• Global Shipping( Marine Adventure) : Risk & Marine Insurance • Marine Insurance: H&M, Cargo, P&I • Surge of Shipowners’ Liability by the Convention etc., covered by P&I Insurance • Impact on P&I Costs • Prospects on P&I Insurance • • • • Role of P&I and Special Aspects on P&I Risk of Ship Financing on owners Marine Insurance Ship Financiers Check up points Ship Financiers’ Insurance( Mortgagee Interests Insurance)


Global shipping
One Market No Barrier for the Open Competition International Governance under Global Regimes/Conventions Cycle Business : Highs and Lows, 90% Global Trade by Shipping Serious Decision on the Investment

com 3 . Joins.Cycles of shipping Bubble Highs & Lows Source : KMI.

• Anti-Shipping Trend is Growing : More Liabilities onto the shipping. Changing the risk profiles to shipping. • Up Sizing of the Ship • Complexity of Shipping Chain-Chartering and FFA • Pressure on Green Management on Ship’s Operation & Design. • The Shift in the Global Shipping/Shipbuilding base from the West to the East 4 .

¼ RDC* Protection & Indemnity( P & I ) Passenger and othersOil Pollution-Wreck Removal .Risk & Insurance for Marine Adventure • Vessel .Hull & Machinery ---H&M -War & Strike ------W&S Insured Value-Insurance Terms & Conditions • • • • Terms & Conditions( Policy) Insured Value/Agreed Value Trading Limit War & Strikes Insurance • Cargo – Cargo Insurance--CARGO INSURANCE • CIF Value ( Insured Value) • Terms and Conditions • Assured/Co-Assured • Terms & Conditions ( P&I Rules) • Mutual or Fixed • Unlimited or Limited Liabilities / LLMC 5 • Liabilities --.P & I Insurance (Marine Mutual) Crew-Cargo.FIFO.

Global Marine Insurance Premium by line of Business Source : IUMI.9 USD billion 12.5% Offshore/Energy Total estimated including not reported : 23.0% Global Hull Transport/Cargo Marine Liability 51.6% 29. report 2010 Total reported : 22.9% 6.6 USD billion 6 .

The Shipowners’ Liabilities Covered by P&I Insurance P&I (Protection & Indemnity Insurance) provided liability cover 95% of the world’s ocean going tonnage entered with P&I Clubs. use and operating of the ships. + 13 Group P&I Clubs Cartel-IGA 7 . incidental to owning. Each club controlled by each club members. Providing liability cover for the owners. charterers.

OPA 1990 (Cert. Ship Recycling Convention.Role of P&I Clubs Liability Cover and Financial G’tee • For the entered tankers : CLC. • For the entered Ships . • Rotterdam Rules 8 .HNS • For the entered Ships – Wreck Removal Convention 2001. Ballast Water Convention. of Financial Responsibility) • For entered non-tankers : Bunker Convention.

advances: wharf/wreck recovery from the deeper seas by the Increase of the costs/expenses relating to the liabilities by the Upsizing of ships by Human elements by the legal Precedents against the Shipping Curtail/deprive an exemption clause from liabilities. 9 .Surge of Shipowners’ Liabilities A B C D E F G by the Convention-driven by the Technology.

Fund Protocol. 2009 • Ballast Water Convention. Suppl.Limitation of Liabilities & Int’l Legal Regimes for the Maritime Claims Property/Personal Injury/death Oil Pollution • LLMC1976 • Protocol 1996 • Wreck Removal Convention 2007 • • • • CLC1992 FC1992. Protocol 1996 • Hague Visby Rule 1968 Hamburg Rule1978Rotterdam Rule 2009 Passenger Shipping/Sea Transportation 10 . 2004 • Athens Convention 1974. 2003 Bunker Convention 2001 HNS Convention 1996 *Environment and Safety • Ship Recycling Convention.

1996  Wreck Removal Convention.     CLC.  Allow the claimant to bring direct action against the insurers for compensation.Compulsory Insurance for the Liabilities in the Int’l conventions  Maintain compulsory insurance or financial security.2001 NHS (Convention On Hazardous and Noxious Substances) Convention. 1996 Bunker Convention.  the Convention provides for a ship owner to be “strictly liable” for damage caused by ….1969)+1971 IOPC(Fund) LLMC 1976.2007 11 .

