11/2009: Reinsurance Arrangements for the 2010 Policy Year; United States Oil Pollution Cover; Special War Risks P&I Cover
Circular no. 11/2009
February 2010
To all Members of Assuranceforeningen Gard - gjensidig - and Gard P. & I. (Bermuda) Ltd
Dear Sirs,
Reinsurance Arrangements for the 2010 Policy Year
United States Oil Pollution Cover
Special War Risks P&I Cover
Reinsurance Arrangements for the 2010 policy year for P&I entries with Assuranceforeningen Gard - gjensidig - and Gard P. & I. (Bermuda) Ltd (hereinafter individually referred to as the "Association" and collectively as the "Associations").
Owner's Entries
The structure of the cover reinsured through the Pool:
Club retention: | USD 8 million |
Pool retention: | USD 42 million (in excess of USD 8 million) |
General Excess Loss Cover: | USD 2000 million (in excess of USD 50 million) |
Common overspill protection: |
USD 1000 million (in excess of the underlying General Excess Loss Cover) |
The Owner's P&I cover reinsured through the Pool is subject to the following special limits:
Oil pollution: | USD 1000 million |
Passenger and seamen combined: | USD 3000 million |
Passenger (sub-limit): | USD 2000 million |
The oil pollution limit applies to the aggregate of Owners' and Demise Charterers' liabilities any one vessel arising out of any one event each Owner's Entry.
The standard P&I cover for owners with regard to the passenger and seamen risks combined for all categories of vessels shall be limited to USD 3000 million, any one vessel arising out of any one event. A sub-limit of USD 2000 million shall apply to passenger risks only.
The overspill protection reinsurance has been bought by the Group for claims of up to USD 1000 million in excess of the limit of the Group's Excess Loss Reinsurance. This overspill protection reinsurance is available to all Group Clubs to reduce the need to make an overspill call on their Members.
Although the limit on each mutual Member's liability to pay an overspill call remains unchanged at 2.5 per cent of each entered ship's Convention Limit, the combination of the limit on cover for passenger and seamen claims and the USD 1000 million special overspill reinsurance protection reduces the exposure of all Members to an overspill claim.
Charterer's Co-assured under an Owner's Entry
For the 2010 policy year the overall limit of cover for charterers named as co-assured under an Owner's Entry will be a combined single limit of USD 350 million for both pollution and non-pollution claims each incident or occurrence, each vessel each entry.
United States Oil Pollution Cover
Exclusion and Reinstatement of Cover
The exclusion from cover under Rule 53.2 of oil pollution liabilities arising out of an incident to which the US Oil Pollution Act of 1990 ("OPA 90") is applicable in respect of ships capable of carrying oil in bulk as cargo will continue for the 2010 year.
However, cover can be reinstated if the Member agrees to make declarations in the manner set out in Appendix III paragraph 3 - US Oil Pollution Cover - to the Rules for Ships. The declaration procedure for the 2010 policy year is identical to the procedure which applied for the 2009 policy year.
The Associations will assume that those Members who agreed to the declaration procedure for the 2009 policy year also agree to the declaration procedure for the 2010 policy year. Thus, the cover will be automatically reinstated unless by 20 February 2010 the Association has been notified to the contrary. Members who did not agree to the declaration procedure for the 2009 policy year, but who wish to reinstate the cover for the 2010 policy year, must notify the Association that they agree to the declaration procedure prior to 20 February 2010.
Voyage Cap and Surcharge
The voyage surcharge system for tankers is designed to contribute to the costs of the General Excess Loss Reinsurance in relation to the additional cost of the clean up of spills anticipated in US waters. For 2010, the Group has decided that the surcharge per GT per voyage will be US cents 6.47 for MARPOL tankers and US cents 7.8 for those that are not. To qualify for the MARPOL tanker category, a tanker must be equipped with segregated ballast tanks in accordance with the requirements of Regulation 18 of Annex 1 to MARPOL 73/78. The limit of the number of voyages which will attract the surcharge will be 20 as in the current year.
Owners of ships of 1,000 GT or less will pay USD 78 per voyage for non-MARPOL tankers and USD 65 per voyage for MARPOL tankers.
Parcel Tankers
Owners of parcel tankers carrying less than 5,000 tons of persistent oil cargoes will pay a rate of USD 234 per voyage for non-MARPOL tankers and USD 194 per voyage for MARPOL tankers. However, where parcel tankers are carrying between 5,000 and 9.999 tons of persistent oil cargoes the owner will pay a rate of USD 586 per voyage for non-MARPOL tankers and USD 486 per voyage for MARPOL tankers.
Owners of parcel tankers carrying more than 9.999 tons of persistent oil cargoes will pay the voyage premium based on the ship's full tonnage.
