Issue 27 - Summer 2001

Excellent financial shape Instanbul report Frank Ledwith TRI-MEX

Ship inspection International Group Online services, SCOPIC Hill Harmony

Farewell, Mr. Coghlin

Terence Coghlin pictured in front of International House in London. (Photo courtesy of TradeWinds)

Mr. Kairis has described Mr. Coghlin as "the most respected and influential figure in the world of P&I management for the past 20 years. The shipping industry, which voted so strongly to preserve the mutual system through its clubs, owes him a great debt of gratitude."

The UK P&I Club's solvency position remained unchanged and is well above the target set by the Board as a fall in invested assets was counterbalanced by a reduction in the provision for outstanding claims.

The Club's investment activities did not escape unscathed from the worst year for a decade in equity markets. The overall return for the year was -0.3 per cent, compared with 7.8 per cent for the previous year. However, the six-year annualised return including the year under review was 7.3 per cent.

The UK Club has seen a significant fall in claims and more particularly a reduction in the provision for estimated and forecast, i.e. IBNR (incurred but not reported) claims. There has been a sharp fall in the claims on the 1999 policy year and there are early indications that the 2000 policy year claims will also be lower than previous years.

The UK Club's Report and Accounts for the year ending 20th February 2001, which were approved at the April board meeting in Bermuda, were published in July. The total funds of the UK Club stood at US$1,083 million, providing a free reserves figure of US$349 million after total undiscounted liabilities of US$734 million are taken into account.

In his Chairman's statement, Aleco Kairis said:-

"We have a Club in excellent financial shape, and this has been confirmed by the increased security rating accorded by Standard and Poor's. We foresee a period of steady consolidation based on the core values of services and financial strength."

The Club's AA- (stable) rating endorsed its "long-standing place in the highest level of security achieved by any P&I club." S&P's "stable" endorsement reflects their view that the rating is expected to remain at this new level for the next few years. The UK Club's reinsurance with the Swiss Re is designed to support the Club's solvency position without the need for unplanned supplementary calls or premiums.

For the 2001 policy year, the Club continues to have available these arrangements to fill any gap in excess of the cover provided by the conventional Pooling and reinsurance arrangements and by the Catastrophe reserve and its own overspill reinsurance. The Swiss Re reinsurance covers all outstanding claims in excess of a retention, designed to maintain the UK Club's free reserves within its target band. Taking all available reinsurances and Catastrophe reserve together, the Club could potentially meet its share of an overspill claim (of even more than US$ 4 billion) without making an overspill call.

The 2000 policy year is the first year of the new system of debiting premiums, whereby the mutual premium is payable in four equal instalments, three in the policy year itself and the fourth not later than December 2001. The current supplementary premium estimate is nil.

The UK Club's board meeting in Istanbul in July attracted a high attendance of 31 directors.

Investment considerations formed a major part of the agenda. Changes in investment policy were accepted by the board, following discussions of currency allocation ranges and limits to the proposed property and absolute return funds. The board considered the performance review report for the 2000 policy year produced by the WM Company and noted the latest position on investment return during the current year. The board agreed a proposal that the four investment report updates produced for the intermediate meetings between the chairman and deputy chairmen should be circulated to the full board, in addition to the reports made at the four board meetings per year.

The Strategy Working Group of directors and managers reported on a proposed revision to the free reserves target and on new product development. The free reserves proposal should be refined sufficiently for full consideration at the October board meeting. There was an interim report on the value for money project in respect of legal costs; an update on the Club's investment in the managers' holding company, Thomas Miller Holdings Limited; and a presentation of the Club's finances.

Following the annual review of underwriting, the board noted that mutual principles were being maintained with results showing underwriting fairness as between different categories of ships, and large and small fleets. The board's audit Committee reported on its review of the Club auditors' report on the managers' processes and systems. There were reports on the ship inspection programme, overdue calls, and claims of note being handled by the managers.

The board reviewed the surcharge on oil tankers trading with the United States. The managers were asked to press the International Group to agree to widening the contribution differential between SBT/double skin tankers and tankers pre-MARPOL.

The board also considered possible revisions to the Athens Convention on Passenger Liabilities, including proposals for compulsory insurance; progress on industry talks concerning possible revision to CLC oil pollution limits; the use of the SCOPIC clause in salvage contracts; and other issues under discussion in the International Group.

The board noted the candidates for election as directors by the members at the Annual General Meeting in October, and changes to the rules and bye-laws that would be proposed for the membership.

The 20th February 2001 renewal saw the Club achieving its premium targets. A general increase of 7.5 per cent in premium ratings had been ordered. In the event, an overall increase of five per cent was achieved in respect of fleets renewing. This was in line with the board's expectations, particularly as the market had only just begun to turn after four years of rate reductions.

Losses and gains at renewal more or less cancelled each other out but in the preceding year, mutually owned entries grew by just over three million tons. By 20th February, the Club's entered tonnage was 90 million gross tons. When added to approximately 15 million gross tons of chartered tonnage, the entered total exceeded 100 million gross tons. One-third of the vessels coming on risk during the year were new buildings.

