The Marine Insurer October 2023 Issue 15

The Marine Insurer

MarineClaims andEnergy Special

Ukraine war: Fall out for marine market continues

l Oil pollution: Learning the lessons from past events

l Claims security: Working through the US legal system

l AI claims handling: Time to grab the opportunities?

l Methane emissions: Remaining stubbornly high

l Liquifaction: Bigger problem than perceived?

The risk of all change, but no change

THESE days we hear about the same subjects over and over again. Take the Ukraine war, for example, or climate change.

Both are huge global events set to change lives and economies, as well as the marine market, for years to come. However, there is also a risk that we feel we have seen and read everything that we need to know and our eyes and ears are at risk of slightly glazing over when the subject comes up yet again.

But, as our piece from Arthur and Iryna shows, listening to those on the ground who are living this experience there is plenty more to learn. The impact of the Ukraine war, for example is set to last for years but there will be opportunities in due course as the country rebuilds.

In the meantime, the tentacles of war continue to spread, with most noticeably in recent months in Turkish ports. But also in contracts and market practice going forward as the marine insurance market learns from the Ukraine experience and adapts.

Elsewhere, it is more of the same old, same old. But, again, that doesn’t make it any less worth hearing about. Take liquefaction as another example. The problem has existed for years and yet the marine industry continues to struggle and seafarers have been paying the ultimate price as vessels sink.

Another issue that continues to impact the sector is that of climate change. The marine industry is like the proverbial oil tanker turning in that it has been slowing adapting to the desire for a greener sector. Insurers are playing their part in this, calling for greener solutions, insuring innovative solutions and then discouraging those who might not want to change at a fast enough pace.

Again, though, there is more to say about this. Not only does the switch from fossil fuels to renewables come with innovation, it will also mean rapid growth in the global shipping fleet – something that will need insurance. Of course there will be challenges but insurers are the ultimate risk takers and it is worth keeping a close eye on the opportunities.

This issue concentrates on claims and how the insurance sector is adapting to those new challenges on a daily basis, as insureds are faced with new scenarios and call on their insurers for support.

As we all know, claims are the pointy end of the insurance industry –the moment when the promise becomes a tangible thing.

Enjoy the read.

Liz Booth Editor, The Marine Insurer

UKRAINE WAR: FALL OUT FOR MARINE MARKET CONTINUES

Rising to the challenges of war

Iryna Petrenko (left) from Nordic Marine Solutions and Arthur Nitsevych , (bottom left) a partner at InterLegal a law firm headquartered in Odessa, discuss the challenges for the marine sector since Russia invaded Ukraine on 24 February, 2022

Arthur: On the first day of the invasion, the operations of Ukrainian sea ports came to a halt, making it impossible to transport cargo by sea for an extended period. More than 80 commercial vessels were stuck in Ukrainian ports. This blockade had a significant impact on Ukrainian exports, as more than 90% of goods were transported by sea, leading to a shortage of grain on the world market.

According to a survey conducted by InterLegal, most members of the business community did not anticipate the outbreak of hostilities.Therefore, many vessels that had started loading/unloading processes shortly before the invasion were instructed to continue cargo operations in February 2022. The prevailing sentiment was: “We did not believe that there could be a full-scale war in the center of Europe.”

Iryna: How has the blockade of Ukrainian sea ports affected Ukrainian exports and which legal implications have arisen from the vessels blocked in Ukrainian ports?

Subsequently, the decision to continue loading proved to be problematic for buyers and charterers and raised numerous contentious questions: Is the carrier obligated to issue a bill of lading? Can the seller demand payment for the goods if the vessel is loaded but unable to leave the port of departure? Does the charterer have grounds to terminate the charter?

Iryna: How are P&I clubs and insurance companies handling the issue of ships blocked in ports?

Arthur: After 12 months had passed since the invasion, P&I clubs and insurance companies began to take an interest in the issue of ships blocked in ports. They sought an answer to the question: Were these ships genuinely unable to leave Ukrainian territory and, therefore, considered lost, warranting insurance compensation? Shipowners of the blocked vessels started declaring abandonment, arguing that since a specific vessel could not leave the port for an extended period (more

than 12 months), it fell under the blocking and trapping vessels clause.

Insurers scrutinize each case, examining the actual reasons preventing the ships from sailing. For instance, in the case of the Kherson seaport, on April 29, 2022, following the Order of the Ministry of Infrastructure of Ukraine, several sea ports under enemy occupation, including Berdyansk, Mariupol, Skadovsk, and Kherson, were officially closed. Consequently, no ships have left Kherson since the beginning of the war due to obvious dangers. This represents one situation.

However, when considering a ship blocked with “nongrain” cargo in one of the ports of Greater Odessa (Odessa, Chornomorsk Pivdenny), the situation differs. Ports such as Pivdenny, Odessa, Chornomorsk and Mykolaiv were not officially closed. But, from both practical and legal standpoints, it was impossible for ships to leave.

Iryna: What issues have arisen during the implementation of the Grain Agreement for non-grain cargo?

Arthur: On July 22, 2022, the so-called Grain Agreement was signed, establishing sea corridors for the export of Ukrainian grain from three Ukrainian ports: Odessa, Chornomorsk, and Pivdenny, in collaboration with the UN, Turkey, Ukraine and the Russian Federation.

The first vessel to depart Ukraine under the grain agreement was the t/h Razoni on August 1, 2022.

Subsequently, several commercial ships carrying non-grain cargo were able to unload their cargo, load grain and exit Ukraine along the grain corridor. Implementing this plan raised several issues, which can only be resolved through the active cooperation of all participants in the process:

A. Finding a port terminal ready to handle the cargo efficiently, considering the terminal’s technical capabilities and the vessel itself.

B. Obtaining permission from the military administration to move the vessel if it is not docked.

“According to a survey conducted by Interlegal, most members of the business community did not anticipate the outbreak of hostilities.Therefore, many vessels that had started loading/unloading processes shortly before the invasion were instructed to continue cargo operations in February 2022.’’

C. Securing the cargo owner’s consent for unloading.

D. Determining the customs status of the cargo and clarifying who will bear the costs of its storage at the terminal.

Unfortunately, from our experience, not all participants in the process were consistently interested in unloading the cargo.

Within the framework of the “grain agreement” from August 2022 to June 2023, approximately 30 million tons of Ukrainian grain were exported. On July 17, 2023, the Grain Initiative was terminated.

To restore navigation in the region, coastal warning No. 122/2 was issued on August 9, 2023, based on the order of the Naval Forces of the Armed Forces of Ukraine. This directive aims to establish temporary routes for merchant vessels traveling to or from Ukrainian seaports. The Joseph Schulte vessel was the first ship to successfully depart the Ukrainian seaport after the termination of the grain agreement.

Iryna: What obstacles has Russia posed to the smooth functioning of the “grain corridor”?

Arthur: Russia has posed obstacles to the smooth functioning of the “grain corridor” by interfering with inspections, implementing limited registration of incoming fleets, and blocking ports:

1. The Russian side has selectively chosen vessels for inspection at its discretion. For instance, on June 4, only two incoming vessels were registered, which had declared their participation in the “grain agreement” on the same day, while 56 ships were still waiting to enter Ukrainian ports in Turkish territorial waters. Such actions by Russia contradict the established rules for inspecting vessels, which typically prioritize inspecting vessels that have been waiting the longest.

2. The inspection plan is often not fully executed. For instance, when nine inspections are planned (three for entry, six for exit), Russia has frequently carried out no more than half of the agreed plan.

3. Russia has continued to block ships from accessing the port of Pivdenny for several months. As a result, out of the three Ukrainian ports designated in the “grain agreement” only two are currently functioning.

These developments have introduced additional risks for trade within the framework of the “grain agreement” and it will be interesting to observe how market participants adapted their commodity contracts and voyage charter parties. Disputes are likely to emerge.

Iryna: What provisions can be included in contracts to address challenges in the grain trade?

Arthur: Specific provisions in contracts can be effective mechanisms for addressing these challenges:

1. Impossibility of inspection. Contracts can stipulate the consequences if the nominated vessel fails the inspection, such as the seller’s right to replace the vessel or terminate the contract.

2. Inspection delays, ship damage/detention. In contracts, it is advisable to address the consequences of shipment delays and significant changes in the functioning of the “grain corridor” due to delays caused by inspections and military operations.

3. Transfer of risks. Parties can modify the standard risk distribution in contracts to transfer risk after the ship leaves Ukrainian territorial waters and insurance policies begin covering military risks. Such clauses can help exporters convince counterparties to purchase Ukrainian goods.

Iryna: What kind of cases are being handled in 2023 related to the Danube ports of Izmail and Reni?

Arthur: In 2023, we are primarily dealing with cases related to the arrest or release of vessels calling at the Danube ports of

“To restore navigation in the region, coastal warning No. 122/2 was issued on August 9, 2023, based on the order of the Naval Forces of the Armed Forces of Ukraine. This directive aims to establish temporary routes for merchant vessels traveling to or from Ukrainian seaports.”

Izmail and Reni, which are physically located in the Danube River but considered maritime ports. These cases often involve smaller vessels, primarily coasters, leading to congestion in the channels entering both Romanian and Ukrainian ports.

Additionally, we have seen an unusual increase in collision cases within the Danube ports, creating something akin to a traffic jam on the water.

