HISTORY, BACKGROUND AND STRUCTURE OF P&I CLUBS

• 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

• Hull and Machinery (H&M)

• Protecting and Indemnity (P&I)

• Freight, Demurrage & Defence (FD&D)

• War Risks

• Strike Insurance

3

SHIPOWNERS INSURANCE REQUIREMENTS

• 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

5

HISTORY OF P&I INSURANCE

• 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.

6

HISTORY OF P&I INSURANCE

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

7

HISTORY OF P&I INSURANCE - 1836

De Vaux Versus

Salvador

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

• 1855 - First protecting club formed

9

HISTORY OF P&I INSURANCE - 1855

• North of England P&I Association established

Newcastle

Greece

Hong Kong

Singapore

Japan

10

HISTORY OF P&I INSURANCE - 1860

• Global fleet of 4,000 ships

• 400 member groups

• Providing P&I insurance to 12% of the world’s owned shipping tonnage

11

HISTORY OF P&I INSURANCE - 1860

CARGO

• Common law

• Freedom of contract

• Few cargo claims

• Westerhope incident 1870

• Deviation

12

HISTORY OF P&I INSURANCE - 1870

Port

B

Port C

• Increase in overseas trade and changes in the Law

Workmen's Compensation Act

Factory Acts and Industrial Injuries Act

Merchant Shipping Acts

Hague Rules

13

HISTORY OF P&I INSURANCE

• Ships

• Cargo

• People

14

HISTORY OF P&I INSURANCE

15

P&I CLUBS

• An Association of Shipowners

• Providing third party liability insurance cover

• On a mutual basis (sharing of risks)

• Non-profit making

16

P&I CLUBS

16

• 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

17

P&I CLUBS

17

• Managed Clubs

Thomas R. Miller manage UK P&I Club

• Mutually Owned Club

North of England P&I Association

18

P&I CLUBS

18

A Member may be a:

• Shipowner

• Ship manager

• Ship operator

• Charterer

19

P&I CLUBS

19

• P&I policy is a TIME policy:

From Noon GMT on 20 February

To Noon GMT on following 20 February

20

P&I CLUBS

20

21

P&I DEPARTMENTS AND CORRESPONDENTS

22

P&I DEPARTMENTS AND CORRESPONDENTS

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

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

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

25

P&I DEPARTMENTS AND CORRESPONDENTS

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

26

P&I DEPARTMENTS AND CORRESPONDENTS

27

INTERNATIONAL GROUP OF P&I CLUBS

• 13 Member Clubs

• Over 90% of world tonnage

• Collective insurance and reinsurance

• Represent view of shipowners

• Exchange information

28

INTERNATIONAL GROUP OF P&I CLUBS (IG)

28

• North of England

• American

• Gard (Gjensidig)

• Skuld (Gjensidig)

• Britannia

• Japan

• London

• Shipowners Mutual

• Standard

• Steamship Mutual

• Swedish Club

• UK Club

• West of England

29

INTERNATIONAL GROUP OF P&I CLUBS (IG)

• 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

30

INTERNATIONAL GROUP OF P&I CLUBS (IG)

30

• Standing Committees

• Bills of Lading

• Personal Injury

• Maritime Security

• Claims Co-Operation

• Pilotage

• Ad hoc Committees

• Asbestosis

• New York Produce Exchange Charterparty

31

INTERNATIONAL GROUP OF P&I CLUBS (IG)

32

OTHER INSURANCE FACILITIES

• 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

33

OTHER INSURANCE FACILITIES

33

34

SUMMARY

• 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

35

SUMMARY

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

36

SUMMARY

37

THANK YOU

OUTLINE OF RISKS COVERED

• Scope of P&I Cover

• Risks not covered

• Underlying principles of marine insurance

INTRODUCTION

SCOPE OF COVER

•40

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

• People

• Ships

• Cargo

• Others

RISKS COVERED

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

PEOPLE

• Seamen

• Supernumeraries

• Passengers

• Third Parties

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

46

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

STOWAWAYS

PERSONS IN DISTRESS

Expenses for:

• Landing injured or sick

persons

• Assisting persons in

distress

• Landing stowaways or

refugees

DIVERSION EXPENSES

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

COLLISIONS

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)

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)

NON-CONTACT DAMAGE TO SHIPS

DAMAGE TO PROPERTY

POLLUTION

WRECK REMOVAL

DURING TOWAGE

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

• 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

• Additional costs

• Discharging or disposing

Damaged cargo

Worthless cargo

CARGO

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

• General Average

• Salvage

GENERAL AVERAGE

• Who contributes?