The year was characterised by a decline in fixed premium competition. The UK Club's attractiveness has been enhanced by its reinsurance arrangements with the Swiss Re, designed to cover unexpected reduction in the Club's solvency margins. While a number of clubs had improved their Standard and Poor's financial strength ratings, only the UK Club and one other were judged to be AA-.

Because of the high cost of refrigerated cargo claims, the UK Club's loss prevention team has devoted the latest edition of Carefully to Carry to advice and recommended instructions for the carriage of frozen goods. It has been despatched to members.

The aim is to help shippers and carriers reassess their carriage instructions in general and to help improve the operation of refrigerated transport chains.

Mike Jarrett, currently Executive Vice President of Thomas Miller (Americas) Inc, succeeded Tom Bradshaw as President and Chief Executive Officer at the beginning of August.

After graduating in law, Mike worked with Hambros Bank in London and spent two years on the staff of the Law Courts. Joining Millers in 1980, he worked in the claims syndicate dealing with UK Club members in Scandinavia, Finland, the UK, Switzerland and North America. He managed the syndicate from 1986-1992, dealing particularly with members in North and South America and Germany.

In 1993, Mike moved to Millers in New York as part of the policy of regional-ising the UK Club's claims service. He has had particular responsibility for service delivery to members in North America.

Now an American citizen, Mike is a member of the US Maritime Law Association, the Canadian Maritime Law Association and the Connecticut Maritime Association, and an associate member of the Risk & Insurance Management Society.

The choice of Istanbul for the UK Club's board meeting in July reflected the growing importance of Turkish members to the Club.

Some 23 Turkish owners currently account for around 1,650,000 entered tons, spread across 131 vessels - just over 20 per cent of the Turkish merchant fleet and nearly two per cent of the Club total.

Members include Denak Depoculuk ve Nakliyecilik, Semih Sohtorik Management and Kiran Makina ve Gemi Sanayi-Turgut. The country's fleet is set to grow at over six per cent per annum.

Turkish members and others in the national shipping community attended a reception, hosted by Club Chairman Aleco Kairis. Mr Kairis has just been awarded the title of Honourable Archon of the Ecumenical Patriarchate in recognition of his work for his church on the Aegean island of Andros.

The title was bestowed by the Patriarch of the Orthodox Churches, His All Holiness The Ecumenical Patriarch Bartholomew in Istanbul. Before the ceremony, there was a private audience, attended by Mr and Mrs Kairis, UK P&I Club directors and Thomas Miller managers.

Following a successful 2001 renewal, UK Club Chairman Aleco Kairis wrote to members stressing the importance of the Club providing high standards of service - "the key differentiator of the mutual system."

Mr Kairis explained: "I hope we will be able to concentrate on strengthening and developing the service the Club provides. We shall build on existing work in loss prevention information and advice, the use of electronic communication and service delivery through the worldwide network of offices."

Mr. Kairis stressed the importance of service to North American members - mainly risk and insurance managers - at a dinner in Atlanta in May. The guests included representatives from Saltchuk, Fednav, Seastar, Crowley and Disney, who were in Atlanta attending the US Risk Managers' Conference.

The Club chairman was accompanied by a number of managers including Mike Jarrett, President and Chief Executive Officer of Thomas Miller (Americas). He said afterwards: "there were some searching questions about the role of P&I, the UK Club's reinsurance with Swiss Re and the high value placed by members on the Club claims and advisory network. There was a clear feeling that mutuality in general and the UK Club in particular would continue to provide properly funded marine insurance at a competitive price and complementary high quality loss prevention and advisory services."

Frank Ledwith, a former Miller's partner who spent his entire working life with the firm, has died aged 94. He joined Miller's in 1924 as a 17-year-old junior clerk and soon established himself as a leading light in P&I as the Club expanded under Dawson Miller.

After the Second World War, Frank travelled widely and built close relationships with many of the Club's correspondents while helping to develop the international membership. He always maintained a considerable caseload. One of the most notable was the Wagon Mound which went twice to the House of Lords. He helped found the Hellenic War Risks and Through Transport Clubs before retiring in 1973.

After he retired, he turned to authorship, producing Ships That Go Bump in the Night and Ships Afloat in the City, still regarded as standard reading for P&I executives.

Stephen James recalls: "For those of us who joined Millers in the mid to late sixties, he was a great influence as being in charge of training new executives. There are many who had good reason to be grateful to Frank.

"After retirement, he retained a close interest in Millers and the clubs. Almost to the end, it was worth sounding out his view on a thorny P&I or TT problem."

Terence Coghlin retired on July 20th after 36 years at Thomas Miller, having made an exceptional contribution to the UK P&I and Defence Clubs and to the marine P&I movement as a whole. An Oxford law graduate and barrister, Terence Coghlin joined Thos R Miller & Son in 1965. Early in his career, he specialised in handling all types of P&I and Defence Club disputes, except personal injury. He began to specialise in Japanese and Greek fleets and became the manager of syndicate S1.

