Insurance Jottings

Lloyd’s to “flex up” cat appetite: Neal

Syndicates at Lloyd’s will be able to take on a greater level of cat risk from 2021 on the back of improved market dynamics and pricing, CEO John Neal has said.

Standard Club News: IMB Q2 2020 piracy and armed robbery report shows records 25% increase in incidents

16 July 2020

The latest report of the International Maritime Bureau (IMB) shows a 25% increase in the total number of incidents of piracy and armed robbery in Q2 2020 as compared with Q2 2019.

The report noted that 98 ships have reported incidents to the IMB Piracy Reporting Centre (IMB PRC) in the first half of 2020.

The report recorded 81 ships boarded, ten reported attempted attacks, six ships fired upon and one ship was hijacked.

The consequences of these attacks resulted in 54 crew being kidnapped, 23 taken hostage, ten crew being threatened and assaulted and six being injured.

However, the report also noted that ship hijackings are at their lowest since 1993. Masters, crew and owners/operators are nevertheless urged to maintain high levels of vigilance especially while navigating in high risk waters.
Regions where incidents reported 

Gulf of Guinea

This region accounted for approximately 90% of global kidnappings with 49 crew kidnapped in nine separate incidents. The IMB PRC continues to liaise with the regional navies including the Nigerian navy in order to combat armed robbery and piracy in the region.

The IMB PRC thanked the Nigerian navy in its report on the capture of the ten pirates and handing them over to Nigerian Maritime Administration and Safety Agency for due process.

However, the report calls on all countries in the region to take greater responsibility and ownership to address armed robbery and piracy.

IMB Director Michael Howlett has commented: ‘Violence against crews is a growing risk in a workforce already under immense pressure.’ He also said that ‘we need to change the risk-to-reward ratio for pirates operating within the Gulf of Guinea. Without an appropriate and proportionate deterrent, pirates and robbers will get more ruthless and more ambitious, increasing the risk to seafarers.’

Waters off Somalia 

No incidents have been reported off Somalia, however the IMB urges ships to continue implementing BMP5 recommended practices while transiting these waters.

Asia

The Singapore Straits and some Indonesian ports have seen an increase in the number of reported incidents. Most of these are low level, opportunistic crimes, but each has the potential for crew to be taken hostage or injured – as seen in two separate incidents within the Singapore Straits.

Vigilance is the key in these waters as the perpetrators prefer to flee if noticed and the alarm raised. All seafarers are encouraged to keep a vigilant lookout and employ recommended anti-piracy/robbery measures in these waters.

South America

The IMB PRC has seen an increase in incidents in Peru, Ecuador and Mexico. Ships have also been fired upon, crews injured and taken hostage.

All masters, crews and owner/operators are encouraged to report all incidents to the 24-hour manned IMB PRC in order to understand the true risk faced by seafarers in these waters.

IMB Piracy Reporting Centre

Founded in 1991, the IMB PRC’s 24-hour manned centre remains a single and trusted point of contact to report the crimes of piracy and armed robbery. The centre has not only assisted ships in a timely manner, it also provides the maritime industry, response agencies and governments with transparent data – received directly from the master of the ship under attack or its owners.

The IMB PRC’s prompt forwarding of reports and liaison with response agencies, its broadcasts to shipping via GMDSS Safety Net Services and email alerts to ships’ company security officers, all provided free of charge, has helped the response again

Standard Club Article: Australian court considers whether a remotely operated vehicle (ROV) can be considered a ship under Australian law

15 July 2020

Guardian Offshore AU Pty Ltd v Saab Seaeye Leopard 1702 Remotely Operated Vehicle Lately On Board The Ship ‘Offshore Guardian’ [2020] FCA 273

The Federal Court of Australia has handed down a judgment that gives an interesting insight into the meaning of ‘ship’ under the Australian Admiralty Act 1988.

Facts

The applicant sought to arrest an ROV as security for its claim against a diving services company in relation to a contract relating to the use of the ROV. A third party, related to the diving services company and said to be the owner of the ROV, subsequently applied to set aside the arrest. Its application was based on several grounds including that the ROV was not a ship that was capable of being arrested.

To determine the issue, the court had to focus on section 3 of the Australian Admiralty Act 1988 whereby a ‘ship’:

… means a vessel of any kind used or constructed for use in navigation by water, however it is propelled or moved and includes:

(a)   a barge, lighter or other floating vessel
(b)   a hovercraft
(c)   an off-shore industry mobile unit, and
(d)   a vessel that has sunk or is stranded and the remains of such a vessel

but does not include:
(e)   a seaplane;
(f)    an inland waterways vessel; or
(g)   a vessel under construction that has not been launched.

The ROV in question was capable of being launched into the water from an offshore support vessel within a cage-like frame. It could be operated remotely by a pilot on board the offshore vessel and was equipped with lights and cameras to allow the pilot to observe the surroundings in real time. The ROV drew electric power from an umbilical cord attached to the offshore vessel and was otherwise self-propelled and capable of being precisely manoeuvred to undertake complex underwater tasks at depths of up to 2,000 metres.

