CURRENT CHALLENGES IN PROVIDING INSURANCE COVERAGE IN MAJOR ENVIRONMENTAL DISASTERS – OVERVIEW OF AVAILABLE/RELEVANT COVERAGE By Stirling Leech Clyde&Co – Brazil

Maritime Law Association of the US IberoAmerican Institute of Maritime Law October 2013

Introduction

 Offshore and Onshore  Shipping Sector  P&I Insurance Coverage  Pool cover  Extra or fixed premium cover  Offshore packages  Oil & Gas Sector  Oil & Gas Insurance Coverage  Operator’s cover  Contractor’s cover

Introduction cont/d

 Oil & Gas Insurance Coverage – cont/d  Insurance on Mobile Offshore Drilling Units (MODUs)  Control of Well insurance  Offshore construction insurance  Operating insurance  Business interruption, delay and start-up and loss of life  Offshore liability risks  Pollution insurance  Onshore/downstream insurance coverage  Sufficiency/adequacy of insurance coverage to meet major environmental disasters

The Underlying General Shipping Sector

 Transportation of crude, other fuel oils and gas  Bunker spills  Hazardous and noxious substances  Wreck removal  Salvage  “Costa Concordia”  Debate  Spiralling costs  Who bears them?

 The offshore shipping sector  Specialised vessels

P&I Insurance Coverage

 Regular Cover  P&I Pool pollution limits.  Contracted liability and “knock for knock” agreements  Exclusion from poolable cover and fixed premium/limit contracted extension cover  Offshore packages  Skuld, Gard & Standard P&I Clubs  Oil and gas drilling and production operations  Tug and supply vessels, construction vessels, pipe and cable laying vessels, dredgers, pile driving vessels  Limits – lower  FPSOs and FPUs etc  Other fixed premium cover

The Oil and Gas Sectors

 Buyers of insurance basically:  Oil companies  Contractors  Their roles  The oil companies  The JVA • Specifies insurance required • Typically, Operator to arrange insurance programme • But each company may purchase insurance  The Contractors  Specialist companies  Responsible for insuring their own vesels and equipment  Responsibilities and liabilities defined in service contract  Risk allocation

Non P&I Offshore Insurance Coverage

(a) • Mobile Offshore Drilling Units (MODUs) American Institute Time Clauses, the Norwegian Plan, LMOMUF • • Limited amount of liabity coverage Role of P&I Clubs (b) • • • Control of Well insurance Blow-outs Operator procures insurance EED and LSW wordings

Non P&I Offshore Insurance Coverage

(b) • • • Offshore Construction • Design Engineering, FEED contract, construction and installation • Allocation of risk Indemnities irrespective of fault Exceptions for gross negligence or wilful misconduct • Responsibility for providing CAR insurance Contractor or Operator?

- Contractor possibly if one EPC contract • • • - Operator controlled approach more likely LOGIC P&I risks to be insured by Contractor • • WELCAR policy form 2001 Pollution coverage WELCAR 2012

Non P&I Offshore Insurance Coverage cont/d

(d) Operating Insurance • • • Package Policy LSPF stand alone form Institute Time Clauses Hulls – Port Risks (e) Business Interruption, Delay and Start-Up, Loss of Hire • Not all companies purchase • “P-36” platform loss (f) Offshore Liability Risks • • • Myriad of exposures Complex area Package policies traditionally with exclusions and buy-backs

Non P&I Offshore Insurance Coverage cont/d

(f) Offshore Liability Risks – cont/d • Stand alone wordings • LSW 244 and 245 • London ‘Claims Made’ wording (JL 2003/007) • ‘Occurrence’ form (JL 2003/006) • London CGL wording LPO 418(B) • Exclusions

Non P&I Offshore Insurance Coverage cont/d

(g) Pollution insurance • Operators generally accept responsibility for pollution risk from their fixed and floating facilities etc • Contractor accepts liability for bunker spills and leaks of fuel from MODU and construction vessels • Normally provided under control of well policies and under CAR or umbrella liability policies • • Stand alone wordings for e.g. OPA/OPOL OIL and WQIS

