1. André Kroneberg Gard AS
P&I Basic understanding of risks covered, risk assessment and the underwriting process
André Kroneberg
Gard AS
The Nordic Association of Marine Insurers

2. Agenda The P&I risks The Risk assessment The Underwriting process
Additional liability covers
The Nordic Association of Marine Insurers

3. Agenda The P&I risks The Risk assessment The Underwriting process
Additional liability covers
The Nordic Association of Marine Insurers

6. The risk picture The Nordic Association of Marine Insurers Assets
Liabilities
Income
The Nordic Association of Marine Insurers

7. Discussion What P&I risks (third party liabilities) are relevant for:
A Ship owner?
A Charterer?
The Nordic Association of Marine Insurers

8. History of P&I 1688: Lloyds insurance market for ship/cargo insurance
Early 1800: Mutual hull clubs
Pre 1836: Limited need for sophisticated liability insurance
Post 1836: Gradually evolving liabilities – collision/persons
1855: Britannia mutual P&I Club
2014: 13 mutual P&I Clubs – 90% of world market, International Group
The Nordic Association of Marine Insurers

9. Mutual P&I insurance means:
The Members are the owners of the P&I Club
The Members of the Club are both insurers and insureds
There are no third party owners to earn a profit
The Members are liable to pay such additional premium as is necessary to balance the books or build reserves
Members who leave the Club are still liable to pay such additional premium unless they pay a ’release call’
The Nordic Association of Marine Insurers

10. The standard P&I Cover Crew and passenger Cargo
Collision/Damage to fixed and floating objects
Pollution
Wreck removal

11. The standard P&I Cover High limit of cover: Standard deductibles:
Oil pollution: USD 1 BN per event
Passengers and crew: USD 3 BN per event
Additional limit available through Member’s legal obligation to pay overspill call
Standard deductibles:
Crew: USD 5,000.- per event
Cargo: USD 17,000.- per event
Pollution: USD 17,000.- per event
Collision: USD 17,000.- per event
Wreck removal: USD 5,000.- per event
The Nordic Association of Marine Insurers

12. Rule 27 – Liabilities in respect of crew
Liabilities arising out of injury to, or illness or death of a member of the Crew
Crew agreement or other contract of service or employment?
The Nordic Association of Marine Insurers

13. Rule 34 – Cargo liability
Liabilities relating to cargo intended to be or being or having been carried on the Ship
Legal liability for loss, shortage, damage in respect of cargo carried
Terms no less favourable to the Member than those laid down in the Hague or Hague-Visby Rules (mandatory terms are covered)
The Nordic Association of Marine Insurers

14. Rule 36 – Collision with other ships
The Association shall cover liability to pay damages incurred as a result of a collision with another ship, if and to the extent that such liability is not covered under the Hull Policies on the Ship
RDC – 1/4, 4/4
The Nordic Association of Marine Insurers

15. Rule 37 – Damage to fixed an floating objects
The Association shall cover liability for loss of or damage to any fixed or floating object by reason of contact between the Ship and such object, when not covered under the Hull Policies
The Nordic Association of Marine Insurers

16. Rule 38 – Pollution
The Association shall cover liabilities, costs and expenses (excluding fines) arising in consequence of the discharge or escape from the Ship of oil or any other substance or the threat of such discharge or escape
The Nordic Association of Marine Insurers

17. Rule 40 – Liability for obstruction and wreck removal
The Association shall cover costs and expenses relating to the raising, removal, destruction, lighting and marking of the Ship or of the wreck of the Ship or parts thereof or of its cargo lost as a result of a casualty, when such raising, removal, destruction, lighting and marking is compulsory by law
The Nordic Association of Marine Insurers

18. Rule 51 – General limitation of liability
Where the Member or a Co-assured is entitled to limit his liability pursuant to any rule of law, the maximum recovery under a P&I entry is the amount to which the Member or the Co-assured may limit his liability
The Nordic Association of Marine Insurers

19. Rule 55 – Terms of contract
The Association shall not cover under a P&I entry liabilities, losses, costs or expenses which would not have arisen but for the terms of a contract or indemnity entered into by the Member, or by some other person acting on his behalf, unless the terms have previously been approved by the Association
The Nordic Association of Marine Insurers

