Transcript nimport insuring maritime operations in uyo

INSURING MARITIME OPERATIONS,
INFRASTRUCTURES AND INTERNATIONAL TRADE
Let me start by thanking the organizers of NIMPORT for the success
recorded so far in organizing this yearly conference and for the
opportunity provided to make a presentation at this conference.
As we may all be aware, insurance is a very important aspect of risk
management and with the knowledge that the discussion on maritime
operations in any country cannot be complete without reference to
marine insurance (through which modern insurance actually started)
and its relevance to trade and commerce in general and international
trade in particular. There is no doubt therefore, that this forum is best
suited to discuss the subject: Insuring Maritime Operations,
Infrastructures and International Trade.
International Trade
 Exchange of capital, goods, and services across international
borders or territories.
 Represents a significant share of gross domestic product
(GDP).
 Its economic, social, and political importance has been on the
rise in recent centuries.
 Continuously impacted by Industrialization, advanced
transportation, globalization, multinational corporations, and
outsourcing are all having a major impact on the international
trade system.
 Crucial to the continuance of globalization.
 Without international trade, nations would be limited to the
goods and services produced within their own borders.
The Importance of the Maritime Sector
The sea and the maritime infrastructure crucial to human
development and international trade:
Sector plays a very significant role in the socio-economic development of
a country.
 66% of the world’s population live within 100 km of the coastline
 Globally, one in every six jobs relate directly or indirectly to the sea.
 Land-locked countries mainly depend on countries with ports and
harbour facilities to either import and export goods.
 Nigeria has enormous natural maritime resources and a major hub for
international trade in Africa.
 Nigeria Maritime industry contribute significantly to the Gross
domestic Product (GDP.
 The industry has been able to provide channels for flourishing
international trade and investments between Nigeria and other nations.
 Capable of becoming the second highest source of gross earnings (GDP)
to our economy if properly promoted and managed.
 Investment in the Nigeria maritime sector accounts for
about 90 per cent of the global transportation requirement
for the nation.
 remains a critical infrastructure supporting the nation's
economy and international trade.
 Sector significant to development and sustainability of the
economy. It facilitates local & international trade.
 Investment potentials cut across mining, manufacturing
and service industries;
MARITIME INDUSTRY STRUCTURE
Sector structure composed mainly:
- port industry
- shipping and ancillary services,
- offshore services,
- ship building and ship repair,
- marine services,
- bunkering services, etc.
The port industry is relatively the most developed
area in the sector.
Nigeria accounts for over 65% of total seaborne
traffic in volume and value in West and Central
African sub-region.
INDUSTRY STUCTURE CONT’D
The Major Players….
1)
2)
3)
4)
Ship owners
Port /Terminal operators
Freight forwarders/handlers
Regulatory bodies e.g. Nigerian Ports Authority (NPA),
Nigerian Maritime Administration and Safety Agency
(NIMASA), Nigerian Customs
5) Service, Federal Ministry of Transportation, Nigerian
Agency for Food and Drug Administration and Control
(NAFDAC).
6) Shipping service providers
7) Financial institutions
INSURANCE FOR THE MARITIME
SECTOR
Insurance necessary for the following:
Assets
Operations and;
liabilities
emanating from this all important industry that
significantly impacts the economic life of the
nation cannot be over emphasized, hence the
relevance of this topic at this auspicious time.
INSURANCE
Defined as ….
“the act, system, or business of insuring property,
life, etc., against loss or harm arising in specified
contingencies, as fire, accident, death,
disablement, or the like, in consideration of a
payment proportionate to the risk involved”.
“a contract that provides coverage in which one
party agrees to indemnify or reimburse another
for loss that occurs under the terms of the
contract”.
Insurance cont’d
Insurance contract is set forth in a written or printed
agreement or policy. The consideration/amount for
which anything is insured is an insurance premium.
• Entrepreneurs invest resources into the start-up and
continuous operation of a business. If the
entrepreneur suffers any form of loss, the business die
or takes a long time to recover. Insurance is therefore
very important to the business continuity
• The principle of indemnity ensures that an
entrepreneur receives enough compensation to
continue the business with minimum effects.
MARINE INSURANCE
• A contract whereby the insurer undertakes to indemnify
the assured, in manner and to the extent thereby by
agreed, against marine losses, i.e. the losses incident to
marine adventure.
• Covers the loss or damage of ships, cargo, terminals, and
any transport or cargo by which property is transferred,
acquired, or held between the points of origin and final
destination.
• There are various types of Marine insurance such as
Cargo, Onshore and Offshore exposed property (container
terminals, ports, oil platforms, pipelines);Marine Hull;
Marine Casualty; and Marine Liability.
