The Marine Insurer. April 2021. Issue 5

ISSUE 5

| APRIL 2021

The Marine Insurer N AV I G AT I N G N E W S & A N A LYS I S IN THE MARINE MARKETS

ia s A ion & dit c i E d r ial o N ec Sp

Marine market sailing safely through pandemic?

Nordic Marine Insurance Plan: A work in progress l

Covid-19: Marine market in vaccine rollout l

Co-insurance: Courts clarify the rules l

Crew well-being: Vital protection for all employees

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Sanctions: Walking on hot coals

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CONTENTS | EDITORIAL

Comment

Highlights NORDIC & ASIA SPECIAL EDITION 30 Transforming data

Adding customer value to data sharing

32 The co-insurance quandary

Looking at what exactly co-insurance clauses are intended to achieve

36 Rocking the boat

04 Helle Hammer: The Nordic Marine Insurance plan

Looking at the increasing problem of ship fires for marine insurers

06 IUMI

The significant impact of the Chinese ban on Australian coal

10 Crew wellbeing

The removal of one of the most northerly wrecks in the history of salvage

16 Cyber security

Adaptive resilience in the critical area of loss prevention.

18 Digital acceleration in Asia

The challenges presented by new air pollution rules to the marine industry

The CEFOR managing director reviews the Nordic Marine Insurance plan

Lars Lange secretary general of IUMI on measuring emerging marine risk

A critical area of the shipping industry in the Covid-19 era

The Norwegian Maritime Cyber Resilience Centre (NORMA Cyber)

Expanding insurtech into the Asian marine markets

40 Trade war

49 Arctic salvage

50 Loss prevention

52 Air pollution

20 Wind of change

How will the change of US administration affect the International maritime market

24 A question of cover

The significance of a recent judgment that has important implications for charterers

FE ATURES 08 Vaccine transportation

The effective distribution of Covid-19 vaccine is a historic supply chain challenge

12 Dispute mitigation

How to avoid dispute in an increasingly complex and challenging maritime world

14 Sulphur rules

Calls for clarity and consistency in the enforcement of the fuel sulphur cap

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22 Inspections and surveys

How vessel inspections have switched to remote only using innovative new technology

34 Climate change

Challenges faced by the shipping community posed by climate change

43 Risks of LNG

The role of liquid natural gas (LNG) in the global effort to reduce carbon emissions.

Not so far apart IN THIS issue we take a look at some of the key issues in the Nordic and Asia regions. Those two parts of the world may seem geographically far apart, but in a marine insurance sense, they are actually much closer then it might appear.

As I write, the world has been reminded of how fragile the supply chain can be and how inter-connected our lives are, courtesy of the Ever Given becoming stuck across the Suez Canal, causing disruption to global trade routes and impacting businesses across the world.

The fall-out of that one incident is expected to take weeks to clear physically and a lot longer when it comes to settling the resulting claims and disputes that are bound to follow.

For a few days it has diverted the marine world from that other threat: Covid-19. I did not expect to be writing about the ongoing pandemic this far into 2021 but sadly the pandemic continues to impact the health of people across the world from Asia to the Nordics and beyond.

Thankfully the attention is now turning to how to deliver the vaccines to the world’s population. Again, it is the marine industry and its insurers at the heart of the story. Ships are delivering the vaccine globally, enabled by a marine insurance industry willing and able to innovate.

Who knows what else 2021 will throw at us, but the last year has taught us to expect the truly unexpected and to build resilience to cope – something that the marine insurance industry does, reflected by the articles in this issue.

Enjoy the read.

46 Bridging the gap

On the liability of shipowners and their insurers to marine pilots

Editor Liz Booth liz@lizbooth.co.uk Assistant Editor Adrian Ladbury ladburya@gmail.com Art Editor Rob Crotty rob@greenlightpartners.co.uk

Commercial Director Daniel Creasey daniel@cannonevents.com tel: +44 07702 835831 Publishing Director Grant Attwell grant@cannonevents.com tel: +44 07905 933252

Liz Booth Editor, The Marine Insurer Published by Cannon Events and Publications © Cannon Events Limited 2022 Pictures: Adobe Stock

All rights reserved. No part of this publication maybe reproduced, stored in a retrieval system, or transmitted in any form or by any means, electrical, mechanical, photocopying, recording or otherwise without the prior written permission of the publishers. The views expressed in The Marine Insurer Magazine are not necessarily shared by the publisher, Cannon Events limited. The views expressed are those of the individual contributors. No liability is accepted by Cannon Events Limited for any loss to any person, legal or physical as a result of any statement figure or fact contained in this title. The publication of advertisements does not reflect any endorsement by the publisher.

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Nordic Marine Insurance Plan In association with Cefor

Tried and tested solution Helle Hammer, Managing Director, The Nordic Association of Marine Insurers (Cefor), reviews the evolution and future of the Nordic Marine Insurance Plan The first Norwegian Marine Insurance Plan (‘the Plan’) was published in 1871. Some 150 years later the now Nordic Marine Insurance Plan has evolved into a modern set of non-P&I insurance conditions that is regularly maintained to offer protection for shipowners around the world.

The Plan cover is focused on the practical needs of the assured starting with the all risks principle. Everything is covered unless specifically excluded.

The Plan is not just a set of hull conditions. It deals with all standard non-P&I marine and offshore insurances and includes standard rules of the kind often regulated by statute law. It creates a coordinated and comprehensive marine insurance regime that avoids gaps in cover or unnecessary overlapping.

At the core of the Plan lies the well-known pro-active Nordic claims handling model that is backed by in-house maritime experts and a worldwide network of experts. The long tradition of hands-on active support of clients from Nordic marine insurers has remained unaffected by new business models and expansion into other markets.

As a risk management tool, this added service and the benefits of a claims leader function has only increased in importance as vessels become larger and more advanced and shipping finds itself under the watchful eyes of coastal and flag states and the media, once casualties occur.

Handling a major casualty today is becoming increasingly complex, and requires more of all those involved, from The Marine Insurer Nordic & Asia Special Edition | April 2021

initial crisis management until final settlement. Through provisions in the Plan, the claims leader has the necessary authority to ensure the proper functioning of the whole claims process.

CLARITY AND CERTAINTY Looking back on its 150th anniversary, the first Plan was mainly the product of one man, the adjuster J. Aall Møller, with Det Norske Veritas (DNV), the classification society that had been formed by Norwegian mutual insurance companies, as the publisher and copyright holder.

Today’s version of the Plan is based on the 1996 version, drafted by a revision committee with the purpose to include all separate clause and market practice to become the sole and complete document that contains all relevant clauses.

The commentary clarifies many issues of interpretation and practice. This is an important reason why there have been few

MARINE | Nordic Marine Insurance Plan In association with Cefor

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avoiding any gaps in cover.

With its comprehensive commentary, tried and tested solutions, and the Standing Revision Committee, there will remain little uncertainty concerning the interpretation of the Plan text, fewer potential disputes and gaps in cover.

Revisions will continue at regular four-year intervals to clarify and refine the text and commentary, thus removing any potential for friction and keeping up with market developments.

MAIN FEATURES

“Today’s version of the Plan is based on the 1996 version, drafted by a revision committee with the purpose to include all separate clause and market practice to become the sole and complete document that contains all relevant clauses.’’

Helle Hammer, Cefor

disputes concerning the interpretation of the Plan text. Most disputes that have arisen have been resolved with the help of an official average adjuster or independent legal experts.

Another reason for its success are the regular updates to the Plan. Great care is taken to protect the legitimate expectation of assureds that they will not unexpectedly find themselves without cover. This also protects the position of brokers and fosters dialogue, rather than confrontation, between all the parties.

The latest version took effect from 1 January 2019 and is an agreed document. All amendments are drafted and agreed by a committee with strong representation from shipowners in four Nordic countries, often supported by their Nordic brokers, and experts from the Cefor membership. The committee also includes independent legal expertise. The composition of the committee ensures a fair and balanced approach, focusing on the practical needs of the insured and

The all risks principle controls the working of the entire system of the Plan. There is co-ordination between LoH and hull conditions in respect of choice of repair yard so that the assured does not have to choose a partial recovery under one insurance contract in order to achieve full recovery under the other.

The Plan recognises the need to provide a certain level of cover for costs incurred in order to prevent or reduce loss of time during repairs. Through the so-called ‘20% rule’, the vessel’s current earnings are taken into account when evaluating various repair options or whether to incur extra costs to reduce repair time.

There are only a very limited number of cases in which cover terminates automatically because of an alteration of the risk. An innocent breach of any of the assured’s duties will never lead to automatic termination of cover.

In some cases, it may give the insurer a right to cancel by giving 14 days’ notice. In those cases where negligence or gross negligence on the part of the assured is relevant, causation between breach and loss is always required.

Other main features under the hull insurance include separate sums insured with a theoretical limit of three times the sum insured: For physical loss or damage, general average, salvage, sue and labour, and collision liabilities. Because the insurer is liable for salvage in excess of the sum insured for physical loss or damage, the matter of whether the vessel is a constructive total loss is determined after salvage. All costs and expenses incurred to prevent loss are recoverable from the insurer without any deductible.

GOING FORWARD The next version of the Plan will be Version 2023. Discussions on possible new amendments are currently taking place, and the amendments will be published in October next year.

Going forward, much attention will be paid to the evolving needs of the assureds and the shift towards greener solutions that can be facilitated through the drafting of clauses or clarifications. Challenges relating to decarbonisation, sustainable claims handling and offshore floating wind are examples of this. > The Plan is published on nordicplan.org with the latest version uploaded to the Nordic Plan App for smartphones and tablets.

Cefor is today the publisher and copyright holder of the Plan.

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Risk accumulation In association with IUMI

A recent dramatic rise in loss of containers overboard and the catastrophic explosion at Beirut port have re-focused attention on the accumulation of risks. Lars Lange, (right) Secretary General of IUMI, argues that proper measurement of new and growing risk, particularly in situations where accumulations occur is needed. This will significantly enhance underwriting performance and the level of service delivered to the assureds

Measuring emerging marine market risks Accurately assessing risk is the bedrock of good underwriting and insurers are increasingly widening the net of available data and turning to more sophisticated tools to help them do that.

But risk profiles change continuously as do the levels of risk inherent within a particular vessel, cargo, port or other entity.

A growing concern for marine underwriters is risk accumulation and this takes a number of forms.

Economies of scale have encouraged shipping companies to build ever larger vessels to move cargoes more efficiently and cheaply. Yesterday’s post-Panamax containerships of 10,000 TEU seem tiny in comparison with today’s Ultra Large Container Vessels of 24,000 TEU or greater.

At a newbuild cost of around US$150m, these vessels represent a sizeable risk on their own. Add in 24,000 boxes filled with finished goods with a rough value of $50,000 per container and the total value of hull and cargo could easily approach $1bn.

The Marine Insurer Nordic & Asia Special Edition | April 2021

INCREASED VALUES But the issue of risk accumulation extends much further.

Modern container ports operate multiple terminals and each is capable of berthing multiple vessels – all carrying many thousands of boxes. Add this to the containers waiting in the stack or stored in adjacent warehouse facilities and the insured values skyrocket.

A single incident occurring in such a port facility has the potential to become an unprecedented insurance loss. Of course, a financial loss is nothing when compared with loss of life and injury. By their very nature, ever larger port facilities require more people-power and a more concentrated workforce will inevitably - and tragically – result in a higher death toll should the worst happen.

A recent stark reminder was the explosion at the port of Beirut in August 2020 which sadly left 178 people dead and a further 6,500 injured. It is too early to assess the financial impact of the blast and its effect on the insurance sector but

MARINE | Risk accumulation In association with IUMI

“Economies of scale have encouraged shipping companies to build ever larger vessels to move cargoes more efficiently and cheaply. Yesterday’s postPanamax containerships of 10,000 TEU seem tiny in comparison with today’s Ultra Large Container Vessels of 24,000 TEU or greater.” there is certainly a need for more work to be done to fully understand and assess the accumulated values at ports and terminals.

The similar, and equally tragic, incident at the port of Tianjin in China back in 2015 is estimated to have resulted in a loss of around US$3bn. And, of course, we must not forget the 173 people who lost their lives.

COMPELLING ARGUMENTS Both these incidents are compelling arguments to urge terminal operators to manage and store potentially dangerous goods in a transparent, proper and safe manner.

Interestingly, during the early days of the pandemic when cargo wasn’t moving, cargo assureds were reporting reduced values of goods in transit and correspondingly heightened values of goods at locations. Some commodities, particularly oil, was also being stored afloat. Therefore, momentarily, cargo insurers were exposed to more static risk than moving risk.

This, again, changed the risk profile for the cargo market. It also focused the sector on the reality that whilst there are several tools available to monitor accumulation (and therefore risk) at static locations, there is much less certainty and less available data to do the same for cargo that is moving on vessels or at port awaiting loading.

CONTAINER SPILLS A more focused issue of risk accumulation is the seemingly increasing number of container spills from larger vessels. There appears to be a heightened issue with the integrity and stability of onboard container stacks, particularly in heavy weather. The very fact that these vessels are growing larger in size and therefore able to carry more boxes, exacerbates the risk in terms of sheer numbers of boxes lost overboard.

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Between 2008 and 2019, the World Shipping Council reports that an average of 1,382 containers were lost overboard each year. But recent months have seen a massive increase.

In mid-February, 260 containers were lost from the 13,092 TEU Maersk Eindhoven off northern Japan. Two weeks earlier the MSC Aries (14,952 TEU) lost 41 containers in the Pacific. In the same month a further 750 containers were lost by the 13,092 TEU Maersk Essen, also in the Pacific; and in November last year a huge loss from the ONE Apus (14,026 TEU), also in the Pacific, amounted to around 1,800 boxes.

Engine failure leading to excessive rolling is thought to have caused the Maersk Eindhoven spill whilst bad weather was blamed for losses from the ONE Apus and Maersk Essen.

WEATHER PATTERNS The root of the issue is multi-faceted but at its core is the fact that ships are much larger than when containers were first invented back in 1957 and weather patterns appear to be becoming more aggressive.

In this context, IUMI has identified a number of factors which individually or in combination are likely to cause a container spill or stack collapse: > Wrong declaration of container weights (VGM); > Poor packaging of containers not complying with the CTU Code requirements; > Insufficient stowing of containers on-board not complying with the CSS Code; > Non-compliance with ISO standards for container lashing equipment and corner castings; and, > Design problems of the container vessel.

Lashings are a particular problem. Containers are stacked and secured to each other with twistlocks at their four corners. Lashing rods and turnbuckles are then used to secure the containers to the deck of the vessel. Physical forces endured by the ship going through rough weather (such as rolling) are passed through the container stacks creating enormous momentum and often resulting in collapse or loss.

Cargo insurance underwriters have been and will continue to be impacted by these events and IUMI believes that, although this is not a systemic threat, every container lost is one container too many. Therefore, IUMI is working internally on proposals to avoid future losses and will discuss with its external affiliate partners and regulators how best to cooperate.

In the meantime, marine underwriters must be constantly aware of how the maritime sector is evolving and be ready to identify the associated change in individual risk profiles. Proper measurement of new and growing risk, particularly in situations where accumulations occur, will significantly enhance underwriting performance and the level service delivered to the assureds.

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Vaccine transportation In association with Munich Re

Marine market to play critical role in historic supply chain challenge The effective distribution of Covid-19 vaccines across the world presents arguably the greatest supply chain challenge of all time. Sean Dalton, (left) Head of Marine Underwriting, North America at Munich Reinsurance America, and Robert Sedlmair, (right) Senior Underwriter Marine - Innovation & Single Risks at Munich Re, believe that with the right level of partnership and transparency throughout the risk chain this challenge can be overcome and made insurable

As the global community works together to meet the many challenges brought by the Covid-19 pandemic, the unprecedented work on vaccine development is yielding great results. With vaccines becoming increasingly available over the world, we are now witnessing the start of of a global population in a safe, timely and efficient manner, and so... the transportation and distribution of vaccines is critical.

This will require the largest transportation and supply chain efforts ever undertaken and will be on a massive scale. From a marine (re)insurer’s perspective, this requires the following criteria to be carefully assessed: > The volume. Global logistics company DHL estimates that some 10 billion doses of vaccine need to be shipped over a period of two years to transport the vaccine into the far corners of the planet. This will necessitate 15,000 flights, 15 million cooling boxes and approximately 200,000 movements by pallet shippers; > The values. Industry analysts put the value of the vaccines to be shipped at up to US$100bn. This is an unprecedented amount considering that shipments must be delivered within a relatively short period of time; > The cold-chain. Vaccines are a highly sensitive cargo that are extremely susceptible to variations in temperature.

Depending on the manufacturer, temperatures of up to -80 The Marine Insurer Nordic & Asia Special Edition | April 2021

degrees Celsius have to be maintained throughout the entire logistics chain - from the production facility up to the “last mile”, i.e. a hospital, vaccination centre, doctors’ practice or pharmacy. Interim storage of the vaccines requires specialised freezers with monitoring and alarm capabilities. However, today there is a considerable lack of cold-chain logistics capacity suitable for life science products; > Security. In some countries, we can expect that there will be considerable risk of theft and hi-jacking of these highly valuable consignments. Sophisticated security arrangements and loss prevention measures must be put in place along the entire supply chain; and, > Accumulation. The value concentration for single shipments up to storage at facilities such as airports, will reach triple-digit million US dollar values. It is vital for insureds, insurers and reinsurers alike to make sure that risk management measures are in place to monitor and control the accumulations effectively.

ADDRESSING THE ISSUE Rising to this new challenge requires development of innovative marine re/insurance products and solutions.

