Issue 19 - June 1997

UK CLUB NEWS is published by
Thomas Miller & Co

International House
26 Creechurch Lane
London EC3A 5BA

Tel +44 20 7283 4646
Fax +44 20 7283 5614

For and on behalf of the Managers of

The United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited
The United Kingdom Freight Demurrage and Defence Association Limited

Solvency ratio continues to strengthen

Growth in free reserves triggers reduction in 1995 policy year supplementary call

The Board has recently approved the accounts of the year ended 20 February 1997, which will be presented at the Annual General Meeting in October. The accounts show the Associations solvency margin standing at a record high. Underlying this development is a combination of better than expected investment income during the latter part of the financial year and a reduction in the estimated and forecast claims for past years. The Boards benchmark for free reserves was exceeded by a significant margin and, in response to this, the Board restricted the growth in funds by reducing the supplementary call for the 1995 policy year. Despite this move which left funds at 20 February 1997 at much the same level as the year before the reduction in the claims projections for past years has resulted in further growth in the free reserves, which now stand at $246 million without any allowance for investment income or the 1996 policy year supplementary call (which is still to be debited). If these factors are taken into account, the free reserves are $425 million out of total funds, including the estimated supplementary call, of £1.2 billion.

Discounted free reserves ($ millions)

Claims increases absorbed with confidence

Although claims projections overall have reduced, there is an upward trend in the claims in the more recent policy years. The strong financial position the result of forward planning following the Boards strategy review in 1992 means that this trend can be absorbed with confidence.

Total future funds ($ millions) including 1996 future supplementary call

An encouraging 1997 renewal

Tonnage and retained premium maintained, in spite of softer market conditions

The market conditions underlying the 1997 years renewal were very similar to last years in that most owners had yet again benefited from a soft commercial market. The other important factor affecting market sentiment was the considerable reduction in the cost of the International Group Pools excess of loss reinsurance contracts. The softness of the hull market and the large reduction in the cost of the reinsurance inevitably raised expectations of further reductions in the underlying cost of P&I.

Despite these pressures, the result of the renewal can be seen as satisfactory in both financial and tonnage terms. In financial terms, the new owned business contributed a net gain of $3.4 million in advance call premium income. Also, given the continuing improvement in most Members loss records over the last few years and the market atmosphere in which the renewal was conducted, the result is particularly encouraging as the Club has maintained its retained premium levels.

Tonnage up by 1 million

In terms of the net owned tonnage movement, the renewal was a considerable success with a net gain of just under a million gt. There is no doubt that there has been considerable support for the Club at this years renewal with important acquisitions from the US and Germany and further support from the Asia Pacific region. However, the Club has not increased its tonnage by compromising quality. During the 1996/97 policy year and at this year's renewal, the Club's Directors declined to renew over 600,000 tonnes as part of an ongoing strategy to ensure the quality of Members' tonnage in the Club. The Board has declined to renew over three and a half million tonnes since 1992.

Despite the pressures created by the soft market and increased competition between the Clubs, it was, perhaps, surprising that the renewal was relatively quiet overall, with no more than an average movement between Clubs of around 1-2%.

In summary, the Club has emerged from this renewal with its size maintained, its overall finances strengthened and the quality of its tonnage improved.

Obituary

Mr Masahiro Hojo died 17th April 1997 Mr Masahiro Hojo became the UK Club's first Representative when the Japan Branch was formed in 1989. He had formerly worked for the Association's correspondents, Inchcape P&I (originally Dodwell & Co) since the 1960s. Mr Hojo had retired from his position as UK Club Representative on 28th February 1997 and was succeeded as UK Club Representative by Mr Motohiro Sugiura. Mr Hojo had contributed greatly to the successful operation of the UK Club's Japan Branch and will be greatly missed.

New Club Offices in Beijing and Shanghai

In accordance with the Clubs plans to improve service to its Members, two new offices have opened in China this month. Details are as follows:

Shanghai: Thomas Miller & Co Ltd Suite 2704 China Merchants Tower 66 Lujiajui Road Pudong Shanghai 200120 Tel: +86 21 58871600 Fax: +86 21 58871675 Contact: Mr He Yufeng

Beijing: Thomas Miller & Co Ltd Suite 1528 Junefield Plaza Tower 1 Xuan Wu Men Wai Street Beijing Tel: +86 139 1166581 Fax: +86 10 65003818 Contact: Mr Han Bin

Members will have a new focal point in Shanghai

These offices will provide a focal point for liaison work with the Club's Members in China, with the Chinese government authorities and with the Club's claims handling correspondents, surveyors and lawyers. The Shanghai office will also be a point of contact for non-Chinese tonnage in the Port.

