism.”
The International Group have submitted a revised wording for the clause which incorporates these principles and it is hoped that the wording of the clause for the next year will be clearer.
2. The Excess Point
The wording of the excess point for the International Group of P&I Clubs’ reinsurance contracts has been changed for 2003/04 and now reads as follows:-
“This policy to pay claims excess of amounts recoverable under vessels’ or crew war risks P&I policies subject to a minimum excess of the proper value of the entered ship or USD100,000,000 whichever is the less (applicable to owners’ entries and not to charterers’ entries), and further subject to a minimum excess of USD50,000 any one event.”
Once again the brokers and reinsuring underwriters are concerned that the intent of this clause should be clearly understood and, following discussions with the International Group, the brokers have issued the following clarification with the approval of reinsuring underwriters:-
“It is therefore our understanding that in respect of Owners’ entries this policy will respond excess of underlying insurances with a limit of at least the proper value of a vessel.
In the event that a vessel is not so insured, this policy will respond as if an underlying policy with a limit up to the proper value were in place, except that for a vessel with a proper value of more than USD100m, the deemed underlying excess shall be USD100m.
Further we understand that this policy will be in excess of all other policies placed by owners for vessels’ or crew war risks P&I. We do not believe that corporate general liability umbrellas placed on behalf of organisations of which shipping forms a part are underlying policies hereon (even if they might include some war and terrorism cover).
We believe reinsurers understand that Club boards may exercise their discretion as to what constitutes the proper value of an entered vessel, but the payment of claims under this policy remains subject to the criteria above and the Claims Co-operation Clause.”
Members should note that they are deemed to have underlying cover with conditions equivalent to the cover above (“P&I – War Risks) equal to at least the hull value of the ship. Furthermore this cover is excess of any cover which the Member has actually taken out which covers the risk, unless the cover is a corporate general liability umbrella cover. A corporate general liability umbrella cover is difficult to define and it is important that any Member who considers that he has such a cover should inform the Association so that the position can be clarified.
Members are recommended to seek similar clarifications to those set out above from the underwriters of their underlying War Risks cover.
Unquote
The following additional covers are arranged by the Association for 2003/2004. Members requiring these covers shall contact the Underwriting & Marketing Department.
AD VALOREM – Declared cargo value in Bill of Lading
Additional Cover for Oil Pollution
Bunkers
Charterers’ Liability to Hull
Deviation Insurance
Insurance of Deck Cargo shipped against under-deck B/L
Shipowners’ Liability to Cargo at Warehouses and/or Wharves
Time-Charterers’ Liability Excess Protection & Indemnity Risks
Tour Operators Liability Cover
In this circular we have dealt with our general terms. As always, we are prepared to tailor make the insurance cover to suit the special needs of any Member.
Yours sincerely,The Swedish ClubFrans Malmros