2008) 12 .Conventions creek  LLMC Protocol. 1999  CLC 1992 + Supplementary FC. 21. 2003  Wreck Removal Convention 2007  Rotterdam Rules 2009  Bunker Convention 2001 ( Nov.

000.000SDR) +125/ton (10.000 (SDR) 501~2000 +500/ton (1.583.001~ +167/ton (5.000SDR) 2.000 +250/ton (20.666SDR or 25. 1996 Protocol Property Damage 76LLMC 167.13 May 2004 in force ( Limitation of Liability for Maritime Claims) Non-Passenger GRT 76LLMC Less 333.000SDR) *250.000 +167/ton (SDR) +400/ton(SDR) +83/ton(SDR) +200/ton(SDR) 13 .093.400.000SDR) *46.000.500SDR) +300/ton (24.200.000 2.400.000 +800/ton (24.000 Passenger 25mill SDR +600/ton (48.000SDR) 30.574.000(SDR) 1.001~70.000SDR Whichever the less →175mill SDR LLMC 1976.574.000 +333/ton (10.001~3.000(SDR) Passenger 76LLMC 96LLNC 96LLMC 96LLMC 3.000SDR ~ 400.000SDR) OVER 70.500SDR) +400/ton (12.200.000 SDR whichever the less *1.

Liability on Oil Pollution : CLC & IOPC(FC) Oil receivers after sea transport THIRD TIER 2003 Supplementary Fund Protocol Supplementary Fund SECOND TIER Oil receivers after sea transport 1992 Fund Convention 1992 Fund: IOPC Fund FIRST TIER Shipowners 1992 Civil Liability Convention Insurers/P&I Clubs 14 .

000 50.7 1118 1118 1118 1118 1118 15 .5 49 96 133.7 302.9 302.9 6. as at Feb. Amounts of Compensation under the Convention US$ Million.9 19.000 25.7 302.Max.000 140.8 20.000 100.7 302.7 25.000 1 5 9.7 302. 2009 / Source: ITOPF TANKER’S GROSS TONNAGE 1969 CLC 1992 CLC 1992 FUND (Post-Nov 2003) (Post-Nov 2003) Supplementary FUND 5.

such as CLC. ( No specific Reference) • Liabilities in conflict with other IMO conventions. HNS and Bunker Oil Pollution • LLMC 1976. 2007 • Permits state party to take measures on the wreck within EEZ. exclude rights of limit on wreck removal. • Limit Liability pursuant to any applicable regime. • Compulsory Insurance over 300 grt • SCOPIC( Special Compensation of P&I Club) 16 .Wreck Removal Convention.

coast.000dwt).Salvage & Clean up Operation-Break up of the Wreck-Disposal. 18 Jan.K. 2007. How much costs for the wreck removal/ Salvage operation ?? 30 months . $149 mill?? Towed-Beached-Oil Spilt-Oil Removal.4. off the U.419teu MSC Napoli( 62. 17 .

Container Build G/T Location France La Palilice 46-08N.419 ton F. Gibraltar Europa Point.01.08.24 75m 2006 MSC Napoli 1991 53409 2007.10.P&I Costs of wreck Removal PY Vessel Name Type Container Ro-Ro Cargo Ship 4.0125W English Channel Date Loss Amount (USD) 2006 Rokia Delmas 1985 32924 2006. Gibraltar 2007.18 149m 2007 New Flame Bulk carrier 1994 26824 1km south of Europa Point.12 135m 2008 Fedra Bulk Carrier 1984 35886 2008.10 30m 18 .10.

500TEU?? Worst case scenario (based on ‘Emma Maersk’/Munich Re figures) Cargo (14.000 USD 58.Potential Loss/Liability of 14.000 USD 500.500 TEU X USD4.500 TEU X USD100.000.450.000.000 Hull P&I (eg.000 USD 145.000) Containers (14.000.000) USD 1.000. Life/pollution/salvage) 19 .

• More Free Reserve required( Solvency II) • Competition on the new building ships ratings to avert Churn effect due to Increase of Ships’ Demolition. • More Commercial than Mutual • Under the Strong Cartel .Less Number of Claims. ( Aug. Bigger Amount of payments.Anti-Trust Investigation) Two years long anti-trust investigation by EU confirmed IGA Cartel with no Improvement.Restrict on the free move of the membership : • Release calls( European Commission.Impact on P&I Costs? • Claims Pressure--. 2012) 20 .

