Marine Protection Rules Marine Protection Rules Part 102 Certificates of Insurance Amendment 2014

Transcription

1 Marine Protection Rules Marine Protection Rules Part 102 Certificates of Insurance Amendment 2014 Invitation to comment May 2014 Ensuring our transport system helps New Zealand thrive

2 Contents Invitation to Comment... 1 Background to marine protection rules... 1 The purpose of this draft... 1 Options to address the problem... 2 Objectives of the draft amendment rules... 2 Key stakeholders... 4 Making submissions... 4 Appendices Appendix 1:Draft amendment rule...5 ii

3 Invitation to Comment You are invited to comment on the draft Marine Protection Rules Part 102 Certificates of Insurance Amendment The text of the draft rule is set out in this document together with explanatory material on the policy, application and impact of the amendments. This invitation is issued to fulfil formal consultation requirements under the Maritime Transport Act 1994 (MTA). Background to marine protection rules Marine protection rules are delegated legislation made by the Minister of Transport under the MTA for the purpose of protecting the marine environment and ensuring environmental sustainability. The rules establish the minimum standards that participants in the maritime system must meet to protect the marine environment from harmful substances when operating ships, oil transfer sites, offshore installations, and disposing of waste at sea. Marine protection rules are divided into Parts relating to a particular marine protection subject area, such as, for example, the prevention of pollution by oil. Advisory circulars accompany many rule Parts containing information about standards, practices and procedures that Maritime New Zealand (MNZ) has established as an acceptable means of compliance. A strict process for rules development is prescribed by the MTA, including public notification of the intention to make a rule and stakeholder consultation on the draft text. The process involves both MNZ and the Ministry of Transport (the Ministry) and includes policy analysis, any informal consultation, preparation of the formal draft rule text and explanatory material, formal consultation, and preparation of the final draft rule. Once a draft rule has been finalised, Ministry officials provide advice to the Minister of Transport (the Minister) prior to the Minister signing the rule. Every signed rule, including details of the consultation carried out in its development, is tabled in the House of Representatives. A copy of this tabling version of the rule is sent by MNZ to all those who made submissions on the draft. Electronic versions of final rules are available at no direct charge from the MNZ website. Hard copies are available for purchase from Baseline, PO Box 30309, Lower Hutt, 0800 BASELINE. The purpose of this draft The primary purpose of this draft is to show how Marine Protection Rule Part 102 Certificates of Insurance (Part 102) would be amended to increase the minimum insurance or other financial security requirements for regulated offshore installations in line with the proposal set out in the Ministry s consultation document Increasing the minimum financial assurance requirement for offshore installations. The draft amendment rule includes a possible transitional provision, for owners of regulated offshore installations that hold a certificate of insurance under the current Part 102, if the amendment rule comes into force. The draft amendment rule also incorporates some editorial amendments that reflect the enactment of the Maritime Transport Amendment Act

