Circular 03/24: War Risks P&I Excess Cover

Outline

  • Limit on Special War Risks P&I cover for 2024 policy year remains US$500 million with an exclusion of cover in respect of perils in Russia, Ukraine and Belarus, together with a buy-back sub-limited to US$80 million. The “Bio-Chem” exclusion remains, and a supplementary cover for “Bio-Chem” risks in respect of crew and legal costs limited to US$30 million continues to be available.
  • A portion of these covers is provided in accordance with the requirements of the US Terrorism Risk Insurance Act of 2002 (Act), as amended by the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) of 2015 and the Terrorism Risk Insurance Program Reauthorization Act of 2019.
  • The decisions have been agreed by the Club and its subsidiaries, including UK P&I Club N.V. which underwrites all EEA risks.

War Risks P&I Excess Cover

Background for Resolutions

Annual resolutions of the Directors are required in order to provide War Risks P&I Excess Cover, and to provide cover for Biochem risks; and in order to determine the limits applicable to cover for Pollution risks. The three resolutions, set out below the explanatory paragraphs following, are to be passed formally by the UK P&I Club Board, after Members’ Committee consideration.

  1. Resolution A, War Risks P&I Excess Cover: to provide US$500 million of excess cover for P&I war risks.

The War Risks P&I Excess Cover provides insurance in respect of P&I war risks that would otherwise be excluded by Rule 5E.  The cover is limited to US$500 million, excess of the proper value of the entered ship (as defined in Rule 5D  and deemed not to exceed US$500 million) or whatever sum is recoverable from any other policy of insurance in respect of war risks, whichever is the greater. For the 2024 policy year, the cover will as usual form part of the International Group of P&I Clubs (IG) program.

The resolution contains an exclusion of cover in respect of perils in Russia, Ukraine and Belarus, together with a buy-back sub-limited to US$80 million.  The resolution also includes language which enables the Club to participate in the US TRIA Program under which the US Government would participate in compensation for losses resulting from certain acts of terrorism. The language notifies Club Members of the TRIA coverage and the reinsurance by the US Government, and allocates to TRIA a specific part of the reinsurance premium which it is proposed should continue to be 0.25 US cents per ton. The TRIA program was renewed by the US government in 2020 and currently runs until 2027.

  1. Resolution B, War Risks P&I Excess – Supplementary Biochem Cover

The Supplementary Biochem cover provides limited insurance protection in respect of certain P&I war risks that are excluded both from Owners’ primary war risks P&I policies and from the Club’s excess war risks P&I cover by reason of a “Chemical, Biological, Biochemical, Electromagnetic Weapons and Computer Virus” exclusion.  The cover is narrow in scope, extending only to crew claims and to sue and labour costs in respect of any other types of claim, and is subject to a low limit of US$30 million applicable to the aggregate of all claims each ship each accident.  The claims are not reinsured, but are shared in the IG’s Supplemental Pool.

  1. Resolution C, Oil Pollution Cover: to determine the sub-limit of cover for pollution - which remains unchanged at US$1 billion.

The oil pollution cover limit will remain at US$1 billion for the 2024 policy year.  The Club’s Rules require the Directors to confirm this through a formal resolution, hence the need for Resolution C.

Resolutions for Consideration

The three resolutions, which have been formally passed by the Regulated Board on 5th February 2024, are as set out below:

RESOLUTION A

WAR RISKS P&I EXCESS COVER

SPECIAL COVER UNDER PROVISO TO RULE 5E
DIRECTORS’ RESOLUTION OF 5TH FEBRUARY 2024

WHEREAS, in accordance with Rule 5E of the Club’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 in accordance with each individual Owner’s terms of entry; and

WHEREAS, the Terrorism Risk Insurance Act of 2002 (TRIA) (Public Law 107-297), as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2007 and further amended by the Terrorism Risk Insurance Program Reauthorization Act of 2015 and the Terrorism Risk Insurance Program Reauthorization Act of 2019 (Public Law 116-94, 133 Stat. 2534), makes provision for a Federal quota share indemnification to participating insurers for insured losses resulting from certain acts of terrorism occurring through 31st December 2027; and

WHEREAS, this Club, meeting the definition of “insurer”, is required to make available coverage for “acts of terrorism” as defined in TRIA and is entitled under the program to an indemnification by the Secretary of the Treasury of 80% in 2020 calendar year and in any calendar year thereafter until 2027 of losses resulting from certified acts of terrorism in excess of the insurer’s deductible, and 

WHEREAS such indemnification will be available in the 2020 calendar year and in any calendar year thereafter until 2027 only if aggregate insured losses sustained by all insurers with respect to acts of terrorism during the calendar year exceed US$200 million; and

WHEREAS, the Directors on behalf of the Club’s membership have considered whether coverage of TRIA-defined acts of terrorism could be removed from the special cover and made subject to the general mutual indemnity undertaking but have concluded that acts of terrorism, as the other perils subject to the special cover, remain unsuitable for a general mutual indemnity undertaking; and

WHEREAS, no Owner responded affirmatively to the initial offer made by this Club to provide cover of TRIA-defined acts of terrorism on the basis of additional premium rates designed to fund the TRIA deductible and retention without mutual indemnity or the reinsurance available to the special cover; and

WHEREAS, the Directors have determined to provide the Special War Risks P&I cover including cover for terrorism risks as for the current Policy Year and that the estimated cost for TRIA-defined coverage remains 0.25 US cents per entered ton.