It’s crucial to understand the statistics. Ukraine now exports about 2million tonnes of grains and oilseeds every month through the Danube ports, and this figure is expected to rise to approximately 3 million tonnes in the near future. Ukraine also exports grain through European infrastructure via rail and road transport, allowing for an additional 3.5 million tonnes per month. These numbers come from the Ukrainian Grain Association, which recently revised its estimate for the potential harvest in 2023 to 77 million tonnes of grains and oilseeds. Despite planting on 2.2 million hectares less than the previous year, the forecast suggests

that exports from Ukraine in the 2023/2024 season could reach nearly 48 million tons, a significant figure.

There is also an idea to organise anchorage transshipment in Romanian territorial waters. This form of trans-shipment, involving the transfer of cargo from grain barges to Panamax vessels, would substantially increase the capacity of the Danube route for Ukrainian grain exports. This change could potentially double the grain exports through Ukraine’s Danube ports. Moreover, discussions are underway regarding the use of larger vessels that can navigate through the Sulina Canal, including a test involving a 24,000-tonne handysize vessel.

Iryna: Any other noteworthy developments to keep in mind?

Arthur: I would like to highlight two significant developments that require attention

First, The Cabinet of Ministers of Ukraine has approved the Procedure for Providing Guarantees of Compensation for Damage Caused to Charterers, Operators, and/or Owners of Vessels as a Result of Armed Aggression by the Russian Federation. This procedure applies to vessels flying both Ukrainian and foreign flags. While the procedure may not be fully operational at the moment, it is being developed in the right direction.

Second, Ukraine has actively imposed its own sanctions against Russian and Belarusian legal and physical entities, in addition to those imposed by the US and EU. Compliance has always been of utmost importance to reputable shipping and commodity businesses, and we have already received several inquiries on this matter.

Iryna: What is the outlook for future work once the war concludes and peace is established?

Arthur: Once the war concludes or a framework for peace is established, we anticipate a significant increase in our workload. For the next decade, lawyers will play a crucial role in rebuilding and shaping the new Ukraine while pursuing necessary legal actions to claim damages from the aggressor.

It is worth noting that, from February 2022 to April 2023, about 30 vessels suffered heavy damage due to hostilities, with one-third of them flying the Ukrainian flag. Many port terminals and warehouses were damaged, while numerous river barges and caters were stolen or damaged. We have a client who lost 16 barges and river port cranes.

Plans to rebuild Ukraine are already in motion, transitioning from discussions to concrete plans and understanding who will be responsible for what. We firmly believe that infrastructure rebuilding will begin in the Odessa region, which is the closest point on the map to the EU. In fact, our local teams of international consultants are currently working on two investment projects aimed at making the southern part of the Odessa region (Bessarabia) more attractive for logistical investments.

“The first vessel to depart Ukraine under the grain agreement was the t/h Razoni on August 1, 2022. Subsequently, several commercial ships carrying non-grain cargo were able to unload their cargo, load grain, and exit Ukraine along the grain corridor.”

Constructive total loss and the war in Ukraine – detainment

The effect on the Russian invasion in the early hours of 24 February 2022 on vessels calling at Ukrainian ports was profound. According to data from Lloyd’s List, more than 300 vessels in Ukrainian waters at the time of the invasion had not moved a month later.

On a practical level, port clearances could not be issued, while pilots and tugs were not always available. Loading operations, if already underway, ceased.

For some vessels, any attempt to leave of their own initiative came with the associated danger of mines or being stopped by

the Russian military, risking loss to the vessel and, more seriously, potential loss of the lives of the crew.

DIRECT DAMAGE

The Institute War and Strikes clauses (Hulls) Time 1/10/83 (the “War clauses”) cover  “loss of or damage to” insured vessel caused by certain listed perils. Most prominent is  “war” (at clause 1.1). There can now be little doubt that on 24 February 2022, a war had broken out. Any direct damage caused by weapons of war would be covered under the clauses. But, what about the owners with undamaged vessels trapped in Ukrainian ports?

Many turned their attention to clause 1.2 of the clauses, which

Jenny Salmon , legal director at HFW, argues that the 30-year old War clauses have stood the test of time during the Ukraine conflict

covers  “capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat”. Even though the Russian army had not taken control of the vessels in question, many could be said to be prima facie  “detained” as a result of the war.

The peril of  “detainment” is often misunderstood – there is no requirement for this peril to arise out of war or strikes. Prima facie, any  “detainment” will be covered by the clauses, subject to the policy exclusions.

PROXIMATE CAUSE

However, if the peril of detainment strikes, it does not give rise to a claim unless the detainment is the proximate cause of some kind of loss or damage to the vessel. Most commonly, detainment can give rise to a constructive total loss (CTL).

Section 60(2)(i) of the Marine Insurance Act 1906, provides that:  “[…] there is a constructive total loss […] where the assured is deprived of the possession of his ship or goods by a peril insured against, and […] it is unlikely that he can recover the ship or goods, as the case may be […]”

Whether it is  “unlikely” that an owner can recover a ship will always be a question of fact, and the analysis will vary from vessel to vessel.

To avoid this factual dispute, clause 3 of the War clauses (the “Detainment clause”) provides certainty through a “deeming” provision:  “In the event that the vessel shall have been the subject of capture seizure arrest restraint detainment confiscation or expropriation, and the assured shall thereby have lost the free use and disposal of the vessel for a continuous period of 12 months then for the purpose of ascertaining whether the vessel is a constructive total loss the assured shall be deemed to have been deprived of the possession of the vessel without any likelihood of recovery.” [emphasis added]

The 12-month requirement in the clause is sometimes shortened to six months.

Importantly, clause 3 gives no automatic entitlement to a CTL payment after 12 months’ detention. Instead, if the criteria of the Detainment clause are all satisfied, then it will be deemed unlikely that the assured can recover the ship for the purposes of section 60(2)(i) of the Marine Insurance Act 1906.

The requirement for the loss of free use and disposal of the vessel for a continuous period of 12 months may not be straightforward for an assured to satisfy.

If, for example, the vessel remains on hire under the charterparty for part of the 12-month period, would the assured still have lost the free use and disposal of the vessel?

The requirement that the loss of use must be “continuous” for a 12-month period means that certain operations during the 12-month period could jeopardise an owners’ right to claim a CTL after 12 months under the Detainment clause.

MITIGATING LOSSES

One significant trend to arise from the Ukraine war is the market’s attitude to making a recovery when a CTL caused by

detention occurs.

On payment of a CTL, the Marine Insurance Act 1906 gives the paying insurers a right to take over the assured’s interest in the vessel.

Historically, insurers have tended not to exercise this right and have tended to shy away from taking on the owners’ interest in the vessel. This is often because the vessel is heavily damaged and could give rise to significant liabilities.

In the case of the Ukraine war, however, where a detained vessel might be undamaged or minimally damaged, insurers have made use of innovative legal structures to protect their rights on payment of a claim and to make a recovery by sale of the detained vessels to purchasers willing to take the risk of how the war will develop to buy the vessels on favourable terms.

Such risks are beginning to pay off for purchasers, with some previously detained vessels having recently departed from Odessa.

TESTING TIMES

The War clauses are now 30 years old, but have stood up well to the test of this latest conflict. Although application of the War clauses and, particularly, the Detainment clause to the particular circumstances of individual vessels affected by the Ukraine war might give rise to some new and interesting case law developing on how the War clauses should be understood.

Arguably, however, the main takeaway for insurers of the many detainments in Ukrainian waters will be that it can be possible, with the right structures in place, to monetise the value of the detained ships and make some recovery in the case of CTLs caused by detainment.

“In the case of the Ukraine war, where a detained vessel might be undamaged or minimally damaged, insurers have made use of innovative legal structures to protect their rights on payment of a claim, and to make a recovery by sale of the detained vessels to purchasers willing to take the risk of how the war will develop to buy the vessels on favourable terms. ’’

Avoiding Salvage Claims in the Turkish Straits

The Turkish Straits has always been a busy waterway connecting the Mediterranean and Black Sea. Even war in Ukraine did not decrease the volume of the sea traffic.

After the signing of agreement on “Initiative on the Safe Transportation of Grain and Foodstuffs from Ukrainian ports” (“Grain Corridor”) on 22 July 2022 in Istanbul, the sea traffic in Istanbul anchorage increased dramatically because of the inspection regime within the Grain Corridor.

Until the suspension of the Grain Corridor last July, Ukraine had been able to export about 33 million tonnes of agricultural products which were carried by more than 1,000 vessels.

ENGINE BREAKDOWNS

While the Grain Corridor was active, the anchorage areas were very crowded and sometimes vessels had to drift for days awaiting inspections by the authorities.

This led to many salvage claims in the Turkish Straits arising from engine breakdowns which was not uncommon even before the Grain Corridor.

Engine breakdowns in the Turkish Straits leading to salvage claims always raise a question about whether it could have been avoided by the master in the first place.

A ship master’s position is not easy when the vessel has an engine

breakdown in the Bosporus or Dardanelles because of the busy sea traffic.

A state-owned company called Kiyi Emniyeti Genel Mudurlugu (the Directorate General of Coastal Safety) has the monopoly rights for salvage of ships and properties in the Turkish Straits. Therefore, the Directorate General of Coastal Safety is the only remedy in case of emergency.