In 1967, Terence paid his first visit to Japan and soon became the UK Club's chief representative in looking after a growing Japanese membership and dealing with many senior figures in the Japanese shipping industry. By the late 1960s, he was a regular visitor to the Soviet Union to help develop Club membership. Six years later, he was among the UK Club delegates invited to Beijing by the People's Insurance Company. By the end of an eventful trip involving a thorough immersion in the thoughts of Chairman Mao, the delegates managed to negotiate the entry of several COSCO tankers. Terence was instrumental in developing special seminars for shipowners from all over the world. Major claims involvements included the Delian Apollon oil spill at Tampa (1970), the Seawise University wreck removal (1972), the Tosa Maru, which exploded and sank in Singapore in 1975 and the Laconia (1977) which also involved the Defence Club. This landmark case focussed on the right of a shipowner to withdraw his ship from time charter if the charterer failed to make timely payment for hire.

He became a partner in Thos R Miller & Son in 1970. Widening management responsibilities at Miller's led to his participation in international matters. Terence spoke for the P&I clubs at the Comite Maritime International conference in 1981, urging recognition of the salvor's efforts in saving the environment even where no property was saved. The resultant draft convention, with changes, became the 1989 Salvage Convention.

He was elected senior partner of Thomas Miller and chairman of the International Group in 1991, holding the latter office for three years. He spoke on various issues before the European Commission and before Congressional committees in Washington on ship-owners' limitation rights, OPA and other legal issues. He helped defend the International Group Agreement when it was taken to task by the EC Competitions Directorate in 1984 and again in 1997. In both cases, he played a leading role among Club managers in negotiating with the Brussels authorities. He played a major part in gaining acceptance among Group clubs of the principle of limited liability.

Most recently, Terence has focused on modernising Miller's structure, which changed last year from partnership to private, employee-owned company. The creation of Thomas Miller Holdings Limited, of which he was first chairman, helped widen Miller's capital base. This has been reinforced by the UK Club's decision to provide Thomas Miller with a long-term loan convertible into a 10 per cent stake in the company in 2005. The aims are to continue enhancing the service to the UK, Defence, TT, International Transport Intermediaries, professional indemnity and other clubs and to develop innovative insurance and marine products and services through associated businesses.

He is an associate of Southampton University's Institute of Maritime Law, a member of the editorial board of Lloyd's Maritime & Commercial Law Quarterly and a series editor of Lloyd's Shipping Law Library.

Terence is co-author of Time Charters, a work of widely accepted authority, two editions of which have been published in Japanese. He is currently working on the fifth edition. He expects to continue to utilise his expertise in P&I and Defence as an arbitrator in maritime arbitration.

Terence met his wife Claire at Oxford. An all-round sportsman in his younger days, he retains an interest in narrow boats, golf and the fortunes of Arsenal Football Club.

Christopher Brown, formerly Claims Director for Gard, has brought his experience to the UK P&I Club by joining managers Thomas Miller on August 1st.

Mr Brown, 40, trained and qualified as a maritime lawyer in his native United States. A Norwegian speaker, he has been with Gard since 1989 and was stationed at their Hong Kong office after 1997. He leaves Norway for family reasons and is greatly looking forward to working for the world's largest P&I club.

Hugo Wynn-Williams, Chairman of Miller's International Division, said: "People of Christopher Brown's experience and ability are rarely available so we are delighted he has chosen to join us."

He will spend a year in Miller's London office before transferring to Thomas Miller (Asia Pacific) in Hong Kong as Claims Director for Asia, where he will focus particularly on China.

Herry Lawford, Chairman of Thomas Miller (Asia Pacific), added: "Christopher Brown is a well respected figure in the P&I world and will be a great asset to our clubs' business in the Asia Pacific region."

A major feature of Terence Coghlin's contribution to the UK Club, Thomas Miller and the P&I movement in general has been his capacity to look beyond the day-to-day aspects of Club and managers' business to consider future prospects and to influence and take the necessary decisions. This has entailed a continual focus on members, trends in the marine insurance market, management and working relationships.

Some carefully considered reflections are contained in Mutuality, the Club's recently published history.

Board and managers

On the relationship between board and managers, Mr Coghlin explains: "the managerial role is analogous to the role played by senior civil servants in the British government system. Decisions on major issues are taken by the ministers; in our case, the club's board of directors. The role of the senior civil servant is to advise on these major issues, to help his minister make a good decision, and thereafter to implement the decision. On minor matters, the civil servant does not trouble the minister but himself gets on with the daily routine. There is a distinction between points of principle in which directors should be deeply immersed and detailed day-to-day operation. There is no point in the board employing managers yet trying to do all that themselves. The board are very receptive and we do our best to advise them wisely on major issues. We will give our own opinion but we do not expect that it will necessarily carry the day. Nor are we offended if it does not."

Long-term vision

However, this approach needs to be based on an agreed direction for the Club. Mr Coghlin was a member of the high-level working group which looked into the Club's future in the early 1990s and has continued to keep its strategy under review ever since.

