Together with our sister company, Andrew Liu & Co. Ltd in Hong Kong, we have more than 20 years of experience as an insurance broker specializing in Hull & Machinery and P&I Insurance. Our expertise is on claims handling, particularly on large and difficult cases where there are ambiguities in the coverage and insurers allege grounds to decline the claim. Our company, Andrew Liu & Co. Ltd was formed with the intention of providing Shipowners an immediate defense and legal advisory services. This has been proven to be very useful to our Shipowners’ and Charterers’ clients, especially when marine legal disputes are increasing.
ALCO services & strength:
ALCO objectives are to offer Shipowners (our clients), not only on standard Hull & Machinery cover, but also provide tailor made insurance cover to best protect their interests. We are unique in having the experience of not only the English Institute Time Clause (ITC) cover but also the Norwegian, Swedish, German and China insurance covers, and are able to advise Shipowners the differences and suitability. In addition, we usually recommend Shipowners to include additional Owners’ Supplementary Clauses or Riders into the policy of insurance. These clauses are tailor made to Shipowners’ needs and to favour them in the event of any casualty or claim.
These clauses are drafted by ALCO’s personnel who have had many years of experience in the Average Adjusting profession. We are familiar with the shipowner’s risks and requirements including the expenses incurred when a casualty occurs, whether it is recoverable or not under the various insurance policies.
Unlike Hull & Machinery insurance, it is usually not possible to amend P&I Clubs’ terms and rules. However, there are certain risks which can be arranged under the Hull & Machinery or P&I coverage. Our ultimate service is to provide the best solution resulting in total premium saving while still enjoying the same insurance cover.
Marine Legal Advisory Service and Claims
ALCO has an in-house team of lawyers that can complement the advice from the insurers, Clubs, and/or handling of claims, and/or arbitration. ALCO’s client hugely benefit by such additional resource available within our organization with no charges.
We will also recommend and appoint suitable and experience surveyors, lawyers and adjusters to deal with the complex claims issue when the needs arise.
When Shipowners decides to deal with the claims themselves and does not wish to engage independent Average Adjusters, ALCO can offer the Shipowners on the adjusting and claims processing. If Shipowners appoint an independent Average Adjusters, ALCO can liaise and offer a second opinion on the case for the best interest of the Shipowners. We have close connections with the established Average Adjusters as our personnel have been working in this field for many years.
Goods in transit covers transportation by sea or air and occasionally by rail. Insured must have an insurable interest in the goods. Coverage is based on the sales arrangement which is laid out in the Incoterms.
The marine cargo insurance covers:
Cargo underwriters usually offer Ad Hoc insurance policy based on the Incoterm and for high frequency shipments, annual policy is offered based on agreed terms and conditions. Coverage can be arranged worldwide to worldwide on “warehouse to warehouse’ basis including loading, unloading, transshipment and intermediate storage.
Why transshipment is very important in shipping?
Larger vessels which carry significantly more containers and cargo than smaller vessels sometimes cannot berth at small ports. In these circumstances, transshipment is the most effective way of shipping as your cargo can be placed onto a smaller vessel to reach the final destination.
What is the difference between transit and transshipment?
Transit Cargo: Goods onboard which upon their arrival at a certain port are not to be discharged at that port.
Transship: To transfer goods from one transportation line (trade lane) to another, or from one ship to another.
Majority of the cargo in the market is arranged on ICC (A) [All Risks] or ICC (C) [Named perils] basis.
However, shipments to and from or within countries under UN and/or US sanctions are usually excluded or limited.
Marine Hull and Machinery
Hull & Machinery insurance covers the shipowners against loss or losses in connection with damage to the ship itself and auxiliary engines caused by groundings or collisions including running down and being run down by another vessel, striking fixed objects such as buoys, quays, lock gates, fire and explosions etc.
Shipowners may include the financial interest of the banks in the insurance contracts as mortgagees.
The following additional risks are also offered in the market;
Protection & Indemnity (P&I)
P&I is a shipowner’s insurance cover for legal liabilities to third parties. “Third Parties” who may have a legal or contractual claim against the shipowner for their negligence act. P&I insurance is usually arranged by entering the ship in a mutual insurance association, otherwise referred to as a club. Members of such clubs are shipowners, bareboat charterers and/or ship management companies.