It is a large company with many tugs stationed in the Bosporus and Dardanelles to deliver prompt intervention in case assistance is needed. It is not only a salvage company but also an organization that gives vessel traffic services and pilotage in the Turkish Straits.

In the eyes of a ship master, the Directorate General of Coastal Safety is therefore an authority to obey when subjected to pressure from the VTS operator, the pilot on board and the tugs around whose masters are insisting on giving line.

In case of really imminent danger, ship masters can therefore thank the Directorate General of Coastal Safety as assistance can be available within minutes in the Turkish Straits.

The purpose of this article is to focus on simple loss prevention practices that would save the ship/property owners and their underwriters from costly salvage claims.

Ship masters who may have engine or slow speed problems in the Turkish Straits, should be aware that pilots on board and

Caglar Coskunsu , of law firm CAVUS & COSKUNSU, explains how ship master’s must tread carefully when offered salvage assistance in the Turkish Straits

VTS operators are giving instruction for sea passage work under the same state-owned organization with tugs which may offer salvage services.

Therefore, in most of the cases, ship masters should not only rely on VTS operator’s or pilot’s recommendations on which line to take from the tug which comes nearby immediately and even before the master makes any assessment about whether engine power would be restored or dropping anchor would be possible at a safe place.

MASTER’S OWN DECISION

Therefore, the master must make their own assessment. But there is a range of actions that can be taken at the start of the voyage that can mitigate the risk.

Currents and potential anchorage areas in case of emergency even if they are not designated as anchorage area and areas with high density of sea traffic should be studied with local recommendations contained in sailing directions.

In this respect, the ship’s master should consider whether the vessel is in imminent danger and whether it’s position and surrounding circumstances would allow alternative remedies such as dropping anchor in case of engine breakdown or slow speed.

As long as it is safe to do so, in case of an emergency, dropping

anchor is possible in the Turkish Straits. The alternative - taking line from a tug – leads to high salvage claims even where total towage time is only a few minutes.

This is because the Directorate General of Coastal Safety has a percentage approach to salvage cases where they may claim 8 percent to 12 percent of salved values as a reward and salvage security is assessed as 15 percent 20 percent of salved values.

Lower settlements can be made by the Directorate General of Coastal Safety depending on the facts of the case or assessments on values. But the percentage approach makes salvage claims unreasonable even at lower percentages if it is just a towage for very short period, especially where the hull value is high.

The second problem is that after dropping anchor or refusing to take a line from tugs, a ship’s master will be subject to pressure from the VTS operator who will likely state that harbour master has ordered salvage ex-officio and that due to the position of the vessel, salvage assistance from the tugs is compulsory.

The powers of the Harbour Master are primarily regulated in the article 46/3 of Regulations of Ports providing that:

“In cases where situations such as grounding, fire, collision, and the danger of sinking pose a threat to navigation safety and the safety of life, property, sea, and the environment, the port authority initiates salvage operations ex officio. In other cases, if the ship and maritime vehicle authorities do not request salvage within 72 hours, salvage operations are initiated ex officio by the port authority.”

In addition to the above, Application Directive on the Regulation of Maritime Traffic for the Turkish Straits makes reference to potential salvage services providing:

“In maritime incidents in the Straits and anchorage areas specified in the Regulation, salvage services may be provided to

“As long as it is safe to do so, in case of an emergency, dropping anchor is possible in the Turkish Straits. The alternative - taking line from a tug – leads to high salvage claims even where total towage time is only a few minutes.’’

Caglar Coskunsu, Cavus & Coskunsu

the ship(s) ex officio by evaluating the situation. In these cases, all determinations and examinations for salvage including underwater surveys are made by KEGM.

“The ship shall not be allowed to sail until the judicial and administrative injunctions are lifted, the administrative investigation is completed, the salvage fees and damages to the environment are paid or a guarantee is given in these matters.”

A ship’s master should be aware of the above regulation that if anchor is dropped safely, it cannot be forced to accept salvage assistance and ship master is entitled to make its own assessment.

There is a hierarchical structure in the Turkish legal system. The hierarchy of norms in Turkish law consists of written sources such as the constitution, law, statutory decree, international agreements, legislation and regulation.

Therefore, the above mentioned “Regulations of Port” are not stronger than law or international agreements. The article 1298/4(a) of the Turkish Commercial Code and the article 19 of Salvage Convention which Turkey ratified, prohibits salvage services if it is reasonably objected to by the master. If the master is unreasonably pressured, there is always a remedy to challenge the salvage assistance.

RECORDED EVIDENCE

The master should keep the VDR records in mind and if they think there is no danger it should be stated to the pilot or the VTS in order to make sure that it is recorded and can be used as evidence.

The VTS also records all communications. The VTS operator may try to obtain a confirmation from the master over the VHF for salvage or towage that may turn to a salvage claim so that masters should not verbally accept any assistance over the VHF if there is no real imminent danger to justify salvage assistance.

If there is a real danger and salvage assistance is needed, there is another matter that ship masters should be careful about.

There is a standard salvage agreement of the Directorate General of Coastal Safety called “Turks 2015” which is unfavourable to the ship’s interest.

If Turks 2015 has been signed the shipowner has to provide security for all salved properties on board and assume liability for all property on board that includes the liability to pay the salvage remuneration and the associated expenses relating to the vessel, bunkers, cargo and the freight in full. This amounts to an agreement that all claims can be directed to the shipowner alone. This salvage agreement is new version of Turkish Open Form (TOF).

In summary, salvage assistance is available at short notice in Turkish Straits, but the ship’s master should assess whether the vessel is in real danger or not. If not, a salvage

claim may easily be avoided by taking simple actions as set out above.

Particularly, the pilot and the VTS operator operate under the same organisation as the salvage tugs. For this reason, advice or pressure from the pilot and the VTS to accept assistance from the tugs should be approached cautiously and the ship masters should assess the situation carefully. There is no legal obligation if circumstances allow, for accepting the assistance from the tugs which operate in accordance with the general commercial rules of salvage.

“Ship masters who may have engine or slow speed problems in the Turkish Straits, should be aware that pilots on board and VTS operators are giving instruction for sea passage work under the same state-owned organization with tugs which may offer salvage services.”

Caglar Coskunsu, Cavus & Coskunsu

Rule B Attachment: A means to obtain jurisdiction and/or security for maritime claims

through the attachment of property (also known as  quasi in rem jurisdiction).

By George Chalos (left), and Briton Sparkman, (right) at Chalos & Co

In the US, Supplemental Admiralty Rule B provides a unique and powerful tool to secure maritime claims in advance of an award or judgment.

That said, many people only associate “Rule B” with the financial crisis attachment frenzy of US dollar electronic funds transfers (EFTs) in the early 2000s, while they were passing through international clearinghouse banking institutions.

Despite Rule B’s (infamous) time in the international spotlight, it had a long history of securing claims before EFT attachment was permitted in  Winter Storm and it continues to serve as a significant resource for plaintiffs after  Jaldhi.

THE BASIC REQUIREMENTS

Rule B serves the “dual purpose” of securing a maritime claim and as a means of obtaining jurisdiction over a defendant

In  Manro v. Almeida, 23 U.S. 473 (1825), the US Supreme Court held that goods or ships may be attached in the hands of the owner or in the hands of “all others who claim any right or title to them . . .”

That historic maritime attachment right was later codified in the Supplemental Admiralty Rules and what is now commonly referred to as Rule B.

To pursue a Rule B attachment, four prerequisites must be fulfilled.

First, the plaintiff must possess a valid  prima facie maritime claim against the defendant. Second, the plaintiff must verify that the defendant cannot be found within the district where the action is initiated. Third, property belonging to the defendant must be present (or will soon be present) in the district and fourth, that there is no statutory or broader maritime law prohibition against the attachment.  Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 436 (2d Cir. 2006)  abrogated on other grounds by Jaldhi

ATTACHMENT OF DEFENDANT’S INTANGIBLE PROPERTY

Rule B(1) provides a maritime claimant “may attach the

defendant’s tangible or intangible personal property—up to the amount sued for—in the hands of garnishees named in the process.”  However, Rule B sidesteps defining the phrase “tangible or intangible personal property.”

As the Fifth Circuit Court of Appeals has lamented,  “significantly, the rule provides no guidance as to what type of property interest is attachable.” Malin Int’l Ship Repair & Drydock, Inc. v. Oceanografia, 817 F.3d 241, 244-2 (5th Cir. 2016).

Tangible property is simple enough to understand, and includes vessels, bunkers, cargo, vehicles, and/or any other physical property that a US Marshal can physically seize until substitute security is provided, or the asset is sold.

However, the developments in the case law defining the right to seize intangible property remains an evolving area of the law. The only additional guidepost provided by the Supplemental Rules, located at Rule E(4)(c), explains that intangible property is attached by serving the garnishee with “a copy of the complaint and process requiring the garnishee . . . to answer”.

The attachment of intangible property has been recognized by the US Supreme Court for more than 150 years, where it held “in admiralty practice, rights in action, things intangible,  as stocks and credits, are attached by notice to the debtor, or holder, without the aid of any statute.”  See  Miller v. United States, 78 U.S. 268, 297-298 (1870) (emphasis added).

In short, a plaintiff can attach a debt or obligation due and owing from the garnishee to the defendant, so long as the US Court has jurisdiction over the garnishee.