"The aim of the group was to identify a long-term vision of the Club and the strategies to achieve it. Whatever the recommendations, they had to have the approval of the full board. Nothing like this had ever happened before. The group's work would set the character and direction of the club into the next century and ensure that a shared goal existed for the board and the managers."

Personal service

A major feature of that character and direction has been the provision of customised personal service.

"Our future success in managing the UK Club will depend largely on our ability to tailor carefully what the club offers to individual needs. We have to make each member feel that the Club is exactly right for him, giving him precisely what he wants in the right way at the right time and in the right tone of voice. At the same time, we must not prejudice the central integrity of the Club. The core must remain constant but the periphery be adjusted to individual requirements."

Remaining effective

To accomplish this, Mr Coghlin believed it was necessary to "continually re-equip staff with the new attitudes, skills and knowledge they need to remain effective."

At Miller's, the aim had been to "refine and refresh our core competences, from addressing a board of directors to knowing about the Hamburg Rules. As people learn best in different ways, education has to be available in a variety of media."

TRI-MEX, the London-based leader in electronic freight security and Nokia, the world's leading mobile phone manufacturer, are linking up to combat mobile theft. They are engaged in a UK Home Office-sponsored project to tag consignments throughout the distribution process.

This involves the deployment of radio frequency identification technology to implant small silicon chips into pallets and cases. The chips will be linked with TRI-MEX satellite tracking systems and control centre to alert customers and law enforcement agencies when detailed distribution plans are disrupted.

Thomas Miller has invested in and provided board representation and management input to TRI-MEX International.

Strategic agreement

Earlier this year, Miller's and TRI-MEX concluded a strategic agreement to develop transportation telematics. This involves an innovative range of systems and services aimed at combating crime, enhancing operational speed and efficiency and maintaining transported products in prime condition.

Round the clock

TRI-MEX, an Anglo-Norwegian company founded in 1998, has a round -the-clock communications system with three key components: on-board tracking devices; communications through satellite, cellular and radio technology; and monitoring through a 24-hour control centre in Oslo. There are links with emergency response organisations, including law enforcement agencies across the UK and European mainland.

Location and security information for ships, barges, containers, trains, trucks and trailers has been extended to monitoring, assessing and managing the condition of perishable, hazardous and valuable cargoes - in near real time.

Miller's believe that TRI-MEX could make a major contribution to loss prevention activities for the UK Club and other Miller-managed mutual club members.

Thomas Miller Holdings shareholders, all current or former Miller employees, have accepted their board's recommen-dation that Stephen James should succeed Terence Coghlin as chairman. He will continue to work closely with Chief Executive Peter Donnellan, who is responsible for the overall direction of Miller's strategy and activities world-wide and leads the board of Thomas Miller & Co, which co-ordinates all Miller operations. Stephen will retain his P&I responsibities as Chairman of Thomas Miller Ltd.

The UK Club's Ship Inspection report for 2000 indicated high standards among vessels inspected at random and new entrants.

Of 523 vessels visited by the UK P&I Club's ship inspectors during 2000, some 97 per cent were up to the general standard required.

Some 279 ships (53 per cent) incurred no comments at all on their condition or operations. A further 226 (43 per cent) were offered suggestions for improve-ment, particularly in respect of service, maintenance and safety standards. However, the volume of comment was well down on 1999. Some 14 vessels (just over two per cent) required unscheduled full condition surveys to bring them up to scratch. Two have remained in breach of the Club's rules with cover consequently restricted, one has been declined renewal and the other scrapped.

These findings were revealed in the UK Club's 2000 Ship Inspection Report, which has been presented to directors.

The inspections took place in France, the Netherlands, Italy, the United Arab Emirates, the United Kingdom, the USA, Panama, India, Greece, South Korea, Japan, Taiwan and Singapore. Just over 30 per cent of visits were to bulk carriers, nearly 20 per cent to tankers, 13 per cent to container ships and 11 per cent to general cargo vessels. Other visits were spread between all major ship types.

The inspectors looked at cargo- worthiness, manning, pollution control, service and maintenance, safety standards and operational performance. The vast majority of vessels were rated as excellent with good systems or good with improvements suggested to enhance overall performance.

The most frequently issued suggestions related to:

• Watertight integrity of hatch covers
• Firefighting equipment
• Lifesaving appliances
• Engine room bilges
• Hatch cover packing
• Nautical publications
• Cargo hold access hatches
• Hatch cover securing devices
• Navigational charts
• External doors
• Engine room cleanliness/oil leakage
• Cargo hold bilge suctions
• Cargo hold transverse bulkheads.

Condition surveys help to maintain rigorous standards among the UK Club's entered vessels. Of 268 survey files opened in 2000, 72 per cent were a requirement for all ships more than ten years old. This stipulation stems from the late 1980s when a disproportionate number of claims were produced by structural failure among 10-14 year old vessels. Another eight per cent followed claims deficiencies and seven per cent ship inspectors' visits, while five per cent preceded reactivation of vessels after lengthy lay offs for modifications and repairs. Miscellaneous reasons covered the balance.