The Court carried out an extensive review of case law going back to the late 19th century. The Court held that the ROV was not a ship because it (i) lacked the usual characteristics of a ship; (ii) did not obtain buoyancy by displacing water; (iii) had a limited ability to be navigate through water; (iv) was self-propelled only in a limited sense; (v) did not have the capacity to withstand the ordinary perils of the sea; (vi) was unable to leave the jurisdiction on its own (unlike a conventional ship); (vii) was small; and (viii) was not registered as a ship.

Accordingly, the proceedings were dismissed.

Decision

The decision confirmed that an ROV is not considered a ‘ship’ pursuant to the Australian Admiralty Act 1988 and therefore cannot be arrested (unless there is another basis, for example, as ‘other property’ under section 17). However, this was a first instance decision of a single judge and is open to be challenge because while it may be persuasive, other judges are not bound to follow this decision.

English law perspective 

English law cases have tended to consider ships as those capable of navigation and transporting goods and people. See for example Steedman v Schofield 1992 2 LLR where a jet-ski was not a ‘vessel used in navigation’. This approach follows the position in statute whereby the Merchant Shipping Act 1995 refers to a ship at Section 313 to ‘include every description of vessel used in navigation’.

However, in later cases such as Perks v Clark 2001 2 LLR, the court found that where navigation is a significant part of the function of a jack-up unit then it may be considered as a ship. However, the court did concede that there was ‘an issue of the degree as to the significance of the navigation’ and that this would be a question for a fact-finding tribunal.

Whilst this is a decision from the Australian courts relating to an ROV, it may prove to be persuasive in other jurisdictions. The case serves as a useful reminder that with increasing technological trends in shipping, the admiralty courts have to adapt to take into account new technologies and new practices whilst maintaining a balanced commercial view. It remains to be seen how the courts will treat more modern shipping vessels such as autonomous underwater vehicles (AUVs), autonomous surface vehicles (ASVs) and unmanned surface vehicles (USVs).

Club cover and ROVs

Poolable cover responds to members’ liabilities in respect of covered P&I risks that relate to an entered ship. The club’s rules, which are based on the International Group of P&I Clubs’ Pooling Agreement, includes a wide definition of what constitutes a ship. The definition refers to vessels that may be used ‘in navigation or otherwise on, under, over or in water or any part of such ship, or any proportion of the tonnage thereof or any share therein’.

Poolable cover excludes liabilities arising out of the operation by the member of submarines, mini-submarines and diving bells, which includes ROVs and other underwater vehicles (rule 5.14(1)). The exclusion will only apply if it is the member who is carrying out or is responsible

for the ROV operations. When the entered ship has been chartered out as a platform for ROV operations and the ROV is being operated from the ship by another party, the exclusion will not apply.

If the member is responsible for the operation of the ROV, the club is able to provide a limited extension of cover in respect of the excluded liabilities. The extension will only cover third-party liabilities arising out of the operation of the ROV. It will not cover damage to or loss of the vehicle itself but can respond to the cost of its wreck removal.

For more information, please refer to the club’s Offshore Contracting guide.

We are grateful to Ashwin Nair of local legal correspondents Cocks Macnish in Perth, Australia for contributing to this article.

This article intends to provide only general guidance on the above issues, arising as a matter of Australian and English law. It is not intended to provide legal advice in relation to any specific query. ​In case of any doubt, the member should not hesitate to contact the authors, or their usual club contact.​

Lloyd’s Part VII could require £200 million+ syndicate loan if Belgian regulator rejects plans

Lloyd’s syndicates face a loans collection of “at least” £200 million in order to fund the Part VII transfer to its Lloyd’s Insurance Company (LIC) Brussels platform if the national regulator does not approve the Corporation’s current proposals.

Lloyd’s focuses on core US reinsurance and E&S as it gives up admitted licences

Lloyd’s announced it plans to stop accepting admitted market accounts in the US in a year and focus on the US reinsurance and excess and surplus (E&S) insurance market, where it is the market leader.

As part of this strategy to focus on its core markets, Lloyd’s will relinquish its admitted licences in the US Virgin Islands, Kentucky and Illinois, which together represent US$215 million or 1% of Lloyd’s annual US premium income.

It is understood that Lloyd’s US business is a mixture of admitted SME lines and personal lines.

“This decision was not related to the local markets or the business we write under the licences, rather it was a recognition that E&S business is a better fit for our underwriters given the market’s innovative nature and expertise in emerging risks,” said Lloyd’s in a market bulletin issued on the 10^th July.

Lloyd’s said the product flexibility of the E&S space is key to realizing Lloyd’s strategic vision.

“Lloyd’s understands that the market and our key stakeholders will need time to make changes to their commercial plans. We are therefore providing a window of 12 months during which new business will continue to be allowed,” the bulletin said.

However, after the 1^st July 2021, no new business or programs will be accepted on the US licensed platforms.

Regarding existing and renewal business, Lloyd’s will be working with the regulators in the licensed territories to develop plans to non-renew this business with as little disruption to the local markets and policyholders as possible.

Lloyd’s said it will issue further and more detailed guidance in due course once arrangements with the regulators have been agreed.