"Bolt-on" service to give extended cargo cover

New coverage options introduced in response to Members growing interest

The UK P&I Club has decided to offer extended cargo cover for items specifically excluded from normal P&I cover.

Members now have options to increase coverage under standard terms of carriage, deviation, claims payable at the discretion of directors, ad valorem bills of lading, rare and valuable cargo and owners property.

The UK Clubs Managers, Thomas Miller, have an advisory scale to help with rating but stress that fleets and vessels will be individually assessed according to owners requirements and other risk factors.

The limit for any one incident is US$10 million. If bills of lading are not produced, the limit is US$5 million. The UK P&I Club will not retain any portion of the risk. The new options will remain outside the established P&I arrangements. There will be no link with the International Groups pooling arrangements and excess reinsurance contract.

Nigel Brooks, a director of Thomas Miller P&I Ltd, said that the level of Members interest in covering cargo items excluded under the Rules had become sufficient for the Club to “create a bolt-on service”.

It means gearing up our underwriting and claims handling services for a new area of business. It is too early to say which owners, flags and ship types will be interested, although we certainly expect enquiries from the liner trades.

On-line and up-to-date

The Club's two electronic encyclopaedias will soon reach a wider audience

The Club has been working for some time on a project to enhance the amount of information available to Members. Two encyclopaedias, the Miller Encyclopaedia and the Environmental Encyclopaedia, aim to distribute useful information on a wide range of subjects including local legislation and environmental and safety issues. Pilot project The two databases are held electronically in Lotus Notes and are at present accessible to all Millers staff as well as to Members taking part in a pilot project. The information available in the encyclopaedias includes the following: Conventions (usually the full text) Signatories to Conventions Pollution/environmental information Legal information Cargo and stowage information Trading conditions Club publications Port information Travel information Loss prevention information Commentaries and articles from outside sources eg., lawyers newsletters Specialised information eg., crewing issues, indemnities, stowaway, wreck removal.

Two unique data sources The bulk of the information in the encyclopaedias is obtained from the Club's own publications, existing files, Internet websites, articles in the specialist media and lawyers newsletters. In addition, the Club's correspondents in the main maritime jurisdictions are providing specific legal and shipping information covering such subjects as the structure of the courts, limitation (ships, package and time), the procedure for exercising liens, the provision of guarantees and the like. Shipping information includes contacts within the local marine safety agency or port authority and the members of local shipping associations. Both Encyclopaedias are unique and should help keep both the Club and the Members up to date with local legislation. Although the Encyclopaedias can, at present, be accessed only by those with Lotus Notes and a modem, plans are underway to make them available through the Clubs Internet Website. This will enable Members to search the databases without proprietary software for the price of a call to their local Internet service provider.

The mariner's role in collecting evidence

Complimentary copies of new book and video on their way to Members

When claims are made the first step in their investigation is to establish the facts. Only when a clear picture of what happened has emerged can legal analysis be applied. However, the ability to demonstrate, to the satisfaction of the claimant or court, what actually happened depends crucially on the quantity of contemporaneous evidence.

New Edition

In 1989, the Nautical Institute published a book called “The Master's Role in Collecting Evidence”, which has since become a standard reference work. Since last year, a team from the Manager's Sunderland office has been participating in a project to revive and update the book. The resulting new edition is now being published, with a new title “The Mariner's Role in Collecting Evidence” to reflect its wider scope. A complimentary copy of the book, and of an explanatory video, will shortly be sent to each UK Club Member.

Guarantees for discretionary claims

Policy change leads to more helpful approach to Letters of Undertaking

For many owners the release of a ship from arrest by means of a Club Letter of Undertaking will turn out to be one of the most valuable side benefits of Club Membership. This service is provided not as of right, but as a privilege, and is available only if the owner has observed obligations of Membership such as timely payment of calls. It is a facility particularly appreciated at weekends and holidays when closed banks mean arrests can cause long and costly delays. Avoiding weekend delays Two kinds of detention can present special difficulties. First, there are arrests for matters outside the scope of P&I typical examples might include bunker accounts, stevedore charges, or freight disputes. Second, there are arrests for matters which, although usually within the scope of P&I, have occurred in circumstances which make cover subject to the Boards discretion for example, the cargo claim which arises out of a deviation, or arises from delivery without production of the bill of lading.

In 1996 the Directors reviewed their policy on matters outside the scope of P&I and agreed that, in appropriate cases, the Club's Letter of Undertaking might be made available on a short-term, secured basis. In this way a number of owners have been helped in avoiding delays over a weekend, before replacing the Club's letter by a bank guarantee as soon as banks have re-opened. Board agreement Discretionary claims could be dealt with in the same way, but a more helpful alternative is now available following a policy change agreed by the Board earlier this year. The result is that the Club's Letter of Undertaking can now be made available for discretionary claims in suitable cases, on terms that the owner undertakes to submit the claim to a meeting of the Board at the earliest opportunity and to provide substitute security or counter-security if the Boards decision is unfavourable.

Hong Kong Office warms up

Distinguished guests praise TSA venue on a perfect evening

On Thursday, 8th May at TSAs office on the 21st (top) floor of Centre Point we welcomed some of our friends from the Hong Kong shipping scene for an informal gathering. Invitations to help warm the office were sent to 45 companies including Members, insurance brokers, surveyors and law firms. The 80 guests, who included senior representatives from Associated Maritime, Clarkson (Asia), Cosco (Hong Kong), Fleet Management, Griffin (Asia), Noble Group and NYK Ship Management, made the most of the kind weather.

View from the ‘P’ deck

The party was held on TSA's ‘P’ deck the balcony on the top floor which runs the entire width of the building with an unrestricted and much envied view of Hong Kong harbour. With its polished teak tongue-and-groove decking, white walls and awnings, and custom-built teak bar, the flavour is distinctly marine. Rumour has it that Felix Pak used up the last of his four teak trees in laying the deck the subject of many conversations on the night!

On arrival, guests were shown through the main office (styled similarly to the London syndicates) where many a compliment was paid on the working space and decor. However, all the guests, without exception, voiced surprise and delight on being shown out onto the ‘P’ deck, and praise for the venue subsided only with the departure of the last guests at the end of the evening.

Local and London presence

TSA staff turned out in strength, and weight was added to their numbers by the presence in HK that day of visitors from the London office, including Jim Binner, Stephen James, Julian South and Hugo Wynn-Williams. Although promenading was not much in evidence on the day, the ‘P’ deck was pronounced a Perfect venue for such occasions, and it surely will not be long before the event is repeated.

As the ISM deadline looms ...

Many fleets are still dragging their feet on SMS preparation

Reports from IACS indicate that the rate at which fleets are becoming compliant with the ISM Code will continue to be a cause for concern, with many operators having left it to the last moment to start their preparations. For Members of the UK Club, help has been provided with mailings of successive editions of the ICS/ISF Guidelines on the Application of the ISM Code, advice from ship inspectors qualified as ISM Code Lead Assessors, and, earlier this year, the distribution of a model safety management system on disk, to provide examples to those unfamiliar with a structured SMS.

ISM Template

ISM Template, as the model system is called, has been generally well received, not only by Members embarking on the creation of an SMS, but also by those who have completed preparation of their SMS but welcome a source of ideas for its improvement. Its 930 or so pages contain a great deal of information, the compiling of which can be a much lengthier task on a piecemeal basis. ISM Template is now also being sold to third parties.

The Club holds a Software Conformity Certificate for ISM Template issued by Lloyds Register, certifying that it is in compliance with the ISM Code. However, this does not mean its use is an automatic passport to compliance. On the contrary, each owner must prepare and document a safety management system which reflects the particular way in which his company and ships are operated. ISM Template provides a helpful first step down what is a long road to full compliance.

Action on ISM is urgent

Members are recommended not to delay their preparatory work. The US Coastguard, European Commission, and parties to the Paris Memorandum on Port State Control have all recently indicated their intention to enforce compliance energetically.

Prestigious turn-out for Lagos reception

Nigerias maritime judiciary and shipping community attend en masse

The UK Club continued its hands-on position in West Africa by jointly hosting a reception in Lagos, Nigeria last December. The co-host was the Club's correspondent in Nigeria, Pandiship Limited, who have a major presence in Lagos with two offices comprising more than 30 staff, many of whom are ex-patriates. Mr Adrian Chamberlain from Pandiship's London office was in attendance.

Reputation for large claims

The UK Club recognises the need for diligence in claims handling and loss prevention in this area, and the role of the Club in helping shipowners who call there. The Club's service to its Members is therefore enhanced by regular monitoring of port conditions, correspondents, claims trends, stowaways etc.

Lagos (Apapa) is one of the most important ports in Africa although it also has a reputation for large claims and costly litigation. We were, therefore, honoured that the Chief Judge, Hon. Justice M. Belgore was able to attend the reception and was kind enough to give an after-dinner speech. Also in attendance were most of the senior Nigerian Maritime lawyers together with other lawyers in the marine field a total of about 25. In addition to this prestigious turn-out of the legal profession were representatives from the Nigerian Ports Authority, shipping agents and representatives, and the First Bank of Nigeria PLC. Mr Baiyekusi of the Federal Ministry of Internal Affairs also attended.

The occasion was a great success and we wish to express our thanks to all who attended. The UK P&I Club remains dedicated to enhancing its service and loss prevention measures in West Africa.

Chief Judge, Hon. Justice M. Belgore who attended the reception and gave an after-dinner speech

Are you ready for the new century?

Millennium-compliance is a burning issue but many businesses remain oblivious to the dangers

A set of time-bombs may be ticking away in the electronic equipment in your office or on board your ships. Imagine the scenario where your entire fleet is floating aimlessly on the 1st of January 2000 because of the malfunctioning of the navigational equipment and anti-collision radars.

Return to 1900?

The problem arises because many computer and microprocessor systems have been programmed using only the last two digits of the year number, ignoring the century. So, at midnight on 31 December 1999, they will switch, not to 1 January 2000, but to 1 January 1900, and start the 20th Century all over again. Although the subject has been much discussed in the technical press, recent surveys have shown that many businesses are still not aware of the problems which they could suffer.

The difficulties will not only affect computer hardware and software, but also equipment, such as refrigeration units in containers or anti-collision radars in bridge control panels, or any other items of equipment that contain microprocessors using date logic. Action should be taken now to ensure that your systems and equipment will be able to cope with the year change it will be too late in December 1999.

Project team

One of the Clubs Members has been addressing this issue and has drawn up a checklist for ship owners and operators. The first step recommended is to set up a project team, either under the direct control of a director or reporting to the board, to identify all areas which may be affected and work out appropriate remedies. You should not underestimate the amount of investigative and remedial work that needs to be done; computers and microprocessors can be found in the most unlikely pieces of equipment.

Action check-list

The project team should have as its priorities:

- to ensure that all new equipment is millennium-compliant
- to create an inventory of all current equipment which could be affected
- to identify for each of these pieces of equipment:

a. its basic descriptive data (make, model, supplier);
b. its interdependency with other equipment;
c. an appropriate test plan to determine whether it is millennium-compliant

Ask for proof!

If the item is not compliant, your project team will have to consider the nature of the potential failure, the implications (including areas such as financial and reputation risks, as well as safety of operations) and what can be done to rectify the situation. The team will also have to identify people to take responsibility for each area of remedial work. This includes obtaining proof from manufacturers that the system will adapt to the new century (written statements are not sufficient). You should also contact other companies on whom you rely for aspects of your operations, asking them for confirmation that their systems will comply.

Compliance audit

The Club has been working towards millennium-compliance for some time. All new hardware and software purchases are compliant. The database structures underlying the Club computer systems are being systematically checked and, if required, corrected, as are the computer programs themselves. A full-time senior appointment has been made to co-ordinate and manage the complete exercise. The audit will include not only computer systems but also ancillary devices, E-mail equipment, network servers, and even the date logic in spreadsheets.

Video promotes bulker safety

How to avoid the risks that make bulk carriers so vulnerable

Many Members have commented favourably on the first video in the Club's new series on cargo loss prevention, “Cargo Matters”, which was distributed in a variety of formats and languages during 1996.

With continuing concern in the industry about bulk carrier safety, it is appropriate and timely that the second video in the series should focus on preventing avoidable losses in the carriage of bulk cargoes.

Baltic Exchange launch

“Bulk Matters” was recently launched to an appreciative audience at the Baltic Exchange and complimentary copies will shortly be distributed to all bulk carrier and dry cargo ship operators in the Club.

The video reveals that:

• nearly half of major claims on UK Club bulk carriers stem from cargo damage
• dry bulk accounts for half of these, followed by steel and bagged bulk
• water causes most damage, often from leaking hatch covers
• structural failure is more prevalent in bulk carriers than in other ships

Nigel Carden, loss prevention director for the Club, explained: “Members familiar with our previous videos will know that they are designed not as promotional material but as serious tools for use by shipowners, and others, in maritime training programmes. The Club has always been more than just an insurer. If this video can help some Members to reduce their losses and improve service to their customers, it will achieve its aim.”

“If this video can help some Members to reduce their losses and improve service it will achieve its aim” - Nigel Carden, Loss Prevention Director

Making Contact 1997

The latest issue of Making Contact has just been published. More detailed than any of the previous issues, Making Contact 1997 includes photographs of all the staff of Thomas Miller P&I and the staff in Millers overseas offices who work on P&I business.

Copies of the brochure are sent to all the Clubs Members and their brokers and to many others who work closely with the Club including correspondents, lawyers and surveyors.