A parcel tanker is a ship constructed or adapted primarily to carry cargoes of noxious liquid substances in bulk, and capable of carrying at least 10 grades simultaneously, having been issued with an international certificate of fitness for the carriage of dangerous chemicals in bulk. Ships qualifying as parcel tankers will still be required to declare their US voyages and in addition to state the quantity of persistent oil cargoes which has been carried on each voyage.
General
As was the case for the 2009 policy year, the Associations reserves the right to determine whether loading or discharging or transferring cargo at several ports or places constitutes a single voyage or more than one voyage. For the purpose of payment of premium a Member will be charged half the rate specified above if loading or discharging takes place solely at Louisiana Offshore Oil Port (LOOP) or solely at a place, other than a port, approved by the US Coast Guard within the US exclusive economic zone.
Special War Risks Cover
The terms of the special war risks P&I cover are similar to those applying for the 2009 policy year.
The limit of insurance remains USD 500 million any one event each vessel. At the meetings on 28 January 2010 the Board of Directors of Assuranceforeningen Gard and the Executive Committee of Gard P. & I. (Bermuda) Ltd resolved that this cover shall continue to include liabilities arising from acts of terrorism as defined in the US Terrorism Risk Insurance Act 2002 as amended. A premium of US cents 0.25 per entered GT is deemed to be attributable to the US risks in accordance with the terms of the Act. The cover also continues to include an exclusion in respect of chemical, biological, biochemical and electromagnetic weapons.
The terms and conditions of the special P&I war risks cover for the 2010 policy year can be summarized as follows:
Subject to the Associations' Rules and the Institute Notice of Cancellation, Automatic Termination of Cover and War and Nuclear Exclusions Clause - Hulls
The cover afforded is subject to the Associations' standard terms of entry for the 2010 policy year (save that the war risks exclusion in Rule 58 in the Rules for Ships shall not apply) and the attached Institute Notice of Cancellation, Automatic Termination of Cover and War and Nuclear Exclusion Clause - Hulls (Appendix I). This means that the cover can be terminated upon the Associations giving 7 - seven - days' notice of its intention to do so. In certain circumstances the cover will terminate automatically.
Scope of Cover
The special war risk P&I insurance will cover P&I risks set out in Part II, chapter 1, of the standard terms of entry, caused by war risks as described in Rule 58 of the Rules for Ships, but subject always to special terms of entry agreed between the individual Association and the individual Member attached to or included in the Ship's certificate of entry.
TOPIA 2006
The specials war risk P&I insurance excludes loss, damage or expense arising from an act of terrorism which the Member may incur or for which the Member may be liable under TOPIA 2006.
Bio - Chem Risks
All perils included in this special P&I war risks cover shall be subject to the following clause (hereafter called the "Bio-Chem Risks"):
"This clause shall be paramount and shall override anything contained in this contract of insurance inconsistent therewith
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| 1. | In no case shall this contract of insurance cover loss damage liability or expense directly or indirectly caused by or contributed to by or arising from |
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| 1.1 | any chemical, biological, bio-chemical or electromagnetic weapon. |
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| the use or operation, as means for inflicting harm, of any computer virus." |
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However, also for the 2010 the Group has decided that the Bio-Chem Risks shall be covered through special pooling facility covering the Member's liability in respect of
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| damages, compensation or expenses in consequence of personal injury to or illness or death of any seamen; and |
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| for legal costs and expenses incurred solely for the purpose of avoiding or minimising any other P&I liability arising from a Bio-Chem Risks. |
The limit of cover for the special insurance against the Bio-Chem risks is USD 30 million per vessel in the aggregate. The detailed terms and conditions of the Bio-Chem cover is attached in the special Bio - Chem clause (Appendix II).
Special Limit for Owners
For the 2010 policy year the special P&I war risks cover for owners is limited to USD 500 million any one event each vessel in excess of the proper value of the entered ship or any amounts recoverable under any other P&I war risks cover which the Member has arranged, whichever is greater. The minimum excess is the proper value of the ship determined in accordance with Rule 71.1(a) of the Rules for Ships or USD 100 million, whichever is the lesser. The cover is subject to a minimum deductible of USD 50,000 any one event each vessel.
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(s) or with the Association(s) 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(s) and such other association(s) in respect of losses, liabilities, costs and expenses covered under this special P&I war risk cover for owners and/or charterers, shall be limited to USD 500 million any one event 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.
It ought to be emphasised that the special P&I war risks cover is an excess cover only as far as owner's entries are concerned. It is not intended to be a substitute for the Member's primary P&I war risks cover, whether arranged with his hull and machinery insurer or with another insurer, which the Member should effect with a minimum limit of the proper value of the ship. If the Member has effected P&I war risks cover in excess of the proper value of the ship, either by opting for a higher limit on his primary cover or by purchasing additional cover, the special war risks P&I cover will still apply only in excess of the amounts recoverable under all of the other P&I war risks covers.