For example, Company A is owed outstanding hire under a charter party with Company B.  Separately, Company C, which has offices in Houston Texas, owes freight and demurrage to Company B in a totally unrelated voyage charter party. Company A can attach those contractual payment obligations, simply by serving Company C with the Complaint and Writ of Attachment issued by the Court in the Southern District of Texas.  Intangible attachment of property in the hands of a garnishee, can include the obligation to pay freight, hire, loans, disbursements, dividends, and other types of choses-in-action.

INTANGIBLE BANK ACCOUNTS?

What about when the property is a bank account? In the age of digital finance, bank accounts are seemingly “everywhere and nowhere” all at once. Accordingly, funds in bank accounts are considered intangible property.   Boland Marine & Indus., LLC v. Bouchard Transp. Co., 2020 U.S. Dist. LEXIS 118520, *12 (WDTX 2020).

Even so, when and where funds in bank accounts can be attached can be different depending on the location of the Rule B attachment sought.

For example, courts within the Second Circuit Court of Appeals and New York still follow the “separate entity rule,” which provides that branches of a bank are treated as separate banks for purposes of attachment of bank accounts. See  Det Bergenske Dampskibsselskab v. Sabre Shipping Corp., 341 F.2d 50, 53 (2d Cir. 1965).

Said another way, unless an attaching plaintiff can establish that the bank account was actually opened and “located” in New York, the attachment of a bank account

through service on a bank as garnishee is insufficient to attach the account.

LEGAL FICTION

Despite the goal of uniformity in federal admiralty and maritime law, many courts around the US have rejected the separate entity rule (which was based on New York state law from the 1930s). They have instead held that because the situs of intangible property is, in truth, a legal fiction, funds in a bank account can have “more than one situs.”  Boland, supra, citing Acme Contracting, Ltd. v. Toltest, Inc., 2008 U.S. Dist. LEXIS 77747, at *6 (E.D. Mich. Oct. 3, 2008); see also Brennan,  All Things Visible and Invisible, 35 Miss. C. L. Rev. at 257 (“If the jurisdiction does not follow the Separate Entity Rule, attachment can be had in any district in which the bank that maintains the defendant’s account maintains a branch office.”).

Such an approach has led to recent attachment cases where a defendant’s Virginia bank account was seized through a bank located in North Carolina and another defendant’s Illinois bank account was attached via Rule B attachment in Missouri.  In the  Boland matter, the attachment was permitted to stand despite the ‘home’ bank account of the defendant being located in New York, because Texas does not follow the separate entity rule and the Court had jurisdiction over the bank branch in Austin, Texas.   The discord among different Federal Circuits, based on how competing state laws categorize bank branches and accounts, is ripe for exploitation by the savvy claimant pursuing security for maritime claims in the US.

“In Manro v. Almeida, 23 U.S. 473 (1825), the US Supreme Court held that goods or ships may be attached in the hands of the owner or in the hands of “all others who claim any right or title to them . . .”

That historic maritime attachment right was later codified in the Supplemental Admiralty Rules and what is now commonly referred to as Rule B.”

Tangible property is simple enough to understand, and includes vessels, bunkers, cargo, vehicles, and/or any other physical property that a US Marshal can physically seize.

Technology: the maritime insurers’ safety net

With increasing global geopolitical tensions and the rise of complex conflicts, reinsurance companies have become more cautious in underwriting marine war risks.

The escalating nature of these risks, including piracy, terrorism and political unrest has led to higher potential losses and increased uncertainty.

Consequently, reinsurers have tightened their belts, demanding higher premiums, increased exclusions and stricter terms and conditions with some reducing their exposure or withdrawing from covering marine war risks altogether.

I believe a step change is needed.

A better understanding of exposure and aggregation risk is vital to mitigating reinsurance shortfalls. Technology is central to achieving this – a sentiment that is echoed by IUMI.

Drawing on lessons learned from other markets, We can explain what is possible reinforcing that this is more than simply data analytics.

This is about addressing a fundamental human challenge by transforming isolated data into a shared understanding, allowing marine (re)insurers to take this understanding and determine how to change the way they do business and reap the commercial benefits.

UNCERTAINTY DOMINATES

The world has become a more uncertain place in the last five years. This was first caused by Covid-19 and its various impacts upon consumer spending, global workforces and manufacturing, and ultimately, supply chains. The most visible example of this is, of course, the ill-fated and well documented story of the Ever Given and the Suez Canal in March 2021.

Next to rock global industry was Russia’s invasion of Ukraine. The conflict has, and is still, causing significant headaches for the insurance industry.

Back at the beginning of the conflict in 2022, Russia confiscated around 400 foreign-owned planes they had originally leased, resulting in more than US$10bn worth of insurance claims. Western powers have been confiscating yachts and private vessels attributed to Russian oligarchs since the war began.

Maritime merchant shipping faces significant challenges. Insurers began reviewing policies for any ships travelling to Ukraine’s Black Sea ports. In July 2023, Russia quit a UN-backed deal that allowed grain exports through a safe Black Sea corridor. Three days later, Russia sent a warning to any ships willing to make that journey.

Andy Yeoman , CEO of Concirrus, argues that a step change is needed in the use of technology in the marine insurance sector to gain an improved understanding of exposure and aggregation risk to help mitigate reinsurance shortfalls

WARNING SHOTS

Questions surrounding the export of grain and the ships carrying it from Ukraine remain. This has caused Russia to make good on its threats by firing warning shots at a cargo ship in the Black Sea on August 13 2023. Furthermore, potential conflict is not limited to Europe as shown by China’s continued testing of the territorial integrity of its Pacific neighbours.

Insurers and reinsurers have very quickly felt the sting of these developments and altered conditions and pricing in the face of these growing risks.

New technology, however, can help provide much-needed certainty. It can’t insulate an industry from the impact of global conflict. But, artificial intelligence (AI), when used effectively, can provide transparency, information, and ultimately wisdom, in an increasingly busy and opaque world.

Courts may take years to sort out the confiscation of foreign-owned assets, but the impact of the Ukraine war on insurance premiums very quickly took effect.

Reinsurers wanted to know more about the assets they had underwritten – namely, what vessels were where, and why. More data, and therefore better information, was needed.

Reinsurers also started adopting stricter terms and conditions or withdrew from the market completely.

“Maritime merchant shipping faces significant challenges. Insurers began reviewing policies for any ships travelling to Ukraine’s Black Sea ports. In July 2023, Russia quit a UN-backed deal that allowed grain exports through a safe Black Sea corridor. Three days later, Russia sent a warning to any ships willing to make that journey.’’

Andrew Yeoman, Concirrus

As a result, markets hardened and insurers had to retain more risk or withdraw cover with rates inevitably rising.

Many reinsurers have started refusing to cover any shipping in the Ukraine region completely. This has subsequently hit the brokers and insurers too.

AI RISK ASSESSMENT

AI has always been an exciting, if sometimes worrying, innovation and there will not be a market or industry it leaves untouched.

Simply put, AI enables more accurate risk assessment, and therefore pricing, through the collection and analysis of vast amounts of data.

It is, therefore, a tool that can be used to great advantage by maritime insurers and reinsurers.

Firstly, it is the data AI can harvest and analyse in the world at large.

By analysing vast amounts of data from a multitude of sources, such as satellite imagery and weather patterns, it can give insurers and reinsurers a real-time, accurate look into the world around them. This means that risk assessment and underwriting can be much more accurate.

This extends to information about shipping specifically. AI programmes can harvest and analyse vessel tracking data, for example, to understand more about past, present and therefore predicted future routes, speeds and the like.

Even more specific still is how AI can impact the maritime insurance and reinsurance industry itself.

By bringing together all enquiries and claims, both past and present, it can provide new insights into the challenges its customers are facing and any potential opportunities to increase revenue, limit risk and improve service.

INSURANCE VS. REINSURANCE

Reinsurers have broad guidelines and narratives around the risks they are willing to cover and this gives some security to the insurer.

The reinsurer, however, does not have detailed visibility of

an insurer’s written book, which leaves them operating in the dark. This is another reason to tighten belts and reduce risks.

We are now in a situation in which advancements in technology can provide a shared set of data for both partiessecurely, in real-time and without silos.

The reinsurer can have visibility into its aggregate exposure across its cedents and therefore its potential risks. This can be done without those cedents having to specifically expose the exact details of its book and therefore its competitive advantage.

This provides confidence and security so reinsurers can more accurately set policies without blind, sweeping judgements about the market and their assets.

DATA INTO WISDOM

New technology including AI can turn raw data, past and present, into an understanding of behavioural patterns which can be used to predict future events.

Another less obvious benefit to gain from this innovation, however, particularly for the insurance industry, is the democratisation of this knowledge.

This wisdom, that includes how underwriting decisions have been made, can be captured by the technology and accessed by the whole organisation.

No longer is this ‘wisdom’ solely the purview of an individual but rather, it belongs to the company.

NOT ALL AI IS MADE EQUAL

As with all AI, however, there is a warning. This does not come in the form of prophecies of sentient machines and robot uprisings, but rather, the fact that many of today’s AI tools that rely on large language models are not truly secure. Analysis continues to be published that highlights privacy and security concerns of programmes like ChatGPT.

The maritime industry therefore needs a secure, specialist AI tool that protects private data and competitive advantage, while sharing insights and creating wisdom.  Only then will the industry truly reap the benefits of such advanced technologies.