20. Discussion
Under what type of contracts with third parties may a ship owner or charterer be exposed to contractual liabilities in excess of background law/applicable conventions?
Liner trade (containers, roro)
Spot trading (wet, dry bulk)
Offshore trade (supply and anchor handling)
In general
What types of contractual liabilities can you think of under the various contracts?
Cargo, crew, etc.?
The Nordic Association of Marine Insurers

21. Agenda The P&I risks The Risk assessment The Underwriting process
Additional liability covers
The Nordic Association of Marine Insurers

22. Risk assessment Fleet Number, age, type, class, flag Crew
Number and nationality, contracts
Cargo
Type and value
Trade
Port call frequency, US exposure, deep sea/short sea
Owners
Finance, history, claims record
Management
Technical and crew
Insurance requirements
Terms and conditions – exclusions, deductibles, collision?
The Nordic Association of Marine Insurers

23. Gross incurred claims – P&I Mutual 2008 - 2012

24. Discussion Make a P&I risk assessment of following:
Cruise vessel – 2,000 passengers, Miami based, Caribbean trade
Container vessel – 10,000 TEU capacity, worldwide trade, deep sea
Offshore anchor handling vessel – North Sea trade
Identify the most important risk factors?
Give a rough estimate of the relative difference in P&I premium?
Make assumptions as necessary
The Nordic Association of Marine Insurers

25. P&I premium – the mutual formula
Budget Income
Budget Outgoings
Received from Reinsurers
Reinsurance Premiums
Investment Income
Adm. expenses
Deferred Calls
Claims
Advance Calls

26. P&I premium – the mutual formula
Actual Income
Actual Outgoings
Budget Income
Budget Outgoings
Received from Reinsurers
Reinsurance Premiums
Received from Reinsurers
Reinsurance Premiums
Investment Income
Investment Income
Adm. expenses
Suppl. Calls
Adm. expenses
Deferred
Calls
Deferred Calls
Claims
Claims
Advance Calls
Advance Calls

27. The P&I premium call system (Gard)
100%
Deferred Call – debited during following year
25%
80%
Advance Call – debited during Policy Year
The Nordic Association of Marine Insurers

28. Release calls Release calls (Gard, Oct. 2012)
For the 2010 policy year: nil
For the 2011 policy year: 10 per cent
For the 2012 policy year: 50 per cent
For the 2013 policy year: 50 per cent
Upon payment of such Release Calls, the Member shall be released from all liabilities for further Deferred Calls and Supplementary Calls.
The Nordic Association of Marine Insurers

29. Overspill calls Overspill Call
a call levied by the Association for the purpose of providing funds to pay part of an
Overspill Claim.
Overspill Claim
that part (if any) of a claim (other than a claim arising in respect of oil pollution)
incurred by the Association or by any other party to the Pooling Agreement under the
terms of entry of a ship which exceeds or may exceed the Group Reinsurance Limit.
Levying of Overspill Calls
The Association shall not levy on any Member in respect of the entry of any ship an
Overspill Call or Calls in respect of any one Overspill Claim exceeding in the
aggregate two and a half per cent (2.5%) of the Convention Limit* of that ship.
*International Convention on Limitation of Liability for Maritime Claims 1976 (Art. 6 paragraph 1 (b))
The Nordic Association of Marine Insurers

30. IG Reinsurance program 2013 High limits of cover available through a sophisticated re-insurance
Source: International Group of P&I Clubs (

31. Agenda The P&I risks The Risk assessment The Underwriting process
Additional liability covers
The Nordic Association of Marine Insurers

32. The Underwriting process – 4 steps
Client Management
Pre-entry
Cover Management
Renewal
Post-entry
Main activities: - Marketing - Risk evaluation - Quotations - Declines - IGA?
Main activities : - Cover questions - Quotations - Claims - Contract reviews - Documentation updates
Main activities: - Premium policy - Budgets - Quotations - Non-renewals
Main activities: - Notice of cancellation - Inform mortgagee - Premium adjustments
The Nordic Association of Marine Insurers

33. The application for a new entry
Name of Assureds/co-assureds incl. capacity
The name of the ship(s), year built, IMO no., port of registry, flag, Class, gross tonnage
Mortgagees?
Number and nationalities of the officers and crew, including information on the terms of employment
Whether cover is required for collision with other ships and damage to fixed and floating objects
Passenger capacity
Trading areas and planned cargoes
Date of entry
Above basis for production of documents such as Certificate of Entry, debit notes, certificates, Letter of Undertakings etc.
The Nordic Association of Marine Insurers

