WHAT IS P&I INSURANCE? P&I:HISTORY History of P&I - PowerPoint PPT Presentation

WHAT IS P&I INSURANCE?

P&I:HISTORY • History of P&I Clubs? − Shipping could not function without insurance − The first statute dealing with the insurance of ships was recorded in Barcelona in 1434. − The first marine insurers were established in Italy in the seventeenth century. − The whole principle of Mutual Clubs is, if there is a loss all owners contribute, and if there is a gain all owners get the return‟. It drew on the tradition of mutual assistance at sea when seafarers in distress relied on help from passing ships, even if owned by competitors. One rule common to almost all mutual marine insurance clubs, most of which were originally hull insurance clubs, was that Members should come to the aid of ships in distress belonging to fellow Members. − New laws and regulations governing the carriage of goods and people at sea made many owners realise that they needed protecting against a wider range of risks. For instance, the standard hull and machinery insurance of the time only covered collision liabilities on the payment of an additional premium. The owner‟s abortive argument was that collision liability came within the insured risk of „perils of the sea‟. As a result of this decision, policy terms were extended to cover a shipowner‟s liability but limited cover to 75 per cent in the case of collision. Shipowners turned to mutual clubs to insure the remaining 25 per cent. JLT SPECIALTY LIMITED 2

P&I: THE BASICS • What is P&I Insurance? − „Protection & Indemnity‟ − Third Party Liability Insurance − Non- profit „mutual‟ insurance for Ship Owners, Charterers & Vessel Operators JLT SPECIALTY LIMITED 3

PROVIDED ON A MUTUAL BASIS Mutual insurance is different from commercial insurance • It is essentially co-operative self- insurance (a “Club”) • The insured are also the insurers • The insured own the insurance fund • The aim of a mutual is to cover losses, not make a profit JLT SPECIALTY LIMITED 4

RELATIONSHIP BETWEEN MEMBERS AND CLUB • Club is owned by Members • Members elect Board of Directors to run Club • Day to day management delegated to Club Managers • Members insure third party liability risks with Club in exchange for premiums (calls) JLT SPECIALTY LIMITED 5

THE BOARD OF DIRECTORS Ultimate control over the Club‟s affairs rests with the Board of Directors. JLT SPECIALTY LIMITED 6

THE INTERNATIONAL GROUP OF P&I CLUBS • UK • Shipowners • Britannia • Standard • Gard • Steamship Mutual • Japan • Swedish • London • American • North of England • West of England • Skuld The Pooling Agreement: • The biggest Marine Reinsurance contract in the world. • Pooling of risk for the benefit of the Group and its Members. JLT SPECIALTY LIMITED 7

MARINE INSURANCE • P&I Insurance is: − insurance in respect of third party liabilities • P&I Insurance is NOT: − hull and machinery insurance, − war risk insurance, − freight demurrage and defence insurance. JLT SPECIALTY LIMITED 8

BASIC CONDITIONS OF STANDARD COVER • An owner is only insured against loss, damage, liability or expenses incurred by him, which arises: − Out of events occurring during the period of entry of a ship (20 Feb to 20 Feb) − In respect of the owners‟ interest in the entered ship, and − In connection with the operation of the ship by or on behalf of the owner. − Payment first by the Owner – the “pay to be paid” rule JLT SPECIALTY LIMITED 9

STANDARD COVER UNDER P&I CLUB RULES Liability to pay damages or compensation for injury, illness or death of any seaman JLT SPECIALTY LIMITED 10

STANDARD COVER UNDER P&I CLUB RULES Liability to pay damages or compensation for injury, illness or death of persons other than seamen – e.g. passengers or stevedores JLT SPECIALTY LIMITED 11

STANDARD COVER UNDER P&I CLUB RULES Liability in respect of expenses incurred by the Owner in discharging his obligations towards stowaways or refugees. JLT SPECIALTY LIMITED 12

STANDARD COVER UNDER P&I CLUB RULES One fourth or such other proportion as may have been agreed in writing of the Owner‟s liabilities arising out of collisions. JLT SPECIALTY LIMITED 13

STANDARD COVER UNDER P&I CLUB RULES Liability to pay damages or compensation for any loss of or damage to any property whether on land or water and whether fixed or moveable. JLT SPECIALTY LIMITED 14

