International seminar on tanker safety, pollution prevention, and spill preparedness, Dubai, The role of P&I Clubs in raising shipping standards

Transcription

1 International seminar on tanker safety, pollution prevention, and spill preparedness, Dubai, 26 The role of P&I Clubs in raising shipping standards Nigel Carden Deputy Chairman, Thomas Miller P&I Ltd Introduction International Group = 13 P&I Clubs insuring more than 9% of world s blue water fleet and 95% of tanker tonnage Insuring third party liabilities arising from operation of ship: including death and personal injury, pollution, third party property, cargo, collision, wreck removal Owned by shipowners - who are collectively the insurers and individually the assureds Variations in quality of tonnage entered in Clubs - inevitable with 95% market share 1

2 What is the impact of the Clubs on shipping standards? An influence for self-improvement, driven by the desire to improve loss records and so reduce insurance costs? Or a means of protecting operators of substandard ships from the consequences of their conduct? An OECD view OECD Maritime Transport Committee report, Jan 21, The cost to users of sub-standard shipping Marine insurance industry provides a crucial financial safety net. However, at the same time it also provides a very effective cover for sub-standard ships by allowing their risk to be spread over many players in the industry and ultimately to consumers OECD Maritime Transport Committee report, June 24, The Removal of Insurance from Substandard Shipping To establish whether, without prejudice to victims it would be feasible to remove the cover available to sub-standard ships, while maintaining the necessary risks spreading coverage for the rest of the industry 2

3 Meaning of sub-standard ship? vessel that fails to meet basic standards of seaworthiness and thereby poses a threat to life and/or the environment. Report to OECD, 21. ship whose hull, machinery, equipment, or operational safety is substantially below the standards required by the relevant convention or whose crew is not in conformance with the safe manning document. Procedures for Port State Control, IMO, 2. A Club view regarding sharing of losses Ship with poor loss record pays higher premium, intended to balance claims over long term But typically only $1.5 $2 million per claim is included in the calculation to balance claims and premium over time A loss above that point is likely to be shared across Club membership A loss above $6 million is shared with other Clubs A loss above $5 million is shared in reinsurance market too 3

4 Reinsurance Structure 26 US$ 3,5m Overspill pool up to > $4,5m US$ 2,5m US$ 1,5m US$ 55m US$ 5m US$ 3m US$ 6m Mutualised Overspill pooling Top excess layer Third excess layer Second excess layer 25% First excess layer Pool Retention Club Retention Group s excess of loss reinsurance Hydra = 25% of 1 st layer & $2m x/s $3m Oil Pollution Correlation of claims and standards If the cost of claims caused by substandard tonnage is spread through insurance to good quality owners..then substandard ships should feature prominently in an analysis of claims where cost is shared UK Club s Large Claims Analysis includes database of all claims on Club between 1987 and 24 that individually exceeded $1.6 million 4

5 Claims above $1.6 million (UK Club) Ship failure v. human error Number IG Gross incurred Pool Claims at August 25 USD Millions

6 Claims above $1.6 million, caused by human error - by age of ship Number Years Claims above $1.6 million, caused by ship failure - by age of ship Number Years 6

7 Claims above $1.6 million, caused by human error - by flag Claims by number Republic of Panama Cyprus Liberia Greece Bahamas Singapore United States of America Malta Russian Federation People's Republic of China United Kingdom Turkey Kuwait Republic of Korea Italy Bermuda St. Vincent and Grenadines Claims above $1.6 million, caused by ship failure - by flag Claims by number Cyprus Liberia United States of America United Kingdom Bahamas Italy Greece Russian Federation Argentina Malta Iran Germany Republic of Korea Republic of Panama Romania Ukraine 7

8 Claims above $1.6 million, caused by human error - by ship type Number Claims TANKER BULK CARRIER DRY CARGO PASSENGER CONTAINER RO/RO SPECIALIST RIG & SUPPLY ORE/BULK/OIL REEFER PARCEL CARRIER GAS CARRIER Claims above $1.6 million, caused by ship failure - by ship type Number Claims TANKER BULK CARRIER PASSENGER REEFER DRY CARGO RIG & SUPPLY CONTAINER RO/RO ORE/BULK/OIL TUG & BARGE 8