“AI programs can harvest and analyse vessel tracking data, for example, to understand more about past, present and therefore predicted future routes, speeds and the like.”

70+ Countries. 5 Oceans. 1 Network.

As a leading global marine insurer we know the risks businesses face. Our global solutions and expertise help our clients to face them with confidence.

AIG’s marine team has decades of experience in underwriting, loss prevention and claims handling across the globe. We put our experience and expertise to work every day for our clients, assisting them to protect their assets, maintain business continuity and retain their customers’ loyalty. To let us help you to face your risks with confidence visit aig.com

March 22nd 2024, etc. Venues’ 155 Bishopsgate London

Launched in 2018 and now in its sixth year, Marine Insurance London is Cannon Events’ flagship conference. With Lloyd’s at its heart, London is a global hub for marine insurance and Marine Insurance London regularly attracts global heads and c-suite executives from across the marine industry to the speaker faculty. Our aim is to bring together insurers, reinsurers, brokers, shipping companies, service providers and others from the marine world to examine the current state of the marine insurance market and in this case, London’s role in it. We achieve this through a mix of conference presentations (keynotes, panels, workshops and fireside discussions) and one-to-one meetings organised through our meetings program. Ample networking breaks are also provided where delegates can meet with our exhibitors and learn about the latest products and technologies on offer.

SPONSORS:

GLOBAL PARTNERS:

To find out more contact Daniel Creasey on +44 (0)7702 835 831 or email daniel@cannonevents.com

www.marineinsurancelondon.com

AI-powered claims handling is only the beginning

Ronny Reppe , co-founder of Noria Group, explains how AI can finally transform the insurance claims environment

Slow claims handling is holding back  customer-centricity in insurance, causing dissatisfaction and financial stress for policyholders, erosion of reputation and loyalty, increased internal costs and regulatory consequences.

Some things will never change. Complex claims involving large losses, multiple parties, disputes, inadequate underwriting or incomplete and missing documentation will always slow down processes. But, other hurdles are within our power to overcome.

Manual, paper-based processes can be slow and errorprone. Many insurers simply do not have the people or resources to handle a sudden influx of claims. As a whole, the industry is still moving too slowly towards a digital future

But in the age of generative AI and large language models (LLMs), the wait for a technological solution that will dramatically increase the velocity of claims handling is finally over.

SEMANTICS OF CONTENT

As Forbes Council Member  Dr Jeremy Nunn writes: “[AI can improve] effectiveness and efficiency thanks to its ability to understand the semantics of content and automatically acquire knowledge…through intelligent document processing (IDP), the process of data extraction automation from unstructured and semi-structured documents and conversion into structured and usable data, AI has tangibly amplified extracting data with high accuracy.”

Working with a Norwegian client, the team at Noria has created a solution known as the AI-powered virtual assistant for claims handling that is generating impressive efficiency gains, even at the pilot stage.

PwC’s research into digital intelligence found AI-based extraction techniques can save up to 40% of hours usually spent on manual processes such as claims handling. We have already seen efficiency gains of up to 50% in this area, but

even a gain of 10% creates a very compelling business case and a no-brainer for adoption.

How does it work? Our people receive a lengthy document describing the case they are working with. While it would usually take 15 to 20 minutes to read five pages manually, this time is slashed to under a minute with the virtual assistant.

DYNAMIC QUESTIONS

The user selects from a set of dynamic and configurable pre-defined questions, after which the AI generates a series of answers for the user to consider and choose between.

We are training the AI to understand the type of data our claims handlers usually extract from documents, drawing upon Noria’s decades of data history and tapping the experience of our handlers to help the model grow smarter, faster.

The result is speedier claims processing, more accurate decision-making through data-driven insights, satisfied customers and reduced operational spend due to enhanced efficiency and effectiveness.

Crucially, the tool will act as an invaluable extension of the human team to help insurers cope with situations where they would normally be overwhelmed by a high influx of claims. As with any efficiency gain, the technology will also boost productivity, innovation and staff engagement by freeing up your team to tackle new challenges.

This is a new assistant, which means it still needs a skilled and knowledgeable human-in-the-loop to assist with training, sense-checking and understanding if its outputs are correct. We are at the beginning of a training and UX journey that will take some time. But, early results are extremely encouraging and motivating.

Organisations looking to adopt this sort of technology should use caution, and ensure they take the virtual assistant approach rather than simply handing over a task to untested AI and let it go unmonitored. Results may be hit and miss for some time, while the ratio of right-to-wrong answers will be the main factor in determining the efficiency improvement.

BE CURIOUS

At Noria, we encourage our team to be curious and apply the assistant across different areas of the business. Using a similar approach to how we experiment with ChatGPT, this is a technology that anybody can play with and test with new use cases. Alongside claims processing, other applications in marine insurance could include enhanced customer support, risk assessment, policy recommendation, regulatory compliance and loss prevention.

We have also found use cases in programming, where an AI tool has strong potential to help our developers code faster and more accurately. Like the claims processing assistant, the tool would work by suggesting code for auto-completion

or generating code based on prompts.  McKinsey found that developers can complete coding tasks up to twice as fast with generative AI, particularly when “expediting manual and repetitive work, jump-starting the first draft of a new code, or accelerating updates to existing code”.

For us, a 20% efficiency improvement in programming would be enough to justify an investment, which is why we’ll be looking to build an AI-powered programming assistant pilot within the next few months.

GENERALISED MODEL

But why not simply use ChatGPT? The issue lies with ChatGPT’s generalised model, which tends to become weaker and more inaccurate when it is applied to domainspecific use cases.

I was interested to read a press release from SaaS company  Simplifai that noted the importance of training LLMs specifically on information directly relevant to the insurance sector. The authors cite concerns around data security, and inaccurate presentation of data meaning public LLMs such as ChatGPT and Google Bard being labelled unsuitable to address the needs of the claims handling industry.

In conclusion, my advice for marine insurers is to take the plunge in AI-powered claims handling, but use caution at first by keeping a knowledgeable human in the loop. We have been impressed at Noria by the value and efficiency gains already generated by working with this technology and, have a plan for unlocking further efficiencies across several parts of the business.

“Manual, paper-based processes can be slow and error-prone. Many insurers simply do not have the people or resources to handle a sudden influx of claims. As a whole, the industry is still moving too slowly towards a digital future.’’

30+

8+ HOURS OF DISCUSSIONS Asia

SINGAPORE

Co-located with Singapore Maritime Week, The Maritime Port Authority, The Singapore Shipping Association and the Hong Kong Ship Owners’ Association, Marine Insurance Asia (formally Marine Insurance Singapore) has grown rapidly into an Asia-wide focused annual touch point for the marine insurance market.

One of the biggest success stories in our portfolio, this event has seen attendance double year on year. Marine Insurance Asia enjoys huge support from the region’s shipowner community and is a must-attend for anyone with an interest in the Asian marine insurance sector.

www.marineinsuranceasia.com

A flare for warming?

Methane, the primary component of natural gas (+95%), is a potent greenhouse gas (GHG) and some 500,000 tons were released into the atmosphere following the rupture of the Nordstream pipeline.

Although believed to be one of the highest ever methane super-emitter events, this single incident is still a drop in the ocean relative to total human-made methane emissions.

The adverse climate effects of carbon dioxide are widely recognised and reported, but its fellow climate actor methane, generally gets far less airtime, despite being the second most important anthropogenic GHG and contributing a whopping 30% to man-made global warming.

The impact of a GHG is determined by two factors: the length of time it remains in the atmosphere: and its ability to absorb radiant energy.

Although methane has a relatively short atmospheric lifetime, it absorbs significantly more energy per molecule than CO2, meaning it is extremely potent in its heat trapping capabilities.

It is frequently cited that methane has 80 times the warming potential of CO2 in the first 20 years that it is in the atmosphere. As such, methane’s warming power is very different to that of CO2.

NEAR-TERM DRIVER

While CO2 accumulates in the atmosphere through many decades and the concentration is dependent on historical emissions, the concentration of methane is largely driven by

more recent emissions.

Methane drives climate change in the near term and therefore deep reductions in emissions can have an immediate effect on the rate of warming.

Controlling methane emissions and their front-loaded climate impact will play a very important role in achieving the Paris Agreement’s goal to limit warming to below 2⁰C.

Roughly 60% of total methane emissions are derived from human sources, stemming from the agriculture, energy and waste sectors.

Agriculture represents the largest source, but the energy sector is a close second, contributing almost 40% of anthropogenic emissions.

Unlike with CO2, energy industry methane emissions arise

Readers will be familiar with the Nordstream explosions of 2022, but, there is perhaps less awareness of the associated climate impact of the incident. Stewart Mackenzie-Shaw, adjuster, MatthewsDaniel, explains how the focus needs to be as much on methane as its fellow climate actor carbon dioxide

not from the burning of fossil fuels, but from their extraction, production, transport and processing.

Oil and gas operations are the largest source of methane emissions from the energy sector. The methane is released into the atmosphere either through leaks or through process design.

VENTING, FLARING AND LEAKS

More specifically, upstream operations are responsible for the three main sources of oil and gas methane emissions: venting, flaring and leaks.

Venting and flaring, either on a routine or emergency basis, generally relate to oil production operations during which natural gas is produced as a by product.