4 Options to address the problem Readers are directed to the Ministry s consultation document Increasing the minimum financial assurance requirement for offshore installations (the consultation document) and Regulatory Impact Statement Improving the financial security regime for offshore installations for detail on the possible options to address the issue and the preferred options. Both can be found at Objectives of the draft amendment rules The objective of the amendment rule is to amend the amount of insurance or other financial security specified in rule 102.8, which is required to be held by the owner of a regulated offshore installation to meet the owner s potential liability under Part 26A of the MTA, subject to the outcome of consultation (see the related consultation document Increasing the minimum financial assurance insurance requirement for offshore installations ) update the reference in rule to the new Part 26A of the MTA that provides for civil liability for pollution of marine environment from marine structures replace references to the Insurance Companies (Ratings and Inspections) Act 1994 with references to the Insurance (Prudential Supervision) Act 2010 include a transitional sub rule so that the owner of a regulated offshore installation that holds a valid certificate of insurance immediately before the amendment comes into force will not have to increase their required amount until their current certificate of insurance expires. What are the likely benefits of the amended rule? Increasing the amount of insurance cover or other financial security required for a regulated offshore installation Under Part 26A of the MTA, owners and operators of offshore installations are liable, in the event of a spill from their operations, for the full costs related to pollution damage to other parties, and costs incurred by public agencies in preventing and cleaning up a spill. This is supported by a requirement under the MTA that regulated offshore installations have a Certificate of Insurance issued by Maritime New Zealand. The requirements for a Certificate of Insurance are set out in Marine Protection Rules Part 102 (Part 102), and require owners or operators to provide evidence of insurance or other financial security to meet potential liabilities up to a minimum amount specified. In the unlikely event of a significant spill from a regulated offshore installation, the current minimum requirement of approximately NZ$26 million does not provide adequate assurances that an owner or operator can meet its legal liability for the related clean-up costs or pollution damage. An increase to the required minimum level would better ensure there is adequate financial compensation readily available to those affected by a spill. A certificate of insurance under Part 102 may be issued for a maximum period of 12 months. If the minimum amount of insurance or other financial security required by Part 102 is increased, a transitional provision is proposed to preserve the validity of existing certificates of insurance until they expire. Miscellaneous amendments to Marine Protection Rule Part 102 It is also proposed to update references in Part 102 as follows 2

5 update the reference in rule to the Part of the MTA (Part 26A) that concerns civil liability for pollution of marine environment from marine structures. Prior to the enactment of the Maritime Transport Amendment Act 2013, this was Part XXV (Part 25). replace references to the Insurance Companies (Ratings and Inspections) Act 1994 with references to the Insurance (Prudential Supervision) Act 2010, which replaced it. A further required update, to change a cross reference from section 364 of the MTA to section 385H of the MTA, is already provided for in section 100 and Schedule 3 of the Maritime Transport Amendment Act What will be the costs of the amended rules? Most owners or operators with a current certificate of insurance have relied on alternative financial security, and in particular a Parent Company Guarantee, where the liability of a subsidiary company is guaranteed by its parent company. Owners or operators, particularly smaller operators, which utilise alternative financial security to meet their requirements, may face difficulty in acquiring additional security to meet the increase to NZ$300 million. Although owners or operators hold insurance as part of their normal business operations, current insurance products on the market appear to preclude owners or operators from meeting their legal requirements under Part 102 solely through insurance. Should tailored insurance be made available to owners or operators, an increase to NZ$300 million may increase costs for current and future owners or operators depending on their current arrangements. We therefore seek owners and operators views on how they would meet the proposed minimum requirement increase, and the extent of the cost impact. Implementation and review Subject to consultation, the Minister will sign the Rule Amendment to increase the minimum requirement. Maritime New Zealand will implement the new minimum requirement once applications are made. As Certificates of Insurance are issued for a 12 month period, current holders of a Certificate of Insurance will be required to meet the new minimum requirement when they reapply for a Certificate of Insurance after the change takes effect. As outlined in the consultation document, the government has agreed to undertake a subsequent review of the broader financial security regime for regulated offshore installations. As part of this review, consideration will be given to a regime that would allow the minimum level of financial assurance to be scaled depending on an assessment of the likely costs of clean-up incurred by public agencies, and third party damages, associated with a spill incident from each regulated offshore installation. Policy work undertaken by the agencies will draw on owners and operators experiences in meeting the proposed requirement. In particular this will include the types of financial assurance owners or operators have used to meet the proposed minimum requirement, the compliance costs they have faced in meeting this requirement, and the subsequent impact on their operation. This information will assist in informing the subsequent review. The monitoring, evaluation and review requirements will also be reconsidered as part of the review. Which offshore installations are affected by the draft rule? Regulated offshore installations are required to have certificates of insurance by section 385H of the MTA Section 385A of the MTA defines a regulated offshore installation as follows (a) means an offshore installation within New Zealand continental waters; and 3