STANDARD COVER UNDER P&I CLUB RULES Including infringement of rights JLT SPECIALTY LIMITED 15

STANDARD COVER UNDER P&I CLUB RULES The liabilities, losses, damages, costs and expenses caused by or incurred in consequence of the discharge or escape from an entered ship of oil or any other substance. JLT SPECIALTY LIMITED 16

STANDARD COVER UNDER P&I CLUB RULES Costs or expenses relating to the raising, removal, destruction, lighting or marking of the wreck of an entered ship JLT SPECIALTY LIMITED 17

STANDARD COVER UNDER P&I CLUB RULES Cargo liabilities JLT SPECIALTY LIMITED 18

STANDARD COVER UNDER P&I CLUB RULES The proportion of general average, special charges or salvage which an Owner may be entitled to claim from cargo. JLT SPECIALTY LIMITED 19

STANDARD COVER UNDER P&I CLUB RULES Fines JLT SPECIALTY LIMITED 20

STANDARD COVER UNDER P&I CLUB RULES Liabilities, costs and expenses incidental to the business of owning, operating or managing ships which in the opinion of the Directors fall within the scope of the Association – the “Omnibus Rule” JLT SPECIALTY LIMITED 21

COVER LIMITS JLT SPECIALTY LIMITED 22

COMMERCIAL P&I MARKET • The non-IG commercial market totals around US$ 350 million in 2016. This accounts for approximately 11% if the combined International Group (IG) and non-IG market place. • Major Commercial P&I Insurers who also are well known in our part of the world are British Marine Mutual, MS Amlin (previously called Raets Marine), Navigators (part of Thomas Miller Specialty Limited) and Lodestar. Other fixed P&I Insures who operate worldwide are Carina (managed by Tindall Riley), Korean P&I, Hanseatic, Hydor (Brit Insurance facility). Please refer to the FTA list of approved insurers who are allowed to insure vessels that carry a navigational licence from UAE FTA. https://fta.gov.ae/en/about-fta/rules-and- regulations.aspx. • The main differences between IG and Non-IG are as under: − IG works on a „No Profit or no Loss basis‟ i.e. Mutual, whereas Fixed Insurers work for a profit. − IG Clubs reinsurance facility entititles to offer an „Unlimited‟ liability whereas the maximum a fixed Insurer can offer is USD 1 Billion. − The Omnibus Rule which entititles members to take a non-payable to the board and get in paid is not available with the fixed P&I Insurers. JLT SPECIALTY LIMITED 23

MLC AND UAE • Although the UAE has not ratified the Maritime Labour Convention 2006 (“MLC”), a circular from the Federal Transport Authority (“FTA”) issued on 20 th February 2018 requires all ships over 200 GT flying the UAE flag and trading internationally or any non-UAE flagged ship over 200 GT anchoring in UAE waters or calling at UAE ports to carry proof of insurance or evidence of other financial security to meet the shipowner‟s obligations regarding: − Repatriation, the provision of essential supplies to the ship and payment of up to four months‟ outstanding wages where crew members are deemed to have been abandoned in accordance with the provisions of MLC Regulation 2.5, Standard A2.5.2 and guidelines B2.5. − Entitlement to contractual payments for death or long-term disability in accordance with MLC Regulation 4.2, Standard A4.2 and guidelines B4. JLT SPECIALTY LIMITED 24

MARITIME LABOUR CONVENTION, 2006 • Compensation in case of loss or foundering − The shipowner is liable to pay compensation regarding the loss (of possessions) and injury (Standard A2.6.2) is provided for in the legislation. The maximum amount the shipowner will pay as compensation for loss in such circumstances must be specified in the Seafarer‟s Employment Agreement. • Financial Security − The shipowner must provide financial security, a contract of insurance or other security adequate to ensure that the shipowner will meet any liabilities under UK law or under Seafarer Employment Agreements (SEA), to provide compensation in the event of death or long term disability to seafarers arising from occupational injury, illness or hazard. • Wages − The shipowner must pay basic wages to incapacitated seafarers whilst onboard or put ashore up to the time they recover, or if/when repatriated, 16 weeks have elapsed since the date of the injury or commencement of sickness. After repatriation, the shipowner‟s liability is only to meet the difference between state benefits paid and the level of basic wages. JLT SPECIALTY LIMITED 25