Gas is either released directly into the atmosphere (vented)

or combusted (flared) in an attempt to stabilise pressures for safety reasons, or to simply dispose of it owing to the uneconomical nature of its capture.

Methane emissions from flaring result when flares are unlit or are operating at low efficiencies. Leaks typically result from defective or poorly maintained equipment.

Despite the oil and gas sector’s worrying contribution to methane emissions, operational improvements can offer a golden opportunity to promptly reduce the rate of global warming.

It is estimated that the sector can reduce its methane emissions by around 75% by using existing technologies such as finding and fixing leaks and, in particular, stopping all non-emergency flaring and venting.

“Controlling methane emissions and their front-loaded climate impact will play a very important role in achieving the Paris Agreement’s goal to limit warming to below 2⁰C.’’

Stewart Mackenzie-Shaw, MatthewsDaniel

Methane emission reductions in oil and gas operations are also cheap, as the captured gas can be brought to market.

Based on pre-pandemic gas prices, it is thought that around 40% of methane emissions could be avoided at no net cost. That figure would increase to 80% on the basis of the record gas prices seen in 2022.

To date, and despite some progress in recent years, methane reductions have been held back by a lack of reliable data.

Quite simply, if it is not known where the emissions are coming from then it is very hard to mitigate them. Recent analysis suggests energy sector methane emissions are circa 70% higher than reported in official data.

STRONG RULES NEEDED

Therefore, the implementation of strong measuring, reporting and verification rules are required to achieve meaningful reductions.

In this regard, satellites are helping shine increased light on methane emissions and their associated sources across the globe.

More than 500 oil and gas super-emitting events, such as the Nordstream explosion releases, were detected by satellites in 2022.

Associated data show that the US, Russia and Turkmenistan were responsible for the largest number of events, with some relating to extended periods of deliberate venting and others owing to leaks from poorly maintained or regulated equipment.

In addition to technological advances relating to the measurement of methane emissions, various frameworks and initiatives have been developed to assist policy makers and regulators, whilst unifying global governmental efforts to achieve impactful methane reductions.

The Global Methane Pledge, which was launched in November 2021 at the COP26 Climate Change Conference in Glasgow, now has 150 participating countries that have collectively committed to reduce anthropogenic methane emissions by 30% by 2030.

CAUTIOUS OPTIMISM

The growing role of satellites and rising political momentum for abatement action on methane do indeed give reason for cautious optimism. But, so far, methane emissions remain stubbornly high and it seems that recent high energy prices and associated supply security concerns have been insufficient to drive them down.

In addition to meeting the minimum legislative and regulatory requirements, oil and gas companies are under growing pressure from energy buyers, investors and other financial institutions to reduce their methane emissions.

Ultimately, it is the oil and gas industry itself that controls the sector’s methane emissions. Credible reductions that are in line with environmental, social and corporate governance

(ESG) strategies, are now increasingly central to their ability to demonstrate compliance and long-term value to stakeholders, including insurers.

The challenge is that poor data quality undermines methane management efforts and associated stakeholder confidence. Therefore, transparency and robust measurement and reporting are essential to achieve the required trajectory to minimise the industry’s near-term climate impact.

“Despite the oil and gas sector’s worrying contribution to methane emissions, operational improvements can offer a golden opportunity to promptly reduce the rate of global warming.”

Stewart Mackenzie-Shaw, MatthewsDaniel

Cargo Insurance London

21st March 2024

NEWfor2024

Cargo Insurance London is a new conference taking place on the 21 March 2024. Traditionally, our cargo content was focused solely on seaborne transportation. This event is geared to be an accessible and dedicated one-day global cargo insurance conference in the City of London focusing on all aspects of the cargo transportation ecosystem. It is being held the day before Marine Insurance London.

To find out more contact Daniel Creasey on +44 (0)7702 835 831 or email daniel@cannonevents.com

GLOBAL PARTNERS:

Liquefaction of cargoes: a wider risk than often perceived

Liquefaction is a phenomenon in which soil-like material is suddenly transformed from a solid, dry state to an almost fluid state. The consequence for a bulk cargo loaded in a vessel is that what was initially a solid cargo starts to behave like a liquid cargo.

The stability of the vessel can be reduced due to the free surface effect of the liquified cargo and the shifting of the cargo. In the most serious cases, this can result in the vessel structure being damaged or the vessel capsizing.

For the past decade, cargo liquefaction has caused the loss of more than a dozen vessels and the lives of more than a hundred seafarers. The phenomenon can only be avoided by awareness of the conditions that may cause a cargo to liquefy.

TESTING OF CARGOES

Shipowners, charterers, shippers and insurers will be familiar with the risks associated with the Group A cargoes in the International Maritime Solid Bulk Cargoes (IMSBC) Code that have the potential to liquefy if the moisture content exceeds the transportable moisture limit.

These include iron ore fines, nickel ore and bauxite fines. But it is important to be cautious about all cargoes that can potentially liquefy, ie even those not listed as Group A. In both instances, shipping the cargoes without proper

Kunal Pathak , loss prevention manager of Gard, explains why it is so important to comply with the IMSBC Code to prevent incidents related to cargo liquefaction and prevent serious maritime casualties

declarations (from shippers) and precautions can be extremely dangerous for the crew and the environment.

In a couple of recent incidents involving vessels insured by Gard, cargoes that had not been declared by shippers as those that may liquefy did actually liquefy, putting the lives of the crew at risk. Fortunately, there were no fatalities in these cases, but, they certainly highlighted the need for increased awareness and strict adherence to safety guidelines as stated in the IMSBC code.

Ship owners and masters of vessels should keep in mind that the IMSBC Code’s Appendix 3, Article 2, states that many fine particle cargoes, when they have a high moisture content, can be prone to flow like liquid.

Therefore, any cargo that is even slightly damp or contains fine particles should be tested for flow characteristics before it is loaded onto a ship. This rule is not limited to Group A cargoes. It applies to all cargoes, including those not listed in the Code.

NOT EXPLICITLY LISTED

It is important for ship owners and operators to understand that the IMSBC Code does not cover all the types of cargo that can be transported by sea. When dealing with bulk cargo, they should also consider the IMSBC provisions for handling cargoes that are not explicitly listed in the Code.

The first case involved a cargo of soil from a landfill. The ship was carrying more than 1,900 tonnes of soil, which was not listed in the IMSBC Code.

During the voyage, the action of the winds and waves caused the soil to behave like a liquid. The vessel developed a list and the crew had to be rescued before the vessel eventually sank. Authorities had to remove oil from the wreck, but it was not considered a navigation hazard. An investigation by the Norwegian Safety Investigation Authority (NSIA) suggested that moisture in part of the cargo contributed to the problem.

The second case comprised a cargo of calcium carbonate. The ship started listing shortly after leaving the loading port. The cargo was not explicitly listed in the IMSBC Code. However, it was found that the cargo exhibited properties similar to Group A cargoes when exposed to higher moisture levels.

These example cases underscore the importance of following IMSBC Code provisions when dealing with cargoes not listed in the Code. Section 1.3 of the Code outlines the steps for handling such cargoes, including obtaining approval from the competent authority at the loading port.

Shippers should also be reminded to use the bulk cargo shipping name (BCSN) when the cargo is listed in the IMSBC Code. Trade names should only be used as secondary names, and using the BCSN ensures that the cargo’s properties align with the Code’s description. This provides certainty to the master, who can then confirm that the properties listed in the Code under the provided BCSN align with the cargo presented for shipment.

The significance of knowing the cargo being transported, understanding its properties and strictly adhering to safety guidelines cannot be understated. Being vigilant and complying with IMSBC Code provisions is crucial to prevent incidents related to cargo liquefaction and thereby preventing serious maritime casualties.

“For the past decade, cargo liquefaction has caused the loss of more than a dozen vessels and the lives of more than a hundred seafarers. The phenomenon can only be avoided by awareness of the conditions that may cause a cargo to liquefy.”

Being vigilant and complying with IMSBC Code provisions is crucial to prevent incidents related to cargo liquefaction and thereby preventing serious maritime casualties.

November 10th 2023, Quality Hotel Hasle Linie, Oslo

The Nordic marine sector has been a long-term success story, with insurers and clubs developing a global reach. We had felt for some time that as our portfolio developed, the Nordics were an important region that required its own event and as such, Marine Insurance Nordics was born.

The inaugural Marine Insurance Nordics event was held virtually in 2021 and was a resounding success. Thanks to our relationships with our regional and global partners, the inaugural physical event in 2022 was also hugely successful and has seen a record number of companies register their interest in the conference for 2023. We have great traction with the shipowner community in this region and have moved the event to a much bigger venue to accommodate the expected increase in attendees.

Nordics

November 10th 2023, Quality Hotel Hasle Linie, Oslo

9th November 2023 - 17.00-20.00 : Pre-Event Networking Drinks

09.00-09.20: KEYNOTE ADDRESS: How is the Marine Insurance Market Faring?

