THE pirates of Puntland and wild shores of Somalia are causing a spot of bother for the usually stolid and unshakable world of London marine insurers and their P&I club peers.
Lloyd’s underwriters and the Men from the Clubs have been locked in discussions over the sticky issue of general average and the division of claims relating to piracy incidents off the Horn of Africa.
Shipowners are stumping up increasingly hefty ransoms to release crews, cargoes and vessels, and are turning to general average contributions to recoup the cost.
In the discreet world of marine insurance it is accepted that release costs can fall within general average cover in hull and machinery policies, as can other interests in the hijacked vessel.
Hull underwriters are shouldering these costs and indemnifying the shipowner, who can be left with shortfalls if others, such as the cargo owners, do not take a share of the general average.
These insurers’ specific beef with the P&I clubs is that these payments benefit the mutuals, which do not want hijacks to escalate into expensive crew, cargo or environmental liabilities.
The clubs point to their rulebooks and maintain that their interests in ransom situations are minimal (even if the benefit from early and safe release is substantial).
The issue raises a number of questions. Are the P&I clubs beneficiaries at the expense of the owners and hull insurers? Are they duty bound to contribute? Is the hull market paying to prevent even larger liability costs for loss of life or a pollution incident?
What is certain is that the informal agreements around general average are being tested to the hilt as the armed gangs demand ever larger ransoms.
Meanwhile, cargo interests from jurisdictions not as versed in the spirit of general average are also refusing to chip in, raising the prospect of owners insisting they put up security to ensure contributions.
Shipowners have made swift payment to secure the safety of their crew and vessels in the knowledge that they have the backing of their underwriters, clubs and cargo interests. If the system unravels, will owners think twice about these large sums? Are the crews’ interests set to be sidelined by stark commercial calculations?
Source: Lloyds List
By Lloyds List Comment