Cargo Ship

H&M

Value of ship

Cannot pay!

Bad debt

Will not pay!

Unseaworthy

Bunkers

• Manager’s approval:

Short or overlanded cargo

Smuggling

Immigration laws

Accidental pollution

• Director’s discretion:

Others

May compensate for confiscation of ship

FINES

LEGAL COSTS

RISKS INCIDENTAL TO SHIPOWNING

The Omnibus Rule

? ?

• P&I - Cargo

• Hull Damage

• Bunkers

• Freight or Hire

SPECIAL COVER FOR TIME CHARTERERS

• The first part of each claim paid by the Member

• Effect on premium

• Claims below deductible

• See Rule 21

DEDUCTIBLES

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

RISKS NOT COVERED

• Risks covered under Hull Policy

• War Risks

• Radioactive Materials

• Imprudent or Hazardous Operations

PRIMARY EXCLUSIONS

• Damage to entered ship

• Equipment

• Repairs to entered ship

• Freight

• Salvage

RISKS SPECIFICALLY EXCLUDED

• Charterparties

• Bad Debts

• Demurrage

• Towage

• Members’ other interests

RISKS SPECIFICALLY EXCLUDED

• 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

UNDERLYING PRINCIPLES OF MARINE INSURANCE

• Marine Insurance Act

• Seaworthiness

• Payment first by Member

• Provision of security

INTRODUCTION

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

• 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

• Condition precedent

• No direct action

• P&I Rule 20

PAYMENT FIRST BY THE MEMBER

• 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

SECURITY

• Discretionary

• Club Letters of Undertaking (CLU)

• Bank Guarantees

• No cash deposits (unless Directors authorise)

• Rule 34(5) Bail

SECURITY

• Scope of P&I Cover

People

Cargo

Ships

Others

• Risks not covered

• Underlying principles of marine insurance

• Security

SUMMARY

ANY QUESTIONS?

HULL AND MACHINERY INSURANCE

• Standard clauses

• Insured perils

• Partial losses

• Total losses

• Owner's obligations

86

INTRODUCTION

87

STANDARD CLAUSES

Markets:

• London

• Scandinavia

• Europe

• USA

• Others

88

STANDARD CLAUSES

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

90

INSURED PERILS

• Traditional perils

• ‘Inchmaree’ perils

91

INSURED PERILS

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

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

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

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

96

PARTIAL LOSS

Partial loss (particular average)

• Loss other than a total loss

• Damage caused by a “peril”

97

PARTIAL LOSS

• Cover includes reasonable costs for:

Repair

Removing ship to place of repair

• Cover does not include:

Wear and tear

Ordinary use

98

PARTICULAR AVERAGE

99

OTHER PARTIAL LOSSES

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

Contributing parties:

• The ship

H&M underwriters

• The cargo

Cargo underwriters

• The bunkers

Time charterers

101

GENERAL AVERAGE

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

Third party liabilities not covered under standard collision (RDC) clause:

• Loss of life or personal injury

• Pollution

• Wreck removal

10

3

COLLISION LIABILITIES

10

4

TOTAL LOSS

• Shipowner permanently deprived of use of ship

• Actual total loss or constructive total loss

10

5

TOTAL LOSS

• Ship is lost and cannot be salvaged

10

6

ACTUAL TOTAL LOSS

• Recovery and repair would exceed the ships insured value

• Recovery is unlikely

10

7

CONSTRUCTIVE TOTAL

LOSS

10

8

OWNERS OBLIGATIONS

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

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

11

1

SUMMARY

• Standard clauses

• Insured perils

• Partial losses

• Total losses

• Owner's obligations

11

2

SUMMARY

• Standard clauses

• Total and partial losses

• Insured perils

• Owner’s obligations

11

3

SUMMARY

11

4

THANK YOU

• Introduction

• Underwriter’s role

• Premiums

• Loss ratio

• Reinsurance

INTRODUCTION

• P&I

• FD&D

• Extended and ancillary covers

• Offshore oil and gas exploration and production cover

• War

• Newbuilding cover

WHAT WE DO?