6 (b) includes any pipeline connected to that installation. New Zealand continental waters is defined by section 222(1) of the MTA as follows (a) New Zealand marine waters; and (b) the waters beyond the outer limits of the exclusive economic zone of New Zealand but over the continental shelf of New Zealand. Informal consultation The Ministry has undertaken initial informal consultation with insurance brokers and the petroleum exploration and production industry. Key stakeholders owners and operators of regulated offshore installations regional councils commercial fishing companies insurers and insurance brokers local businesses Making submissions Submissions on the proposed Marine Protection Rules Part 102 Certificates of Insurance Amendment 2014 need to be received by the Ministry at the address below by 5 pm Friday 27 June 2014 Submissions can be forwarded : by posting or delivering to the following address: Consultation on financial assurance requirements for offshore installations Ministry of Transport 89 The Terrace PO Box 3175 Wellington 6140 via to Part102@transport.govt.nz by fax to Submissions are public information Please indicate clearly if your comments are commercially sensitive, or if, for some other reason, you consider they should not be disclosed. In addition, if you are an individual (i.e. your comments are made personally and not on behalf of a company or an organisation) please indicate if you consider for some reason that your identity should not be disclosed. We will acknowledge all submissions that we receive and once the rule is finalised you will receive a summary of the full consultation together with the final version of the Rule. Subject to the provisions of the Privacy Act 1993 and the Official Information Act 1982, you may view the submissions made by other submitters at the Wellington office of the Ministry of Transport between 8.30 am and 4.30 pm on weekdays (except statutory holidays). Please arrange this beforehand by contacting the Ministry of Transport on (04)

7 Maritime Transport Act 1994 Marine Protection Rules PART 102 CERTIFICATES OF INSURANCE AMENDMENT 2014 Contents Rule objective Entry into force ii ii Part 102: Certificates of Insurance 1 Amendment of Heading above rule Amendment of rule Transitional Provision 1 i

8 Rule objective The objective of this rule is to amend the amount of insurance cover or other financial security specified in rule 102.8, which is required to be held by the owner of a regulated offshore installation to meet the owner s potential liability under Part 26A of the Maritime Transport Act 1994 (the Act) update the reference in rule to the Part of the Maritime Transport Act 1994 that concerns civil liability for pollution of marine environment from marine structures replace references to the Insurance Companies (Ratings and Inspections) Act 1994 with references to the Insurance (Prudential Supervision) Act 2010 include a transitional provision so that the owner of a regulated offshore installation that holds a valid certificate of insurance immediately before the amendment comes into force will not have to increase their insurance until their current certificate of insurance expires. Marine protection rules are subject to the Legislation Act Under that Act, the rules are required to be tabled in the House of Representatives. The House of Representatives may, by resolution, disallow any rules. The Regulations Review Committee is the select committee responsible for considering rules under the Legislation Act. Entry into force This rule enters into force on [date]. ii

9 1 Heading above rule Replace the heading above rule with Regulated offshore installations Application for and issue or recognition of certificate of Insurance 2 Amendment of rule 102.8: Application for and issue or recognition of certificate of insurance (1) Rule 102.8(2)(b) is amended by (a) replacing 14 million with 162 million (b) replacing Part XXV with Part 26A" (2) Rule 102.8(2)(d) is amended by omitting Insurance Companies (Ratings and Inspections) Act 1994, and substituting Insurance (Prudential Supervision) Act (3) Rule 102.8(2)(e) is amended by omitting Insurance Companies (Ratings and Inspections) Act 1994, and substituting Insurance (Prudential Supervision) Act Transitional Provision In rule after sub rule (3) insert (4) sub rule (5) applies to the owner of a regulated offshore installation who holds a certificate of insurance that was in force for an offshore installation immediately before [date rule in force]. (5) For a certificate of insurance in sub rule (4), until that certificate of insurance expires, rule 102.8(2)(b) is to be read as if 14 million had not been replaced with 162 million. 1