IT IS NOW THEREFORE RESOLVED, that in accordance with the proviso to Rule 5E of the Club’s Rules, special cover be provided to the Members of the Club for the year  commencing at 12 noon GMT on 20th February 2024 against risks, including TRIA-defined acts of terrorism, which are excluded from cover solely by virtue of the provisions of Rule 5E. Unless otherwise agreed in writing, such cover shall be subject to all other terms and conditions of an Owner’s entry in the Club and shall be provided upon and subject to the following terms and conditions:

  1. The risks covered shall be those set out in Rule 2 of the Club’s Rules in accordance with each individual Owner’s terms of entry as set out in the relevant Certificate of Entry and any Endorsement thereto, except loss, damage or expense arising from an act of terrorism which the Owner incurs, or for which he is liable, as a party to TOPIA.
  2. Special cover referred to in this resolution shall be subject to an excess of either:

(a) the “proper value” of the entered ship as defined in Rule 5D (which, for the purpose of this resolution only, shall be deemed not to exceed US$500 million), or
(b) the amount recoverable in respect of the claim under any other policy of insurance, whether of war risks or otherwise,

whichever shall be the greater, provided that the Directors may authorise the payment, in whole or in part, of any claim or part of a claim which falls within such excess, if in their discretion and without having to give any reasons for their decision they decide that the Owner should recover from the Club.

  1. Subject to paragraph 5 below, the limit applying to this special cover shall be the lesser of
    (a) US$500 million each ship, any one accident or occurrence or series thereof arising from any one event, or
    (b) such limit as may be applicable to the claim under the Member’s individual terms and conditions of entry,

PROVIDED ALWAYS that

where a ship entered in the Club by or on behalf of any person is also separately insured in the name of or on behalf of the same or any other person by the Club or by any other insurer which is a party to the Pooling Agreement in respect of the losses, liabilities or the costs and expenses incidental thereto which are covered pursuant to the terms of this Resolution and/or the equivalent policy provisions of such other insurer, the aggregate recovery in respect of all such losses, liabilities and the costs and expenses incidental thereto shall not exceed US$500 million or, the limit applicable to the claim under that person’s individual terms and conditions of entry if less, each ship, any one event, and the liability of the Club to each such person insured by the Club shall be limited to such proportion of US$500 million, or the limit applicable to the claim under that person’s individual terms and conditions of entry if less, as the maximum claim otherwise recoverable by such person from the Club bears to the aggregate of all such claims otherwise recoverable from the Club and all such insurers.

  1. All perils in the special cover shall be subject to an exclusion for vessels transiting and/or calling within all Russian waters including their coastal waters up to 12 nautical miles offshore, and certain European waters as defined below.

 (1)  Sea of Azov and Black Sea waters plus inland waters enclosed by the following boundaries
  a)  On the west, around Romanian waters, from the Ukraine-Romania border at 45° 10.858'N,   29° 45.929'E to high seas point 45° 11.235'N, 29° 51.140'E
  b)  thence to high seas point 45° 11.474'N, 29° 59.563'E and on to high seas point 45° 5.354'N,   30° 2.408'E
  c)  thence to high seas point 44° 46.625'N, 30° 58.722'E and on to high seas point 44°   44.244'N, 31° 10.497'E

  d) thence to high seas point 44° 2.877'N, 31° 24.602'E and on to high seas point 43° 27.091'N, 31° 954'E
  e)  and then east to the Russia-Georgia border at 43° 23.126'N, 40° 0.599'E

(2)  All inland waters of Ukraine

(3)   Inland waters of Russia within the following areas:
  a. Crimean Peninsula
  b. River Don, from Sea of Azov to vertical line at 41° E
  c. River Donets, from River Don to Ukraine border

(4)  All inland waters of Belarus south of horizontal line at 52° 30’ N

(5)  Replacement cover, sub-limited to US$ 80 million any one event, each vessel shall be provided for perils excluded under paragraph 4 above.