The key success factor, however, will be to ensure seamless and secure cold-chain management throughout the entire supply chain. Rigorous temperature monitoring and quality control using state of the art sensor technology will be vital to

MARINE | Vaccine transportation In association with Munich Re

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ensure that the vaccine is still “fit for purpose” when being administered to THREE ARCHETYPES OF END-TO-END LOGISTICS SOLUTIONS FOR human beings.

COVID-19 VACCINE DISTRIBUTION This is an area in which Munich Re has gathered considerable knowledge, OR having partnered with several IoT OR companies in the past to help develop Pallet shipper OR solutions in the transportation and Cooling box monitoring of temperature-controlled goods. In this regard Munich Re has even created a patented business process to translate sensor data into relevant claims information triggering Local cross-docking the indemnification after a loss event Cooling boxes and labeling on pallet much more efficiently.

Technology has advanced significantly and today tracking algorithms are in place and alarms can be sent to the relevant stakeholders in Pallet Last-mile delivery order to take loss prevention measures.

Warehousing shipper of cooling box However, this all depends on a (parcel sized) stable and fully integrated system to create end-to-end visibility on a real1 Direct shipment to point of use 2 Local cross-docking 3 Local warehousing time basis.

Direct shipment of pallet shipper Local cross-docking of cooling There are solutions in place, but capacities to break-down pallet boxes on pallet to reduce not enough to meet the demands of point of use shipper into cooling boxes cross-border costs a complex global logistic chain, with many still isolated elements. It is Source: DHL, McKinsey unrealistic to expect that all shipments can immediately be switched from data logger monitoring to real-time sensor technology. Preparatory Our ongoing discussions have proven the level of detail work is needed, new processes must be defined and we need to consider to tailor an innovative product and substantial investment needs to be made to build the the various challenges we face. infrastructure required.

The key element to start is to co-operate with the respective industry leaders: Risk managers, insurers, claims adjustors, logistics operators, IoT/ storage/distriWAKE-UP CALL bution companies and the like. Full transparency of all Is this unprecedented logistical challenge the wake-up call processes in the “end to end” supply chain also needs to that the industry needs? be ensured.

The Covid-19 crisis underlines the need to quickly adapt In terms of scope of cover and determining the and apply new technologies and solutions, to be in position adequate value insured, it will be essential to identify the to manage exposures of this kind to the backbone of global actual insured party/beneficiary in case of loss and the trade i.e., the supply chain. insurable interest at any given point in time throughout For example, Munich Re has partnered with a global the shipment. specialist marine broker to investigate an innovative cargo There is keen interest on both sides for this concept to insurance concept for Covid-19 shipments. succeed and to contribute to ending the Covid-19 This is likely to involve real-time sensor tracking on a pandemic as quickly as possible, while also taking marine “per parcel” basis from the manufacturer to the final delivinsurance to the next level. ery destination.

By setting up a consortium of re/insurers with Munich Re being one of the key panel members, we would achieve > The above exhibit visual was extracted from the September 2020 a meaningful spread of risk while mitigating and conDHL white paper ‘Delivering Pandemic Resistance: How to Secure trolling large single risk exposure that may occur in major Stable Supply Chains for Vaccines and Medical Goods During the distribution centres or storage facilities.

COVID-19 Crisis and Future Health Emergencies.’

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The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Crew wellbeing In association with Gard

The tools that make a difference Kunal Pathak, Loss Prevention Manager, Gard, provides expert advice on the critical area of crew wellbeing that has shot up the agenda in the shipping industry in the Covid-19 era Gard has been looking into crew wellbeing since well before Covid-19 disrupted the world order.

We know there is a series of existing measures some relatively easy to implement - that can make a world of difference to the health and safety of our seafarers.

Crew wellness has been high on the agenda in the maritime industry over the last year. From the several discussions that we have had with our members and our peers in the industry, the one common observation is that crew wellness is multi-dimensional.

No one policy or procedure is sufficient on its own. Crew wellness requires a holistic approach and a conducive environment to be effective.

SAFE AND SECURE WORKPLACE The multi-dimensional approach to crew wellness can be summarised as two key strategies. The first would be to ensure that the crew has a safe and secure place to work. This would include, amongst others, policies on: > Employment contracts, including pre-joining medical examinations; > Fatigue management; > Diet and food management; > Management of hierarchy on board; The Marine Insurer Nordic & Asia Special Edition | April 2021

> > > > >

KPI’s and the system of reward and reprimand; Safety management systems and plans; Shore-based support to seafarers; Use of internet and other recreational facilities; and, Welfare of next-of-kin.

Several of the above policies have been used by our members, with some being more effective than others. However, when collectively implemented, their effectiveness was commented on positively by the seafarers we interviewed a few years ago.

In addition to the above, seafarers are also recommended to manage their own wellbeing. Some shipowners have issued handbooks and guides to self-care which include activities like yoga, meditation, regular workouts, social gathering and writing daily journals.

Gard has published an insight on how seafarers can help themselves during the uncertain Covid-19 period (see Gard.no).

However, while the first strategic approach to ensure a safe and secure workplace is important, we still need to plan for when things go wrong.

MENTAL HEALTH CRISIS The second strategic approach becomes effective when a crisis hits. A number of shipowners/managers have tried different approaches to deal with cases of mental illness or crisis onboard.

MARINE | Crew wellbeing In association with Gard

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port to deal with post-traumatic stress. This is an area which is frequently overlooked after a serious casualty as the process goes into an investigation mode to get to the root cause of the occurrence.

While investigations are necessary, the human impact of the incident is often sidelined leaving the affected seafarers to deal with their problems on their own. From Gard’s experience we know that the trauma can stay with the individual for years and can have a long term effect on their wellbeing.

“While there is insurance coverage to mitigate the

SUPPORTING NEXT OF KIN

When looking at crisis counselling, the importance of supporting the next of kin of a deceased/affected seafarer is another importfinancial loss caused by an ant aspect which needs our attention.

While there is insurance coverage to mitiincident, the emotional impact is gate the financial loss caused by an incident, the emotional impact on the family members rarely adressed or compensated.’’ of the seafarer is arely adressed or compensated. Crisis counselling by a qualified and experienced professional can provide Kunal Pathak, initial support. This in turn, assures seafarers Gard that the wellbeing of their loved ones matters as much to the organisation as the seafarers themselves.

Hotlines can act more as a conduit These have gained a lot more attention in the recent times given for the seafarers to use their voice. However, given that the the collateral damage caused by Covid-19 in shipping. The policies maritime industry is traditionally hierarchical in which indimay include: viduals in a higher position have significant power over their > Psychological first aid to the crew; co-workers, the boundaries between“command and control” > Crisis counselling to the seafarers and their next of kin, and bullying are easily breached. as required, post a casualty; and, Hotlines for crew to voice their concerns can be effective in > Dedicated hotlines for seafarers to report cases of ensuring sufficient checks and balances are in place for harassment, bullying or depression. effective management on board the vessel. The effectiveness From Gard’s own data on mental health and suicides, we see of these hotlines vary as they depend on how such policies that the number of cases have remained unchanged over the past and procedures are implemented.

10 years but increased significantly in 2020 when compared to previous years. That being said, we fully recognise that our data alone may not be sufficient to assess the scale of CONCLUSION the problem in the shipping industry.

Wellbeing of the crew is multi-faceted, and we need to It is safe to assume that the scale of the problem is consideracknowledge the holistic approach that is required to be able ably larger than what we see. For this reason we have to see some positive outcomes. Further, the obligation of crew promoted training of seafarers and to some extent, shore staff, wellbeing is not limited to the vessels’ owners/managers. Each in the basics of psychological first aid. A number of Gard’s claims player in the maritime industry needs to play their part to handlers are trained in psychological first aid and we have summake it work. marised some of the highlights of the training in our insight on The commercial interests, port states, insurers, and Mental Health First Aid. policymakers all have a stake in ensuring the wellbeing of the In addition to providing psychological first aid, we have also seafarers. We have witnessed the importance of this seen the impact of providing crisis counselling to seafarers after a collaborative approach on an industry level when the industry casualty. Those who have been unfortunate enough to was looking for solutions to the current crew crisis, experience, or even witness, a casualty on board may need supexacerbated by Covid-19.

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Dispute mitigation In association with C Solutions

“The sea, the great unifier, is man’s only hope. Now, as never before, the old phrase has a literal meaning: we are all in the same boat.”

Jacques Yves Cousteau

We are fortunate to work in a business where no two days are the same. It is known for its drive for innovation – be it technology, operations, the use of data, education – underpinned by a thriving multi-disciplinary industry of shipowners, charterers, builders, crew, insurers, lawyers, salvors, banks, surveyors, adjusters…the list goes on.

All rely on an industry that is responsible for the transportation of 90% of world trade.

There is no doubt that shipping and marine insurance are changing. The regulatory aspects of the business are becoming more onerous.

We have seen the development and implementation of a raft of policies over the past few years including the Insurance Act 2015, the Maritime Labour Convention, IMO 2020, international sanctions and more. Now we are looking forward to the IMO’s GHG (greenhouse gas) strategy, not to mention the impact of the global pandemic.

These have all affected the way our industry does business and impacted finances. They have probably made things harder, but, also spurred innovation.

INNOVATION SPARK The legal and claims team at C Solutions enjoys a varied workload, from advising on charterparty wordings and disputes, to investigating and managing the legal and insurance aspects of maritime casualties, pursuing recoveries to defending cargo or insurance claims; we act as TPAs for Lloyd’s and other insurers, offer innovative products to the market through our joint venture company Qwest Maritime – forensic investigation, asset tracing, financial due diligence, receivables financing to name but a few. What we know from these roles over the years is there will always be a new problem to solve – something we have not seen before – even for the grey haired amongst us!”

So, what have we learned from the recent unprecedented period of change?

The Insurance Act 2015 sought to achieve a fair balance between assureds and insurers and mitigate the risks of disputes. But, disputes inevitably occur.

For example, we regularly deal with disputes relating to the duty of fair presentation.

Under this obligation, the insured must ensure fair The Marine Insurer Nordic & Asia Special Edition | April 2021

All in the same boat Chris Telford, Claims Director at C Solutions, argues for collaboration, transparency and partnership to avoid dispute in an increasingly complex and challenging maritime world presentation of a risk to the insurer before the contract of insurance is entered into. They must inform the insurer of every circumstance relevant to the risk that the insured is aware of, or ought to be aware of. This provides sufficient information to put a prudent insurer on notice that it needs to make further enquiries if necessary.

Absent such further enquiries, the insured is not required to disclose a circumstance if the insurer knows it, ought to know it or is presumed to know it, or if it is something as to which the insurer waives information.

So far so good. This part of the act is intended to ensure fairness for all parties and provides an opportunity for the insurer to conduct further enquiries if it deems them necessary.

MODIFICATION QUANDRY But what happens when owners modify a vessel post-inception and those modifications lead to a claim under the policy?

One might expect that an insured would inform their insurer about such modifications. But, in English law the duty of fair presentation applies before an insurance contract is entered into.

With that in mind, and to mitigate the risk of disputes, thought might be given to how a policy should deal with such issues post-inception. Has sufficient research into the risk been conducted and has the information been presented clearly and in a fair manner prior to inception?

Coverage issues relating to policy warranties also cross the desk from time to time.

A vessel was insured for H&M and everything connected therewith, Total Loss Only and the policy contained the express warranty “Warranted Class and Class Maintained”. It was reinsured into Lloyd’s and the reinsurance policy contained no express warranties. This means there was no

MARINE | Dispute mitigation In association with C Solutions

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Crew welfare is at the forefront of many minds, and rightly so. The International Chamber of Shipping estimates the worldwide population of seafarers serving on internationally trading merchant ships to be 1,647,500.

class warranty.

Information provided to insurers included a schedule of all insured vessels under the policy. In respect of the subject vessel, the column in the schedule headed “Class” was blank, as the vessel was not required to be classed in accordance with local law and regulations.

The vessel sank, was incapable of salvage and owners claimed for a total loss. The reinsurers declined the claim citing breach of the class warranty in the insurance policy.

Arguments centred on whether the warranty applied to a vessel that could not, in effect, be classed and disputes ensued.

psychological response to such incidents, to actively support the wellbeing of crew as part of the interview process.

It involves a TIMS investigator backed by a clinical psychologist to provide support, guidance and a pathway of on-going, structured psychological support where required. This supports the crew member, shipowner and insurer with best practice support from experienced experts in the field. All in the same boat.

For more information visit www.csolutionslimited.com

CLARITY OF PRESENTATION What we hope this scenario demonstrates is that clarity when presenting and writing the risk, considering back-to-back terms and conducting a thorough review of the vessels and policy warranties, are vital considerations.

The key is for all parties to work together to mitigate risk of dispute.

Crew welfare is at the forefront of many minds, and rightly so. The International Chamber of Shipping estimates the worldwide population of seafarers serving on internationally trading merchant ships to be 1,647,500. They perform a remarkable role and it is no hyperbole to say that the world relies on them.

We become involved with crew and witnesses when we are instructed to investigate and manage marine casualties for owners and their insurers. These can be shocking incidents and have led us, in conjunction with our partners Recall Recover and Qwest Maritime, to develop Trauma-Informed Interviewing in a Marine Setting, or TIMS. It’s a broadened approach that combines established investigative interviewing techniques with expertise in human

“We become involved with crew and witnesses when we are instructed to investigate and manage marine casualties for owners and their insurers. These can be shocking incidents and have led us, in conjunction with our partners Recall Recover and Qwest Maritime, to develop Trauma-Informed Interviewing in a Marine Setting, or TIMS.” Chris Telford, C Solutions The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Sulphur rules In association with North P&I Club

Sulphur cap needs clarity and consistency Alvin Forster, Loss Prevention Executive at North P&I Club, calls for clarity and consistency in the enforcement of the fuel sulphur cap In terms of safety, the introduction of the International Maritime Organisation’s (IMO) 0.50% sulphur cap on marine fuels has largely been a success.

Predictions of vessels losing propulsion in busy shipping lanes or suffering loss of electrical power were, thankfully, proved incorrect. By and large, the industry – in particular ships’ crews – have managed the transition very well.

It has not, however, all been plain sailing.

The backend of 2019 saw concerns being raised on the poor stability characteristics of some of the new very-low-sulphur fuel oil (VLSFO) products and the risk of incompatibility between stems, which did indeed become realised to a certain extent throughout 2020.

There were some operational issues that were perhaps not as well foreseen, such as increased liner wear of engines attributed to the poor matching of cylinder lubricating oil with the fuel in use combined with too infrequent scavenge inspections.

These have all had some sort of impact on us at North, resulting in claims and, more prominently, disputes amongst shipowners, charterers and fuel suppliers.

However, what has kept us busiest are the reports of potential marginal non-compliance, which sounds innocuous to say the least.

THE PROBLEM SCENARIO The vessel requests compliant bunkers to be delivered. The party ordering the bunkers (either the owner or time charterer) specifies compliant fuel to be supplied to the vessel.

Upon completion of bunkering, the supplier issues a bunker delivery note (BDN) which declares the fuel to be compliant (0.50% S or less). The receiving vessel then sends a representative sample drawn during bunkering to an independent laboratory where it is tested against ISO 8217 listed parameters for commercial purposes.

Several days later, the test result returns a sulphur content that is between 0.51% and 0.53%, therefore indicating non-compliance The Marine Insurer Nordic & Asia Special Edition | April 2021

with the limit specified in MARPOL Annex VI. What happens next? Are the bunkers off-spec, non-compliant or both? Can the fuel be used? Who should be notified? Will the vessel be targeted by the authorities and what action will they take? Should it be de-bunkered?

This is where confusion reigns and this is leading to commercial disputes and, in some cases, de-bunkering.

ARE THE BUNKERS OFF-SPECIFICATION? According to existing industry guidance issued by organisations such as the International Bunker Industry Association (IBIA) and the International Council on Combustion Engines (CIMAC), if the receiving vessel’s own sample returns a result of 0.53% or less, they cannot bring a claim against the supplier.

The rationale behind this 0.53% cut-off mark is ‘single-test reproducibility’, which raises its head frequently in this matter.

In very simple terms, it is an allowance that is applied to a lab test result that recognises the limitations on the accuracy of a single test.

If the vessel’s sample test result is over 0.53%, then a claim against the supplier may be initiated. The supplier’s retained sample is usually contractually binding and therefore tested. If that test returns a result of 0.51% or more (single-test reproducibility is not applied in this stage – just to confuse matters!), then it is deemed off-spec for commercial purposes.

However, these are only guidelines and a supplier may have different terms in their bunker contract.

The situation becomes more complex in situations where the time charterer provides the bunkers under the terms of the charterparty. While the supplier will consider their sample to be the binding commercial sample between them and the fuel purchaser, this is unlikely to be the binding sample under the charterparty, which is usually that drawn by the vessel.

This could lead to situations where the time charterer is liable to the shipowner but is unlikely to be able to recover losses from the supplier.

NON-COMPLIANT BUNKERS? If the receiving vessel’s own sample returns a result greater than 0.50%, then it does not automatically mean that the bunkers are non-compliant with MARPOL. Non-compliance can only be confirmed by testing any of the MARPOL (International Convention for the Prevention of

MARINE | Sulphur rules In association with North P&I Club

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Pollution from Ships) delivered sample, WILL THE VESSEL BE the MARPOL in-use sample or the TARGETED BY PSC? MARPOL onboard sample.

