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Maritime Law Association of the US IberoAmerican Institute of Maritime LawOctober 2013
By Stirling Leech Clyde&Co – Brazil
CURRENT CHALLENGES IN PROVIDING INSURANCE COVERAGE IN MAJOR ENVIRONMENTAL DISASTERS – OVERVIEW OF AVAILABLE/RELEVANT COVERAGE
Introduction 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
Introductioncont/dIntroductioncont/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
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 CoverageP&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 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
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
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 Coveragecont/d
Non P&I Offshore Insurance Coveragecont/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 Coveragecont/d
Non P&I Offshore Insurance Coveragecont/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 Coveragecont/d
Non P&I Offshore Insurance Coveragecont/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 Coveragecont/d
Non P&I Offshore Insurance Coveragecont/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/Adequacy of Coverage
Conclusions and Sufficiency/Adequacy 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
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© Clyde & Co LLP 2009
Contact:Contact: Stirling Leech Partner
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