FP Marine Risks » shipping

EU Sanctions against Iran

nicola — Mon, 16 Aug 2010 17:41:53 +0000

Following the CISADA sanctions, the UN, EU and UK have issued separate sanctions against Iran along similar lines.

The EU sanctions ban European companies from investing in Iran’s oil and gas industries, while restricting trade and financial links including barring any European company from providing insurance services to Iranian entities.

The EU sanctions go further than the UN sanctions currently in place.

This has subsequently had the effect of a large majority of EU and UK insurers declining risks that involve regular trade to Iran, carriage of goods to Iran and/or risks that are known to have an Iranian entity involved in the operation of the vessel.

Notwithstanding the parameters of the sanctions, underwriters are being advised to take a very cautious position and are already including the new JH Sanctions Exclusion Clause in all policies. In addition, the treaty market is starting to impose mid-term amendments which will translate to all original policies being issued with the Sanctions Exclusion Clause included as a matter of course.

Companies trading into Iran, trading with Iranian entities and/or chartering vessels to Iranian companies (notwithstanding the nature of those trades) should consider their position carefully as cover may not be available for all or part of the trade.

We would urge companies involved in this trade or considering becoming involved in trading to or contracting with Iranian entities to seek confirmation from their insurer in advance that cover will continue unaffected.

For anyone who wishes to discuss their insurance situation with FP Marine Risks, please contact your usual broker or email info@fp-marine.com

Clyde and Co have released the following information which provides a good overview of the situation: http://www.clydeco.com/attachments/published/19085/Iran%20EU%20sanctions%20update%20July%202010.pdf

Gard announces no general increase for 2010

nicola — Fri, 30 Oct 2009 15:56:59 +0000

The Board of Gard has decided that no general premium increase will be required for mutual and fixed premium P&I entries for the 2010 year. This is not to say that Gard will not be seeking increases, simply that those increases will be dependant upon each individual member’s exposure and loss record. In addition, any increase in the International Group reinsurance programme costs will be passed on to members.

For 2010, deductibles will be increased by USD1000 for all P&I risks below standard terms with FD&D minimum deductibles increasing to USD5000.

In respect of prior years, 2006 has now been closed with no further calls being levied. Gard anticipate 2007 will be closed in October 2010 with no further calls being levied, commenting that the 2007 year should produce a surplus. The 2008 year, however, is likely to produce a deficit due to the investment losses incurred but the Club are not anticipating any supplementary calls being levied.

Release calls remain at 10% for 2008, 50% for 2009 and 50% for 2010.

Falling ship values highlights importance of value adjustment rates

nicola — Mon, 03 Aug 2009 12:02:23 +0000

As shipowners will know all too well, ship values have continued to fall; at FP Marine Risks we have seen some reductions of up to 50% in recent months.

However, the consequent reduction in premium varies widely among insurers and it is important that shipowners are aware of the basis of that variation in premium if they are to get the best deal when they come to negotiate any renewals or changes in value.

In each case, underwriters generate a specific value adjustment rate, which is applied to the difference in value to calculate the return premium due.

This value adjustment rate will be significantly lower than the Hull & Machinery rate, reflecting the fact that the risk of loss is no different, even though the value of the ship is. The return premium will therefore not be in direct proportion to the reduction in value.

Typical of a competitive market, insurers’ value adjustment rates vary widely – by up to 500% – which significantly affects how much of a reduction in premuim the Assured will receive.

It is important that owners understand the importance of obtaining competitive value adjustment rates when they reduce their insured values.

And equally the same approach is recommended when the S&P market rebounds and premiums need to be re-calculated in response to the higher ship values.

For any shipowner who would like to discuss their current situation please contact any of our Shipping brokers who can help you further.

More shipowners enjoying benefits of Asian placement in these difficult times

nicola — Tue, 30 Jun 2009 16:15:04 +0000

Shipowners with smaller fleets, smaller vessels or lower values can still benefit from an Asian insurance placement as world markets become more competitive.

Some believe that Asian-based underwriters are dedicated to the Asian-based shipowning market (putting aside Japan and Korea’s involvement in the large fleets) to the exclusion of non-Asian tonnage.

Whilst this may have some truth for the smaller underwriters who are perhaps more interested in Asian brownwater tonnage, for the majority of markets, there are no such restrictions – indeed the Asian headquartered markets are actively seeking out non-Asian business where they can.

Capacity in the marine markets remains buoyant and given the disparate way in which the Asian market is loosely structured there is less market sentiment than perhaps there is in other more close-knit underwriting locations.

This lack of market sentiment creates an environment where risks are rated more subjectively based on loss records, fleet profiles etc., rather than against a benchmark of the market as a whole. Owners can therefore enjoy the benefits of their own strong track record without being negatively affected by a wider statistics-driven rating.

Lay up returns or cancelling returns only on Hull and Machinery policies

nicola — Mon, 02 Mar 2009 15:04:27 +0000

As freight rates and trade volumes have dropped, an increased number of vessels are being laid-up whilst owners reduce costs and sit out the current downturn. Some estimates suggest this is affecting up 9% of the world container fleet. So, what’s the most premium efficient way to manage a lay-up?
The Institute Time Clauses – Hulls 1/10/83 allows for lay-up returns to be reimbursed by underwriters. A lay-up return is a return of premium for the period a vessel is laid-up either in a port or a specified lay-up area.

The amount of return will depend on whether the vessel is under repair or not and the number of crew on board. Theoretically, the percentage is fixed at the outset of the policy, however the underlying annual rate is usually higher where such lay-up returns are allowed. This is in contrast to a “Cancelling Returns Only” (CRO) designated policy where the annual rate will be lower but the Assured continues to pay full premium during the lay-up. This decision, which must be taken at the outset of the policy, has in recent times not been an issue for the majority of owners because freight rates were high and vessels were rarely being laid-up, hence CRO was almost invariably being taken to reduce annual premium costs.

However, in the current climate, we are advising owners to consider whether or not, during the policy period, any of their vessels might be laid up and if so, to consider their options. It is worth noting that if lay-up returns are excluded, owners may not have a right to cancel an ITC – Hulls policy if the vessel does enter lay-up. This may be a matter for negotiation with underwriters who are now seeing a general decline in premium volumes, given the reduction in vessel values.

To assist owners, we have also created an insurance facility to allow our clients to reduce their insurance premium for vessels entering short or long-term lay-up, whether under repair or not. The facility is directly focused on owners who have any part of their fleet out of service and can be utilised easily and cost-effectively where a complimentary underlying hull policy is in place.

Negotiations arise when changing technical management

nicola — Fri, 13 Feb 2009 15:19:17 +0000

As some insurers become more conservative in their approach to risks, what might have been a simple request to agree to a change of technical management is fast becoming a more difficult negotiation.

One of the aspects an underwriter will consider when rating or accepting a risk is the identity of the technical manager and their specific experience with the vessel(s) in question.

Established names do not generally give rise to detailed probing. However, where technical managers are new or lack the necessary experience there is a clear desire for more background information.

This is by no means an insurmountable challenge, notwithstanding underwriters’ more risk-averse approach. However, additional and in-depth information on the proposed technical manager is necessary to achieve a smooth transition as far as the insurance is concerned.

The areas that insurers will want to focus on include the CVs of people involved in the vessel(s), their experience in technical management as a whole, the Company’s time in existence and the background to the change by owners. If there is a change of crew arranged by the technical managers as well, then additional information will be expected.