Repairs were recommended for 117 ships, 82 of which (70 per cent) were aged 15-24 years and between their third and fourth special surveys. Around 65 per cent of these vessels were bulk carriers (46) and general cargo ships (34). The remainder comprised 15 tankers, nine container ships, six reefers, four passenger ships, three ro-ros, two chemical carriers, one gas carrier and one specialist vessel. They were spread across 27 flag states.

Rise in PSC activity

The inspectors detected a general rise in Port State Control detentions across the globe, affecting all classification societies and all P&I clubs. UK Club members have found that PSC authorities have been concerned mainly with fire fighting and lifeboat equipment and with oily water separators.

The main detaining countries in 2000 were the USA, Italy, Canada, Germany, Australia, Japan, Belgium, Spain and the UK. According to UK Club Loss Prevention Manager Karl Lumbers: "The steady increase in detentions is worrying but is almost certainly due to the increasing activities of Port States and not to deteriorating quality among Club members. While the reasons for some detentions were understandable, in some cases they were inconsequential. However we cannot be complacent. The Club continues to maintain a dialogue with the authorities.

The Club's managers have taken initiatives to make better use of the huge fund of information on members' vessels built up from claims records over the year and 5,600 ship inspections over a decade.

A new analysis software is being introduced to allow data to be examined in greater detail; and to link with the Club's ClaimsTrac system to enable claims records to be brought to bear in the underwriting process. Moving averages and other indicative data by ship type, size, flag, age and ownership will provide easily accessible, up-to-the minute overviews of fleet quality, trends and benchmarks for future reference. The data should also be used to produce updated versions of the Ship Inspection and Human Factors publications and to monitor the impact of legislation and regulation, such as the ISM Code and STCW 95.

The ship condition report on newly entered vessels is being redesigned to make it more 'ship type' specific. Further, the Club aims to move away entirely from paper reports in favour of electronic transmission and storage of data. An internet-based electronic information transfer system would speed up reporting time, enabling the inspection department to receive pre-entry reports and photographs sooner; to store, retrieve and analyse them more easily; and to adapt them to events and circumstances. The Club hopes to trial these innovations shortly.

No other P&I club has an inspection programme on the scale of the UK Club's, which is aimed at helping owners and masters towards safe working practices, reducing the volume of claims and enhancing the overall quality of the fleet. With an annual target of over 500 visits, the Club's ship inspection department must keep its criteria for vessel selection under constant review.

The ship inspection team (left to right): David Powell, Chris Roberts, Gordon
Cummings, Les Hesketh, David Wright and Karl Lumbers

Inspections also relate closely to official requirements, such as Standards of Training and Certification of Watchkeeping and the International Safety Management Code. The inspectors are also keeping close tabs on Port State Control, pre-empting what the authorities are likely to pick up. They make a note of particularly demanding authorities and the areas on which they are focusing.

There are two key questions for an inspector:

• Is the ship acceptable by UK Club standards?
• Would the inspector sail on this ship without reservation under its present management?

Bases in Rotterdam and Houston are permanently manned. These two centres see as much shipping as anywhere in the world and are therefore prime locations for inspection activity. However, the inspectors have to follow the fleets.

There are grain carrying bulkers at Buenos Aires in February and at Seattle in October while Miami is suitable all year round for cruise ships. Reefers are generally inspected in Western Europe where so many unload. Durban, Newcastle (New South Wales) and Dampier (Western Australia), are favoured locations for bulker inspection. The UK Club's ship inspectors are former master mariners with great diversity of experience. All have held senior management positions with shipping operations and are qualified ISO 9000 and ISM lead auditors.

The inspectors take into account the general appearance of the vessel and broad considerations such as company policies and communications between ship and shore personnel. There is a particular focus on manning, officers' and crews' knowledge of the ship, bridge equipment and procedures, engine room and steering gear, safety, lifesaving and fire fighting factors, pollution, cargo/ballast system and mooring equipment.

Captain David Wright, the UK Club's longest serving ship inspector, explains: "We set out to get a feel for the vessel and the way it is operated. A tanker is quite different from a reefer, although many areas are obviously similar, such as the bridge and engine room.

"We walk around the deck and look into the cargo areas but do not carry out specific tests. We consider accommodation and put considerable store by living and working conditions and by diagrams and other information designed to improve best and safe practice. The language mix is important. If everyone is Chinese, that's fine for running the ship and dealing with officials and emergencies in most Asia Pacific ports. However, in American ports, a reasonable standard of English is required by the officers to deal with procedures and emergencies.

"We listen particularly carefully to masters' problems and offer various on-the-spot assistance, such as helping to draft marine protests. Many masters find difficulty in keeping up with the paperwork. They feel unfairly put upon. ISM, GMDSS and increased use of third party crewing companies have been responsible for significant paperwork in the past couple of years. So much falls back onto the master in the broad context of insufficient officers with insufficient training.

Awareness

"We are not trying to trip people up but to promote awareness among masters and crews. We are always looking at areas which could be improved. Sometimes, we see good ideas being put into practice and advise other ships to consider them."