What impact on the P&I Management?  Non-profit mutual operation>> More commercial P&I Management  O/s and paid claims+ reinsurance costs+ Pool claims+ management expenses= P&I Calls+ Free Reserves + Investment income  13 Clubs’ Pooling and Reinsurance Scheme (IGA Reinsurance rating increase)  Increase of Claims Payment: Increased crew wage & Cargo Value Liability Claims generated from the New Conventions/Legal case. 21 .

General Increase ( a mandatory Increase in P&I Ratings ) • 2000-2010(11 years) : 333. Increase per a year:33.6% * 2013 PY ?? 22 .6% of accumulated increase of the P&I Ratings : av. Increase per a year : 21% • 2005-2009(5 years) : 168%(accumulative increase) : av.

060m US$ 1.000m International Group of P and I Associations General Excess of Loss Reinsurance Contract Structure Owned and Chartered Entries (including Overspill Protection.060m Second General Excess Unlimited Reinstatements Coinsurance 25% Reinsured by Hydra FirstReinstatements General Excess Unlimited FirstReinstatements General Excess Unlimited US$ 500m Second General Excess Unlimited Reinstatements Coinsurance 25% Reinsured by Hydra US$ 560m Protection and Indemnity and Oil Pollution First General Excess Unlimited Reinstatements ICR 10% Coinsurance 25% Reinsured by Hydra US$ 500m First General Excess Unlimited Reinstatements First General Excess Unlimited Reinstatements US$ 350m US$ 290m US$ 60 m US$ 45 m US$ 8m US$ 15m US$ 15m US$ 22m US$ 8m Upper Pool Reinsured by Hydra Pool –– Reinsured by Hydra Pool R by Hydra Lower Pool Lower $30 Lower – Pool 45million Lower Pool $8 – 30 million Club Retention (ICR) Primary Charterers RI Lower Pool $30 – 45million Lower Pool R by Hydra Lower Pool $8 – 30million Club Retention(ICR) US$ 15m US$ 15m US$ 22m US$ 8m US$ 60m US$ 45m US$ 30m US$ 8m Owned Entries Chartered Entries 23 .000m Third General Excess Unlimited Reinstatements US$ 1. Pooling and Individual Club Retentions) 12 months at Noon GMT 20th February.IG Group P&I Clubs’ Reinsurance/Pooling Scheme.060m Collective Overspill Protection US$ 1. PY 2012 Protection and Indemnity US$ 3. Hydra Participation. 2012 Oil Pollution One Reinstatement US$ 2.

0 46.3 356.1 200.1 390. 2009 data: Elysian Insurance Pooling Retention:$ 50 million.5 2008.0 129.5 15.0 105.3 80.5 * Reinsured by Hydra since 2005-6 24 .6 256.6 488. February 2004 to date Policy Year Number Retention as below Lower Pool Higher Pool* $20 xs 30m Total $50m 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 12 6 20 33 24 29 $ 7m $ 7m $ 7m $ 7m $ 6m $ 5m 72.8 433.IG Clubs’ Pooling Losses(2004-2009) Valued at 20 Feb.3 692.0 92.

6 mill/year. av.+25%/year • General Increase : 2005-2009 : av.4% per a year • U/W Results : -978 mill .22.-60mill/year • Claims: +113 mill.6 mill/a year. av.13 IG P&I Clubs-U/W results 2005-2009 source: Elysian-insurance (Unit: US $.+26.6% per year or accumulated +168% Increase av. (+129%) av.30. 21%/year 2000-2010 : av.million) • Growth of Call Income : + 718 mill(+132%) 143.5%/year) 25 .-195 mill/year • Overall Results :-302 mill. av.21% per year or accumulated +336% Increase(av. 33.

000.000~350.000/year/ship. Aframax $150. □  Continued Increase of Premium (Call) under Mutual operation □  Burden of Reinsurance Costs : Cruise $250.000 extra) 26 .Impact on (P&I) Insurance □  Continued Increase of Claims & U/W Losses □  PY 2008: Six Clubs’ Un-forecasted Cash Call : more than abt. VLCC $250. Surchage $100.US$700 mill.000 ( US Poll.

• Increase of P&I Costs /reinsurance/ Burden on • P&I costs to the shipowners will continue.  Harsh Claims handling by the P&I Clubs. (General Increase Supplementary Call) 27 . • More retention/deductibles demanded by the Club/Pool  More Burden on the Shipowners Liability.Prospects On the Liability( P&I )insurance • Much More New Convention awaiting for emerge • Less Exemption / Immunity to be granted for the Shipowners.