(6) All perils included in the special and replacement covers shall be subject to the following Chemical, Biological, Biochemical, Electromagnetic Weapons and Computer Virus Clause:
“This clause shall be paramount and shall override anything contained in this insurance inconsistent therewith:
  1. In no case shall this insurance cover loss damage liability or expense directly or indirectly   caused by or contributed to by or arising from
  1.1 any chemical, biological, bio-chemical or electromagnetic weapon.
  1.2 the use or operation, as a means for inflicting harm, of any computer virus.
  1.3 Clause 1.2 shall not operate to exclude losses (which would otherwise be covered under   the terms of this policy) arising from 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.”

(7) At any time or times before, or at the commencement of, or during the currency of any Policy Year of the Club, the Directors may in their discretion determine that any ports, places, countries, zones or areas (whether of land or sea) be excluded from the insurance provided by the special and replacement covers. Save as otherwise provided by the Directors these covers shall cease in respect of such ports, places, countries, zones or areas at midnight GMT on the seventh day following the issue to the Members of notice of such determination in accordance with Rule 41 of the Club’s Rules. Unless and to the extent that the Directors in their discretion otherwise decide there shall be no recovery from the Club under the special or replacement covers in respect of any claim howsoever arising out of any event, accident or occurrence within the said area after such date.

(8) Whether or not notice has been given under Clause (7) above, the special and replacement covers shall terminate automatically: 
  (a) upon the outbreak of war (whether there be a declaration of war or not) between any of the   following countries: United Kingdom, United States of America, France, the Russian   Federation, the People’s Republic of China and this insurance excludes loss, damage, liability   or expense arising from such outbreak of war;
  (b) in respect of any ship, in connection with which cover is granted hereunder, in the event of   such ship being requisitioned either for title or use and this insurance excludes loss, damage,   liability or expense arising from such requisition.

(9) Notwithstanding any other term or condition of this insurance, the Directors may in their discretion cancel the special or replacement covers giving 7 days’ notice to the Members (such cancellation becoming effective on the expiry of 7 days from midnight GMT of the day on which notice of cancellation is issued by the Club) and the Directors may at any time after the issue of notice of such cancellation resolve to reinstate special or replacement cover pursuant to the proviso to Rule 5E on such terms and conditions and subject to such limit as the Directors in their discretion may determine.

 

RESOLUTION B

WAR RISKS P&I EXCESS COVER

SPECIAL COVER UNDER PROVISO TO RULE 5E

SUPPLEMENTARY DIRECTORS’ RESOLUTION OF 5TH FEBRUARY 2024

WHEREAS, in accordance with Rule 5E of the Club’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 A of 5th February 2024 and

WHEREAS, the special War Risks P&I Excess Cover provided to Members pursuant to the Directors’ Resolution A of 5th February 2024 contains in Clause 6 a Chemical, Biological, Bio-chemical, Electromagnetic Weapons and Computer Virus exclusion; and

WHEREAS, the Directors have decided that the Club 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 of the Club for the year commencing at 12 noon GMT on 20th February 2024. Unless otherwise agreed in writing, such cover shall be subject to all other terms and conditions of an Owner’s entry in the Club and shall be provided at no additional premium on the terms and conditions and exclusions set out hereinafter:

  1. The risks covered under this supplementary resolution are the Member’s liability
    (a) to pay damages, compensation, costs or expenses in consequence of personal injury to or illness or death of any Seafarer (including repatriation and substitute expense, shipwreck   unemployment indemnity and diversion expenses) as set out in Rule 2, Sections 2, 3, 4, 5, 6, 7   of the Club’s Rules
      (b) for legal costs and expenses as set out in Rule 2, Section 25(B) of the Club’s Rules   incurred solely for the purpose of avoiding or minimising any liability or risk insured by the   Club other than liabilities, costs, expenses, risks recoverable at the discretion of the   Directors under Rule 2, Section 24 of the Club’s Rules

to the extent that such liabilities, damages, compensation, costs and expenses are not recoverable under the War Risk P&I Excess 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

  1. 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 certain ports,   places, zones or areas or during certain period as agreed by the Directors.
      (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 GMT on the day the notice is given.

  2. 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 GMT on the day notice of cancellation is given.

  3. Limit of Liability
    (a) Subject to Clause 4(b), the limit of the liability of the Club under this supplementary cover in respect of all claims shall be in the aggregate US$30 million each ship any one   accident or occurrence or series thereof arising from any one event.
      (b) 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 Club 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(a) and   the liability of the Club 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 Club and any such other insurer.

  4. Deductible
    Notwithstanding Clause 2 of the Directors’ Resolution A of 5th February 2024, 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.

  5. Law and Practice
    This cover is subject to English law and practice.

 

RESOLUTION C

OIL POLLUTION LIMIT

That in accordance with Rule 5B(ii) it is hereby determined that with effect from 12 noon GMT on 20th February 2024, the limit of the Club's aggregate liability for claims in respect of oil pollution shall be: US$1,000 million each event in respect of each ship entered by or on behalf of an owner not being a charterer other than a demise or bareboat charterer.

William Beveridge

Chief Underwriting Officer

Date05/02/2024