Presenter: Atle Fjeldstad, Chief Underwriting Officer, Nowegian Hull Club

09.20-09.40: FIRESIDE CHAT: Crew Matter

Panellists: David Hammond, Chief Executive Officer, Human Rights at Sea Lars Lislegard-Baekken, Chief Opperating Officer, Gard AS

09.40-10.25: PANEL DISCUSSION: And There She Blows – The Offshore Market

Panellists: Radmil Kranda, Vice President, Gard, Mats Johan Waage, Commercial Legal Advisor, Nowegian Hulll Club, Michael Andrew, Senior Broker, Gallagher, Eivind Killengreen, Head of Legal and Claims, Wilhelmsen Insurance Services

10.25-10.55: NETWORKING BREAK

10.55-11.35: PANEL DISCUSSION: Adjusting to Changing Market Conditions

Presenters: Andrew Chamberlain, Partner, HFW, Marlena Truszczynska, Vice President Claims, Nowegian Hull Club, Johan Henriksson, Head of Marine Claims, Alandia

11.35-12.00: PRESENTATION: Global Programmes

For corporates, global programmes are often an effective solution to manage their multinational risks. However, ever-increasing nationalism among regulators is creating new challenges for the insureds and their insurers. In this session, we will provide an update of the changing regulatory landscape for both insurers and their insureds.

12.00-12.20: PRESENTATION: Climate Change – A Wider Context

Presenter: Andrew Moncrieff, Principle Associate, Hawkins

12.20-12.50: FUTURE SESSION: The Desperate Race to Create a Protection Zone for the Biodiversity in the Rapidly Melting Arctic Ocean

Presenter: Pen Hadow, Explorer and Conservationist, 90 North Foundation

12.50-14.00: LUNCH BREAK AND NETWORKING

14.00-14.45: PANEL DISCUSSION: From Birth to Death –Shipyards to Recycling

Moderator: Ms Mariika Virrankoski-Poulsen, LL.M. Manager, Marine Claims, Wesmans

Panellists: Caglar Coskunsu, Partner, Cavus & Coskunsu Law Firm, Pia Melling, Managing Director, Grieg Green, Liam Glynn, Underwriter, British Marine

14.45-15.05: PRESENTATION: Kept in the Dark – The Shadow Fleet

Presenter: Mark Church, Head of FD&D Claims- Nordics and Northern Europe/Head of Sanctions Advice, North Standard

15.05-15.25: NETWORKING BREAK

15.25-16.10: PANEL DISCUSSION: Technology –Making the Best of Things

Panellists: Ronny Reppe, Chief Executive Officer, Noria, Anders Johannessen, Head of Special Risks, Lockton Edge, Ove Jarl Andersen, Vice President, Digital Customer Offerings, Gard, Nils Arne Fagerli, Head of Specialty, Marsh Norway

16.10-16.30:

PRESENTATION: Calm After the Storm – The Latest From Ukraine

Presenter: Anders Hovelsrud, Insurance Director, Den Norske Krigsforsikring for Skib

16.30-17.00:

PRESENTATION: Sanctions – The Practical Implications

Presenters: Bas Michiels, Vice President, T&T Salvage, Malin Högberg, Director Corporate Legal, Chair of the International Group of P&I Clubs’ Sanctions Committee, The Swedish Club

17.00-17.20:

PRESENTATION: Up, Up and Away Again –Claims Inflation

Presenter: Matt Bevan, Claims Director - Nordics & Northern Europe, NorthStandard

15.25-16.10: PANEL

DISCUSSION: Salvage and the True Cost of ESG

Moderator: Nina Hanevold-Sandvik, Vice president, Casualty and Major Claims, SKULD

Panellists: Victor Fenwick, Legal Director, HFW, Andreas Brachel, Head of Environmental Claims, Gard, Dave Wisse, Senior Commercial Manager, SMIT Salvage, Eftychia Tsakou, Vice President Claims, Nowegian Hull Club

16.10-16.30:

PRESENTATION: Electric Vehicle Transport by SeaMisconceptions and Facts

Presenters: Martti Simojoki, Senior Loss Prevention Manager, Alandia, Geir Jorgensen, Skuld

16.30-17.00:

PRESENTATION: Cyber – The Risk of the Uninsured

Presenters: Kelly Malynn, Product Leader Cyber Physical Damage MAP Risks, Beazley, Irene Philipps, Chief Digital and Operations Manager, Den Norske Krigsforsikring for Skib

17.00-17.20:

PRESENTATION: Capturing the Market – Carbon

British Marine staff surveyor Anthony Gardner (left) and chief surveyor Neil Hobson highlight the key areas where owners should review and check their shipboard arrangements

Survey lessons learned: oil pollution

As part of its loss prevention service, British Marine conducts numerous risk assessment surveys of insured vessels each year. These surveys aim to reduce incidents that lead to claims and allow it to gather the data of regularly occurring hazards.

The results give British Marine the opportunity to provide specific advice on the risks identified, alongside offering recommendations for improvements.

EMERGENCY PLANNING

The Shipboard Oil Pollution Emergency Plan (SOPEP) or Shipboard Marine Pollution Emergency Plan (SMPEP) is mandatory for the respective classes of vessel. But, unfortunately, some vessels are found with the required emergency plan missing, inadequate, or wrongly approved.

The SOPEP or SMPEP should be approved by the current flag state or recognised organisation (RO). If there is a change in management of the vessel, the plan needs to be re-approved.

The plan should be ship specific and be realistic in the guidance it provides to the vessel’s crew in the case of an operational oil spill or spill resulting from casualty. It must be in the working language of the vessel.

While a SOPEP/SMPEP is only mandatory for certain

vessels, we expect that all vessels have a demonstrable emergency plan in the case of oil spills occurring.

It is self-evident that having a plan will result in a quicker and more efficient response to a spill. Having no plan will result in confusion and a delayed emergency response.

The list of national contact points should be maintained up to date. An updated list is produced on a quarterly basis and is available at: https://www.imo.org/en/ourwork/circulars/pages/ cp.aspx

ANTI-POLLUTION EQUIPMENT

A stock of anti-pollution equipment appropriate to the vessels trade should be provided in a clearly marked locker or compartment.

This equipment should be treated with the same importance as other emergency equipment and should be stored in a readily deployable manner.

The anti-pollution gear should be inventoried and stocks maintained. Regular checks must be undertaken to check that the condition, functionality and quantity of material remains acceptable.

When engaged in higher risk activities (cargo discharge or bunkering, for example) consideration should be given to

pre-positioning equipment on site. This will reduce the time taken to access it in the event of a spill.

ANTI-POLLUTION EXERCISES

The crew should conduct drills at suitable intervals, depending on the vessel’s trade.

Many oil/chemical tankers conduct a drill monthly, whereas non-tankers more commonly conduct the exercise on a quarterly schedule.

Owners should pick a frequency that is most appropriate and allows for onboard and shore staff to gain an understanding of the actions required should a spill occur. Records should be maintained and the scenarios should be as varied as possible.

BUNKERING

There should be a bunkering procedure, supplemented by a checklist. Hard copies of the completed checklists should be retained for an appropriate period onboard.

This procedure should act as a minimum requirement and cover the following points in relation to spillage prevention:

1. Confirm sufficient space is available in each bunker tank nominated for loading;

2. Calculate maximum filling volume in each nominated tank;

3. Confirm communication methods between bunker supplier and person in charge of bunkering;

4. Make arrangements for emergency stop;

5. Agree on maximum rate of transfer, particularly for start of transfer and topping-off;

6. Establish the method of connection and disconnection of hoses – including any draining method;

7. Issue instructions on drawing samples of the received bunkers;

8. Document the procedure for changing over loading tanks;

9. Gauge frequency, including that of any tanks not being loaded – always being aware of the possibility of valve leakage; and

10. Return the system to normal operation. The bunkering pipeline should be pressure tested at least annually and records maintained.

Details of the test pressure and date of test should be stencilled on the pipeline/manifold.

Any manifolds not in use should be fully blanked/capped. Scuppers, freeing ports and other deck edge openings should be securely plugged during bunkering.

Consider putting these arrangements in place during each port or anchorage stay as an additional layer of protection against spills to sea.

SAVE-ALLS AND DRIP TRAYS

Drain plugs should be purpose made and ideally tethered to the adjacent structure to prevent loss when removed. Drain plugs should always be in place and only removed to allow controlled draining under supervision of a crew member.

It is important that any liquids in the save-alls or drip trays are kept to a minimum. Similarly, material should not be stored within the save-alls or drip trays. Both conditions can reduce the available capacity and increase the chances of a spill occurring.

“The Shipboard Oil Pollution Emergency Plan (SOPEP) or Shipboard Marine Pollution Emergency Plan (SMPEP) is mandatory for the respective classes of vessel. But, unfortunately, some vessels are found with the required emergency plan missing, inadequate, or wrongly approved’’

Forward Thinking™ Foreign Exchange

Renewable risk and reward

The swift expansion of renewable energy production in recent years has necessitated a rapid growth in the global shipping fleet required to build, operate and service the infrastructure. For the Shipowners’ members who currently work in the oil and gas industry, there are clear parallels with renewables work. However, while redeploying assets across sectors, or acquiring new assets and technology can present opportunities in the current market, both scenarios also present unique challenges. Alex

McCooke, offshore syndicate manager of the Shipowners’ Club

In 2010, less than 20% of global power generation came from renewables, whereas in 2021 the figure had risen to 28.7%. Events of the last year have further highlighted the benefits to countries in producing local, clean energy, as opposed to relying on the procurement of fossil fuels.