Strengthen the Precedents and Change of Regulations.Solutions for the less exposure On the Maritime Liabilities A B C D F G H No patent Solutions to Stop the Maritime Liability Claims. Be alert on the Evolution of the Int’l Regimes. Keeping up Precedents and Change of Regulations. Lobbying and Collective Resist on the adverse legislation against the ship owners interests( by the Clubs ) Learn how to wisely deal such Liability Matters via P & I Clubs and other measures. Improve your Terms & Conditions of the Insurance. 28 .

Risks of the Ship Financing  Whether the Insurance Cover is adequate enough to protect Mortgage and the Proprietary Rights  Whether the Terms and Conditions of the Insurance Contract are met with the financiers’ requirement  Whether the Insurance Contracts are remain valid during the period of the financing Contract  Whether the assureds meet his obligation to the Underwriters  Whether the Financier's Insurance is attached as agreed 29 .

suspension of class.Whether fully covered by your H&M Insurance?? 1) Breach of expressed or implied warranties . any breach of trading limit or war exclusion zone 2) Whether Insured Amount is properly maintained to cover the actual market loss 3) Partial or Non-coverage on Insurance due to representation) 4) 5) 6) 7) 8) (non-disclosure. change of ownership ( automatic termination of H&M) Un-seaworthiness. Unqualified crew( Properly unmanned) Cause of the claims must be proven--proximately cause Claims not to be Time barred. Breach of deviation 30 . Over loading. mis- Withdrawal/suspension of Class. I. change of flag.e.

Failure on maintenance of class. ISM( Int'l safety management code). breach of other Club’s instruction. Club Rules. Circulars./ flag state requirement 2) Cancellation of P&I Insurance due to non-payment of calls( Premiums) 3) Part of prejudiced coverage due to the deficiencies of Condition survey 4) Breach of Class rules . Illegal Acts 6) Refusal of the claims payment due to “Pay to be paid rule “ 7) Excessive coverage over USD1billion for any one oil pollution case. 5) Willful misconduct. 8) Contract of carriage for the excessive package limitation on the Hague Visby rule 31 .Whether Fully Covered by your P&I Insurance ( Liabilities) 1) Breach of SOLAS(Int'l convention for the safety of life at sea) regulations. ISPS(Int'l code for the security of ships and port facilities).

with aa Letter of Undertaking from P&I clubs .  The Ship Financiers are always at risk of owners Marine Insurance claims being refused or declined. . A lessor must confirm its single ship owning company is included as a named assured on all policies including P&I Club Certificate of Entry. Liability Claims by P&I. as contracted by their financing contracts.Ship Financiers’ Insurance and Risk  Though the Ship Financiers' are trying to exercise their due diligence in confirming the owners’ H&M policies and P&I entries.  The risk of Ship Financers on the Marine Insurances: Physical damage claims of H&M. H&M and other policies  For P&I risks.Mortgagees secure their interests on owners insurance policies by way of full assignment of H&M. 32 .

as they would require futhter payment of supplementary calls and Overspill calls in the future. condition surveyors findings. full disclosures to the Club on all material facts. the Cesser of Insurance.  P&I Call payment is not simple. All P&I risks  Mortgage Rights Insurance( Political risks Insurance for Mortgagees) 33 . lessees. with operator. the paramount Pay to be paid rule  Mortgagees Interest Insurance(MII)  Mortgagees Additional Peril Insurance: Pollution.  P&I claims will be paid or not viewing any breach of club rules.Ship Financiers’ Insurance and Risk(Continued…)  A named assured( or co-assured): introduced a joint and several liability for payment of premium. bare boat charterers on policies. breach of cargo and trading limits.

:Large cruise carriers  Mortgage Rights Insurance.  Mortgagees additional perils( All P&I Risks) insurance : P&I War Cover: P&I provide excess USD500mill war/terrorism cover in excess of Hull(W&S): Passenger liability cover( P&I limit USD2billion per incident).  Pre-Existing Lien Insurance 34 . the Political Risks Insurance for Mortgagees.Ship Financiers’ Insurance  Mortgagees additional perils (pollution) insurance :Excess coverage for Oil Pollution for over USD1Billion.

or.kr 35 .Q&A Many thanks for your attention!! bspark@kpiclub.

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