9 Claims above $1.6 million, caused by human error - by loss type Number Claims Dock damage Collision Cargo Pollution Crew injury Cruise/Ferry Wreck removal General average Salvage Claims above $1.6 million, caused by ship failure - by loss type Number Claims Cargo Cruise/Ferry Pollution Dock damage Crew injury/illness Wreck removal Collision General Average 9

10 Substandard ships not identifiable by claims record No correlation of sub-standard ships and bad claims records No correlation of high quality shipping and good claims records Doubtful whether premiums of quality owners subsidise losses of sub-standard ships Doubtful whether premium rating can be used to discourage sub-standard shipping New ships accidents caused by unfamiliarity Crew claims more costly for trained, well paid seafarers Cargo large scale aggregation of risk and high losses when accidents happen; container liner operators Cargo - Voluntary assumption of higher liability by higher quality operators (e.g. Walmart service contract) Pollution - high quality operators may trade in most developed areas, where cost of damage is highest Passengers most demanding on best ships Club procedures to identify risk Clubs assess risk by desk based procedures and by physical surveys of ships as precondition to entry for older ships, and at any time for ships identified as higher risk Clubs suspend or limit cover when required repairs are not made Clubs use common Rules to link cover to compliance with flag state and class requirements And run extensive loss prevention programmes 1

11 Club Rules and shipping standards Insured must: Promptly report to Class any matters in respect of which class might make recommendations Comply in timely fashion with lass Rules Authorise Class to disclose information to Club Advise Club if Class Society is changed IG policy no insurance without valid ISM/ISPS IG Clubs policy to deny rights of recovery for claims arising from failure to comply with Flag State requirements Loss prevention examples Newsletters, circulars, books, posters, videos. Close co-operation with other institutions with maritime expertise Websites with fresh advice, eg. Weekly loss prevention bulletins Practical help in compliance with International law - eg. ISM, STCW, ISPS. National law - eg. US federal and State law Distance learning Tools and statistics to help focus on risks 11

12 Pre Employment Medical Examination Programme (PEME) pre-employment medical Significant pre-existing illnesses and repatriation avoided (c.5%) Available in twelve crew-supplying countries Clinic network developed to meet member s needs Top 1 Reasons of Unfitness PEME Worldwide Unfitness Statistics Top 1 Reasons Hepatitis B Abnormal Liver Function Hearing Loss 17 Hypertension PTB Abnormal Lung Function Gallbladder Disease Diabetes Kidney Disease Other December 25 1, th medical exam 12

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14 Strengthening of existing procedures Clubs are strengthening their systems to assess and influence risks, in response to: 1. Recommendations in OECD report on how to withdraw insurance from sub-standard shipping; 2. Concerns expressed within IOPC 1992 Fund Assembly and Working Group regarding substandard transportation of oil 3. Concerns of Club boards about risks presented by substandard tonnage - both as regards the victims of avoidable damage, and as regards considerations of fairness and reputation. IG proposals Submission made to IOPC Fund Working Group proposed: i. Risk selection - checklist of common standards ii. common scope of P&I club surveys, iii. agreed triggers for conducting entry surveys, and HFO provision iv. process to record and share information regarding condition of ships, v. introduction of a financial consequence teeth if a Club knowingly underwrites substandard ship. 14

15 IG response (i) risk selection List of minimum information for underwriters to take into account, + question as to whether insurance has ever been refused/discontinued, + agreement to consent to release survey information. Possible use of computer based vetting systems in which risk related information (age, class, PSC record, yard build, casualty history, etc) is integrated from many sources: CDI, SIRE, RightShip, etc. Possible use of management audits. IG response (ii) existing survey triggers Survey trigger factors for ships already entered: Age / type PSC Detentions EU Black List Class Records Claims record Other third party information about poor ship condition Clubs exercise judgement on a case by case basis 15