Non P&I Offshore Insurance Coverage cont/d

 Onshore/downstream insurance  Encompasses:  All aspects of oil, gas and petrochemical operations such as refining of crude, cracking of hydrocarbons into petrochemicals, transportation and storage  Catastrophe, liability/pollution and business interruption cover  OIL and other market players

Conclusions and Sufficiency/Ad equacy of Coverage

 Coverages developed significantly recently, especially with increased number of specialized vessels and FPSOs and general offshore activity  Sufficiency/adequacy of coverage?

Dovetailing contractual wordings/extra contractual liability risks against coverage Sufficiency of different insurance wordings? Too many wordings but not enough dovetailing together?

Increasingly higher exposures Pollution Fines Criminal Wreck removal FPSOs and FSUs covered by CLC/Fund Conventions?

Thank you

 

Abu Dhabi

Tel: Fax: +971 2 644 6633 +971 2 644 2422 Email: [email protected]

 

Bangalore*

 Tel: Fax: +91 (0) 80 4016 0000 +91 (0) 80 4016 0001 Email: [email protected]

Belgrade*

Tel: +381 11 303 8822 Fax: +381 11 303 8309 Email: [email protected]

London

Tel: Fax: +44 (0)20 7623 1244 +44 (0)20 7623 5427 Email: [email protected]

Moscow

Tel: Fax: +7 495 601 9006 +7 495 601 9005 Email: [email protected]



Riyadh*

Tel: Fax: +966 1 279 5212 +966 1 279 5101 Email: [email protected]



Rio de Janeiro

Tel: Fax: +55 21 2217 7700 +55 21 2217 7720 Email: [email protected]

Clyde & Co LLP is a limited liability partnership registered in England and Wales.

Regulated by the Solicitors Regulation Authority.

© Clyde & Co LLP 2009 

Mumbai*

Tel: +91 (0) 22 4001 0000 Fax: +91 (0) 22 4001 0001 Email: [email protected]



San Francisco

Tel: +1 415 365 9800 Fax: +1 415 365 9801 Email: [email protected]    

Caracas

Tel: +58 212 2785 7118 Fax: +58 212 285 5098 Email: [email protected]

Doha

Tel: Fax: +974 496 7434 +974 496 7412 Email: [email protected]

Dubai

Tel: Fax: +971 4 331 1102 +971 4 311 9920 Email: [email protected]

Guildford

Tel: Fax: +44 (0)1483 555 555 +44 (0)1483 567 330 Email: [email protected]



Nantes

Tel: +33 (0)2 40 47 00 71 Fax: +33 (0)2 40 35 84 82 Email: [email protected]



Shanghai

Tel: +86 21 5877 5128 Fax: +86 21 5877 9128 Email: [email protected]



New York

Tel: +1 212 710 3900 Fax: +1 212 710 3959 Email: [email protected]



Singapore

Tel: Fax: +65 6544 6500 +65 6544 6501 Email: [email protected]



Paris

Tel: Fax: +33 (0)1 44 43 88 88 +33 (0)1 44 43 88 77 Email: [email protected]



St Petersburg*

Tel: Fax: +7 812 232 2297 +7 812 233 8109 Email: [email protected]



Piraeus

Tel: Fax: +30 210 417 0001 +30 210 417 0002 Email: [email protected]

*Associated office 

Hong Kong

Tel: +852 2878 8600 Fax: +852 2522 5907 Email: [email protected]

Contact:

Stirling Leech Partner Clyde&Co Rua Padre João Manoel 199/2º Conj. 24, Cerqueira César Cep 01411-001

Sao Paulo

Tel: (11) 2768-8720 Fax: (11) 2768-8723

Rio de Janeiro

Tel: (21) 2217-7716 Mob: +44 (0) 7879 032 042 E-mail: [email protected]