Circular 2/11: Special War Risks P&I Excess Cover and Bio-Chem Cover and US

War Risks P&I Excess Cover
At their meeting on 31st January 2011, the Directors reviewed the basis on which special war risks P&I cover could be made available to Members in accordance with the proviso to Rule 5E and determined that this cover should be made available to Members for the 2011 policy year in accordance with the terms of the attached Directors' Resolution of 31st January 2011.

The terms on which the War Risks P&I Excess Cover is provided remain the same as for the 2010 policy  year, including the limit of cover of US$500 million. As for the 2010 policy year, the cover will only respond to claims in excess of the proper value of the entered ship as defined in Rule 5D or whatever sum is recoverable from war risk underwriters, whichever is the greater.

Bio-Chem Cover
The Directors also decided to provide cover for "Bio-Chem" claims in respect of crew risks and legal costs relating to all P&I liabilities that are excluded from the War Risks P&I Excess Cover by virtue of the "Bio-Chem" exclusion, on the same terms as for the 2010 policy year, including the limit of this cover which is US$30 million.

Claims on this cover will again be pooled with the International Group clubs in excess of the club retention of US$8 million.

The detailed terms and conditions of the cover are set out in the attached Supplementary Directors' Resolution of 31st January 2011. 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$30 million any one accident or occurrence or series of accidents or occurrences arising from one event each vessel.

2) The limit of cover (US$30 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).

4) Areas of particular sensitivity may be excluded from the cover by the decision of the Directors.

5) No additional premium will be charged for the cover.

Notices of Coverage
- US Terrorism Risk Insurance Act of 2002 (Act), as amended by the Terrorism Risk
Insurance Program Reauthorization Act (TRIRA) of 2007
On 26th December 2007, the Terrorism Risk Insurance Program Reauthorization Act of 2007 (Public Law 110-160)("TRIRA") was signed into law by President George W. Bush extending the TRIA programme for seven years through 31st December 2014.

A portion of the War Risks P&I Excess Cover and the "Bio-Chem" Cover afforded to Members pursuant to the Directors' Resolutions are provided in accordance with the requirements of the US Terrorism Risk Insurance Act of 2002, as amended by the TRIRA of 2007 and give coverage for losses arising out of "acts of terrorism," as defined in Section 102(1) of the Act and as required by Section 103(c) of the Act.

Cover for losses caused by certified "acts of terrorism" can be partially reimbursed by the US government under a program established by the Federal Law. Under the program, the United States pays 85 per cent of covered terrorism losses exceeding the statutory established deductible paid by the insurance company providing the cover. The Act, as amended, also imposes a program trigger on the government's compensation: i.e. insurers cannot have the benefit of the government's compensation unless the aggregate industry insured losses from a certified act of terrorism exceed a certain insured loss or "trigger" amount. The current trigger amount is US$100 million. In addition, if the aggregate insured losses exceed US$100 billion during any program year, the government shall not make any payment for any portion of the amount of such losses that exceeds US$100 billion and no insurer that has met its insurer deductible shall be liable for the payment of any portion of that amount that exceeds US$100 billion.

Although no additional premium is charged for coverage for "acts of terrorism", a premium of US cents 0.25 per gross ton entered is deemed to be attributable to the US risk in accordance with the terms of the Act.

Yours faithfully

 Members requiring further information should contact Dr. Chao Wu at or
telephone +44 20 7204 2157.

NOTE:  The full text of the Directors' Resolutions in respect of War Risks P&I Excess Cover is contained in the Annex to this circular which is attached in pdf format.

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