34. P&I Renewals general increase + adjustment for loss record
The Nordic Association of Marine Insurers

35. The International Group of P&I Clubs
13 Member Clubs
P&I cover for approximately 90% of the world’s ocean-going
tonnage
Re-insurance function
Claim sharing agreement
Representative function
Promote shipowner’s interests
Exchange of information
Sharing information on matters of common concern

36. The International Group Agreement - Change of Club
Shipowner authorises Holding Club to release terms, conditions and net loss record to New Club
New Club reviews and accept/decline entry on same terms as proposed by Holding Club
New Club becomes a Holding Club only after a full Club year of entry (20/02-20/02)
The Nordic Association of Marine Insurers

37. The International Group Agreement - Competition
Adding a new vessel to an existing fleet
“Free business” between Holding Clubs only
New Clubs must ask Holding Clubs for terms
A new fleet (commercial management)
“Free business” for all Clubs
First entry with a Club – “Holding Club” status
The Nordic Association of Marine Insurers

38. Agenda The P&I risks The Risk assessment The Underwriting process
Additional liability covers
The Nordic Association of Marine Insurers

39. Four main, stand-alone P&I covers (Gard)
Owner’s P&I
As per Rules for Shipowners
MOU P&I
As per Rules for MOUs
Crew Manager’s P&I
As per Crew and personnel related Rules
Comprehensive charterers P&I
As per Rules for shipowners
Extension of cover note for DTH etc.

40. P&I Cover for Mobile Offshore Units
History back to the early 1970s
Ship-owner Members started with drilling rigs
Non-poolable risk - need for special insurance
Floating Production & Storage Units, Drilling Rigs and Accommodation Units
The Nordic Association of Marine Insurers

41. Comprehensive Charterers Cover
Risks covered include:
P&I risks
Damage to Hull
GA contribution
War risks
Maximum limit: USD 750 million

42. Additional, bolt-on liability insurance
Standard P&I
Crew/ personnel
Cargo
Specialist operations
Contracts
Passenger

43. Gard’s Comprehensive Carriers Cover
Cargo (legal) liability under a TT BoL
Cargo and third party (legal) liability
Cargo and third party (legal and contractual) liability, regardless of BoL
Cargo liability – geographical/contractual deviation
Geographical deviations (e.g. bunkering on non-customary ports)
Contractual deviations (e.g. del of port other than stated in BoL)
Delivery of cargo without BoL or similar document (subject to LOI)
Standard P&I Cover
Comprehensive Carriers Cover (CCC)
The Nordic Association of Marine Insurers

44. Gard’s Extended Crew Cover
Liabilities in respect of crew whilst on leave (e.g. compensations for death, disability, medical expenses)
Liabilities in respect of other persons in-tort or under contract (e.g. site teams, maintenance teams)
Liabilities to third parties due to the acts and omissions of crew and other personnel – in-tort or under contract (e.g. site team at yard with liability exposure under a yard contract)
Liabilities to close relatives to the crew (spouse and children)

45. Gard’s CGL and Offshore Contractual Liability - Cover for offshore and specialist vessels
Liabilities and risks not covered by standard P&I:
Specialist operations
Contractual liabilities
Towage
Operation of subsea equipment
Divers

46. “A day in the life of an underwriter” - request for insurance from a new ship owner
Good people all,
We are a newly started Ship owning company who will take delivery of 4 newly built car carriers, each with a capacity of 6100 cars, by the end of Q As a result, we are in urgent need of taking out proper insurance for our activities carried out as ship owners.
Please see below list of liability interests we wish to insure which we kindly ask for your response to:
Liability for cargo (while on board vessel) – (legal and contractual)
Liability for crew – (legal and contractual)
Liability for pollution
Liability (to third parties) for collision and striking
Also, to what extent could you include cover for the following;
Liability for cargo when not onboard vessel e.g. if we agree to take on responsibility to transport cargo “door-to-door” incl. transport by train and/or truck and warehousing
Liability for crew when not onboard ship but away on training course and/or excursion and/or underway to get to and from vessel to home
Deviation from contractual route for bunkering etc.
Kind regards, 
Cpt. Schettino
CEO
Schettino’s Shipowning Company
Questions:
To what extent would the P&I cover comply?
Any need for additional liability insurance?
What further information would you request for rating purposes?
The Nordic Association of Marine Insurers