Circular 9/04: War Risks P&I Bio-Chem Cover and US Terrorism Risk Insurance Act 2002

  • Date: 19/03/2004


Circular Ref 4/04).

  • War risks P&I cover for crew risk and legal costs previously excluded under the Bio-Chem exclusion will now be provided.
  • The cover is subject to the Member’s usual deductibles and a limit of US$20 million per ship each event or occurrence and in the aggregate.
  • There is no additional premium.
  • The cover is described fully in the Supplementary Directors’ Resolution of 15th March 2004 accompanying this circular.


  • No immediate action required by Members, this circular is for information only.



At their meeting on 26th January 2004, the Directors decided that, if possible, the Association should provide supplementary cover to Members for P&I liabilities excluded from Members’ War Risks P&I cover by virtue of Bio-Chem exclusions (see

Most War Risk Hull and P&I policies issued since February 2003 include a Bio-Chem exclusion and will continue to do so for the foreseeable future. The 2004 War Risks P&I cover provided to Members pursuant to the Directors’ Resolution of 26th January 2004 for US$400 Million in excess of an entered vessel's proper hull value also contains a Bio-Chem exclusion with the result that most, if not all, Members have no cover for War P&I risks which are caused either directly or indirectly by a chemical, biological, bio-chemical, or electro-magnetic weapon, or by the use of any computer or computer system as a means for inflicting harm.

The International Group Clubs have agreed to pool “Bio-Chem claims” but only in respect of crew risks and of legal costs relating to all P&I liabilities that are otherwise excluded. The Association will retain the first US$5 million, with the US$15 million excess over US$5 million being pooled amongst the participants in the usual way.

The detailed terms and conditions of the cover are set out in the attached Directors’ Supplementary Resolution of 15th March 2004. The principal provisions are that:

(1) Cover will be from the ground-up (in excess of a Member's usual deductible), but limited to US$20 million any one event or occurrence (or series of occurrences arising from the same event) each vessel.

(2) The limit of cover (US$20 million) will apply to all interests for each vessel in aggregate regardless of the number of interests and regardless of whether or not they are entered in different P&I Clubs (e.g. Owners, charterers and sub-charterers).

(3) To avoid excessive aggregation of risk, cover will have a cancellation provision (24 hours notice) and areas of particular sensitivity may also be the subject of geographical exclusions (e.g. the area around Athens at the time of the Olympics).

(4) No additional premium will be charged for the cover.

TRIA Notices of Coverage

A portion of this cover and a portion of the War Risks P&I cover afforded to Members pursuant to the Directors’ Resolution of 26th January 2004 are provided in accordance with the requirements of the U.S. Terrorism Risk Insurance Act of 2002 (“the Act”) and give coverage for losses arising out of “acts of terrorism,” as defined in Section 102(1) of the Act. Cover for losses caused by certified “acts of terrorism” is partially reimbursed by the United States under a formula established by Federal Law. Under the formula, the United States pays 90% of covered terrorism losses exceeding the statutory established deductible paid by the insurance company providing the cover. Although no additional premium is charged for coverage for "acts of terrorism", a premium of US cents 0.25 per entered ton is deemed to be attributable to the US risk in accordance with the terms of the Act.

Yours faithfully





WHEREAS, in accordance with Rule 5E of the Association's Rules coverage for certain war and similar risks, including acts of terrorism, is excluded under the general mutual indemnity undertaking. Special cover is nevertheless provided for these same certain risks under the proviso to Rule 5E and the Directors’ Resolution of 26th January 2004; and

WHEREAS, the special War Risks P&I Cover provided to Members pursuant to the Directors’ Resolution of 26th January 2004 contains in Clause 4 a Chemical, Bio-chemical, Electromagnetic Weapons and Computer Virus exclusion; and

WHEREAS, the Directors have decided that the Association should provide supplementary cover to Members in respect of certain liabilities costs, losses and expenses excluded by the operation of this clause or by equivalent clauses in other war risks P&I policies.

IT IS NOW RESOLVED, that supplementary cover be provided to the Members with effect from 15th March 2004 at no additional premium on the terms and conditions and exclusions set out hereinafter:

1. The risks covered under this supplementary resolution are the Owner’s liability


(a) to pay damages, compensation, costs or expenses in consequence of personal injury to or illness or death of any Seaman (including repatriation and substitute expense, shipwreck unemployment indemnity and diversion expenses) as set out in Rule 2, Section 2, 3, 4, 5, 6, 7 of the Association's Rules

(b) for legal costs and expenses as set out in Rule 2, Section 25(B) of the Association's Rules incurred solely for the purpose of avoiding or minimising any liability or risk insured by the Association other than liabilities, costs, expenses, risks recoverable at the discretion of the Directors under Rule 2, Section 24 of the Association's Rules
to the extent that the such liabilities, damages, compensation, costs and expenses are not recoverable under the War Risk P&I Cover or any underlying war risks policies covering the same risks, solely by virtue of the operation of an exclusion of liabilities, costs, losses and expenses directly or indirectly caused by or contributed to by or arising from

(a) any chemical, biological, biochemical or electromagnetic weapon

(b) the use or operation, as a means for inflicting harm, of any computer, computer system, computer software programme, malicious code, computer virus or process or any other electronic system,
other than liabilities, costs, losses and expenses arising from

(i) explosives or the methods of the detonation or attachment thereof

(ii) the use of the entered ship or its cargo as a means for inflicting harm, unless such cargo is a chemical or bio-chemical weapon

(iii) the use of any computer, computer system or computer software programme or any other electronic system in the launch and/or guidance system and/or firing mechanism of any weapon or missile

2. Excluded areas

a. Unless and to the extent the Directors in their discretion otherwise decide, there shall be no recovery in respect of any liabilities, costs, losses and expenses directly or indirectly caused by or contributed to by or arising out of any event, accident or occurrence within the ports, places, zones or areas or during such period as are specified below:

The area bounded by the NW entrance to the Corinthian Canal, encompassing all of the Corinthian Canal and Saronikos Kolpos and the region bounded by a circle drawn 33 nautical miles from position 37 deg 54’N 023deg 51’E during the period from 0001 GMT 1st August 2004 to 2400 GMT 15th October 2004.

b. At any time or times before, or at the commencement of, or during the Policy year, the Directors may by notice to the Members change, vary, extend, add to or otherwise alter the ports, places, countries, zones and periods specified in Clause 2.a from a date and time specified by the Directors being not less than 24 hours from midnight on the day the notice is given.

3. Cancellation

Cover hereunder may by notice to the Member be cancelled by the Directors from a date and time specified by the Directors, being not less than 24 hours from midnight on the day notice of cancellation is given.

4. Limit of Liability

4.1. Subject to Clause 4.2 the limit of the liability of the Association under this supplementary cover in respect of all claims shall be in the aggregate US$20 million each ship any one accident or occurrence or series thereof arising from any one event.

4.2. In the event that there is more than one entry by any person for Bio-Chem cover as provided herein in respect of the same ship in the Association and/or any other insurer which participates in the Pooling Agreement, the aggregate recovery in respect of all liabilities, costs, losses and expenses arising under such entries shall not exceed the amount stipulated in Clause 4.1 and the liability of the Association under each such entry shall be limited to such proportion of that amount as the claims arising under the entry bear to the aggregate of all such claims recoverable from the Association and any such other insurer.

5. Deductible

Notwithstanding Clause 2 of the Directors’ Resolution of 26th January 2004, the deductible applying to this supplementary cover shall be the deductible applicable to the relevant risk as set out in the Rules and the Member’s individual Certificate of Entry or Endorsement.

6. Law and Practice

This cover is subject to English law and practice.

Dear Sirs

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