“The backend of 2019 saw concerns Commercial samples - such as the It is important not to disincentivise vessel’s own sample - should not be reporting of potentially non-compliant fuel being raised on the poor stability considered evidence of definitive as the IMO GISIS module - which allows flag non-compliance. However, very few characteristics of some of the new very- states to report on behalf of shipowners - relies administrations have confirmed this on these reports to identify suppliers that explicitly, and experience suggests that provide non-compliant fuel. low-sulphur fuel oil (VLSFO) products some port state control functions are If a port authority targets a vessel for taking a contrary view. inspection following the submission of a and the risk of incompatibility between There are also reports of port state voluntary notification, it is likely to control officers in some countries not stems, which did indeed become realised disincentivise reporting. applying the single-test reproducibility How port state authorities around the tolerance to in-use samples during world are acting upon these notifications is to a certain extent throughout 2020.’’ their inspections. It is not mandatory not yet known; and as COVID-19 impacts for port state authorities to apply this their current inspection protocols, we may not Alvin Forster, tolerance when testing the fuel in use, be seeing an accurate picture on how this will North P&I Club but the IMO is promoting its early be dealt with in a post-pandemic world. adoption.

However, the European Maritime Safety Again, the lack of a consistent approach by port states Agency (EMSA) Inspection Guidance states clearly that EU ports around the world causes confusion for calling vessels. will target a vessel for inspection if they submit a voluntary Vessels trading to the United States will of course switch to notification of potential non-compliance.

0.10% max sulphur fuel before entering the North American emission control area (ECA). But this does not eliminate the CLARITY AND CONSISTENCY risk of contravening MARPOL. Marginally off-spec bunkers are causing lengthy disputes and, in some US lawyers have indicated that any vessel proceeding cases, de-bunkering. Considering the carbon footprint of the de-buntowards the US with fuel on board with a sulphur content kering process, we query whether this is what the IMO would intend, greater than 0.50% may be in violation of the carriage ban, especially considering the IMO’s environmental goals. regardless of whether it is to be consumed.

Shipowners need to be confident that the rules are clear and that there is a consistent approach to the enforcement of the rules around the world.

WHO TO NOTIFY? In general, shipowners have been advised to follow the notification process in MEPC.321(74) 2019 GUIDELINES FOR PORT STATE CONTROL UNDER MARPOL ANNEX VI. This states: “In addition, if the BDN shows compliant fuel, but the master has independent test results of the fuel oil sample taken by the ship during the bunkering which indicates non-compliance, the master may have documented that through a Notification to the ship’s flag Administration with copies to the competent authority of the relevant port of destination, the Administration under whose jurisdiction the bunker deliverer is located and to the bunker deliverer.”

However, as the document’s title suggests, this is the IMO guidance for port state control. There is no published guidance to shipowners. And, by stating that “the master may…” this would imply that the notification process is merely voluntary and there is no obligation to notify the referenced parties.

There is also uncertainty on what is meant by “indicates non-compliance”. Is the IMO’s intention that the notification process applies when the ship’s sample test result exceeds 0.50%, or is it 0.53% to allow for single-test reproducibility?

Providing clarity on the notification process could remove a massive amount of doubt.

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Cyber Security In association with Norwegian Shipowners’ Mutual War Risks Insurance Association (DNK)

NORMA

paves the way The Norwegian Maritime Cyber Resilience Centre (NORMA Cyber) was established on 1 January 2021. The centre provides cyber security services for the Norwegian shipping and maritime sector. More than 30 shipowners and operators have already become members,representing more than 800 vessels. NORMA Cyber is a joint initiative between The Norwegian Shipowners’ Mutual War Risks Insurance Association (DNK) and the Norwegian Shipowners’ Association. Lars Benjamin Vold, (above left) Managing Director NORMA Cyber, explains Society has become more vulnerable as a result of new technology. We have seen several examples of cyber-attacks both nationally and internationally, and the shipping industry is as exposed to this risk as all other sectors.

The Norwegian shipping and maritime sector needs to protect itself and therefore DNK and the Norwegian Shipowners’ Association are joining forces in a powerful initiative to prevent and deal with cyber threats against shipping, both against ships and against the shipping companies’ land-based organisations.

DNK has for several years provided a successful loss prevention programme focused on physical threats such as war, terrorism, and piracy, through their Intelligence and Operations Centre (IOC).

Throughout the last few years DNK has also provided services focused on cyber security. But by establishing NORMA Cyber, DNK is increasing this effort significantly.

The centre will provide a system for effective information sharing, incident support and other proactive services.

Through this initiative the aim is to combine the members’ need for defending their own infrastructure with DNK’s work The Marine Insurer Nordic & Asia Special Edition | April 2021

within loss prevention.

Since DNK is a mutual club, these interests are fully aligned.

Together with the extensive collaboration with Norwegian authorities and other relevant entities, this gives a unique set-up which you can’t find anywhere else in the world of shipping.

We also see that some of these services are much more efficiently delivered from a centralised organisation than enables each member to build capabilities and competence independently.

It is obvious that we all become more efficient if security matter are managed on a collaborative basis.

Norwegian shipping and the maritime industry have long traditions when it comes to co-operation and information exchange within security and contingency preparedness.

NORMA Cyber is now continuing that work with the services that it provides.

NORMA Cyber already provides regular updates to its member about relevant cyber threats and mitigation. The centre has also detected activity which is relevant for its members.

The centre has observed certain threat actors that specifically target the maritime sector and shipping. These are both nation states and cyber criminals with different motivations and goals.

RISE IN RANSOMWARE Ransomware has increased significantly in recent times. From July 2020 until January this year we saw 17 maritime companies internationally suffering from ransomware attacks. Over the last 12 months it has also been observed that ransomware groups, in addition to encrypting data, also threaten to leak data.

This is done to pressure the compromised companies even

MARINE | Cyber Security In association with Norwegian Shipowners’ Mutual War Risks Insurance Association (DNK)

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innovative and important and the centre will be the first of its kind in the world.

On the one hand, we want to lay the foundation so that our industry continues its innovation work where digitalisation is crucial for sustainable development. On the other, we must ensure the security of new technology by applying the necessary competence and quality. This is best done by pooling resources in a joint effort against cyber threats

SECURITY OPERATIONS SERVICE

further to pay the ransom. Despite several law-enforcement operations which have taken down some of the activity, new groups and ransomware variants keep popping up.

Currently, most of the attacks on the shipping and maritime sector is hitting land-based IT infrastructure. But, as connectivity continues to increase on vessels and new digital and autonomous solutions are being used, the vessels are potentially also becoming much more vulnerable.

The consequences for vessels is obviously much higher than for land-based infrastructure.

For this reason, it is critically important to adopt an holistic approach when it comes to defending vessel and land-based systems and technology.

As vessels are increasingly connected the need for cyber security within this area is increasing. But the threats will likely come through land-based systems. Simultaneously, there are few indications that the number of pure land-based cyber threats is about to decrease.

The capacity that NORMA Cyber is now building is both

From June NORMA Cyber will also provide a managed Security Operations Centre (SOC) service for its members. The centre is already building up extensive competence within the area and is running a Proof of Concept with three larger shipping companies. The aim is to deliver a so-called Manged SOC service that is tailored for the shipping and maritime sector.

This will be the most proactive service where we monitor relevant systems to detect threats and provide early notification and mitigation advice to the member.

We need to move away from a situation in which members call to tell us about an ongoing incident, to a situation where we can call our members with an early notification This will hopefully avoid incidents from escalating. The full potential is also to investigate across several fleets and the digital activity observed and be even more proactive.

NORMA Cyber aims to deliver this service without distributing any hardware to the vessels or land-based organisations but rather through using technology that the members already have invested in.

BUILDING COMPETENCE NORMA Cyber has hired several personnel with extensive cyber security competence during the last year. It will have eight employees from April 2021 and the latest recruits have extensive experience from vessel systems both on the IT side and on the vessel system side.

The most important component when it comes to delivering quality for the members is competence. NORMA Cyber is now building up a unique team that consists of personnel with experience from cyber security, shipping, and vessel systems among other areas. By the end of this year, the centre will be staffed by a multi-disciplinary team of between 10 and 14 personnel.

Throughout the last few years DNK has also provided services focused on cyber security. But by establishing NORMA Cyber, DNK is increasing this effort significantly.

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Digitalisation In association with Concirrus

Digital acceleration in Asia Asia represents the largest and fastest growing continental economy in the world and the insurance market continues to increase its share of the global marine business through well-established hubs in Singapore, Hong Kong and Shanghai. Mike Davies, formerly of AXA XL and member of the executive committee at IUMI, recently joined expanding insurtech Concirrus to help lead its expansion into this huge regional market. He provides a snapshot of the challenges facing the region and highlights why a data-driven approach is critical for businesses looking to ensure profitability, operational efficiency and portfolio growth.

Gartner’s former head of research, Peter Sondergaard, once said the following about the importance of data analytics: “Information is the oil of the 21st century, and analytics is the combustion engine.”

In other words, there’s little point in stockpiling vast amounts of data if it cannot be used to drive your business forward.

Coinciding with a hardening of the insurance market, the global pandemic has brought about significant challenges and has produced some interesting dynamics relating to broker submissions, underwriters’ assessment, and quote & bind processes.

Even before the onset of COVID-19, several insurance companies had withdrawn from the Asia marine insurance The Marine Insurer Nordic & Asia Special Edition | April 2021

market because of volatile results and poor performance.

This cycle of shrinking capacity is still in motion.

There is good news, however. Marine insurance premiums have increased, and anecdotal feedback indicates that current performance has improved.

Marine insurers are well placed to capitalise on the recovery in Asia, which is projected to be faster than the rest of the world. This, in conjunction with the accelerated push to digitalise and still limited insurance capacity, points to a positive recovery for those marine insurers that have the vision and strategy in place to act quickly and maximise this opportunity.

Local and regional insurers and brokers are now looking more closely than ever at how to solve their three most pressing challenges - improving profitability, reducing

MARINE | Digitalisation In association with Concirrus

operational expenses and ensuring portfolio growth.

What is clear is that marine underwriting companies must harness the power of data analytics to develop a profitable portfolio and open up new opportunities and revenue streams. Asia is extremely well placed to take advantage of this new world with its focus on insurtech and big data.

Despite the challenges presented by the pandemic and continued hard market, this is an exciting time for the industry.

BEHAVIOURIAL DATA IS KING This is where access to previously unavailable data and analytics could be the tipping point for insurers, reinsurers and P&I clubs because it will give them the ability to underwrite their existing portfolio more successfully. It will help them to confidently expand into new risk areas knowing that their decisions are based upon proven behavioural data.

Leveraging a platform like Quest Marine will ultimately equip marine insurance professionals to make better risk and pricing decisions. The platform is powered by bespoke machine learning that is applied to a vast and varied dataset, revealing behavioural trends and expected losses that are indicative of risk at vessel, cargo shipment and account level.

At portfolio level, this translates to significantly improved loss ratios by a minimum of 10%, plus the ability to use analytics to grow the book in new target segments. Add to this the ability to automate submission management and monitor aggregation at port and/or client bespoke zone and monitor sanction breaches in real time, and you have a marine analytics solution that is as unique as it is powerful.

DRIVING PROFITABILITY AND GROWTH Put simply, adopting a data-driven approach is critical to ensuring profitability, operational efficiency, and portfolio growth.

All insurers have historical data within their existing portfolio. They are, however, not necessarily resourced to take full advantage of this data and this can limit growth and expansion into new areas of marine risk. They need support with the cleansing of their own data and conversion into a dataset that allows them to clearly see the strengths and weaknesses of their portfolio.

Insurers can also gain access to a far broader market model that continues to grow exponentially as more marine market data is added to the pool. This includes global data such as historical and real time vessel movement, performance and technical management, global casualty and weather analysis and accumulation of vessels and cargo in ports and high-risk areas including sanctions and war zones.

Covid-19 has brought about a huge increase in the use of electronic submissions methods such as email. The hardening market is driving brokers to add more underwriters to each submission. This has led to an overwhelming number of submissions to assess per underwriter.

Leveraging artificial intelligence (AI), email submissions

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“Covid-19 has brought about a huge increase in the use of electronic submissions methods such as email. The hardening market is driving brokers to add more underwriters to each submission. This has led to an overwhelming number of submissions to assess per underwriter.’’

Mike Davies, Concirrus including attachments can now be automatically ingested into a digital platform, augmented with risk profile data, and priced. This allows underwriters to quickly determine how new business fits their current risk appetite.

Platform integration helps deliver a seamless transition from receipt of email submissions to written policies. This streamlining of processes can improve underwriting productivity by over 400% and thus enable existing underwriting teams to review four times as many risks.

This leads to a significant improvement in new business and renewal processing and, ultimately, written premium.

PIVOTAL MOVEMENT Digital transformation is as inevitable as it is powerful and challenging to execute. Right now, we are experiencing a pivotal moment of digital transformation and marine analytics is still in its early stages.

It is important to remember that technology develops exponentially - processing power doubles every 18 months!

This means that in five years’ time, we will see incredibly sophisticated tools that enable better capital management and smarter ways of working in a digitalised marine insurance marketplace in which underwriters, brokers and shipowners alike focus on discussions that really matter and add value.

During the coming Marine Insurance Asia conference (April 21-23), we will expand upon how marine digitalization can not only lead to increased profitability and operational efficiency together with portfolio growth, but also portfolio management, consultancy, and enhanced risk management capability.

To join the Marine Insurance Asia conference please sign up for free at marineinsuranceasia.com

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Political In association with Ed Broking

Wind of change Stephen Barton, Chairman – Marine, Ed Broking, asks what the change of administration in the US means for the international shipping industry Last year was one of unprecedented challenges in shipping as Covid-19 had a catastrophic impact in some sectors and a negative effect on all. So, does a change of administration in the US hold out any hope of better times ahead in shipping? Only time will tell but the initial signs might give cause for optimism, both domestically and internationally.

It would be wrong to imply that the outgoing President did nothing for shipping, particularly in port development grants and domestic ship-building. But the overwhelming impact on the industry was the ongoing trade dispute between the US and China. There are two sides to every story, but the Trump administration took centre stage.

Statistics show a very significant drop in volumes of goods exported from the US to China and this will have directly affected shipowners around the world, particularly in the shadow of the Covid-19 pandemic and a failure to compensate for its impact with increased volumes from other trading partners.

One of the Trump administration’s earliest acts was to pull out of the Trans-Pacific Partnership (TPP). This decision will be impossible to reverse because the TPP has now been overtaken by a new agreement – The Regional Comprehensive Economic Partnership. This, with China’s involvement, creates the largest trading bloc in the world.

It does seem however that the Biden approach will be less protectionist and more focused on “free” trade. As we move towards a post-Covid-19 environment this must be seen as positive.

SHIPPING DIVIDEND There are also real prospects of a domestic shipping The Marine Insurer Nordic & Asia Special Edition | April 2021

dividend arising from President Biden’s well-known credentials on environmental matters.

One of his first acts as President was to reverse his predecessor’s decision to leave the Paris Accord on Climate Change, which the US has now re-joined. President Biden has previously articulated the role shipping has to play in his decarbonisation plan during his election campaign.

Membership of the UN’s International Maritime Organisation (IMO) as a Category ‘A’ Council Member gives the US a leadership opportunity that it has not really been exercising with any real authority.

This is expected to change, particularly as the IMO moves towards its stated goal of reducing emissions by 50% by 2050, allied with President Biden’s stated interest in shipping becoming greener.

WHAT COULD THIS MEAN IN REALITY? > Support for cleaner fuels such as Liquefied Natural Gas (LNG) and new methods of propulsion such as using fuel-cell technology to develop electrically powered ships (using hydrogen, ammonia for example); > Continued support for the development of the existing ports with a much greater emphasis on sustainability and accountability for measuring emissions; > Improving the immediate environment around ports; and, > Growing dependence on electrical power in all port activities.

The potentially big dividend for shipping, particularly but

MARINE | Political In association with Ed Broking

One of the first acts of the Biden administration was to reverse the previous administration’s decision to leave the Paris Accord on Climate Change, which the US has now re-joined.

President Biden has previously expressed the role shipping has to play in his decarbonisation plan during his election campaign.

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experience and the highly specialised vessels that will be required in some numbers to be able to realise the new President’s ambitions.

The jack-up Wind Turbine Installation vessels that are essential to these projects are in limited supply and in great demand. South Korea for example has announced their commitment to constructing what will be the world’s largest offshore wind farm.

Monaco headquartered and NYSE listed Scorpio Bulkers (now re-named ENETI) declared last August that it would quit the bulk carrier market, disposing of all its vessels to concentrate on the offshore wind market.

NEW ENTRANTS ENETI is reportedly seeking to build four specialised installation vessels in South Korea. I mention this extraordinary move to illustrate the attraction of this sector and the interest of new entrants to the market.

However, it should be noted that these will not strictly qualify as Jones Act ships.

There is no doubt that the US has the capacity to mobilise its work force and economy to mobilise a ship construction programme and to deliver the tonnage that will be necessary.

This will take time. For this reason, there may be a need for some pragmatism to access the right equipment and expertise in the initial phases of development.

Two Jones Act-compliant shipowners, Crowley and not exclusively domestically, is the development of Offshore Great Lakes Dredge and Dock, have recently made Wind Farms (OWF), an area where the US falls behind the EU. announcements about their intentions to participate.

In another early policy announcement, the President Crowley plans a logistical and project management launched his ‘Buy American’ initiative. This strengthens joint venture with established onshore wind operator existing legislation and creates new roles of responsibility Watco. Great Lakes has ordered what will be the first US and transparency within the new administration. flag, Jones Act-compliant inclined fall pipe sub-sea rock The order very specifically highlights installation vessel, a highly the importance of Jones Act shipping, and specialised key component for although not specifically included in the offshore wind construction Presidential Order the development of “Membership of the IMO as a Category projects. Great Lakes has also offshore renewable energy has been declared offshore wind to be a referenced in this context.