MARINE INSURANCE - Cargo
 Sub-branch of Marine Insurance & Occupies an important position
in international trade.
 Primarily concerned with the protection of ocean-going cargoes
 Also covers against
 Hazards associated with connecting land conveyances and;
 Risks involved in shipments by rail or air.
 Its simplest form provides cover against accidental damage and
other maritime risks. The other extreme is a comprehensive all-risk
policy, covering a range of specified accidents - including damage
during loading, theft and negligence.
 Cargo insurance is so important to both local and international trade
that the Government of Nigeria had to come up with a national
policy on same.
MARINE CARGO INSURANCE
What the Law says Cont’d
• Promulgation of Decree no. 2 of 1997 addressed the
problem
• Section 76: An insurance of goods to be imported into
Nigeria shall be made with a Nigerian registered
insurance company.
• This position is further reinforced in Section 67 of the
Insurance Act of 2003.
• Thus the Law in Nigeria is that all cargoes being imported
into Nigeria must be insured in Nigeria by Nigerian
insurance companies.
• The Law need to be effectively enforced.
MARINE HULL INSURANCE
• Marine Hull insurance covers almost everything that
floats or moves on water starting from ordinary rowing
boats to the massive ocean tankers, including nonpropelled objects such as floating docks, buoys,
transshipment barges and floating accommodations.
• Policy also insures vessels under construction or
conversion.
• Protects the vessel including the hull, machinery, gear and
equipment against loss or damage on all risks basis.
• Ship owners may also be able to claim for their ship’s
share of salvage, salvage charges and general average,
depending on the policy wording.
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MARINE HULL INSURANCE
Related
Covers
The Marine Hull and Machinery policy is the basic insurance required by
vessel owners and ship operators. Other related insurances are analysed
below
– Disbursements, Freight, Increased Value (IV)
Vessel owners would be entitled to claim certain amount of money (which
must have been agreed beforehand) in excess of insured value of your
vessel in case she will be a total loss, whatever actual or constructive.
– Loss of Hire (LOH)
Ship operators need money to run ship and expects some profit from her
operation as well.
No income once ship is not working, hence so need for LOH insurance.
LOH Insurance will compensate daily amount (as may have been preagreed) whilst ship undergoes repairs following an accident covered under
H&M insurance.
Cover subject to time excess of about 14 days.
Mortgagees' Interest Insurance (MII)
Normaly demanded by bankers and other financiers (or mortgagees).
Protects the mortgagees' interest in the insured vessel in case H&M
underwriters refuse to settle a claim due to breach of warranty stated
in H&M policy.
 e.g. H&M Policy allows vessel to sail only within the West African
coastal waters, but the vessel ends up in collision in the north sea – the
H&M policy will turn down the claim but the MII policy will protect
mortgagees' interest anyway.
Builders' Risks
 For the vessel under construction.
 Cover is normally against all risks of loss or damage to vessel whilst
under construction or conversion and during trials and would include
certain liability risks as well.
 This insurance is normally taken by ship builders.
MARINE LIABILITIES
• Liabilities associated with maritime operations are in various
forms.
• Some relate directly to vessels and cargoes.
• Others have to do with the ownership and operations of jetties,
harbours, etc.
• Some of the insurances associated with marine liabilities are:
Charterers Liability
• Protects charterers of vessels from a range of liabilities, either
through contract or in tort. Cover can include liabilities
resulting from damage to the vessel itself, or from third parties
directly or by way of indemnity.
Port, Harbour and Terminal Operators Marine Package Policy
Terminal operators may have to take out insurance policies, either
under the terms of operating agreements entered into between them
and port authorities; as a result of the terms of terminal tariffs
previously drafted by such authorities; according to the liability and
indemnity clauses inserted in contracts agreed upon with particular
users; or simply because the terminal operator not able to bear the
consequences of the materialization of one risk, decides to transfer
it to a specialized company (i.e. insurance company).
Ship Repairers Liability
Insurance that protects a ship repairer from liabilities whilst the
vessel is under their care, custody and control.
Designated Persons Ashore Personal Professional Indemnity
In an accident where pollution, damages or injury occur, the
Designated Person can be held personally responsible. This insurance
covers a DP’s liability from professional negligence, the “contingent
liability” of a claim that would normally be covered by their
employer’s P&I policy and legal expenses to defend a claim.
Marine Pilots Liability
This insurance provides cover against claims made against marine
pilots. Cover extensions are available for third party liability and
personal accident.
Ship Brokers, Ship Agents and Ship Managers Liability
Cover to protect transport intermediaries against claims for
negligence and error or omission.