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

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)

• 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

• New Business

New Owners – KYC

New Members – IGA Business

• Existing Business

Addition to Fleet

Renewal 20 February

THE UNDERWRITER’S ROLE – DAY TO DAY

• 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

Premium:

Amount that can be quantified prior to entry

MUTUAL PREMIUM

FIXED PREMIUM

PREMIUM – DEFINITIONS RULE 2

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

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

Loss Ratio = Level of Claims x 100% Premium

LOSS RATIO

Fleet Example:

Claims = US$300,000

Premium = US$500,000

Loss Ratio = 60%

LOSS RATIO

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

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

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

• 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

• 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

• 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

IG REINSURANCE – STRUCTURE

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

• Claims up to US$10 million (currently)

• Maintains underwriting discipline

• Cost Effective

• Retention Reinsurance

Excess of Loss

Stop Loss

IG REINSURANCE – CLUB RETENTION

• 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

• 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

• Reinsured by Hydra

• Claims from US$80m to US$100m

IG REINSURANCE – HYDRA LAYER

• 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

• 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

• Back to individual Clubs

• Upper limit not fixed precisely

• Currently approximately US$7 billion

IG REINSURANCE – EXCESS OF OVERSPILL

• 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

• Introduction

• Underwriter’s Role

• Premiums

• Loss Ratio

• Reinsurance

SUMMARY

THANK YOU

LOSS PREVENTION & SURVEY

North of England’s loss prevention strategy

• Provision of information

General

Targeted

Bespoke

• Risk based assessment

• Condition survey

149

INTRODUCTION

PUBLICATIONS

http://www.nepia.com/publications/loss-prevention-publications/

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

• Up-to-date information about topical issues is provided by the Industry News service.

INDUSTRY NEWS

http://www.nepia.com/news/industry-news/

• 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/

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

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

• 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

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

Role of the P&I Club

• Third party liability insurer

• Assess the risk posed by the ships condition for insurance purposes

158

CONDITION SURVEYS

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

160

CONDITION SURVEYS

161

CONDITION SURVEYS

162

CONDITION SURVEYS

163

CONDITION SURVEYS

164

CONDITION SURVEYS

North of England’s loss prevention strategy

• Provision of information

General

Targeted

Bespoke

• Risk based assessment

• Condition survey

165

SUMMARY

THANK YOU

OUTLINE OF FD&D INSURANCE

• Introduction – What is FD&D Cover?

• Features of FD&D

• Scope of cover

• Limitations to cover

• North of England FD&D Department

INTRODUCTION

INTRODUCTION – WHAT IS FD&D COVER?

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 …”

• 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?

FEATURES OF FD&D

“The business of this class is the enforcement of all proper claims and the defence of all claims improperly brought…”

FEATURES

• Discretionary cover:

Prudent uninsured

Reviewed throughout claim

Members Board have absolute discretion with regard to support

FEATURES

• 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

• Security:

For claims

For costs

FEATURES

• 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

• Deductible – 2016/2017

25% deductible

Minimum deductible $10,000

Maximum deductible $150,000

• No costs if no external parties appointed

FEATURES

SCOPE OF COVER

SCOPE OF COVER

Types of disputes - May 2016-May 2017

C/P DISPUTES 94%

DISPUTES WITH OTHERS 3%

DISPUTES WITH SUPPLIERS 1%

OTHERS 2%

• 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

SCOPE OF COVER UNSAFE PORT CASES

“where she may safely lie, …..

SCOPE OF COVER UNSAFE PORT CASES

…,always afloat….”

SCOPE OF COVER BUNKER DISPUTES

Bunker quality/quantity

Quantities on

delivery/redelivery

• Stevedore damage

• Liaise with H&M underwriters

SCOPE OF COVER STEVEDORE DAMAGE

SCOPE OF COVER NEWBUILD/MOA

• Newbuilding disputes

• Sale and purchase disputes (MOA)

• Review of contracts

• Limit on cover – US$250,000

• 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

• Check before fixing

• International Maritime Bureau (IMB)

• Baltic and International Maritime Council (BIMCO)

• Internal Enquiries

SCOPE OF COVER

LIMITATIONS TO COVER

• Classification society requirements

• Statutory requirements

• Rule 22

LIMITATIONS ON COVER

NORTH OF ENGLAND FD&D DEPARTMENT

• As of 20 February 2017

About 3,300 Owned and Chartered vessels

About 200 Members

122 million GT

FD&D DEPARTMENT

• 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

• 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

FD&D DEPARTMENT

• FD&D Guide Online • www.nepia.com • FD&D Class

• Introduction – What is FD&D Cover?

• Features of FD&D

• Scope of cover

• Limitations to cover

• North of England FD&D Department

SUMMARY

THANK YOU