After each visit, the inspectors write to the member outlining the findings and recommending remedial measures as appropriate. Captain Wright concludes: "Having inspected nearly 5,600 ships in the last ten years, the team has a unique overview of working practices among Club members. However, we cannot afford to be complacent about the problems even if we've seen nearly all of them before. Our whole approach is to assist the master, crew and member."

The International Group remains at the heart of P&I affairs. This article summarises its work and the issues it addresses.

The International Group of P&I Clubs arranges collective insurance and reinsurance for member clubs, represents the views of shipowners and charterer members on matters of concern to the shipping industry, and provides a forum for the exchange of information.

The Group is a voluntary, unincor-porated association, comprising the American, Britannia, Gard, Japan, London, North of England, Shipowners, Skuld, Standard, Steamship, Swedish, UK, and West of England Clubs. Together, these clubs insure over 90 per cent of the world's blue water tonnage.

Each club in the Group is an independent, non-profit making mutual insurance association, indemnifying its members in respect of third party liabilities. While full time managers deal with the day-to-day running of each club, elected boards of directors or committees take responsibility for each club's strategic and policy issues, including those which may be of concern to the Group as a whole.

Pooling and reinsurance

The International Group provides its member P&I clubs with essential support as insurers through two co-operative methods. First, it enables the pooling of common P&I risks by the clubs in a co-insurance. Second, it functions as a group identity through which the General Excess Loss Reinsurance can be purchased by member clubs.

The risks to be pooled, their allocation between clubs and criteria for settling claims equitably are set out formally in the Pooling Agreement. The Pool deals with claims against shipowners of between US$5 million and US$30 million, and those potential overspill claims arising in excess of the limit of the Group reinsurance.

The prime benefit of pooling is to reduce the fluctuation in costs caused by large claims by spreading their effect across a tonnage base encompassing over 90 per cent of the world merchant fleet. In contrast to a commercial insurance contract, the only cost of this security is that of the claims themselves. There is no profit element as no premium is paid into the Group in advance. Indeed, the Pool does not hold any funds, each club paying its share of a claim, when it has been settled, direct to the club upon which it has fallen.

The General Group Excess Loss Reinsurance is a market reinsurance contracted by the Group clubs for claims against shipowners in excess of the US$ 30 million Pool limit up to US$2.03 billion per claim. The reinsurance provides a lower limit of US$1 billion in respect of oil pollution, in common with the maximum limits offered by the Clubs. There are also lower limits for claims against charterers.

Group agreement

The International Group Agreement, commonly referred to as the "IGA", provides that for a period of one year an owner may not be insured by another Group club at a lower rate unless the competing club can demonstrate that the holding club's rate is unreasonably high.

The Agreement seeks to curb unrestricted undercutting of rates by clubs in favour of members who "shop around" for the lowest possible rate, while their risks remain pooled through the Group. Pooling between clubs that under-rated ships in such circumstances would undermine the trust and confidence necessary for the successful operation of the Pool, not least because a club's premium income is an element in the calculation formula for contributions towards pooled claims.

Perhaps the Group's greatest recent challenge has been that presented by the EC Competitions Directorate, whose suggestion that the International Group Agreement did not meet its competitive criteria was successfully rejected after a concerted effort in 1998.

Recent issues

The International Group provides an effective voice for P&I club members, particularly on new Conventions and on national and regional legislation affecting shipowners' and charterers' liabilities and their insurance. The Group is generally supportive of uniform treatment of marine liability issues by the international community.

As regulators seek to ensure ever higher standards of safety and ever greater financial security for those who suffer loss in maritime accidents, members look increasingly to their clubs for advice and assistance in these areas.

There is a steady liaison with inter-governmental bodies such as the International Maritime Organization, the United Nations Conference on Trade and Development and the Comite Maritime International, and with national governments. In recent years, topics have included:

• oil pollution at national and international level, such as OPA '90, the 1992 CLC and Fund Conventions and proposals prompted by the Erika spill
• development of the HNS Convention
• opposition to the Hamburg Rules and proposed revisions of US Cogsa
• participation in the CMI's work on transport law
• development of Lloyds' Open Form (LOF) 2000 and updating of the SCOPIC clause
• revisions to the Athens Convention on passenger claims
• drafting the Bunkers Convention

The Group provides individual clubs with a forum to exchange information about marine liabilities. This encompasses general issues such as oil pollution, stowaways and personal injury; the performance of club correspondents; problems at particular ports; and troublesome types of claim, such as difficult cargoes and industrial illnesses. Recently, the Group clubs have co-operated over the serious rise of incidents involving Chinese stowaways.

Pollution sub-committee

The pollution sub-committee has been particularly busy over the past year, dealing with proposals for change to the current oil pollution compensation regime in Europe, prompted by the Erika spill. Advised by the sub-committee, the Group has opposed the approach suggested by the EC of a distinctive European regime, instead supporting the notion that if any change is required it should be accomplished within the framework of the Convention system. In order to maintain the sharing between shipowners and cargo owners which exists under that system, the sub-committee has developed a proposal to volunteer an increased minimum limit under 1992 CLC for small ships. This would balance a proposed optional third tier of compensation funded by oil receivers. The proposal has been approved in principle by most P&I Club boards, although the details and an exact figure for the increase have still to be agreed.