‘A’ Council Member gives the US a strategic growth area and has appointed a Head of Offshore Wind CLOSING LOOPHOLES leadership opportunity that it has not to lead its programme.

Promising to close existing loopholes, this Offshore wind is a rapidly is what some commentators have described really been exercising with any real growing sector and it is easy to as an “unprecedented” level of support and envisage perhaps decades of growth endorsement of the maritime sector within authority. This is expected to change, as the demands for sustainable clean the very early days of the new administraenergy seem likely to rise tion. This has been warmly welcomed by particularly as the IMO moves towards its exponentially. As well as the conboth the ship-owning and ship-building struction of new specialised units, communities in the US. stated goal of reducing emissions by 50%.” the demand could provide much On the face of it this is all great news needed employment for the for the domestic shipping community, and beleaguered OSV sector, as well as shipyards across the US. There is however a Stephen Barton, dredging and other support potential difficulty.

Ed Broking functions.

Currently the US does not have the The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Inspections and surveys In association with MatthewsDaniel

Back to the future The arrival of Covid-19 demanded a switch from physical vessel inspections to remote only using innovative new technology. This has brought some benefits and possible cost savings for all but Simon Ward, Director, MatthewsDaniel, argues that physical attendance by an experienced individual must remain the baseline of the system when possible Over time, the modern merchant fleet has been subject to an increasing number of ‘essential’ inspections and surveys. They range from statutory Class and Flag State inspections and surveys, through to specific insurer or charter party requirements.

These include the Offshore Vessel Inspection Database created by the Oil Companies International Marine Forum (OCIMF OVID) and the Common Marine Inspection Document produced by the International Marine Contractors Association (IMCA eCMID).

This in turn has led to a sense of dependence on these surveys from those who use the output as part of their management, safety and quality assurance systems.

However, the COVID-19 global pandemic has seriously impacted the ability to undertake such surveys over the last year.

For this reason service providers have increasingly been looking The Marine Insurer Nordic & Asia Special Edition | April 2021

to innovative solutions to satisfy inspection requirements because of the restricted travel and closed borders.

Without suspending these surveys and impacting the established assurance regimes and safety management systems on which they rely, the main solution has been the ‘remote survey’.

FALSE COMFORT? The question now seems to be ‘can a remote survey ever fully replace on board attendance as a means of delivering what is actually required from the inspection?’

Also, on the back of these ‘soft touch’ surveys and as consequence of them, is there a building level of risk that is currently masked by a sense of comfort that the survey box has been ticked digitally?

The fact that these surveys were ever required in the first place indicates that there was a value to them. The service providers trusted to deliver them are generally staffed by experienced mariners. These deck officers or marine engineers, or even naval architects with no seagoing experience use their experienced eyes, in conjunction with a well-defined scope of work, that identify any areas of concern.

A physical visit not only satisfies the objective elements of the survey but also provided subjective added value – first impressions at the top of the gangway or sensing the general atmosphere during attendance can tell an experienced surveyor a lot about a vessel.

The move to remote attendance has been a necessary shift because of global Covid-19 restrictions. Aside from the necessity of the change, there have also been additional benefits for the clients as well as the wider marine community.

Firstly, clients can now ‘take part’ in the survey via a suitably secure weblink. This gives service providers the opportunity to explain more fully, with the aid of live or recorded visuals, what lies behind key observations, often in real time.

MARINE | Inspections and surveys In association with MatthewsDaniel

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level of attendance, or where the Clearly the risk here is that clients attendance of a surveyor as an become focussed only on what is withindependent expert who can take in the in shot and being shown and loses the “A physical visit not only satisfies the whole picture is essential to an effective value provided by a surveyor delving deeper into what is not apparent on camera. objective elements of the survey but also outcome.

Remote surveys may form the basis of After all, the ability to undertake remote other, more discretionary, inspections surveys relies upon a suitably trusted agent provided subjective added value – first in the future. In fact, the need for more on board. The key questions are whether the activity can be truly independent if impressions at the top of the gangway or of them may emerge as charterers and shipbrokers realise that they can have that agent is an employee of the party some form of virtual inspection of a vessel being inspected and whether the natural sensing the general atmosphere during before committing to a contract. next step to this could simply be a Master’s However, the future landscape for Declaration that all is in order as per the attendance can tell an experienced vessel surveys is likely to be a blend of inspection scope? surveyor a lot about a vessel.’’ both approaches, with the end recipient of The other seductive benefit to remote the survey product deciding which form of surveys is the perception of a cost saving.

Simon Ward, attendance best delivers their required outWith no need to pay for attendance day MatthewsDaniel comes at the right cost. rates or expenses, then surely the service That all said, the maritime community is not emerging into can be delivered and management systems satisfied for less outlay? this brave new world from a solid baseline. The last 12 months The savings of remote surveys are perhaps overstated. They of Covid-19 restrictions have forced the shipping world into often require multiple professional surveyors watching remote survey solutions as a stop-gap measure. multiple video feeds for hours on end to cover what could be This is clearly less ideal than any sort of managed transition easily achieved in one attending surveyor in a single day. to a different way of conducting surveys and the reality is This may ultimately be cheaper than attending on site but that there are probably a whole host of issues that have gone these are perhaps marginal gains against the product a undetected in the meantime. charterer or Insurer may receive.

The consequence of this is a need to rebuild confidence of These limited fiscal gains can be further undermined when individual vessels in the short term through physical attenproblems or issues that are undetected because of the inherent dance by surveyors and inspectors before then determining limitations of remote attendance then manifest themselves later. the ideal blend of surveys moving forward.

The cost of incident recovery will always far outweigh the cost This process should also be informed by proper use of the of a survey before the potential reputational damage is taken plethora of survey reports that exist for many vessels as supinto account. porting evidence along with an understanding of the standards So, having touched upon the value-added elements of of the operator/management company. physical attendance and the potential limitations of remote The last 12 months have irrevocably changed many aspects surveys, there could be a conclusion drawn that they should be of life globally and shipping is no exception. avoided wherever possible.

Through sheer necessity the use of remote surveys has been accelerated.

But just because they have sufficed as a stop-gap PERFECT BLEND measure does not mean that they can or should fully replace However, that would falsely paint the debate over physical surveyor-based attendance. versus remote as a binary one. Remote surveys have existed It is clear that there is a need for both approaches going for a long time, but perhaps have been previously called forward but that new surveying landscape needs to be a ‘desk top review’. With the genie now firmly out of the approached with eyes wide open and a recognition of the relative bottle on remote attendance, the debate should instead be values of each. If this new approach to survey activity is to be focussed on how to blend the two approaches into a seen as wholly credible the maritime community needs to recognise modern methodology for vessel surveys. that the right baseline for the future has not yet been set.

There is unlikely to be a return to all surveys relying on The remote surveys of the last year have been a temporary physical attendance as this was never fully the case. But equally, solution borne out of necessity and therefore have not wholly remote solutions for surveys can only ever provide a necessarily been introduced from a solid foundation. A partial solution. sensible approach would seem to be a return to physical There are undoubtedly certain surveys and inspections that attendance as the baseline for any inspection and audit will need to remain firmly in the ‘attendance’ category because regimes before building a reliance on a new methodology. In of the importance of them being effectively conducted with the meantime we can only hope there are not an increasing independent oversight. number of skeletons lurking out of the camera’s eye that are Examples of such surveys may be specific Class, or Flag State currently being overlooked. inspections, with Port State Control unlikely to relinquish any The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Legal View In association with Quadrant Chambers

A question of cover The dispute arose out of the hijacking of the mv Polar in the Gulf of Aden by Somali pirates in October 2010 whilst it was performing a voyage from St Petersburg to Singapore.

The Marine Insurer Nordic & Asia Special Edition | April 2021

MARINE | Legal View In association with Quadrant Chambers

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Paul Toms, Quadrant Chambers, reviews the significance of a recent judgment that has important implications for whether the agreement by charterers to pay the insurance premium for any types of losses affects the liabilities of a bill of lading holder for losses that fall within the relevant insurance policy

transit the Gulf of Aden.

The vessel was released in August 2011 following the payment of a ransom of US$7.7m by Herculito. General average was declared and, in the usual way, cargo underwriters provided a general average guarantee and Gunvor a general average bond. An adjustment was issued pursuant to which US$4,829,393.22 was held to be the amount of Gunvor’s contribution to general average.

Under the terms of the charterparty referred to above, Herculito had procured war risks and K&R cover which indemnified them for the entirety of the ransom paid That claim was met with the defence that the charterparty provisions which required Clearlake to pay the insurance premiums for the war risks and K&R cover disentitled Herculito from claiming a contribution to general average from cargo interests under the charterparty.

This was because the insurance provisions were, in effect, a complete code ie an agreement that Herculito THE FACTS would only look to the underwriters (and not Clearlake) The dispute arose out of the hijacking of the mv Polar (in for any losses falling within the scope of the cover which the Gulf of Aden by Somali pirates in October 2010 while it had been paid for by Clearlake. was performing a voyage from St Petersburg to Singapore pursuant to a voyage charter (charterIt was further argued that those proparty) between Herculito and Clearlake visions were incorporated into the bills Shipping (Clearlake). of lading such that a claim could not Gunvor were the lawful holder of six be brought against Gunvor under the bills of lading issued in respect of the bills either.

“The tribunal also held that, even if the cargocarried on board. The bills provided that freight was payable as THE AWARD obligation to pay the extra insurance per the charterparty. The bills also conThe tribunal held that Gunvor’s tained general words of incorporation defence succeeded. It held that the premium was not incorporated into the bill which purported to incorporate “terms charterparty did set out a “code” for and conditions, liberties and exceptions” the losses resulting from the operation of lading contracts, that did not matter, of the charterparty. of on-voyage piracy risks in the Gulf The charterparty had the following of Aden area, namely that Clearlake “since we think all that matters is that the relevant clauses: agreed to pay the premiums for the • A clause which permitted Herculito relevant insurance policies and charter code involved an agreement by the not to continue the voyage or to Herculito agreed not to advance claims deviate; against Clearlake in respect of losses owners not to seek contribution for • A clause which obliged Clearlake to which fell within those insurance bear the expenses caused by the policies. piracy losses.’’ exercise of the liberties referred to The tribunal further held that the immediately above by Herculito and, obligation to pay extra insurance Paul Toms, • Clauses which required Clearlake premiums was incorporated into the Quadrant Chambers to pay for additional war risks and bill of lading contracts and, therefore, kidnap and ransom (K&R) insurance to the same “code” applied as between On Friday 4 December 2020, Sir Nigel Teare handed down judgment in Herculito Maritime Limited (Herculito) v Gunvor International BV (Gunvor), a s. 69 appeal from an arbitration award of Timothy Young QC, Dominic Kendrick QC and Simon Gault (the tribunal). Guy Blackwood QC of Quadrant Chambers appeared on behalf of Herculito, the successful appellant, instructed by Richard Neylon and Jenny Salmon at HFW. The case concerned two novels points of law: • Whether a war risks clause (or equivalent) in a charterparty was incorporated into a bill of lading by general words of incorporation; and, • Whether provisions concerning responsibility for the payment of insurance premiums in a charterparty could affect the obligation of a bill of lading holder to contribute to general average.

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Legal View In association with Quadrant Chambers

Herculito and Gunvor.

However, the tribunal also held that, even if the obligation to pay the extra insurance premium was not incorporated into the bill of lading contracts, that did not matter, “since we think all that matters is that the charter code involved an agreement by the owners not to seek contribution for piracy losses. It is not a case of incorporating a positive obligation on cargo but of an agreement by the owners excusing cargo from liability.”

THE JUDGMENT Sir Nigel Teare identified three principal issues which fell to be determined: • Were the charterparty provisions concerning the payment of insurance premiums incorporated into the bills of lading?; • Was the effect of the insurance provisions in the charterparty such as to prevent a claim being made by Herculito against Clearlake under the charterparty?; and, • Was the effect of the insurance provisions in the charterparty such as to prevent a claim being made by Herculito against Gunvor under the bills of lading?

Issue 1: Incorporation Sir Nigel Teare set out the well-established principles of incorporation of charter terms into a bill of lading contract supplemented with some additional observations found in the authorities.

In applying those principles, he held: 1. The words of incorporation in the bills of lading were wide enough to incorporate the relevant clauses from the charterparty (see paragraph 39).

2. The obligation to pay for additional war risks and K&R cover to transit the Gulf of Aden was directly germane to the carriage and delivery of the cargo under the bills of lading. This is because the bill of lading holders would expect the vessel to proceed on its voyage via the Gulf of Aden and would have understood that Herculito might have to take out such insurance (see paragraph 53).

3. That the key question on incorporation was whether it was appropriate to substitute the words “holder of the bill of lading” for “charterers” so as to make the bill of lading holders liable under the bill of lading contracts to pay the insurance premium.

4. He held that it was not appropriate to do so for two reasons. Firstly, the price to be paid by the bill of lading holder for the carriage of his cargo to Singapore was freight as per the charterparty. As such, the Judge held that “clear words would be required to impose … a liability not only to pay freight but also to pay the additional insurance premium as the price for the carriage of his cargo” and there were no such clear words. Secondly, The Marine Insurer Nordic & Asia Special Edition | April 2021

the bills of lading gave no indication as to what each bill of lading holder was to pay given that the additional premium was for the entire voyage and not on a per bill of lading basis. Given the lack of any wording in the bills addressing the precise liability of each of the holders or how the premiums were to be apportioned, that was “a further indication that the parties … did not intend that “charterer” should be substituted by “bill of lading holder”.

Issue 2: Did the insurance provisions prevent Herculito making a claim for cargo interests’ contribution to general average under the charterparty?

The Judge held by reference to the dicta of Lord Roskill in The Evia No. 2 [1983] AC 736 and the analysis of Longmore LJ in The Ocean Victory [2015] 1 Lloyd’s Rep 381 (with whose judgment the majority of the Supreme Court agreed) that if there was an agreement by a charterer to pay insurance premium, the usual construction would be that the charterer was exempt from liability to the shipowner under the charter for losses falling within the scope of the cover put in place at charterer’s expense.

The primary argument advanced by Herculito as to why that prima facie position should be displaced was that the claim advanced was not one of damages for breach of contract (as in The Evia No. 2 and The Ocean Victory) but rather a claim for payment of cargo interests’ contribution to general average.

The Judge agreed with the tribunal that this distinction was irrelevant. Indeed, the position of charterers might be thought to be stronger where the claim was not founded

MARINE | Legal View In association with Quadrant Chambers

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The Vessel was released in August 2011 following the payment of a ransom of US$7.7m by Herculito. General average was declared and, in the usual way, cargo underwriters provided a general average guarantee and Gunvor a general average bond. An adjustment was issued pursuant to which US$4,829,393.22 was held to be the amount of Gunvor’s contribution to general average.

on a breach of contract by them. The rationale in the other cases applied equally here, namely it would be a “remarkable result” if Clearlake was liable to pay for the insurance premiums and yet was still liable in respect of losses caused by the peril insured against.

The one particular factor of this case which gave the Judge cause for concern was that the implied carve out of responsibility to contribute to general average was one way.

Had cargo interests incurred general average expenditure or made a general average sacrifice, there would have been nothing to stop Clearlake under the charterparty from claiming Herculito’s contribution to that general average expenditure or losses despite the fact that cargo interests would invariably (and on the facts of this case) have procured their own insurance.

However, the Judge decided that it was significant that Clearlake had agreed to pay the premium for the insurance procured by Herculito and, by contrast, Herculito had not agreed to pay the premium for the insurance procured by cargo interests.

In other words, there was a good reason for concluding that the parties had in fact agreed that there was a one way liability for general average contributions under the charterparty.

Issue 3: Did the insurance provisions in the charterparty prevent Herculito making a claim for general average under the bills of lading against Gunvor?

As set out above, the Judge held that it was not a term of the bill of lading contracts that Gunvor was obliged to make

payment of the additional premiums for war risks and K&R cover.

It follows, therefore, that the code set out in the charterparty did not directly apply to the bill of lading contracts. As a result, it could not be said of the bill of lading holders “that they have paid the premiums not only for no benefit for themselves but without shedding any of their liability to contribute in general average in respect of losses caused by the additional insured perils”.

Despite this, Gunvor argued that no claim could be brought against them because the scheme of the charterparty was that the “insurance based solution was set up at no cost to the owners so that they could perform the contract of carriage and recover any resultant loss from underwriters”.

In other words, it was argued that the charterparty constituted an agreement or arrangement by which Herculito had accepted that it would not be able to claim contributions to general average arising out of losses falling within the scope of the insurance cover which had been set up at no cost to it.

Sir Nigel Teare held that The Evia No. 2 and Longmore LJ’s dicta in The Ocean Victory made clear that what mattered for a party to be taken to have agreed to look only to its underwriters to be compensated for a particular loss was an agreement that the contractual counterparty should pay for the relevant insurance premium.

In the absence of such an agreement, there were no words in the bill of lading contracts which established an “insurance code” or expressly stated that Herculito had agreed to look only to the underwriters. Moreover, since Gunvor had not agreed to pay for the premium, it would not be a “remarkable result” if it was held liable – in the usual way – for its contribution to general average.

In other words, Sir Nigel Teare held that the lack of incorporation of the obligation in the charterparty to make payment of the insurance premiums into the Bill of lading contracts was fatal to Gunvor’s defence.

