|Four years have now elapsed since the effect of the US Oil Pollution Act 1990 (OPA 90) required tanker owners to have Certificates of Financial Responsibility (COFRs) for US trading, and as of 28th December 1997 this requirement extended to all vessels entering US waters. COFRs have been supplied from inception by specialist providers since it is clearly not in Members’ interest for Clubs to allow direct action by guaranteeing payment for oil pollution liabilities, as in some cases the sum payable would not be recoverable from the Club. For example, P&I cover may be cancelled within the notice period required by the US Coast Guard (USCG). Therefore, various schemes have arisen to provide owners with the required certificates. At least one original scheme has gone into run-off and been replaced with a new scheme, entirely new ones have arisen and one has been suspended so that there may now exist some confusion about what is available and how that co-exists with Members’ P&I cover. The following is a review of what is currently required and what is available. The intense competition has also resulted in a reduction of cost.|
Bad for the environment and a large bill for the operator.
For a tanker vessel over 3,000 gross ton, a COFR in an amount of USD 1,200 per gross ton or USD 10 million, whichever is the greater, is required, while for a tanker vessel of 300 to 3,000 gross ton OPA 90 requires a COFR in an amount of USD1,200 per gross ton or USD 2 million, whichever is the greater. For all other vessels the requirement is for COFRs in an amount of USD 600 per gross ton with a minimum of USD 500,000.
Methods of providing evidence of financial responsibility
Financial responsibility may be evidenced by:
– evidence of insurance in an acceptable form;
– surety bonds;
– self insurance;
– financial guarantee;
– other evidence of financial responsibility acceptable to the USCG.
Insurance forms acceptable under OPA 90
Launched in June 1997, administered by Terra Nova Underwriting Agency on behalf of Scandinavian Re Limited. It is a condition of cover that the vessel covered shall be entered in a P&I Club of the International Group.
Shoreline and Arvak (managed by Shoreline)
Shoreline, a mutual supported by Centre Re, was the first scheme available and may be accessed in Bermuda or through Sedgwick or Willis Faber & Dumas in London. Arvak was originally managed by Aon Risk Services and was taken on by Shoreline in 1997. It is a condition of cover that the ship covered shall have an entry in a P&I Club of the International Group, and must also be classed with an IACS society. It operates a deposit processing fee for issue of a COFR when required when the fee is adjusted.
SIGCo (The Shipowners’ Insurance & Guaranty Company Limited) (incorporating First Line)
The second scheme to come into operation was First Line. It was absorbed into SIGCo, capitalised by Stockton Re, Ace and Global Capital, in December 1996. It is only available for owners entered in International Group P&I Clubs. It can be accessed via brokers and in Bermuda. The start up equity is expected to be returned over a five year period. It also operates a deposit processing fee for issue of a COFR when required on the same basis as Shoreline.
WQIS (Water Quality Insurance Syndicate)
This is a group of US underwriters insuring pollution liabilities, mainly for US domestic craft, but they can also cover international trading dry cargo vessels. They are based in New York. This scheme does not require International Group P&I cover to be in place.
There are a number of other forms of insurance available but since these are associated with other P&I providers we have not thought it necessary to mention them here.
International Sureties Limited
This facility was terminated on 10th June 1998, with existing bonds remaining in effect until their expiry date.
The situation with regard to providing evidence of financial responsibility is likely to continue to change, and so Members in any doubt about their position should contact their insurance broker or the Club for the latest situation.