Other matters which have occupied the sub-committee over the past twelve months have included the development of the Bunkers Convention and a number of pollution issues from the United States, particularly in relation to financial responsibility and contingency planning for non-tank vessels.

Bills of lading sub-committee

Despite its name, the bills of lading sub-committee deals with all aspects of the carriage of goods and is currently engaged in studying the CMI's work to develop a new maritime transport convention for UNCITRAL. The committee monitors the position adopted by other shipowners' organisations, such as ICS, Bimco, Intertanko, and Intercargo, and develops advice particularly in relation to issues that may have implications for liability or insurance.

One recent outcome of the committee's work was the new wording for the letters of indemnity used where cargo is delivered without presentation of a bill of lading or at a port other than that named in the bill. The new letters incorporate a 'join-in' wording for banks, drafted in consultation with the British Bankers Association. (See UK Club circular ref. 4/01, March 2001).

Other topics presently being addressed include the wording of guarantees and jurisdiction agreements.

Salvage sub-committee

An article on page 11 reports on the SCOPIC clause, developed by this sub-committee.

Ships' standards sub-committee

This body addresses matters of relevance to the quality of tonnage entered in the Clubs in the International Group, including club surveys, classification, and the general debate on sub-standard ships. The committee is represented on the Advisory Committee to the IACS Quality System, and liaises with the IACS Council. Over several years it has maintained contact with the European Commission's Maritime Safety Directorate, and has drafted Group papers on what measures exist in the Clubs to discourage sub-standard shipping, for submission to meetings and conferences in the Quality Shipping Campaign. These include club condition surveys, common rules on classification and statutory requirements, a common policy in relation to the ISM code, a wide variety of loss prevention initiatives, and an underwriting system which, through the IGA, does not permit the owner who incurs frequent losses to 'dump' his record at the expense of other owners. The committee also met last year with the International Commission on Shipping, to whom it provided similar information. The committee also receives reports from the Group's Ship Technical Committee, where representatives of Club survey departments liaise on matters of common interest.

The International Group's only full-time personnel are Lloyd Watkins, Secretary and Executive Officer, Hugh Hurst, Legal Assistant and their secretarial support. All other executive work is carried out by the Clubs through their managers or representatives.

Detailed work is done in specialist sub-committees and working groups to tackle issues of concern to shipowners - obtaining information, analysing and clarifying it and producing recommend-ations for club boards. The Reinsurance and Pollution sub-committees are particularly significant. Sub-committees often have three or four people but the Reinsurance sub-committee has a representative from every club. Each sub-committee elects a chairman, who reports to full meetings of Group managers which take place in February, June and November.

The Chairman of the International Group is a club manager who usually serves for three years. The present chairman is Stephen James of Thomas Miller. He was elected in November 2000 as the successor to George Greenwood of Steamship Mutual.

Miller managers representing the UK Club on Group sub-committees and working groups include:

• Jeremy Barrett - correspondents
• Nigel Carden - pollution; ships standards; ISM Code; bills of lading
• Graham Daines - salvage; pilotage
• Herry Lawford - guarantees
• Peregrine Massey - compulsory insurance
• Phil Nichols - personal injury; passenger liabilities
• Luke Readman - funding major claims; co-insurance
• Gordon Sharp - accounting standards
• Martin Turner - occupational disease
• Nick Whitear - Equasis
• Hugo Wynn-Williams - lGA; reinsurance and ship management

Demand for the UK Club's online services is rising fast. Since the end of 2000, the number of members and others registered on the epandi website has more than doubled to 800. This rate of increase appears to be continuing unabated as members discover the convenience of immediate access to information specific to their own entry and of wider Club, insurance and shipping interest.

For several years, the UK Club has been the acknowledged leader in providing electronic services to its members. It is continuing to improve their access to data and enhance their interaction with the Club. Some services are offered to brokers, correspondents and surveyors.

Most services are delivered by the Internet. However, some long established database systems, such as the Club's logistics claims handling system, developed for global container lines, are based on Lotus Notes.

At the heart of the Club's electronic services are two websites - one with public access at www.ukpandi.com and the other with access based on status (member, broker, correspondent, lawyer and surveyor) at www.epandi.com

www.ukpandi.com

As the most extensive site in the industry, www.ukpandi.com provides a range and depth of information which make it an early point of reference for the mutual industry in general and the UK P&I Club in particular. It features a general description of this publicly accessible site and a site map.

The aim of this website links with other areas of the site.

About P&I contains a history and explanation of P&I and the UK Club, the latter's workings, and names and photographs of the Club's directors. There is a description of the International Group with hotlinks to Group clubs' websites and a "plain language" description of the UK Club's rules.

Club events gives dates and venues of directors' meetings, news of recent seminars and a link to the Club's education section on www.epandi.com.