CONCLUSION The judgment will be of interest to those in the shipping, insurance and commodities markets. Notwithstanding that there should be relatively few unresolved disputes arising out of the large number of vessels hijacked Somali pirates from the late 2000’s until 2012/2013, the judgment is of wider application, concerning as it does whether the agreement by charterers to pay the insurance premium for any types of losses affects the liabilities of a bill of lading holder in respect of losses falling within the relevant insurance policy.

The Marine Insurer Nordic & Asia Special Edition | April 2021

Nordics

www.marineinsurancenordics.com 4-6 May 2021

All times are in Central European Time (CET) Tuesday 4th May

Wednesday 5th May

13.00-13.05: Welcome Address 13.05-13.25: Keynote Address: Towards Zero Emission Shipping Presenter: Sveinung Rotevatn, Minister for Climate and Environment, Government of Norway 13.25-14.15: Panel Discussion: Sustainability – Keeping it Principled Moderator: Anders Johannsen, Managing Director - Norway AS, Edge Group Speakers: Helle Hammer, Managing Director, Cefor, Sturla Henriksen, Special Advisor, Oceans, United Nations Global Compact, Trude S. Husebo, Chief Human Resources Officer, Skuld, Rolf Thore Roppestad, Chief Executive Officer, Gard AS 14.15-14.40: Keynote Address: Crew Change Presenter: Harald Solberg, Chief Executive Officer, Norwegian Shipowners' Association 14.40-15.00: Networking Session 15.00-15.25: Keynote Address: Seafarer Fatigue Presenter: Casper Meland, Chief Executive Officer, Marine Benefits AS 15.25-15.40: Presentation: Trauma-Informed Interviewing and Crew Wellbeing in Marine Casualties Presenter: Dr. Rachel Glynn-Williams, Consultant Clinical Psychologist, Qwest Maritime/Recall Recover 15.40-16.25: Panel Discussion: Emerging Opportunities in Offshore Wind Moderator: Søren Lassen, Head of Offshore Wind Research, Energy Transition Practice, Wood Mackenzie Speakers: Michael Andrew, Senior Broker, Parisco AS, Radmil Kranda, Vice President, Head of Energy Underwriting, Gard AS, Bin Wang, Senior Underwriter, Norwegian Hull Club, Alexandra Koefoed, Chief Executive Officer, Fred Olsen Windcarrier 16.25-17.10: Panel Discussion: Autonomous Vessels – Out on Your Own Speakers: Jarle Fosen, Senior Loss Prevention Executive, Gard AS, Pia Meling, Vice President of Sales and Marketing, Masterly, Odd Magne Nesvåg, Technical Responsible - Ship Systems & Components Høvik, Maritime, DNV AS, Callum O’Brien, Underwriter, The Standard Club 16.25-17.10: Panel Discussion: Loss Prevention – Reducing the Costs Speakers: Simon Hodgkinson, Global Head of Loss Prevention, West of England P&I Club, Simon Ward, Director and Chief of Staff, MatthewsDaniel, Colin Gillespie, Director – Loss Prevention, North of England P&I Club.

Thursday 6th May

Presenter: Daniel Creasey, Managing Director, Cannon Events

13.05-13.35: Keynote Address: The Digital Underwriter – A Virtual Journey from Submissions to Portfolio Optimisation Presenter: Mark Phillips, Vice President, Head of Sales, Concirrus 13.35-14.30: Panel Discussion: Digitalisation – Propelled by Covid-19?

Moderator: Ole Noklegaard, Nordic Marine and Energy Practice Leader, Marsh JLT Specialty Speakers: Ole Jorgen Eikanger, Chief Business Development Officer, Norwegian Hull Club, Alem Jasarevic, Chief Operating Officer, Skuld, Christian Pritchard-Davies, Chief Financial Officer, Gard AS, Ronny Reppe, Chief Executive Officer and Co-Founder, Noria Group 14.30-15.00: Presentation: Why Specialty Insurance Needs to be a Connected Experience Presenter: Stefan Schrijnen, Chief Commercial Officer, Insurwave 15.00-15.30: Networking Session 15.30-15.50: Presentation: Diminishing Stability in an Ageing Fleet Presenter: Kevin Byers, Project Engineer, Envista Forensics 15.50-16.15: Presentation: NORMA Cyber – The Norwegian Approach to Cyber Security Presenter: Lars Benjamin Vold, Managing Director, NORMA Cyber 15.50-16.15: Presentation: Case Study – The Northguider Presenter: Robert Meijer, Manager – Projects, SMIT Salvage

13.05-14.00: Panel Discussion: Market Dynamics – Stability Paying Dividends Moderator: Demian Smith, Head of Mutual, Agency and Captive Re-insurance Solutions, Guy Carpenter Speakers: Lisbeth Christiansen, Head of Nordic Marine Claims, Codan, Dan Lenhammer, Managing Director, Nordic Marine Insurance, Jan Limnell, Director, Alandia, Anders Mjaaland, Managing Director, Bergvall Marine 14.00-14.30: Keynote Address: Global Trade Patterns - Cyclical Recovery and Structural Change Presenter: Thomas Holzheu,Chief Economist Americas, Swiss Re Institute 14.30-15.00: Networking Session 15.00-16.00: Panel Discussion: Geopolitics and Sanctions – Keeping the Right Side of The Law Moderator: Lasse Brautaset, Attorney, Nordsik Legal Services Speakers: Jason Waguespack, Director, Galloway, Johnson, Tompkins, Burr & Smith, Mark Church, Director (FD&D) and Head of Sustainability, North of England P&I Club, Gina Venezia, General Counsel, The Standard Club 16.00-17.00: Presentation Followed by Panel Discussion: VLSFO 2020 – Learning from the past, planning for the future.

16.15-17.00: Presentation: The CMA CGM LIBRA: Passage Planning, Unseaworthiness and Cargo Underwriters’ Liability (or Not) for General Average Expenditure Presenter: John Russell QC, Barrister, Quadrant Chambers 16.15-17.00: Panel Discussion: Ship Fires – Putting Out the Fire Speakers: Filip Svensson, Vice President Marine Operations, Wallenius Wilhelmsen, Mårten Sandblom, Regional Loss Control Manager, Marine Europe and CIS, AIG Robert E O’Connor, Managing Partner, Montgomery, McCracken, Walker & Rhoads LLP

17.00-18.00: Roundtable Sessions and End of Each Day

Nordics

4-6 May 2021

A brand new event, Marine Insurance Nordics will run virtually in 2021 from 4-6 May. Specifically designed to bring together all the key players in the marine insurance market from Norway, Sweden, Finland, Denmark and Iceland, it will feature a range of senior speakers discussing, debating and offering actionable insights into the issues affecting the region in 2021 and beyond.

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MARINE | Analytics In association with Noria Software

Adding value to business intelligence

We are all told that data is now king but the key question is how are you adding value to the data you share with your customers? How do you take raw numbers and shape them in a way that transforms data into actionable, valuable business intelligence?

Ronny Reppe, CEO of Noria Software, lists five ways to add value to the information that is shared with clients and stakeholders Gartner’s former head of research, Peter Sondergaard, once said the following about the importance of data analytics: “Information is the oil of the 21st century, and analytics is the combustion engine.”

In other words, there’s little point in stockpiling vast amounts of data if it cannot be used to drive your business forward.

In the insurance industry, data analytics is a value-adding process that enables better decision-making. Higher-quality information helps insurers provide a more exact price for expected claims, and (more importantly) can be leveraged to help prevent future claims.

Insurers can use data analytics to analyse historic claims, track the data flowing into the system through connected insurance (IoT), understand client risks, then provide customers with targeted advice on how to minimise or avoid future claims.

Providing data analytics to clients needn’t be a face-to-face The Marine Insurer Nordic & Asia Special Edition | April 2021

service or manual task. Instead, insurers can add real value by providing clients with actionable information in the form of self-service dashboards that enable them to make better-quality decisions.

Let’s dive in. Here are five ways companies can add value to the data they share with their clients.

> MAKE IT SELF-SERVICE A 2018 Deloitte paper on modern business intelligence spoke of the power of self-service: “As self-service analytics technology continues to put more power and responsibility into the hands of the business user…organisations can save time, resources, and better achieve mission effectiveness by harnessing the power of data to become modern, data-driven, insight-driven agencies,” it stated.

“Organizations [can] take advantage of mass amounts of existing and new information in vastly different ways than were previously possible, allowing users to ask and find

MARINE | Analytics In association with Noria Software

answers to any question, with any data, at any time,” continued the paper.

The question that needs to be asked is: Can your customers find the answers they need on-demand, at any time, from anywhere, and with any device? When designing your digital customer journey and self-service portal or dashboard, ask yourself if there are any areas where customers will still be forced to pick up the phone and call your organisation to request key information.

“Insurers can use data analytics to analyse historic claims, track the data flowing into the system through connected insurance (IoT), understand client risks, then provide customers with

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> (Push) Continuous real-time analytics. Alerts users or triggers notification as events take place.

Consider your customer’s needs when designing their digital journey.

Will they need analytics on-demand, or will they benefit more from an alert/notification set-up?

> PUT IT IN CONTEXT

Numbers are meaningless on their own. Data cannot be properly understood or acted upon if it is read targeted advice on how to minimise or in a vacuum.

How can you, as an insurer, provide > MAKE IT VISUAL avoid future claims.’’ your clients with context around the They say a picture tells a thousand data you give them? This may involve words. In a business environment Ronny Reppe, providing information on relevant where speed and efficiency are Noria Software current events that are impacting their paramount, making data rapidly portfolio such as the COVID-19 crisis, understandable through visualisation trade wars, or geopolitical risk. is more important than ever.

It may also involve the provision of benchmarks against An MIT (Massachusetts Institute of Technology) study the rest of your client body or on a wider scale against published in 2014 (In the blink of an eye) found that the global best-practice. human brain can process an image as fast as 13 milliseconds.

The most valuable context to provide is to show how the We are wired for visual information. Some 90% of the data relates to what the organisation is trying to achieve. information transmitted to the brain is visual, and humans This requires a step backwards and discussion with the can process images 60,000 times faster than text. customer as to why they need this data.

Add value for your customers by building dashboards that A 2018 McKinsey report (Analytics translator: The new represent key metrics visually using charts, graphs, must-have role) urges all companies to hire an “analytics infographics and other visualisations. translator” to provide the bridge between data and the Ensure they are customisable. Customers should be able to business context. convert a pie chart to a bar graph with a single click, or swap But, I would argue that, as the gatekeepers of data out a key dashboard metric without requiring IT improve the way business intelligence is made understandassistance. able and accessible, this fledgeling role should become With well-designed visualisations, customers should be unnecessary. able to find the information they need at a glance. But keep in mind that the graphic should be the tip of the iceberg. A a user should have easy access to the full data set if they need to dig > MAKE IT ACTIONABLE deeper.

The best indicator of data value is how easily it can be turned into actionable steps. But this can be a significant challenge. Research carried out by Bryan Hopkins, VP > MAKE IT REAL-TIME Principal Analayst at Forrester, found that while 74% When you’re driving at high speed along a busy highway, it’s of business leaders want their organisations to be “data no good if your speedometer is showing you how fast you driven”, only 29% say they are good at converting analytics were travelling yesterday. For an organisation to be more into action. responsive and agile in their decision-making, the Truly actionable data will give your customers the ability information that feeds those decisions must be 100% to seize new opportunities, course-correct on mistakes that real-time, not 24 hours old. have been made, drive process or performance improveDashboards should therefore be integrated with a data ments, and make higher-quality decisions. source that updates continuously with real-time information Do your organisation’s data dashboards help make it – not once per day, per week, or per month. clear for decision-makers what actions need to be taken?

Real-time data can be provided through a “fetch” or “push” Data can be made actionable by following the steps I’ve scenario. outlined above: Making it accessible on-demand, making > (Fetch) On-demand real-time analytics. Only delivers it visual, making it real-time, and putting it in context. results when triggered by a user query.

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Subrogation rights In association with Joseph Tan Jude Benny LLP

The Co-insurance quandary Murali Pany, (left) Managing Partner, and Samuel Lee, (right)Associate of Singapore-based law firm Joseph Tan Jude Benny LLP, examine two recent important English court cases that underline the importance of carefully considering what exactly insurance clauses are intended to achieve when agreed The economics of insurance have been reliant on the doctrine of subrogation which allows the insurer to sue the “guilty” party on behalf of the insured. Two recent English cases have highlighted situations where such rights of subrogation may be lost based on the terms of the contract between the insured and the “guilty party”.

THE OCEAN VICTORY [1] The first case took place in 2017 and involved the Ocean Victory[1],which was owned by Ocean Victory Maritime Inc and demise-chartered to a related company, Ocean Line Holdings Ltd. The demise charterer then sub chartered the vessel. Each charterparty in the chain contained a safe port warranty.

The vessel subsequently became a total loss caused by grounding. The hull insurers paid out and issued proceedings against the sub charterers (as assignees of the demise charters) on the grounds of breach of the safe port warranty.

The demise charterparty contained a co-insurance clause that required the demise charterers to keep the vessel insured against, The Ocean Victory became a total loss caused by grounding. The hull insurers paid out and issued proceedings against the sub charterers (as assignees of the demise charters) on the grounds of breach of the safe port warranty.

The Marine Insurer Nordic & Asia Special Edition | April 2021

inter alia, marine risk in the joint names of the demise charters and shipowners. Further, the shipowners were to approve such insurance.

The UK Supreme Court, in a narrow 3:2 majority, adopted the position that the “guilty” co-insured’s liability to pay damages was excluded by the terms of the co-insurance clause in the contract and that parties had agreed to look to the insurance funds as the sole recourse for any breach of the safe port warranty.

As such, the demise charterers, not being liable to the shipowners, had no claim to pass on to the sub charterers. The insurers of the demise charterers, as assignees, had no greater right and the same would have been true if the insurers had brought a subrogated claim against the sub charterers in the name of the demise charterers.

‘EXHAUSTIVE AVENUE’ Lord Clarke (speaking for the minority) was of the view that construing the co-insurance clause as an exhaustive avenue to make good any loss arising from a breach of the safe port warranty,

MARINE | Subrogation rights In association with Joseph Tan Jude Benny LLP

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would render the safe port warranty nugatory (of no value).

In contrast, Lord Toulson (speaking for the majority) took the position that the safe port warranty sets limits on the use of the vessel, whereas the co-insurance clause dealt with the consequences of breach. As such, the co-insurance clause did not render the safe port warranty pointless.

While much turned on the interpretation of the wording of the co-insurance clause, Lord Mance (speaking for the majority) also highlighted that the insurance was to be taken out in a fixed amount (US$70m). At the date of her total loss, the vessel was said to have been worth some US$15m more than that amount.

Lord Mance opined that it was implausible to suggest that, having developed a comprehensive insurance scheme (and having paid for it), the demise charterers would accept being potentially exposed to paying additional damages.

anism for apportionment of the insurance premium between the B/L holders.

The Judge held that since the cargo owners had not paid the insurance premium, there was no agreement between the shipowners and the cargo interests for the shipowners to look only to the insurance policy. As such, the cargo owners were liable to pay for their portion of the GA. However, the Judge went on to observe that, as between the shipowners and the charterers (who paid for the insurance), the shipowners’ insurers would prima facie have no right of subrogation against the charterers. However, the charterers were not involved as the claim was against cargo owners for GA. It is understood that permission to appeal to the English Court of Appeal had been granted.

THE POLAR [2]

The outcome of The Ocean Victory and the position taken by the cargo owners in The Polar (which was rejected by the English High Court) are departures from the general norm that insurance recoveries are ignored in the assessment of damages arising from a breach of duty.

That said, it appears that the impact of The Ocean Victory and The Polar may be quite limited.

The holding in The Polar was that the B/L holders could not take advantage of the insurance or the insurance clause in the charterparty as they did not pay the premiums. As such, the insurers (of the shipowners) could still claim against the B/L holders.

Whilst the outcome of The Ocean Victory was not beneficial to the insurers, both the minority and the majority Judges, took pains to highlight that there were other possible claims (such as bailment and/or the principle of transferred loss) on which a demise charter might be able to claim damages from a sub charterer. These other claims were not considered on appeal as the insurers did not argue these alternative claims in the Courts below.

Implicitly, the UK Supreme Court recognised that the sub-charterers should not be allowed to get off “scot-free”.

Whilst these other heads of claim will need to be elucidated in due course, it shows that the Court is cognizant of the need to preserve the right of insurers to claim against the party causing the loss.

Nonetheless, parties should be aware of the potential impact of co-insurance clauses and consider carefully what exactly they intend when agreeing to such clauses.

The second case in 2020 involved a time chartered vessel that was seized by pirates in the Gulf of Aden and released after a ransom of US$7.7m was paid. General average (“GA”) was declared, and a claim was made by the shipowners (the insurers through a subrogated claim) against the cargo owners.

The time charterparty included clauses that required specific insurance concerning piracy risk whilst transiting the Gulf of Aden to be paid for by the charterers. The bills of ladings (“B/ Ls”) contained incorporation clauses referring to the terms of the charterparty.

The cargo owners argued that the shipowners agreed to look solely to their insurance cover and not to their counterparties for general average.

We pause to observe that while the Judge found that the insurance clauses in the charterparty were incorporated in the B/Ls, he held that such incorporation did not have the effect of making the cargo owners liable for the additional insurance premiums (by way of manipulation or substitution of “charterer” with “B/L holder”). This was, inter alia, because there was no mech-

COMMENT

[1] Gard Marine and Energy Ltd v China National Chartering Co Ltd and another; China National Chartering Co Ltd v Gard Marine and Energy Ltd and another; Daiichi Chuo Kisen Kaisha v Gard Marine and Energy Ltd and another [2017] UKSC 35 (“The Ocean Victory”) [2] Herculito Maritime Limited and others v Gunvor International BV and others [2020] EWHC 3318 (“The Polar”) The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Climate change In association with UK P&I

The maritime industry is far more efficient than many alternative modes of transportation, accounting for just 3% of global emissions while carrying up to 95% of the UK’s international trade.