If you have any questions, please contact the P&I underwriting department in Gard AS.
Yours faithfully
GARD AS
Claes Isacson
Chief Executive Officer
Appendix 1 to Circular No. 11/2009
INSTITUTE NOTICE OF CANCELLATION, AUTOMATIC TERMINATION OF COVER AND WAR AND NUCLEAR EXCLUSIONS CLAUSE - HULLS
This clause shall be paramount and shall override anything contained in this insurance inconsistent therewith
1 | Cancellation | |
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2 | Automatic Termination of Cover | |
| 2.1 | upon the outbreak of war (whether there be a declaration of war or not) between any of the following: United Kingdom, United States of America, France, the Russian Federation, the People's Republic of China; |
| 2.2 | in respect of any vessel, in connection with which cover is granted hereunder, in the event of such vessel being requisitioned either for title or use. |
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3 | Five Powers War and Nuclear Exclusions | |
| 3.1 | loss damage liability or expense arising from |
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| 3.1.1 the outbreak of war, whether there be a declaration of war or not between any of the following: United Kingdom, United States of America, France, the Russian Federation, the People's Republic of China; |
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| Law and Practice |
Appendix 2 to Circular No. 11/2009
1 | Bio-Chem Clause | |
1.1 | Subject to the terms and conditions and exclusions set out herein, cover is extended to include the liability of the Member: | |
| (a) | to pay damages, compensation or expenses in consequence of the personal injury to or illness or death of any seaman (including diversion expenses, repatriation and substitute expense and shipwreck unemployment indemnity), |
| (b) | for the legal costs and expenses incurred solely for the purpose of avoiding or minimising any liability or risk insured by the Association (other than under the Omnibus Rule) |
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1.2 | where such liability would be recoverable under either | |
| (a) | cover provided by the Association for such liabilities, costs, losses and expenses as would be covered under the Rules but for the exclusion of war risks in Rule 58 of the Rules for Ships; or |
| (b) | any other policy of insurance providing equivalent cover |
1.3 | save only for the operation of an exclusion of liabilities, costs, losses and expenses directly or indirectly caused by or contributed to by or arising from | |
| (a) | any chemical, biological, biochemical or electromagnetic weapon |
| (b) | the use or operation, as a means for inflicting harm, of any computer, computer system, computer software program, malicious code, computer virus or process or any other electronic system, |
1.4 | other than liabilities, costs, losses and expenses arising from | |
| (a) | explosives or the methods of the detonation or attachment thereof |
| (b) | the use of the entered Ship or its cargo as a means for inflicting harm, unless such cargo is a chemical or bio-chemical weapon |
| (c) | the use of any computer, computer system or computer software program or any other electronic system in the launch and/or guidance system and/or firing mechanism of any weapon or missile. |
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2 | Excluded Areas | |
2.1 | Unless and to the extent the Association may in their discretion otherwise decide, there shall be no recovery in respect of any liabilities, costs, losses and expenses directly or indirectly caused by or contributed to by or arising out of any event, accident or occurrence within the ports, places, zones or areas or during such period as are specified below: | |
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2.2 | At any time or times before, or at the commencement of, or during the Policy Year, the Association may by notice to the Member change, vary, extend, add to or otherwise alter the ports, places, countries, zones and periods specified in Clause 2.1 from a date and time specified by the Association not being less than 24 hours from midnight on the day the notice is given to the Member. | |
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Cancellation |
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| Cover hereunder may by notice to the Member be cancelled by the Association from a date and time specified by the Association, not being less than 24 hours from midnight on the day notice of cancellation is given to the Member. |
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| Limit of Liability |
4.1 |
| Subject to Clause 4.2 the limit of the liability of the Association under this extension of cover in respect of all claims shall be in the aggregate USD 30 million each ship any one accident or occurrence or series thereof arising from any one event. |
4.2 |
| In the event that there is more than one entry by any person for Bio-Chem cover as provided herein in respect of the same ship with the Association and/or any other insurer which participates in the Pooling Agreement or General Excess Loss Reinsurance Contract, the aggregate recovery in respect of all liabilities, costs, losses and expenses arising under such entries shall not exceed the amount stipulated in Clause 4.1 and the liability of the Association under each such entry shall be limited to such proportion of that amount as the claims arising under that entry bear to the aggregate of all such claims recoverable from the Association and any such other insurer. |
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| Deductible |
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| The deductible shall be the deductible applicable to the relevant cover set out in the Certificate of Entry. |
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| Law and Practice |
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| This clause is subject to English law and practice. |