International climate pledges to reduce carbon emissions to net zero by 2050 will require renewables’ share of power to reach 90%. The Internaional Energy Agency advises this will requireannual capacity additions in the wind and solar industries that are five times higher than that seen by 2021.

Aligned with this, industry commentators predict demand for specialist vessels, especially those designed to work in the offshore wind environment, to outstrip supply for decades to come.

NEW CLAIMS

The growth in the number of vessels operating in these renewables sectors is generating a new composition of claims, with new specific insurance requirements.

The regulatory environment and the customers are distinctand the contracts in use, while possessing some similarities, have novel and sometimes nascent formats and clauses.

Consequently, the Club is advising members on increasingly complex issues through our underwriting, claims and loss prevention services. This trend will only continue to grow in future years, demanding even greater numbers of suitable vessels to cover the associated transport, construction and servicing requirements.

Traditional heavy lift operators that currently service the oil and gas (O&G) market have an opportunity to transition to meet the demands of renewables projects. However, the use of certain heavy lift vessels will be restricted by the dimensions of the offshore wind farm (OWF) components that they would be expected to transport.

While perfectly suitable for O&G cargo, when transporting turbine blades and other components, existing vessels could struggle with the distance between cranes, insufficient deck space and a lack of specialist transportation racks.

Vessel suitability challenges extend into the installation stage of a project lifecycle.

Traditional O&G mono-hull or semi-submersible installation vessels are not necessarily appropriate for OWF installations (at least not for mono pile and turbine installs), due to vessel platform motions and inadequate crane tip heights. For these units, the preferred installation vessels

are jack-ups.

This is not to say that some assets originally designed for O&G installations are unsuitable to be used in the windfarm arena.

Some conventional offshore heavy lift vessels are being used in the installation of jacket type foundation structures on several wind farm developments. Some pipelay vessels have also been converted specifically to install turbine foundations.

DOWNWARD PRESSURE

Renewables work can also see greater downward pressure on vessel day rates, as the project income expectations do not correlate with those available in traditional O&G markets. This can make it harder to justify large CapEx expenditures on speculative work.

Certain operators transitioning across the offshore industries have found it impossible to cover their asset crewing and servicing costs, when switching assets with a cost base established in the O&G industry.

However, there is evidence that rates in the offshore wind industry are improving.

It is also important to observe the level of acute demand

which can attach depending on the industry. In O&G, a typical shallow water (50-100m) development may require ten or so jack-up operations, but in a windfarm project that requirement may be several hundred.

This can result in customers attempting to secure assets and contracts earlier in the process to ensure supply is available.

The emergence of floating wind projects has also provided towage and anchor handling owners with a potentially significant opportunity and generated huge potential for cable lay vessels where they are able to adapt their working practices to the windfarm environments.

EXPANSION SCOPE

Operation and maintenance vessels also have major scope for expansion, with some units being in demand across both industries and those with mixed fleets comprising specialist lighter vessels able to bid across both O&G and renewables projects, hedging the rate cycles across these markets.

It is clear there is a lot of potential opportunity for O&G shipowners to transition operations into the renewables space, but a successful repositioning will depend on thorough planning and feasibility testing, as well as risk assessments to compete with the new-build vessel boom emerging in the offshore wind space.

As the industry focuses on becoming greener, there is an argument that repurposing existing vessels would be a more environmentally friendly means of meeting demands. However, with OWF component transportation and installation requiring specific vessel attributes and capabilities that may not be present in most O&G service vessels, shipowners must be realistic as to whether vessel conversion is a sensible route to go down and must look for novel solutions for existing assets, or themselves join the new-build boom.

As ever, while there are clear challenges present in either direction, there are also exciting opportunities.

With thanks to Alex Harrison, group director of energy services at ABL Group, assistance with the article content.

“Traditional heavy lift operators that currently service the O&G market have an opportunity to transition to meet the demands of renewables projects. However, the use of certain heavy lift vessels will be restricted by the dimensions of the Offshore Wind Farm (OWF) components that they would be expected to transport.’’

Loss of hire insurance: is everything clear?

Gianpiero Priano , of Cambiaso Risso, the London based insurance broker, ship agent and ship broker, provides

(LoH) insurance is a well-known marine insurance tool which, at its outset, was primarily an additional protection adopted by few prudent shipowners against the risk of loss of the income-producing capacity of their vessels while carrying on repairs of damages falling under relating hull and machinery (H&M) policies.

Originally the protection was limited to the net loss of hire (ie deducting any savings by the assured) and of course for the number of days in excess of the policy deductible and up to the maximum number of days insured “per occurrence and in all”.

Nowadays an agreed sum is generally insured and paid without deductions for each day of time charter lost in excess of the deductible period.

Where appropriate clauses are included or the policy is agreed

a guide through the sometimes complex world of loss of hire insurance

as a loss of earnings insurance it is possible to apply it even where no time charter party exists, but the vessel is operating under different contractual terms, for instance on a voyage charter basis.

COLLATERAL PROTECTIONS

LoH insurance has become ever more popular and currently, banks and lenders in general are including loss of hire among the collateral protections required to the owners in most ship finance operations.

LoH may be purchased from most of the insurance markets “marine-oriented” and covered in accordance with the London market or alternatively the Nordic or American markets’ set of clauses. Each market offers the same basic protection but with some minor differences.

Everything clear? Probably less than one would expect.

Let’s start with clause 1 of the London market basic clause, “loss of charter hire insurance, including war”, cl. LPO 454 so called ABS 1/10/83 Wording.

If in consequence of any of the following loss, damage or occurrence covered by H&M agreed set of clauses and also loss damage or occurrence covered by war & strikes agreed set of clauses or breakdown of machinery provided that such breakdown has not resulted from wear and tear or want of due diligence by the assured, the vessel is prevented from earning hire for a period in excess of an agreed number of days (which is usually fixed  14 days), then LoH insurance shall pay an agreed amount per day, not exceeding an agreed limit of days (usually fixed at 90 days).

The following clause 2 has a fundamental role in understanding LoH insurance: No claim shall be paid if the

“Where appropriate clauses are included or the policy is agreed as a loss of earnings insurance it is possible to apply it even where no time charter party exists, but the vessel is operating under different contractual terms, for instance on a voyage charter basis.’’

occurrence in respect of which such claim arises is the cause of a vessel becoming a total loss (actual or constructive).

Therefore, once the above circumstances have occurred, the assured will submit his claim for LoH, including of course the necessary supporting documentation, specifically aimed at the correct assessment of the time lost (in number of days) to be then multiplied by the agreed daily amount.

FIRST SURPRISE

Here may come, although quite seldom, the first surprise.  May a discrepancy between the actual H&M policy conditions and the H&M conditions mentioned in the LoH cover note leave a gap such as to make the occurrence covered under the H&M insurance but not under the LoH cover (and vice-versa)?

These words provided by 1 of Cl. LPO 454 “option of (H&M) clause to be exercised at inception”could imply that the insurer tends to attach a decisive weight to the contents of the specific clauses “as mentioned”.

Based on previous case, we have experienced a LoH claim, disputed by insurers because the cause of the damage triggering the loss of hire claim was covered under the H&M policy of that vessel by the inclusion therein of the “additional perils clause”, which had not been included in the LoH cover note.

Specifically, the claim was a shaft misalignment which was indeed covered by H&M under the “additional perils clause”, but, the LoH insurers disputed the time spent in correcting the defect because of the lack of the above clause under LoH policy.

One would then question what the meaning of para (b) of clause 1 (breakdown of machinery provided that such breakdown has not resulted from wear and tear or want of due diligence by the assured) which goes beyond the perils covered in ITCH 1/10/83 that it does not require “loss or damage to the vessel”, but the simple fact that machinery etc., or boilers have had a breakdown.

QUESTIONABLE REJECTION

It is therefore questionable if the rejection of that claim, in the case mentioned above, would justify if para (b) could possibly apply.

It remains that, but for said possible escape, the LoH insurers would be entitled to pay only the time lost because of damage which is covered by the policy in the absence of the “additional perils clause”; for instance, in case of a latent defect which results in consequential damage, only the time lost in repairing the consequential damage and not the time lost in correcting the defect itself.

There is another possible surprise, positive this time.

Let us assume that, despite the damage, the vessel is nevertheless able to continue her trading, although somewhat affected in her capacity of earning.

Damage to one of the deck cranes may allow the vessel to operate, but, at a reduced loading rate or damage to the

cargo systems of a tank may allow the other tanks to be used, but the total loading capability of the vessel is reduced. In this case, is any claim under the LoH policy excluded by the fact that the vessel is not, strictly speaking, prevented from earning hire?

The answer is negative. A claim is still possible. In fact, in the appropriate circumstances, the terms of the Nordic LoH conditions and the practice governing the ABS 1/10/83 wording both offer the possibility to turn the reduced earning capability of the vessel into a corresponding (partial) loss hire claimable to the policy.

It is clear that any case under LoH insurance must be carefully considered in light of both the wording and the facts as the solution is not often a clear-cut one.

However, it is without doubt that this kind of cover is of utmost importance for several shipowners and grants financial protection which, in some on the above cases, can take on a fundamental role in the everyday business.

“LoH may be purchased from most of the insurance markets “marine-oriented” and covered in accordance with the London market or alternatively the Nordic or American markets’ set of clauses. Each market offers the same basic protection but with some minor differences.”

Gianpiero Priano, Cambiaso Risso