Patrick Ryan, Sustainability Director, UK P&I, reviews the huge challenges faced by the international shipping community posed by climate change, not least decarbonisation. Mr Ryan argues that true partnership is needed to rise to this challenge

Partnership time for shipowners and insurers Climate change is one of the most serious and complex challenges our planet faces today. This is a truly global issue that requires action at all levels of society. Every individual, business and industry, including shipping, has a part to play.

The precise mechanisms for the decarbonisation of shipping are still being worked out, both politically and technically. But, there should be no doubt that the shipping sector will need to cut its carbon emissions in line with the Paris Agreement’s climate change targets.

This will not be easy. The maritime industry is far more efficient than many alternative modes of transportation, accounting for just 3% of global emissions while carrying up to 95% of international trade but, many commentators anticipate that emissions from ships (which need to carry their energy source with them) will be harder to eliminate than some other emissions.

The International Maritime Organisation (IMO) set out its ambitions in its initial Greenhouse Gas (GHG) strategy in The Marine Insurer Nordic & Asia Special Edition | April 2021

2018. It targets a 40% reduction in CO2 intensity by 2030, a 70% reduction by 2050, and a 50% reduction in all GHG by 2050, all with reference to 2008 levels.

The regulatory architecture required to enforce or support these goals is still emerging. Although the specific regulatory requirements will have a great impact on how shipowners plan and carry out their operations, the scale of change needed is clear even without getting into the detail.

A combination of technical and operational solutions have already been explored and some good progress has been made.

By 2018, the carbon intensity of international shipping had fallen by 22% according to the fourth IMO Greenhouse Gas Study (2020). This was principally achieved by the widespread adoption of slow steaming[i].

The year 2030 is less than nine years away and, in the context of the life-cycle of a ship, there is very little time left to achieve the additional 18% reduction required by that date.

BRUTAL DECADE Common sense suggests that the easiest gains have been

MARINE | Climate change In association with UK P&I

achieved first, meaning further cuts in carbon intensity will become progressively more difficult. At the recent UK Chamber of Shipping Conference, industry experts referred to the next period in this process as “The Brutal Decade”, indicating the size of the challenge ahead.

There is, however, cause for optimism. Existing technologies such as the use of Liquefied Natural Gas (LNG) as bunkers are becoming more common.

New innovations, involving hydrogen, ammonia, fuel cells, wind technology, and even nuclear power, are being explored as part of the possible solution. As with any emerging technologies, however, there are significant questions about which solutions will be both practicable and commercially viable.

Some operators are beginning to see how various operational and technological measures might be aggregated in order to achieve the 2030 reduction targets.

But the situation is complicated by the long life-span of ships, which is often factored into the initial investment decisions. This means that long term targets cannot be ignored, even in the short term.

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and operators have confidence they have the protection of suitable insurance.

SUSTAINABLE COVER

For insurers like the UK Club, the challenge is to ensure that as the technologies and associated risks change, suitable insurance products are provided at sustainable prices.

Underwriting and claims handling services must be based on a proper understanding of the emerging risks and technologies. Insurers must also reflect seriously on the carbon emissions associated with their own operations and take suitable action to ensure their own impact is sustainable.

The issue of sustainability is of course much wider than decarbonisation alone. P&I clubs are primarily insurance providers, but, they offer more than mere risk transfer. Their ongoing efforts to prevent losses and minimise their impact will continue to grow in importance.

The UK Club has made “the human element” a particular focus in preventing such losses for some time. With thousands of seafarers unable to return GREEN SHIP home currently because of the pandemic, seafarers’ One can imagine, for example, a new ‘green’ ship ordered physical and mental health has never been more for delivery in the late 2020s which, through adoption of important. new technologies, can achieve a 50-60% reduction in carbon Whilst it will be for each and every person and intensity (well within the 2030 targets). business to take action to address the climate change By the end of a 20-25 year operating lifetime, however, emergency, there will need to be coordination and without significant further retrofitting and between those efforts, and on an unprecedented improvement, it will still be on the wrong side of the 2050 scale. targets.

The shipping industry plays a vital role within Additionally, it may not be possible to retrofit all of the many different parts of today’s interrelated world, technologies required to meet the carbon reductions target, meaning that synchronised cooperation will be meaning some vessels will need to be needed with the global energy, trade, retired before their planned time. and tourism sectors, to name but Quite apart from the commercial challenge this poses for shipowners “The International Maritime Organisation a few.

The challenges and opportunities and operators, it will likely increase presented by this need for collective the demand for sustainable ship recy(IMO) set out its ambitions in its initial action are great. cling. This is another area in which In this challenging, interconnected, the regulatory landscape is changGreenhouse Gas (GHG) strategy in 2018. and fast-changing world, the need ing and, with the Basel Convention already in place and the Hong Kong It targets a 40% reduction in CO2 intensity for a strong and supportive relationship between shipowners and Convention on the horizon, this will their insurers will be more important also require careful planning and by 2030, a 70% reduction by 2050, and a than ever. management.

The challenge for those who own 50% reduction in all GHG by 2050, all [i]Slow steaming refers to the practice and operate ships is both enormous whereby the operational speed of the and immediate. Major action is with reference to 2008 levels.” ship is reduced, effectively meaning the required now to meet the 2030 targets ship’s engine is not used at full power, and beyond. thus saving fuel, reducing CO2 and air Given the substantial investments Patrick Ryan, pollutant emissions. required in new technologies, it is more UK P&I important than ever that shipowners The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Containership fires In association with Envista

Rocking the boat Maritime risks have risen in the age of Covid-19 despite reduced global trade. Kenneth Millard, Managing Director – Denmark, Envista Forensics, explains why fires in particular have become a major problem and how critical it is to mitigate and assess the losses as quickly as possible

The maritime insurance industry has experienced relative stability in terms of insurance risk and claims volume compared to other lines of business, such as property or liability that can be drastically impacted by weather and other environmental factors.

However, over the last year, there has been a sudden surge in maritime accidents. This comes at a time when Covid-19 has introduced several new risks and is endangering long-term safety improvements for maritime stakeholders.

Whether it be new liability considerations, disruptions to maintenance or port inspections, or travel restrictions, the risks are abundant and evolving every day.

This analysis will focus on containership fires, how specifically COVID-19 has impacted the volume and severity of container fires and what maritime stakeholders need to know to navigate these complex incidents.

BY THE NUMBERS In February 2020, supply issues in China led to the first wave of “blank sailings”, leading to the withdrawal of 36% of Asia to Europe sailings and 28% of transpacific haul capacityi. By May 2020, as global lockdowns went into effect, 11% of the world’s container fleet was idle.

Despite reduced vessel use because of the pandemic, large fires on cargo vessels remain a serious problem and are on the riseii. Disruption of essential maintenance, lack of access to spare parts, and reduced or delayed surveys and port inspections pose risks such as unsafe practices and The Marine Insurer Nordic & Asia Special Edition | April 2021

undetected defective equipment.

These are all factors that lead to increased fire risk.

Additionally, decreased use can lead to mechanical issues with these vessels which can also lead to fires.

According to the Allianz 2019 Safety and Shipping Review, 13% of maritime claims, including total loss, are caused by fires and explosionsiii. In the US alone, containership fires account for over $500m annually.

WHY SO RISKY? The big question is, why are containership fires so risky?

Firstly, fires on board marine vessels can be hard to detect early and are extremely difficult to fight. If the burning container is stowed high and far from the lashing bridge, it can be challenging for firefighters to reach and extinguish.

According to HydroPen, a provider of fire suppression solutions, these fires happen, on average, every one-to-two months, and an average 25–30% of cargo claims costs are fire relatediv.

Additionally, the increase in size and complexity of containerships that the industry has experienced over the last decade is only intensifying the risks associated with container fires.

Cargo figures presented by the Organisation for Economic Co-operation and Development (OECD) suggest that the scale of modern 22,000 TEU vessels increases the risk of having a container fire onboard by a factor 4v.

So, whether it be the remote location of container ships while at sea or the size and scale of cargo being carried, container fires on board are inherently extremely dangerous and pose many risks.

MARINE | Containership fires In association with Envista

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operational risks.

Time is of the essence when it comes to mitigating equipment, system, or cargo damage from corrosion. It is important not to power on equipment that exhibits loss related contaminants. Prematurely powering on equipment contaminated with conductive matter can cause electrical short circuits, damaging systems that may not have sustained functional damage as a result of the fire incident.

Delaying damage assessment, even by hours or days, can have substantial negative impacts on the repairability of equipment and cargo, and often results in severe financial consequences.

ROOT CAUSE

FIRST RESPONSE

Following fires onboard containerships, it is also vitally important to identify the root cause of the incident. Whether to determine coverage, assign liability, or pursue subrogation, all impacted systems and equipment need to be fully evaluated.

Was the incident related to a faulty product or improper installation? Was there a service, inspection or maintenance issue? Answering these questions is paramount, and stakeholders should proactively engage experienced marine and fire investigation experts to conduct origin and cause investigations into where and what started the fire, and why and how certain systems or equipment caught fire.

When a containership fire starts, the first priority, and naturally the most important, is to stop the fire as quickly CONCLUSION and safely as possible to reduce the risk of loss of life or The last year has posed incredible challenges across many serious injury. The second priority is to prevent or remove industries, maritime included. While shipping levels have damage to the affected parts of the vessel, cargo, and/or decreased because of Covid-19 restrictions, the volume of equipment. incidents, including containership fires, has jumped. Idle vessels, The smoke that is released during a fire carries soot, delayed maintenance and inspections, and exhausted crews have which consists mostly of carbon as well as a range of other led to numerous catastrophic incidents around the globe. chemical compounds. These chemicals For marine stakeholders, the coming months are crucial to can be extremely corrosive and conducensuring the safety of marine vessel tive, depending on the composition of equipment and systems. Whether there the consumed matter. has been a fire incident or equipment and For instance, chlorine accounts for a systems need to be evaluated following “Fires on board marine vessels can be significant portion of polyvinyl extended lay-up periods, engineers and chloride (PVC) mass. Once consumed experts experienced with the maritime hard to detect early and are extremely by a fire, even small concentrations of industry should be consulted.

PVC byproduct are highly reactive and difficult to fight. If the burning container can cause corrosion. Already a major i https://link.springer.com/article/10.1057/ risk onboard containerships because of is stowed high and far from the lashing s41278-020-00180-5 ever-changing environmental ii https://www.agcs.allianz.com/news-andconditions, corrosion impacts to critical bridge, it can be challenging for fireinsights/expert-risk-articles/shipping-2020containership mechanical or electrical loss-trends-ro-ro.html systems can be catastrophic. fighters to reach and extinguish.’’ iii https://www.agcs.allianz.com/news-and-inFollowing a fire, it is critical that sights/news/safety-shipping-review-2019.htmtrained engineers and equipment l#:~:text=Safety%20%26%20Shipping%20 experts, experienced with marine vessels Kenneth Millard, Review%202019%3A%2046,of%20shipand their critical systems, fully evaluate ping%20incidents%20is%20stable Envista Forensics all impacted areas to assess the type and iv https://hydropenfire.com/ level of contamination and potential v https://www.oecd.org/ The Marine Insurer Nordic & Asia Special Edition | April 2021

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40

MARINE | Trade war In association with The American Club

Walking on hot coals Dimitris Seirinakis of the American Club analyses the significant impact of the Chinese ban on Australian coal for the maritime sector.

As ever, major international trade disputes can lead to complex implications for shipowners and their insurance partners By now, China’s ban on Australian coal announced at the end of last year will have pricked up the ears of even the most casual observer of the maritime industry.

The severity of the ban, however, cannot be exaggerated. Australia exports more to China than to its five next biggest markets combined1 and ships over 50% of its 170m ton metallurgical coal exports to China2. The trade is estimated to be worth some US$23bn.

Tens of ships are stuck off China’s coastline, threatening the delicate commercial relations between shipowners, their charterers, and the interests whose cargoes they carry. This is also the latest calamity to befall hundreds of crews, compounding The Marine Insurer Nordic & Asia Special Edition | April 2021

their already deteriorating mental and physical wellbeing caused by their prolonged stay on board because of Covid-19.

CAUSE OF THE DISPUTE In retrospect, the inevitability of what is now a full-blown trade war between China and Australia, should have been obvious as far back as May last year.

It was around that time that China’s ambassador to Australia, Cheng Jingye, warned the “Lucky Country” that it was treading on dangerous ground by pressing for an independent inquiry into the origins of the coronavirus. A reference to ordinary Chinese not wanting to “drink Australian wine, eat Australian beef” should have left the Australian authorities in no doubt as to China’s intentions.

By the end of May 2020, China had placed tariffs of over 80% on Australian barley and banned beef from Australia’s four biggest abattoirs. The abattoir ban alone blocked an estimated 35% of Australia’s exports of beef to China.

Australian barley growers send around half of their annual exports to China (US$393m). The tariffs all but killed the trade3.

It was, therefore, little surprise that, in October 2020, one of The American Club’s China-based Correspondents (Oasis P&I) reported of substantial delays to vessels carrying

MARINE | Trade war In association with The American Club

Australia exports more to China than to its five next biggest markets combined and ships over 50% of its 170m ton metallurgical coal exports to China . The trade is estimated to be worth some US$23bn.

Australian coal to China.

At that time, the delays in waiting for a discharge berth were ranging from 2 or 3 weeks up to 3 months. By the end of the year, there were reports of some vessels remaining at anchorage for more than 200 days.

Ostensibly, the delays were attributed to a strict interpretation by the customs authorities of import regulations and stricter enforcement of quota controls. It was also suggested that there was a weaker domestic demand for imported coal.

By the beginning of November 2020, the row was already six months old and escalating. It was understood that China’s Central Government had verbally communicated the ban to all Chinese state-owned and private traders. Those who could, diverted cargoes to India, Korea or Vietnam.

By the end of November 2020, when China had presented 14 grievances to the government of Australia4 setting out how Australia was “poisoning bilateral relations”, no rational observer would have hoped for a prompt resolution.

TIME AND VOYAGE CHARTERS Shipping has long learned to navigate geopolitical quagmires.

With rare exceptions, the industry is famously non-partisan when it comes to diplomatic quarrels, its sole interest here being who should bear the costs of a stuck vessel. A number of legal

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issues arise from the delays.

Under a time charter, owners seek assurances that they will continue to receive hire. After all, they have kept their side of the bargain – their vessels are available to perform the service required of them. Normally, the risk of delay lies with the charterers, but, if someone in a charterparty chain withholds payment of hire or freight (in the case of a voyage sub-charter) it has a domino effect.

Owners are usually permitted to suspend service pending payment of hire. But this is hardly a threat to charterers when the vessel is at an anchorage doing nothing.

The draconian measure of withdrawing the vessel from service and terminating the charter is, in theory, still available to owners. But this is severely blunted by the fact that owners owe separate obligations to the cargo receivers under bills of lading. The coal itself can be a useful bargaining chip, but, Chinese law only permits owners to exercise a lien over the cargo in rare circumstances.

Under a voyage charter, the owners are likely to have received most of their freight before arriving at the discharge port. If the vessel is delayed beyond an agreed period (laytime), owners are entitled to demurrage, essentially liquidated damages payable by charterers for breaching this agreed period.

The rate of demurrage is intended to estimate owners’ losses although it does not always reflect the vessel’s earning potential back in an open market. Nevertheless, huge amounts of demurrage can accumulate.

Laytime is triggered (and, subject to exceptions, runs out making its way for demurrage) when the vessel tenders a valid Notice of Readiness (NOR). Exceptions can also apply to demurrage. Congestion is not normally an exception.

Voyage charters can be “port” or “berth” charters. If it is a port charter, an NOR can be tendered at anchorage and the delays will be for the charterers’ account. If it is a berth charter and the vessel is delayed at anchorage, a valid NOR cannot be tendered and owners will have to bear the loss of time.

Could charterers look to plead a case of force majeure?

There is no such general doctrine under English law; it can only exist as an express clause in the charterparty.

Most likely, charterers will not be able to invoke a contractual force majeure clause. Such clauses require, among other stringent requirements, that the event in question is identified in the clause, that, at the time of fixing, the ban was not foreseeable, and that charterers could take no reasonable steps to mitigate the ban or its consequences. This is a very high bar to clear depending on the circumstances of the case.

An equivalent doctrine in common law, that of Frustration, is also unlikely to be of assistance. Broadly, it requires that performance of the charter has become impossible. There is currently still no clear policy by the Chinese government that prohibits Australian coal. The current ban is likely to be lifted and, as we will see below, it may have already eased.

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Trade war In association with The American Club

CARGO CONCERNS

million metric tons to 15.5 million metric tons in the same period5.

Russia is another source of coal but “Shipping has long learned to navigate cannot satisfy China’s appetite because of limited production capabilities. geopolitical quagmires. With rare Mongolia is also a benefactor of the row.

Bimco estimates shipments jumped exceptions, the industry is famously to 8 million metric tons in September from less than 2 million metric tons in non-partisan when it comes to the first month of last year6. An increase in overland coal volumes from Mongolia diplomatic quarrels, its sole interest or increase in China’s domestic here being who should bear the costs of production may hurt the demand for bulk carriers.

Overall, however, the effect of the a stuck vessel. A number of legal issues spat may ultimately be beneficial to shipping interests. arise from the delays.’’

China is looking further afield for its coal, importing from Colombia, usually Dimitris Seirinakis, only a backup, and South Africa after a The American Club long hiatus. Long-haul trade from Canada may also emit methane, a flammable gas. and the US has increased despite China’s relations with the two The water draining out of coal can be highly acidic and North American nations remaining decidedly frosty. may cause corrosion to a vessel’s uncoated metal surfaces North American coal, however, is tied up in long-term including its bilge systems. contracts and cannot match Australia’s volume and quality7 . At The provisions of the IMSBC Code are mandatory and the same time, Australian coal is travelling longer distances contain detailed requirements, in particular as they relate to India, Pakistan and the Middle East. to gas monitoring, ventilation and pH monitoring of a Even with a more diversified supply, it does not look like vessel’s bilges.

China can omit Australia. Already, some stranded cargoes are making their way to berths. This is good news for everyone, even if, as suggested, these are cargoes that arrived at China’s HUMAN ELEMENT shores before the ban came into effect. After all, there is no use Seafarers continue to be collateral damage in the diplomatic fanning up hot coals when you have to walk across them8. dispute. Many, as a result of Covid-19, have stayed onboard for longer than a year and as long as 20 months. Their already lengthy stay onboard has been exacerbated by the Author’s note: The intention of this article is to remind ban. On some occasions, they are unable to access medical readers of the origins and development of China’s ban on facilities ashore.

Australian coal and to highlight the implications for global trade.

The International Transport Workers’ Federation (ITF) has We have considered legal issues arising under both time and called on the two countries to put aside their dispute for the voyage charters, and considered cargo and crew issues common sake of averting a humanitarian disaster and on the industry to both types of charter. Any advice contained in the article is to dig into their pockets, sail to ports where crews can be for information purposes only. Readers who are directly affected disembarked, and carry out much-needed crew changes. by the delays are advised to seek legal advice and consult their MSC, one of the largest international shipping lines, has insurers. responded to the call by covering the costs and penalties necessary to do so. It is hoped others will follow, even if 1 China punishes Australia for promoting an inquiry into covid-19, The they are not as big.

Economist, 21 May 2020 2 China’s ban on Australian coal is blow for bulker Coal is a hazardous cargo within Group B of the International Maritime Solid Bulk Cargoes Code (IMSBC Code). The Code’s aim is to facilitate the safe stowage and shipment of solid bulk cargoes by providing information on the dangers associated with their shipment and instructions on the procedures to be adopted.

These significant and relatively unprecedented delays raise concerns about the effect they may have on the both the cargo itself and the safety of the vessel and its crew.

For example, coal cargoes are known to self-heat. The self-heating process causes carbon monoxide to be emitted.

It is an odourless and colourless gas, yet toxic when inhaled. Some types of coal

WHAT NEXT? According to shipowner association Bimco, China’s imports of Australian coal dropped from 7.8 million metric tons in January 2020 to 1.4 million metric tons in December 2020.

By contrast, coal imports from Indonesia rose from about 9 The Marine Insurer Nordic & Asia Special Edition | April 2021

owners, Lloyd’s List, 6 November 2020 3 See 1 above.

4 Could Australia’s government have handled China Better? The Economist, 28 November 2020 5 China-Australia dispute leaves coal carriers stranded, The Wall Street Journal, 19 January 2021. 6 Ibid.

7 China’s ban on Australian coal drives diversification, but can it fill the gap?

South China Morning Post, 17 January 2021. 8 Attributed to Bernard Malamud.

MARINE | Risks of LNG In association with Waves Group

Need to focus on ` risk of transfer Liquid natural gas (LNG) plays an important role in the global effort to reduce greenhouse gas emissions. Kenneth English, (left), LNG Specialist, Consultant Marine Engineer, Waves Group, and Paul Coates, (below) Fire Expert, Marine Fire and Hazmat Consultant, Waves Group, stress that the attendant handling requirements and hazards need to be taken very seriously and require investment

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Vessels will need to be aware of Isolated vapour pockets, as any significant change in stability can lead to a situation whereby the gas at the top of the tanks has no path to vent, this could increase pressure in the tank to the point of rupture.

In November 2020, the International Maritime Organisation (IMO) agreed the next stage in meeting their 2030 Green House Gas ambitions, allowing LNG to be the viable fuel to bridge the energy transition as the world moves towards a carbon free future. As operators embrace LNG as a fuel, it is imperative that the risks and hazards of handling and transferring LNG are fully understood.

LNG needs to be kept at below -162ºC to stay in liquid form and once allowed to warm up to a gas, it will expand by 600 times. LNG needs to be scrupulously handled when being transferred from ship to shore or vice versa and from ship to ship under routine operational conditions. If it is handled incorrectly flash fires, brittle fracture and tank ruptures can occur.

LNG bunkers are now available, or will soon be available, in all major hub ports. As LNG is introduced into mainstream shipping operations new risks and hazards will emerge.

CRYOGENIC TEMPERATURE To practicably transport LNG, it needs to be kept in a liquid The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Risks of LNG In association with Waves Group

state at -162ºC which requires a suitable low temperature steel containment unit. With the greatest risk of LNG leakage occurring during the transfer operation, it is essential that the operators have a robust procedure in place for the handling of LNG both as a cargo and as a fuel. It must be understood that any spillage to noncryogenic resistant steel will result in metal embrittlement and the risk of structural fractures. The effects of LNG on organic materials are no less damaging, with frostbite and cold burns being the result of LNG contact with skin.

HAZARDS Other credible risks that need to be recognised and addressed include the risk of fire and explosion.

Once this odourless gas escapes it will warm up and rise and this potential gas cloud will host the risk of both asphyxiation and ignition. Once ignited it will burn back to its source as a flash fire. If not extinguished and isolated at source, the leak can continue to emit and re-ignite upon contact of any ignition source.

Thankfully, as LNG warms it can be visible because of the low temperature gas freezing any water in the air creating a white cloud, this does however restrict visibility. Other hazards unique to this fuel include RPT, or Rapid Phase Transition, whereby LNG spills onto water, as the LNG warms it evolves gas at a steady rate to a point where the transformation increases rapidly, this gives rise to an over pressurisation of the gas similar to an explosion.

In more confined spaces such as a ship engine room any sustained leakage will result in a concentration build up. As the gas moves out of the immediate gas safe zone towards an ignition source, such as a light fitting or overheated pump bearing, then an explosion will result.

Early detection of any leakage is required. This will be in the form of integrated gas detectors and shut down systems that are able to isolate the LNG source whilst maintaining fuel to the engines and propulsion.

Should a fire occur, then dry powder is the most efficient method of extinguishing, however, this medium will also require supplementing with carbon dioxide systems, water curtains and an effective emergency response plan.

Evacuation must also initially be considered and covering sprays should be placed on surrounding structures. Any flames impinging on tanks can lead to a BLEVE (Boiling Liquid Expanding Vapour Explosion) if the tank insulation fails.

CONTAINMENT AND BOIL OFF GAS Keeping the LNG as a liquid (below -162ºC) requires suitable insulation and careful management of the vapour produced.

As the LNG warms because of interaction with its surrounding environment there will be an increase in temperature and the cargo will begin to boil. The boiling of The Marine Insurer Nordic & Asia Special Edition | April 2021

To practicably transport LNG, it needs to be kept in a liquid state at -162 ºC which requires a suitable low temperature steel containment unit.

the liquid will release gas. This boil off gas (BOG) will need to be managed or a resulting over pressurisation of the tank will lead to an inadvertent discharge.

To manage this excess pressure, the vessel must operate a gas management system that can use this gas, either by using it as fuel within the vessels propulsion plant, flaring it or reliquefying it back to the tank. The latter is inefficient for LNG because of the high-power consumption required for reliquefication.

To satisfactorily use LNG as a fuel, appropriate engine management will be paramount as part of the vessel’s integrated automation system. With the inherent risk of an explosive gas in a permeable area - careful maintenance and understanding of this system will be required. But it will not end there.

Most vessels will require an inert gas system to be installed capable of generating nitrogen to purge pipework and inert tanks when not in use. This requires more equipment, more maintenance, more cost and a greater potential for damage.

Engine maintenance will also need careful attention. Poor maintenance and engine combustion will lead to methane slip and a release of this greenhouse gas to atmosphere in the unburnt condition as it fails to ignite in the engines.

Levels of awareness and cooperation will also need to increase.

The vessel’s master will need to be mindful of the effects of navigation on the fuel and on the tanks as any increase in vessel movement will stir the tanks, liberating more gas and under certain conditions building up waves leading to sloshing tank damage.

BUNKERING Transferring cryogenic liquid between two floating vessels needs careful planning. This will be the most probable time to have

MARINE | Risks of LNG In association with Waves Group

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“Other credible risks which need to be a loss of containment. To mitigate this risk a careful plan and a ship/ship/shore compatibility survey or check will be required.

The operation will need to be completed in a suitable location, with a gas safe zone mitigating the risk to the local area. Emergency plans will require review and competent personnel will be required to oversee the operation.

Appropriate safe mooring and fendering arrangements and an emergency shut down system will be necessary to ensure no leakage occurs.

Operators will also need to understand the risks of cargo rollover, where two fuels of differing densities interact over time to produce a temperature inversion (the warmer fuel on the bottom of a containment tank flips over). This gives rise to a rapid surge in tank pressures and release of gas.

Class and shipyards have worked together to deliver the IMO expectations, but, once completed, operators will need a technical specialist to ensure that the vessels are maintained and kept operational.

The LNG industry has an impeccable safety record, but this has mainly been driven by project vessels with high investment. The International Code of Safety for Ships using Gases or other Low-flashpoint Fuels (IGF Code) has bridged the gap to make LNG more attainable to vessels than its platinum coated big brother the International Gas Carrier Code (IGC Code). The standard may have been adjusted, but, the risk remains the same.

With such a high safety record there have been few major incidents to date.

Collisions and damage are rare, but, that does not mean

recognised and addressed include the risk of fire and explosion. Once this odourless gas escapes it will warm up and rise, this potential gas cloud will host the risk of both asphyxiation and ignition.” they will not happen and when they do occur new problems arise. If the vessel experiences a stability error and should a vessel list or ‘tip’ to one side, it may find a new equilibrium (angle of loll). This higher angle would lead to isolated vapour pockets, when the gas at the top of the tanks has no path to vent, this could increase pressure in the tank to the point of rupture.

Other considerations include collisions and tank breaches, whereby a loss of containment into say, a ballast tank or double bottom, is likely to result in secondary breaches as pressure builds up elsewhere and cannot be relieved as the LNG warms and expands. This is assuming that the LNG does not freeze and plug the leak on contact with any moisture or water!

With new technology being driven by legislation, any operator will need to carefully consider the risks and potential outcomes. Should an incident occur there will be a need for LNG and Hazmat expertise to manage the situation to bring about the best possible outcome.

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Employee injury law In association with Galloway

Bridging the gap Jason Waguespack, Managing Director at leading US-based maritime law firm Galloway, explains the background leading up to an important recent decision that extends the liability of shipowners and their insurers to pilots under the Sieracki doctrine The United States affords maritime workers numerous statutory protections for employment-related injuries. The scope or basis of an individual worker’s protection depends on the worker’s employment classification.

Congress attempted to cover the full spectrum of maritime workers, ranging from blue-water seaman to land-based longshoremen, by enacting a patchwork of statutes that were intended to augment the general maritime law remedies.

The Jones Act, 46 U.S.C. § 30104, grants seamen a remedy against their employer for causes of action based on negligence, while the Longshore and Harbor Workers’ Compensation Act, 33 U.S.C. § 901 (“LHWCA”), covers landbased longshoremen. Seamen have additional remedies available under general maritime law, the federal body of common law developed by the courts.

ABSOLUTE DUTY A common and expansive maritime remedy is the doctrine of unseaworthiness. The doctrine holds that a shipowner has an absolute duty to provide a seaworthy vessel to certain workers onboard the vessel.

The test to determine whether a vessel is seaworthy is whether the vessel and its appurtenances are “reasonably fit for their intended use.” Mitchell v. Trawler Racer, Inc., 362 U.S. 539, 550 (1960). It is important to note that a shipowner’s liability for an unseaworthy vessel is not contingent on negligence; rather, it is a form of strict liability.

It was unclear whether a longshoreman could bring an The Marine Insurer Nordic & Asia Special Edition | April 2021

unseaworthiness claim against a vessel owner for many years. The Supreme Court resolved the uncertainty when it decided Seas Shipping Co. Inc. v. Sieracki, 328 U.S. 82 (1946), which held that longshoremen could sue vessel owners for unseaworthiness and that an employer-employee relationship was not required for an injured longshoreman to recover from a vessel owner. Longshoremen filing an unseaworthiness claim under this doctrine would come to be known as a “Sieracki seaman”.

Subsequently, in 1972, Congress amended the LHWCA, adding § 905(b), which in part mandated that no worker covered under the LHWCA could maintain an action for unseaworthiness against a vessel owner. This change effectively eliminated the unseaworthiness cause of action for longshoremen. Still § 905(b) allows an injured worker to bring a third-party claim against a vessel owner for negligence, but this requires the claimant to prove a vessel owner’s negligence, a more burdensome standard than the “warranty” of seaworthiness.

An additional requirement of § 905(a) states that to be covered by the LHWCA, an injured maritime worker must be the employee of someone. While this is a seemingly innocuous coverage requirement, it has an outsized effect of eliminating coverage for independent contractors. While Congress attempted to provide a statutory right of recovery for all maritime workers, courts have classified some workers as neither seamen nor longshoremen.

MARINE | Employee injury law In association with Galloway

Pilots are in the tenuous position where their injuries aboard a vessel are neither recoverable under the Jones Act nor the LHWCA. The United States Court of Appeals for the Fifth Circuit recently extended to pilots the ability to bring an unseaworthiness action against vessel owners.

UNIQUE POSITION Pilots occupy this unique position among maritime workers as they are neither seaman under the Jones Act nor longshoremen under the LHWCA. Pilots are typically self-employed independent contractors who are licensed by the state and belong to a pilot association. They are brought aboard vessels to navigate waterways where local knowledge is essential. A pilot association is not the pilot’s employer but instead acts as an agent for the pilots.

As pilots are independent contractors, they do not satisfy the employee requirement under § 905(b) and cannot recover under the LHWCA. Further, they do not qualify as a seaman because they do not have the requisite connection to a vessel that is “substantial in both duration and nature.” Bach v. Trident Shipping Co., 708 F. Supp. 772, 773 (E.D. La. 1998).

Pilots are in the tenuous position where their injuries aboard a vessel are neither recoverable under the Jones Act nor the LHWCA. The United States Court of Appeals for the Fifth Circuit recently extended to pilots the ability to bring an unseaworthiness action against vessel owners.

In Rivera v. Kirby Offshore Marine, L.L.C., 983 F.3d 811 (5th Cir. 2020), the Fifth Circuit held that a pilot could recover from the third-party vessel owner under a theory of unseaworthiness. Captain Rivera was a typical state-commissioned Branch Pilot for the Port Aransas Bar and Corpus Christi Bay in Texas. He piloted vessels through the Port

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Corpus Christi Ship Channel and the LaQuinta Channel.

In August 2016, Captain Rivera was brought aboard a vessel to pilot her to an oil buoy in the Corpus Christi Harbor.

Captain Rivera suffered injures while onboard the vessel.

SIERACKI DOCTRINE Captain Rivera filed suit against the vessel owner in the Southern District of Texas alleging, among other claims, unseaworthiness under the Sieracki doctrine and the vessel owner’s negligence under § 905(b) of the LHWCA. The trial court held that the vessel was unseaworthy under Sieracki and, in the alternative, the vessel owner was negligent under § 905(b).

The Fifth Circuit examined on appeal whether Captain Rivera was permitted to bring a § 905(b) claim because to do so, he would have to be considered an employee. Again, pilots are neither employees of their associations nor the vessel owners. They are instead generally regarded as independent contractors who work aboard vessels.

Because Captain Rivera was not an employee of any entity, he did not qualify for LHWCA protections. The court held that because he did not qualify for protection under the LHWCA, nor as a seaman under the Jones Act, he could instead pursue an unseaworthiness claim as a Sieracki seaman.

This decision expands the Sieracki seaman doctrine in the Fifth Circuit to pilots. Bluewater vessel owners and their insurer should be aware that pilots may be entitled to recover for an unseaworthiness claim against a vessel owner.

“Pilots are typically self-employed independent contractors who are licensed by the state and belong to a pilot association. They are brought aboard vessels to navigate waterways where local knowledge essential. A pilot association is not the pilot’s employer but instead acts as an agent for the pilots.’’

Jason Waguespack, Galloway The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Salvage In association with SMIT Salvage

Teamwork delivers the goods under extreme conditions Robert Meijer, SMIT Salvage’s Manager Projects, explains how co-operation and teamwork enabled the removal of the “Northguider”, one of the most northerly wrecks in the history of salvage In December of 2018 the 55-meter-long Norwegian shrimp trawler “Northguider” (above pic) ran aground in icy water on the rocks on Sparreneset in the Nordaustlandet nature reserve, a location in the Northern part of Svalbard (also known as Spitsbergen), only about a thousand kilometers south of the North Pole.

Helicopters picked up the 14 members of the crew from the vessel, which was listing about 20 degrees. It was possible The Marine Insurer Nordic & Asia Special Edition | April 2021

to safely remove the 300,000 liters of diesel on board in early 2019.

Officials wanted to have the wreck removed in order to restore the site of the nature reserve and for this task SMIT Salvage proposed an approach to remove the stranded vessel.

PRISTINE ENVIRONMENT After extensive discussions about the measures to mitigate further impact on the pristine environment, SMIT was awarded the contract for this great, albeit complicated, project.

The location is extremely difficult to reach and very inhospitable. In addition, the ship was listing severely. After the salvage plan had been approved by the Norwegian authorities, SMIT mobilised a floating sheerlegs vessel to right the “Northguider”, to repair the damaged starboard hull with patches in order to carry out a supported refloating operation.

Exceptionally challenging weather and ice conditions

MARINE | Salvage In association with SMIT Salvage

Left: The Northguider aground in icy water Above: Exceptionally challenging weather and ice conditions restricted the annual window for operations. In the beginning of July 2020, SMIT started the second removal campaign with the mobilisation of a fleet of nine vessels, ±40 salvage personnel and a range of equipment to the Arctic location.

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including polar bears, and the required polar code, under which assets have to adhere to and comply with when working/ sailing in polar regions, are just a some of the limitations that SMIT had to plan around.

Additional challenges, were found when the Covid-19 pandemic broke out and new safety protocols, regulations and restrictions had to be adhered to.

Successfully adapting to both the common and unique challenges, SMIT removed the wreck in approximately 50 pieces which were loaded on the barges and transported for disposal. A dive team removed the remaining materials from the seabed.

The operation was executed through good cooperation with Owners’ P&I Club (Gard) and the local authorities (NCA & Governor of Svalbard). The wreck was removed well ahead of schedule and the project is considered a success by all parties. As such, the armada of vessels was demobilized safely to their home ports, with the barges containing the wreck and debris sailing towards the location of safe disposal.

This project has been reported as the most Northern sizable wreck removal operation in records of salvage history.

“Managing the ice - both outside and inside the vessel - the presence of -magnificent but potentially dangerous

restricted the annual window for operations. The area is usually ice-free in August but the weather changed as the salvage operation was about the commence. The wind turned and ice floes forced SMIT to suspend the operation and demobilize temporarily.

In the beginning of July 2020, SMIT started the second removal campaign with the mobilisation of a fleet of nine vessels, ±40 salvage personnel and a range of equipment to the Arctic location.

HOSTILE LOCATION Besides the challenges associated directly to the wreck removal operations of the “Northguider”, it was also required for the SMIT to consider the challenges of working in one of the most hostile and remote locations on our planet.

Managing the ice - both outside and inside the vessel - the presence of -magnificent but potentially dangerous wildlife

wildlife including polar bears, and the required polar code, under which assets have to adhere to and comply with when working/sailing in polar regions, are just some of the limitations that SMIT had to plan around.’’

Robert Meijer , Smit

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Loss Prevention In association with Skuld

Listening is all Joe Maguire, Technical Manager, Skuld Loss Prevention and Technical Management, explains how a journey of listening and open mindedness leads to adaptive resilience in the critical area of loss prevention

Where does one start a journey? In this case at the end, which is the sea farm ‘Jostein Albert’ at 385 metres long and 59.5 meters wide it has a capacity of 10,000 tonnes of salmon.

The latest technologies and huge vessels which are more akin to a semi-submersible offshore unit than what would be considered a more conventional vessel or fish farm found in a fjord, are being deployed to farm these silver torpedoes.

So how can we translate our knowledge of ships and their role in the world to a ship like structure which floats but has a very different role to play in an ever evolving and innovative maritime industry?

An alternative question could be: what has this got to do with a bulk carrier and a department called Loss Prevention at a P&I Club? A fair question to raise.

Defining loss prevention is important because a popular search engine will tell you there are some 434,000,000 possible definitions! Narrowing that field, therefore, is a salient point.

The Marine Insurer Nordic & Asia Special Edition | April 2021

COLLABORATIVE WORKING To throw my hat into the ring of an already saturated pool of definitions: Loss Prevention is listening without prejudgment.

To be inquisitive and to understand without agreeing or disagreeing any given set of often dynamic and complex systems, which most often overlap into other complex and dynamic systems, working collaboratively to grow (operational) resilience.

The vast majority of the companies that I work with on a day to day basis are succeeding, growing and enjoying positive outcomes in the course of their business more often than they are not.

Understanding how and why this is the case often holds the key to both gaining a good relationship and building trust and then translating that into transparency and collaboration to increase resilience when or where a negative outcome occurs for a company.

It is self-evident that you need to know how a company succeeds before loss prevention can support any fine-tuning or

MARINE | Loss Prevention In association with Skuld

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passion which lies behind the development of a business or organisation.

Acknowledgement that the person talking to you is the expert in their company and how they work is paramount, and we firmly believe that there is knowledge to be gained from every level of the organisation.

Put simply, I have found it is the person actually doing the task who is normally best placed to tell me how to do the task.

Giving ownership to any process we engage with allows all members of the organisation to buy into our strategies and, by that, provides the most certain way of ensuring success.

This is the purest form of the definition of loss prevention: Becoming a valuable partner, an extension of the organisation who can be a reliable resource, by listening and then talking.

You have to acknowledge that in a typical loss prevention department there are a number of mariners with at least some relatable experience such as myself. But you don’t need to be a mariner to be curious about how something works and there are many different mariners all with different experiences, all contributing to the whole.

VALUABLE PARTNER

“Defining loss prevention is important because a popular search engine will tell you there are some 434,000,000 possible definitions! Narrowing that field, therefore, is a salient point.’’

Joe Maguire, Skuld evolution of their operation to reduce the frequency and/or the impact of negative outcomes.

I am confident of my years of experience across the sector. But I also believe that you cannot be a specialist in everything or have extensive knowledge of every element of the broad and diverse maritime industry and the companies that operate within it. Collaborative working and shared expertise is a crucial part of the development of successful working relationships and successful business across the sector.

Every organisation has its own story to tell and that story describes that company’s unique journey from inception to the present day. A key element of loss prevention is a willingness to listen to and understand that story and the

So, to the circumstance where a vessel or sector of the industry is so new that the configuration of the vessel, its complexity, its operation and even geographical location for that operation is new. How can loss prevention remain a valuable partner to improve resilience when what we encounter may exceed our relevant maritime experiences?

Hopefully the preceding paragraphs have gone some way to answering that, or at least give a perspective about one way of trying to do that. I am not planting my flag in the ground here saying this is the definitive answer to working in a rapidly changing industry; there are always other approaches, different perspectives, and desired outcomes.

This thinking has not, I hope, only helped support and benefit the organisations which I have worked with and will work with in the future, but it has also helped me grow as a professional and it has given me much satisfaction and enjoyment at the same time, somethig which really cannot be taken for granted.

Going back to the start seems appropriate at this point.

Perhaps to consider from a different perspective, what has a bulk carrier and a department called Loss Prevention got to do with an offshore aquaculture behemoth?

The philosophical answer is everything and nothing. By using existing personal knowledge and experiences, listening and with a genuine desire and humility to understand complex and interrelating systems from as many perspectives as you can, by talking about how things go well and the problems faced, solutions more often than not present themselves. The ultimate expression of understanding and support from an insurer is becoming a partner of these cutting-edge enterprises and to collaborate by protecting ocean industries together.

The Marine Insurer Nordic & Asia Special Edition | April 2021

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MARINE | Air pollution In association with West of England Insurance Services

Planning is key

Capt. Simon Hodgkinson, Global Head of Loss Prevention at West of England Insurance Services, says that planning is the key factor as the shipping industry rises to the challenges presented by new air pollution rules

The impact of nitrous and sulphur oxides on the health of crews and coastal communities is becoming an ever-more prominent matter for regulators and air pollution rules are becoming one of the fastest evolving areas in the maritime industry. This drive has been behind the creation of several landmark regulations in recent years, as well as the expansion of NOx (nitrogen oxides) Emissions Control Areas (ECAs).

ECAs were created by MARPOL Annex VI to govern emissions in specific high-impact areas, especially in coastal locations. These areas can cover Sox (sulfur oxides), NOx, and/or particulate matter, depending on the specific rules of the ECA. The North American and Caribbean Sea NOx ECAs came into effect in 2016, creating a roadmap for many pollution minded policymakers. These regulations impose different and progressively more stringent emissions to power output standards of vessels based on when they were built. They are split into three tiers; Tier I, covering ships built after 1 January 2000, Tier II, covering ships built after 1 January 2011, and, Tier III, covering ships built after 1 January 2016.

Since then, China has created two domestic ECAs, including one that regulates NOx emissions. These cover the Pearl River Delta, the Yangtze River Delta and the Bohai-Rim Area including Beijing, Tianjin and Hebei. Two additional NOx ECAs came into effect on 1 January this year, covering the North Sea and the Baltic Sea and enforcing the Tier III standard against ships built after 1 January 2016.

It is unlikely that these are the last that will be created.

The Marine Insurer Nordic & Asia Special Edition | April 2021

MARINE | Air pollution In association with West of England Insurance Services

Shipowners must be aware of these new regional rules, and ensure that they are in full compliance.

TIER III REGULATIONS Any qualifying vessel built after 2016 that passes through a NOx ECA requires an approved and working control systems such as a Selective Catalytic Reduction (SCR) to trade.

These SCR systems reduce the NOx content in the exhaust gasses of a ship’s engines by injecting a reducing agent into the exhaust system at a relatively low temperature. This injection causes a reaction between the NOx particles and the agent, creating harmless nitrogen and water.

This means that shipowners and crews need to stay up to date on the boundaries and classifications of ECAs, and that a vessel will need to turn on its SCR system when entering a restricted area.

Most SCRs use a solution of urea as the reducing agent, although it is possible to use the ammonia systems used by on-land systems that are used in many power generation operations. At the moment, urea has a distinct advantage because it is more stable and can be stored in normal atmospheric tanks.

Any compliant SCR will have received approval from flag states and classification societies for the engine that it is installed within to verify that it meets the regulatory pollution reduction standards for the ship engine in question.

Provided that no critical or listed parts in either the SCR or the engine are then modified, it should be as simple as turning the system on at the right time.

IMPLICATIONS FOR SHIPOWNERS ECAs have persistently represented geographic peculiarities for shipowners, and this is especially true for NOx ECAs. Ensuring that vessels comply with applicable regulations always requires planning, especially when new machinery was required, and regional differences exist in the rules.

On 1 January 2021, the Baltic Sea and North Sea became NOx ECAs in Europe. For some shipowners, SCR systems and Tier III compliance is becoming a new point of negotiation when concluding shipbuilding contracts.

This has pushed some shipowners to assign older tonnage to these areas to comply with the regulations, without requiring additional investment. Others have been tasked with either fitting a compliant system or finding new routes or owners for ships that currently arry out trade in the area.

INSURANCE PERSPECTIVE The fundamentals of NOx emissions regulation are simple. If your vessel is Tier III, it either must use a compliant system or not enter an ECA. SCR systems are generally very reliable, and

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measuring compliance is relatively simple.

However, logistics represents a real challenge. The reducing agent used within the system must be externally supplied, and the global urea supply chain is not as stable or extensive as many shipowners would like. Indeed, it isn’t regularly available in sufficient quantities in many global ports.

It can thus be difficult for shipowners and ship managers to ensure that urea tanks remain full, especially for ships operating tramping services on the spot market. Owners and managers must remain vigilant about regional or port-specific supply issues, and plan ahead to maintain a reliable supply.

Poor planning or mis-operation, however, are not exceptional circumstances, are not likely to be covered, and could lead, if not compliant, to the inability of a vessel to enter or trade in an ECA.

PLANNING EMPHASIS Thorough planning is critical for so much in shipping. This is especially true for NOx emissions regulations. Shipowners must ensure that they have the right systems for the geographic areas of their vessels, in good time. They must also think strategically about where their vessels are deployed.

For the foreseeable future, this extends to supply chains.

Confidently and reliably securing urea in the right quantities for vessels means understanding the ports that ships are sailing to, and the local market conditions. This is no easy task, especially if an owner has not yet built this administrative capacity.

“The fundamentals of NOx emissions regulation are simple. If your vessel is Tier III, it either must use a compliant system or not enter an ECA. SCR systems are generally very reliable, and measuring compliance is relatively simple.’’

Simon Hodgkinson, West of England Insurance Services

The Marine Insurer Nordic & Asia Special Edition | April 2021

Americas

1-3 June 2021

www.marineinsuranceamericas.com

All times are in Eastern Standard Time (EST) Tuesday 1st June

Wednesday 2nd June

Thursday 3rd June

10.00-10.55: Pre-Conference Focus Session: Cargo on Slow Turn to Profit?

Panelists: Rodrigo Amengual, Marine and Casualty Head - LatAm, Zurich Insurance, Bill Keogh, Senior Advisor, Concirrus, David Fowler, Divisional Vice President, Great American Group

10.00-11.00: Pre-Conference Focus Session: What’s in the Box? Panelists: Ian Lennard, President, National Cargo Bureau, Charlie McCammon, Vice President Risk Consulting, Willis Towers Watson, John Miklus, President, American Institute of Marine Underwriters

10.00-11.00: Pre-Conference Focus Session: A Fresh Wind Blowing Through?

Panelists: Ian Duthie, Director, North of England P&I Club, Dennis Smith, Vice President Global Marine and Energy Specialty, Guy Carpenter, Bin Wang, Senior Underwriter, Norwegian Hull Club,

10.55-11.00: Welcome Address: Daniel Creasey, Managing Director, Cannon Events

11.00-11.05: Welcome Address: Daniel Creasey, Managing Director, Cannon Events

11.00-11.05: Welcome Address: Daniel Creasey, Managing Director, Cannon Events

11.00-11.40: Keynote Address: The State of the Market and the Latest Trends in the Marine and Specialty Classes of Business Presenter: Jon Hancock, Chief Executive Officer - International General Insurance, American International Group, Inc.

11.05-12.00: Panel Discussion: Making Technology Pay Moderator: Matthew Yeshin, Managing Director Marine, Logistics and Transportation North America, Marsh JLT Specialty Panelists: Juan Carlos Martinez, Chief Executive Officer, Cargo Risk Corporation, Bill Keogh, Senior Advisor, Concirrus, Ronny Reppe, Chief Executive Officer, Noria Digital

11.45-12.45: Panel Discussion: Current Market Dynamics: Matching the Economics to the Risks Moderator: Michael Pellegrini, Managing Director, North American Practice Leader, Marsh JLT Specialty Panelists: Sean Dalton, Executive Vice President, Head of Marine North America, Munich Re, Michael McKenna, Chief Underwriting Officer Global Specialty, The Hartford, Brian Murphy, Senior Vice President, Berkley Offshore, Xavier Pazmiño, President, ALSUM 12.45-13.15: Networking Break 13.15-14.00: Panel Discussion: Covid-19: Impact Rippling Across Marine Market Panelists: Richard Max Adler, Key Client Broker and Chief Commercial Officer, Atlantic Insurance and Reinsurance Brokers, Michael Venturella, Practice Leader Marine Group, Envista Forensics 14.00-15.00: Roundtable Sessions and End of Day One

12.00-12.45: Panel Discussion: Cyber Criminals Looming Large Panelists: Elisabeth Case, Managing Director, Marsh JLT Specialty, Rob Dory, Chief Executive, Astaara, Lars Benjamin Vold, Managing Director, NORMA Cyber 12.45-13.15: Networking Break 13.15-14.15: Panel Discussion: Sustainability: How Green Can We Go? Panelists: Frank Gonyor, Senior Claims Advisor/Lawyer, Gard (North America) Inc., Mike Unger, Director, Britannia Americas P&I LLC, Peter Malinowski, Executive Director, Billion Oyster Project 14.15-15.00: Roundtable Sessions and End of Day Two

11.05-11.55: Panel Discussion: Catastrophe – A Stormy Outlook Panelists: William Cho, Head of Weather, MatthewsDaniel, Bill Lang, Chief Underwriting Officer, Starr Marine 11.55-12.45: Panel Discussion: Loss Prevention – Reducing the Numbers Panelists: John Dolan, Deputy Loss Prevention Director, The Standard Club Dr. William Moore, Global Loss Prevention Director, The American Club 12.45-13.15: Networking Break 13.15-13.45: One to One Discussion: International Group of P&I Clubs Participants: Martin Cook, Divisional Director Marine, Ed Broking, Paul Jennings, Chief Executive Officer, North of England P&I Club, Chairman, International Group of P&I Clubs, 13.45-14.30: Panel Discussion: Smuggling and Fines Moderator: Jason Waguespack, Partner, Galloway, Johnson, Tompkins, Burr & Smith Panelists: Claudia Botero-Gotz, Senior Lawyer, Gard, Ruby Hassan, Senior Claims Executive, Skuld, Leanne O’Loughlin, Regional Director Americas, Thomas Miller (Americas) Inc. 14.30-15.30: Panel Discussion: Social Inflation – Feeling the Pain, Fueling the Claim!

Moderator: Frederick W (Billy) Swaim III, Director, Partner, Galloway, Johnson, Tompkins, Burr & Smith Panelists: Tony Cowie, Senior Vice President, Head of Ocean Marine, Swiss Re America Corporation 14.30-15.30: Panel Discussion: The Underwriter of the Future Moderator: Maria Fernanda Alonso, Vice president, Swiss Re and President, Alsum Cargo Committee Panelists: Daniel Revilla, Regional Head Latin America and the Caribbean, Lloyd’s of London Axel Trauttenmiller, Aon Re 15.30-16.00: Roundtable Sessions and End of Conference

Americas

1-3 June 2021

A brand new event, Marine Insurance Americas will run virtually in 2021 from 1-3 June. Specifically designed to bring together all the key players in the marine insurance market, in the Americas the agenda will feature a range of senior speakers discussing, debating and offering actionable insights into the issues affecting the regions in 2021 and beyond.

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