1. Energy Loss Scenario based on the Nordic Marine Insurance Plan 2013 London 13 July 2015

2. MARSH Agenda  Energy Loss Scenario based on the Nordic Marine Insurance Plan 2013

3. MARSH Energy Claim Case based on the Nordic Marine Insurance Plan 2013  Introduction to the Loss Scenario  Extract of the Policy Wording  Claim Process – How will a Norwegian Claims Leader approach this case  The Loss Notification phase – Initial Consideration in order to get the situation under control/clause consideration  The claims monitoring phase – Clause Consideration  The final adjustment and settlement phase – Clause Consideration

4. MARSH Loss Scenario  Drillship “X2” move from one field to another  Operation Area; North Sea  Move plan issued to Leader. Drillship “X2” moves well excess of safety zone (500m) of the nearby fixed platform. Drillship X2 exposed to unexpected bad weather  Drillship “X2” lose control of their propulsion system  Drillship “X2” collides with a Fixed Platform

5. MARSH Loss Scenario  Both units a total loss/ no knock for knock agreement in place between the parties  Drillship “X2” Owner fully responsible  Mitigation/ salvage costs incurred in the amount of USD 600,000,000  Value Fixed Platform: USD 1,800,000,000 Bn.  Value Drillship “X2”: USD 1,400,000,000 Bn. Split H&M USD 1,120 Bn./ HI USD 280 Mill.  What will be covered under Drillship “X2” Owner`s H&M policy??  What will be Drillship “X2” Owner`s Collision liability towards the fixed platform owner??  How will the adjustment be under ITC??

6. MARSH Loss Scenario – Extract of Insurance Cover  Conditions:Nordic Marine Insurance Plan 2013  Policy Period: 01.01.15 – 01.01.16  Insured unit:Drillship – “X2”  Interest: H&M, HI and LOH  Sum Insured:USD 1.4 Bn. - split H&M USD 1.12Bn/ HI USD 280 M. and LOH 60/290/290 – LOH sum insured USD 130,500,000

7. MARSH Loss Scenarios – Extract of Insurance Cover - Cont  Trading Area:Worldwide  Classification Society:DNV GL  Claims Leader:Norwegian Claims Leader  Following market:Aspen and other London based markets  General conditions:Including Assured`s liability arising from collision or striking as per clauses 18-35 to 18-38 & 18-39 (b)  Special Conditions:Condemnation – ref. clause 18-10

8. MARSH Loss Notification Claim MonitoringClaims Settlement Review coverage Notify carriers Forward loss adjusters’ reports to all carriers Liaise with applicable insurers Pre-empt loss issue for smooth claims handling Ensure regular claims reporting Deal with payment or account requirements Manage claims processing Collect and distribute funds Validate payments to loss payees Appoin t loss adjuste r Assign Marsh resource Prepare claims Handling procedur e The claim process and main clause consideration

9. MARSH Prepare claims handling procedure Appoin t loss adjuste r Assign Marsh resource Assign Marsh resource Prepare claims Handling procedur e The Loss Notification phase – Initial Claims Leader Consideration in order to get the situation under control  Emergency Response/ Salvage operations. Bring the situation under control soonest possible. Emergency team will be put into operation  Minimizing potential loss of life, injury, pollution and damage to the environment, damage to the vessel, her cargo and other property  Establishing communication lines  Loss Adjuster on site asap  High Profile Incident/ Media Attention. Protecting Owner's reputation and brand  Legal aspects including but not limited to collisions, salvage, fires, general average, actions against third parties, etc.  Help Assured to safeguard their interest  Total loss consideration

10. MARSH Prepare claims handling procedure Appoin t loss adjuste r Assign Marsh resource Assign Marsh resource Prepare claims Handling procedur e Loss Scenario – Situation under control  The situation is brought under control within 12 hours  No loss of life or serious injuries  Mitigation/salvage costs incurred in the amount of USD 600 M.  4 days after the incident the Drillship X2 is declared a total loss.  No knock for knock agreement in place  Drillship Owner fully responsible for the incident  Fixed Platform also declared a total loss

11. MARSH Norwegian Law If a casualty has occurred, the assured shall do what may be reasonable expected to avert or minimise the loss Assured act as a prudent uninsured Clause 3-30. Duty of the assured to avert and minimise loss Norwegian Law

12. MARSH Assured shall provide the insurer with information and documents required by the insurer for the purpose of settling the claim. Clause 5-1. Duty of the assured to provide particulars and documents

13. MARSH Claims Leader is entitled to take steps with binding effect on the co-insurers The right of the claims leader to act on behalf of the co-insurers Clause 9-2. The right of the claims leader to act on behalf of co-insurers

14. MARSH The Plan covers All Risks, subject to a few specific exceptions Main exceptions: a.)War Risk b.)Intervention by state power c.)Insolvency d.)RACE II clause (1-5) Clause 18-1. (b) Perils insured against/ ref. Cl. 2-8 and Cl.2-9

15. MARSH The Nordic Marine Insurance Plan Assured has the burden of prove that he has suffered a loss covered by insurance Insurer has the burden of prove that an exclusion apply Clause 2-12. Main rule relating to the burden of proof

16. MARSH If the MOU has been damaged without the rules relating to total loss being applicable, the insurer is liable for the cost of repairing the damage in such a manner that the MOU is restored to the condition it was prior to the occurrence of the damage. Clause 18-17. Main rule concerning liability of the insurer

17. MARSH Wells equipped with BOP Separate MOU move plan to be approved by the Claims Leader Clause 18-1. (e) Safety regulations/ Ref. Cl.3-22 and Cl.3-25

18. MARSH Norwegian Law The Nordic Marine Insurance Plan Assured’s Special Condition Norwegian law and exclusive Norwegian jurisdiction Clause 1-4. Jurisdiction and choice of law Norwegian Law

19. MARSH The Nordic Marine Insurance Plan The area of the operation for the MOU shall be set out in the policy Clause 18-1. (h) The area of operation/ Ref Chapter 6

20. MARSH Norwegian Law The Nordic Marine Insurance Plan Before any damage is repaired, it shall be surveyed by a representative of the assured and a representative of the insurer Will submit stage by stage reports Clause 18-27. Survey of the damage

21. MARSH Time-limit for notification of a casualty Assured looses right to claim if notice not given within six months from assured, master or chief engineer became aware. Clause 5-23. Time-limit for notification of a casualty

22. MARSH Clause 18-1. (c) Alteration of the risk/ Ref. Cl. 3-8 Limited number of cases where cover terminates if a particular alteration of risk occurs; ­Change of ownership ­Loss or suspension of the main class

23. MARSH The Claims Leader is responsible for setting up a Claims Adjustment Clause 9-9. Claims Adjustment

24. MARSH Appoin t loss adjuste r Assign Marsh resource Assign Marsh resource Prepare claims Handling procedur e The claims monitoring phase – Clause Consideration Negotiations phase The limit of liability of the insurers Collision consideration Total loss consideration Defense measures

25. MARSH Clause 18-1. (g) The limit of liability of the insurer H&M liable up to the sum insured for loss caused by any type of casualty Loss mitigation/salvage costs capped at USD 500 million The H&M insurer has a separate liability to third parties which is a result of collision or striking Hull insurance “on full conditions”; Physical Damage to the unit Loss mitigation/ salvage cost Collision liability

26. MARSH The insurer will indemnify the assured for loss of liability imposed on the assured due to collision or striking by the MOU, its accessories, equipment or cargo, or by a tug used by the MOU The exclusion of liability for damage to or loss of fixed installations on the continental shelf under paragraph 18-14 of the 1996 plan was removed during the 2013 revision. Liability of the assured arising from collision or striking Clause 18-35. Scope of liability of the insurer

27. MARSH Collision liability under the H&M policy equals to sum insured but not exceeding USD 500 M. or 50% of sum insured, whichever is the higher amount. Loss Scenario: Value Drillship “X2”: USD 1,400,000,000 Bn. Split H&M USD 1,120 Bn./ HI USD 280 Mill. Collision Liability: USD 560,000,000 Liability of the assured arising from collision or striking Clause 18-37. Maximum liability of the insurer in respect of any one casualty

28. MARSH If insurance has been effected against total loss and excess collision liability (hull interest insurance), the insurer is liable for the amount stated in the policy Loss Scenario: Value Drillship “XX2”: USD 1,400,000,000 Split H&M USD 1,120 Bn./ HI USD 280 Mill. Excess Collision Liability: USD 280,000,000 Liability of the assured arising from collision or striking Clause 18-39. Insurance against total loss and excess collision liability (hull interest insurance)

29. MARSH Clause 18-8.Total loss The assured may claim compensation for a total loss if the MOU is lost without there being any prospect of being recoverered, or if the MOU is so badly damaged that it cannot be repaired. Clause 18-10.Condemnation (Constructive total loss) CTL Cost of repairs will exceed 80% of: a.) insurable value or, b.) of the value of the ship after repairs if this is higher than the insurable value Special clause.Condemnation to Clause 18-10 of the Nordic Plan 2013 The asssessed insurable value (Hull and Machinery value) together with the Hull Interest shall be the insurable value or the value of the ship after repairs (estimated/ agreed market value). Furthermore, it is agreed that there is a claim for condemnation where the conditions otherwise specified in that paragraph are satisfied when the cost of repairs exceed the insured value under Section A (Hull and Machinery) Total Loss Clauses 18-8./ 18-10. and Special Clause

30. MARSH Loss Scenario: Value Drillship “X2”: USD 1,400,000,000 Split H&M USD 1,120 Bn./ HI USD 280 Mill. Trigger for total loss: Repair cost exceeds USD 1,120Bn Total Loss Clauses 18-8./ 18-10. and Special Clause

31. MARSH Insurers not liable for LOH, when Assured entitled to a Total Loss compensation Loss of hire insurance for MOUs Clause 18-44. Total Loss

32. MARSH When the final claim is likely to take some time to complete, Assured may request Insurers to make an interim Payment on Account Basis is completed repair work and cost incurred Loss Adjuster will recommend POA in report submitted to Leader for formal approval Clause 5-7. Duty of the insurer to make a payment on account

33. MARSH Appoin t loss adjuste r Assign Marsh resource Prepare claims Handling procedur e The final adjustment and settlement phase – Clause Consideration  Formal agreement reached between the parties  Collect documentation  Adjust the claim  Final payment

34. MARSH Claims Lead to issue the claims adjustment as soon as possible. He may give responsibility for drafting the adjustment to an average adjuster Clause 5-2. Claims Adjustment

35. MARSH The assured as well as the insurer may demand that the adjustment be submitted to a Nordic average adjuster for his opinion before the dispute is brought before the court Clause 5-5. Disputes concerning the adjustment of the claim

36. MARSH According to § 5-4 – Assured are entitled to interest on their claim adjustment Loss Adjuster to review documentation and invoices from the Assured and finalize the claim adjustment Clause 5-4. Interest on compensation

37. MARSH In The event of a total loss, the mortgagee`s interest takes priority Clause 7-4. Payment of compensation

38. MARSH Compensation is payable six weeks after the date when the claim adjustment is or should have been issued. Clause 5-6. Due Date

39. MARSH Claims Scenario – Collision Liability – Final Adjustment Drillship collides with a fixed installation Both units a total loss/ no knock for knock agreement in place Drillship owner fully responsible Mitigation/ salvage costs incurred in the amount of USD 600,000,000 Value fixed platform: USD 1,800,000,000 Value drillship: USD 1,400,000,000 (Split: H&M: USD 1,120,000,000 and HI USD 280,000,000) What is covered under the Drillship Owner`s H&M policy? Total loss of the Drillship: USD 1,400 Bn. (Clause 18-1. g) Mitigation/ Salvage: USD 500 Mill. (Clause 18-1. g) Collision liability (H&M) USD 560 Mill. (Clause 18-37.) Excess Collision liability (HI) USD 280 Mill. (Clause 18-39.) Total recovery : USD 2,740 Bn.

40. MARSH Claims Scenario – Collision Liability – Final Adjustment What is Drillship Owner`s overall collision liability towards the Fixed Platform Owner? Value Fixed Platform:USD 1,800 Bn. Drillship Owner`s Hull and Machinery Insurers: Collision liability (H&M): USD 560 Mill. Excess Collision liability (HI): USD 280 Mill. Drillship Owner`s P&I Clubs: Primary P&I:USD 500 Mill. Excess P&I:USD 460 Mill. Total recovery : USD 1,800 Bn. H&M insurer will pay collision liability from ground up/ P&I club XS Insurers may require “knock for knock” in contracts where customary in the industry, ref. clauses 4-15. (b) and 3-28. by accepting waiver of subrogation. Knock for knock contracts customary in the North Sea.

41. MARSH Claims Scenario – Collision Liability – Final Adjustment ITC Drillship collides with a fixed installation Both units a total loss/ no knock for knock agreement in place Drillship owner fully responsible Mitigation/ salvage costs incurred in the amount of USD 600,000,000 Value fixed platform: USD 1,800,000,000 Value drillship: USD 1,400,000,000 (Split: H&M: USD 1,120,000,000.and HI USD 280,000,000) What is covered under the Drillship Owner`s ITC H&M policy: Total loss of the Drillship: USD 1,400 Bn. Mitigation/ Salvage: USD 600 Mill. Collision liability-RDC/ FFO Not applicable under H&M Total recovery : USD 2,000 Bn. Collision Liability under Drillship Owner`s P&I Clubs: Collision liability 4/4 FFO USD 1,800 Bn.

42. MARSH Realistic Loss Scenario!!! Thank You for your attention