MARINE PROFESSIONAL INDEMNITY
For marine surveyors, consultants, architects, ship managers and
other marine professionals. The insurance covers claims arising from
legal liability and errors & omissions in the exercise of the insured’s
professional duties. Cover extensions include third party liability and
liability for fines and duty.
PROTECTION AND INDEMNITY INSURANCE COVER
Protection and Indemnity insurance, or “P&I” , is a shipowner’s insurance cover
for legal liabilities to third parties.
 Provides cover for the property, equipment, liabilities and financial exposures of
port authorities, as well as the port, harbour and terminal operators who work there.
Cover extensions are available for excess protection and indemnity, removal of
wreck, and fines and penalties.
PROTECTION AND INDEMNITY INSURANCE (P&I)
 Usually arranged by entering the ship in a mutual insurance
association, usually referred to as a “club”.
Ship-owners are members of such clubs.
Legal liability is decided in accordance with the laws of the country
where an accident takes place.
 Cover for contractual liability is agreed at the time the owner
requests insurance cover from the club usually in accordance with the
owner’s responsibility under crew contracts or special terms relating to
the trading pattern of the vessel.
“PROTECTION”
 Protection means the insurance also covers assistance when a ship is
involved in an accident and the shipowner and his Master need help.
Club’s early intervention and assistance will help to head off problems
and serve to protect the Ship-owner from inflated claims.
“INDEMNITY”
P&I insurance is an indemnity type of insurance, which
means the ship-owner (or member of the club) must
demonstrate his loss before the club will pay out (or
indemnify him) under the terms of the insurance policy.
It is important to bear in mind that the club never
assumes the owner’s liability, therefore technically the
owner (or
member) is always responsible for payments (the “pay
to be paid” principle). In practice, the club takes over
the business of handling claims and ensuring that
payments are correctly made.
COVERAGE INCLUDE:
- Collision with Fixed or Floating Objects (FFO)
The P&I cover may include liability for collisions (“RDC”), for
example when the member’s ship is in collision with another
ship, or when the entered ship strikes a fixed object, i.e. a quay,
dock or buoy.
- Death and Personal Injury on Board The Vessel
P&I insurance covers an owner’s liability for all deaths,
personal injuries and illnesses which occur on board, including
death or injury to crew, passengers, stevedores, pilots
and visitors to the ship.
Repatriation of Sick or Injured Crew and Hospital Expenses
P&I insurance also covers a shipowner’s liability to pay for the
costs of repatriating crew members who become sick or are
injured on board. The insurance also covers the crew’s hospital
bills and costs of sending replacement personnel to the ship if
necessary.
crew
belongings in cases of shipwreck or fire on board. The cover
only
applies to items which are deemed to be reasonable for any
crew member to have with him on board.
Loss of or Damage to Cargo
One of the major functions of Protection and Indemnity
insurance is to cover a shipowner, or the charterer of a ship,
for liability for loss of, or damage to, cargo if there has been
a breach of the contract of carriage. This breach of contract
usually means that something has happened to the cargo
while it was on board the ship or being loaded or discharged,
and for which the owner or charterer can be held
responsible.
Other P&i Covered Risks
Other risks covered include liability for stowaways, liability for oil
pollution and other types of pollution and legal liability for wreck
removal if the ship sinks and is blocking free navigation for other
vessels. In short, P&I insurance is a very comprehensive type of
insurance cover which makes it easier for a shipowner or charterer
to trade in international shipping transportation. P&I is as important
to a prudent shipowner as his Hull and Machinery insurance cover.
SUMMARY
P&I is a special type of marine insurance. It is a liability insurance
that a prudent shipowner, manager or charterer needs, particularly if
the ship is employed in by the multinational companies such as oil
companies or for international trade. P&I insurance covers a
shipowner or charterer for liabilities and losses in direct connection
with the operation of the ship.
IGI and P&I
IGI is aware of the difficulties ship owners go through before they get
admitted into P&I Clubs which are mainly administered from Europe and
America. The company is also not unaware of the heavy contribution
required on year to year basis in maintaining membership of P&I clubs.
SOLUTION
IGI has therefore established a simplified relationship with a P and I
Association called the East of England Protection and Indemnity
Association, which has given her the capacity to admit members and take
appropriate decisions.
We are now able to admit both the vessels operating in brown water and
blue water into the Club up to a limit of liability of $100m any one vessel.
For this purpose, we also confirm that the capacity of the Association is
also fully backed by underwriters from the Lloyds of London. We are
open to assist you in this regard and with regard to conventional insurance
policies at any time, starting from this conference.
Thank you for listening.