Links is one of the most extensive specialised links sections in the shipping industry, covering companies, ports, law, e-commerce, education and other matters. There are links to other clubs and businesses with which Miller's is connected.

Making Contact provides a full list of staff engaged in Miller's 13 offices worldwide, with photographs, biographies and contact details.

Emergency and out of hours response is available with contact details of all duty staff worldwide, updated weekly.

Loss Prevention includes recent issues of Loss Prevention News, Carefully to Carry and Loss Prevention Bulletins. It describes the Club's loss prevention activities and provides details of some publications.

Press releases contains a range of announcements dating from 1996.

Publications includes the full range of service leaflets describing particular UK Club services, full versions of the Rules (also in Japanese and Chinese) and simplified cartoon brochures of the risks covered by the Club. Current and past editions of UK Club News and Japan Branch News are found here.

Club images also contains weekly photographs of Millers' staff at work in the Club's offices round the world.

Guestbook allows visitors to leave comments about the site.

Technical enables Members to download essential software such as Adobe Acrobat. A running list of updates to the site also appears here.

www.epandi.com

The core of the Club's e-commerce services lies in www.epandi.com. This site delivers access to several of the Club's key databases and allows members, correspondents and others to access information direct from the Club's systems.

ClaimsTrac gives access to members' claims and underwriting records. It has been greatly welcomed by Members and their brokers. It allows up-to-the minute loss records, fleet lists and terms to be viewed and downloaded at any time. ClaimsTrac is under continual development and will evolve into a system which facilitates the management of the financial and underwriting relationship between Club and members.

Later in 2001, members will be able to access a "statement of account", showing what has been paid and credited to their own records, as well as giving details of future instalments of mutual premium, "contra" debits and the like. Members will be able to complete online application forms and declare ships taken on charter - currently a laborious process.

Next year, members and brokers will be able to print certificates of entry and other documentation such as blue cards. Swift accessibility of such documentation will become increasingly important in the light of compulsory insurance certification brought about by the Bunkers Convention.

The Miller Encyclopaedia and Environmental Encyclopaedia contain a wealth of specialised knowledge difficult to find elsewhere. They carry the text and articles of the major conventions and national laws, features on cargoes and commodities, legal articles and commentaries, and specialist information on a wide range of subjects.

The Environmental Encyclopaedia is unique to shipping and provides up-to-date information on pollution and environmental laws and regulations worldwide, particularly in the United States. It is maintained by Dr Chao Wu, the Club's environmental adviser, based at Thomas Miller (Americas) in New Jersey. It includes the Club's Analysis of Major Claims.

Searchable lists of the Club's entered ships and a database of Correspondents are always available and up-to-date. The Club also supplies ship entry details to the international database EQUASIS. For the correspondent network, the managers are working with other clubs in the International Group to create a single Internet-based system for the submission and payment of fees, speeding up a time consuming and laborious paper-based process.

An Internet directory focused on the transport industry complements the more specific links pages on ukpandi.com and is constantly updated.

Circulars are listed as is a separate Selected circulars of lasting relevance.

Directors services allows the UK Club directors access to agendas and minutes of their meetings and other policy material. Reports of directors' meetings are available to members.

Shipping News contains daily news headlines from Lloyd's List, available on email to members.

To obtain access to epandi.com:

• Go to the UK Club's main site at www.ukpandi.com and select "Online Services" from the menu on the left.
• Take the registration option which will present you with an online application form.
• Complete this fully and register. As personal contact with Miller's staff is an important part of the security and verification process, usual contacts should be included.
• Once registered, your user name and password will enable you to access systems from any computer.

In view of recent amendments to the Lloyd's Open Form contract, a revised Special Compensation P&I (SCOPIC) Clause has been produced. When SCOPIC was introduced in 1999, the UK Club circular 22/99 (November 1999) carried a recommendation that it be incorporated into all future LOF contracts, with an indication that the International Group, the ISU and UK property underwriters would review the effects of this change after two years.

The Lloyd's Form Working Party has since produced LOF 2000, a new version of the traditional salvage contract which contains only those provisions which relate to the services themselves and to the parties' rights and obligations. As the original SCOPIC clause referred specifically to the LOF 95, a revision has been produced earlier than anticipated in order to take account of the updated LOF 2000. This has provided the opportunity to introduce a number of changes to parts of the clause which were considered unclear.

Because of its potential importance to all shipowners, the UK Club has issued members with a new circular containing the revised SCOPIC clause and its supporting appendices. It also contains copies of the guidelines for Shipowners' Casualty Representatives, LOF 2000 and its subordinate provisions, and Lloyd's Procedural Rules.

SCOPIC can now apply to any LOF agreement which incorporates the provisions of Article 14 of the International Convention on Salvage 1989 and can be used with LOF 90, LOF 95 and LOF 2000. If a salvage is undertaken on the basis of an LOF agreement incorporating SCOPIC, the traditional Article 14 "safety net" will not apply, even if SCOPIC has not been invoked.

According to other changes and clarifying ammendments: