Liability issues pose challenge to marine market
1 September 2008
There are growing concerns that merchant ships and their cargos will be stranded outside ports unable to access terminals because of new legislation that requires ships to insure against pollution from fuel spills.
The Bunkers Convention (BC), due to come into force on 21 November, requires individual vessels to carry a certificate or ‘blue card’ proving that they have adequate insurance against pollution caused by a spill of heavy fuel, or ‘bunker’, that powers ship engines.
By the end of July, 22 countries representing 29% of the world’s merchant tonnage had signed up to the convention, including the UK. After 21 November, vessels without a certificate will not be allowed into BC-member ports.
Liability underwriters are waiting to see if certificates will be issued in time to meet the November deadline. Apprehension is also growing over the prospect of vessels and their cargos being stranded outside ports unable to access terminals until they have received the necessary clearances.
With freight rates still at high levels and vessel hire costing over $100,000 per day, insurers are concerned about a potential rise in claims for delay or non-delivery of cargos.
Nick Riddle, Executive Director of the global marine practice at Lloyd’s broker HSBC Insurance, says owners are hoping that the P&I Clubs, which provide the liability insurance for vessels, can broker some kind of solution that will avoid potential problems.
“The Bunker Convention is the biggest issue the owners and the [P&I] clubs have to face at present,” he says. “The other issues for the market are not new, but given the timescale for the implementation of the convention, the hope from owners is that a pragmatic solution will be found to ensure that vessels will be able to trade.”
His view is supported by Stephen Hawke, Executive Director of the Marine Division of Lloyd’s broker Aon: “There are a number of things which frustrate us if they go wrong in the insurance process, such as late payment of claims; and ship owners are no different. Another frustration is the late issuance of documentation, and given that there will be ports where vessels without the blue card will not be allowed access, the clubs have to ensure that they have a process in operation that enables the cards to be issued in time to ensure vessels are not delayed. Compulsory insurances are now becoming the norm rather than the exception, and the sector needs to ensure that it has the administration right to enable the documentation to be issued on time to its policyholders.”
Last updated on 01 Sep 2008