Freight Defense & Demurrage
Freight, Demurrage and Defense is popularly known as FD&D. Shipowners and Operators can consider obtaining insurance covers to protect their legal expense claim which is referred to as “Defense Costs Insurance”. Coverage is mainly for claims handling assistance and legal costs including arbitration & experts expense for disputes arising from the building, buying, selling, owning or operation of vessel which is outside the scope of P&I and Hull & Machinery insurance policy. FD&D coverage excludes principal sum in dispute of demurrage claim or unpaid hire under a charterparty or claim denied by Hull insurers.
Common disputes may arise from:
Marine & Hull – Third Party Liability
Legal Liability to third parties for loss of life, personal injury or damage to property arising out of the use or operation of the vessel or craft.
Defense and Liability is the main coverage provided under a Charterer’s Liability insurance.
Pursuing or defending a dispute can result in enormous legal costs. Charterers are indemnified under the policy against legal costs and expenses arising from disputes concerning:
Charterers are indemnified under the policy against disputes arising from shipowner or other claimant regarding the following aspects inter alia:
What is War Risk Insurance?
War Risk insurance covers damage due to war perils such as acts of war including invasion, insurrection, rebellion and hijacking.
War risk insurance is for liabilities arising out war perils: P&I liabilities, Hull and Machinery liabilities as well as the Loss of Hire liabilities. P&I liabilities arising from the war perils can be obtained from the P&I Clubs as an additional coverage to the P&I cover. Other war risks cover can be obtained from the mutual war risks underwriters or fixed insurance companies specializing in providing such covers. In some insurance market all liabilities arising of war perils can be covered under one policy.
What does War Risk Insurance Cover?
War Risk Insurance covers loss of or damage to the vessel caused by, in particular, perils set out as below:
Piracy can be extended to the war risk cover to avoid having to prove the motive of perpetrators and also no deductible for piracy claim.
War risk insurance is intended to take care of war risks specifically excluded in the Hull & Machinery or P&I insurance policy.
What is JWC excluded area?
War risks cover ordinarily offered is for the risks that occur during peacetime for a moderate premium cost for the owners. Vessels operating in actual active war zones the risks are dramatically increased require a higher premium. For this purpose, the Joint War Committee (JWC) in London insurance market maintains a list of areas, which are excluded from the ordinary war risks cover. When vessel enters one of the excluded areas it is deemed to breach the War Risks Trading Warranties unless Shipowners agree to pay an additional premium which is based on the degree of perceived risk in that particular area.
Under the Institute War and Clauses, the war risks insurance can be terminated on short notice when there is an increased risk of war or warlike activities in a new area so that this new area can be included in the areas of perceived enhanced risk. The justification for allowing the market to cancel cover on short notice to adjust the trading limits is due to the fact that without this facility the premium that the owners would have to pay for his ordinary / annual war risk cover would have to include the possibility of the risk for warlike activities increasing somewhere in the world sometime during the policy year, a risk that may not materialize at all. It can, therefore, be said that his cancellation clause allows the market to assess the premium realistically in accordance with the actual risk.
In the war risks cover there could be conditional areas, where the vessel is covered under the war risks policy as long as the additional conditions as stipulated in the war risk cover are satisfied by the vessel. However, certain maritime regions of the world are designated “Additional Premium Areas”. These areas are considered much more likely to be affected by war risks and so represent a significantly greater risk to the vessels transiting these areas.
What is Kidnap and Ransom Insurance?
Customarily, most Hull War policies provide for a deemed loss of a vessel after 12 months under seizure. However, many Owners wish to seek a shorter deeming period, such as six months. In both the scenarios, Kidnap and Ransom cover (“K&R”) cover provides the customary means i.e. ransom by which claims for a total loss under the Hull policy are avoided.
In such cover, the insurers pursuant to K&R over provides expert claims assistance in most aspects of negotiation and payment of ransom following seizure of vessel or crew. The usual K&R cover includes the following:
Taking up K&R cover can lead to significant reductions in the cost of Hull War insurance (in high risk or “breach” areas).
Strike & Delay
This cover protects the assureds for loss of income if the ship is delayed as a result of certain perils. Cover is normally divided between ashore and onboard incident.
Shore risks – Cover can be obtained for labour disputes and/or force majeure incidents such as fire, explosion on land, mechanical breakdown, landslides, port /waterway closure, severe weather etc.
Onboard risks – Cover can be obtained for strikes, stranding, grounding, collision, illness, injury, death, presence of drugs on board, actual or alleged pollution of vessel, quarantine etc.
Marine Delay insurance suits owner, charterer and operator’s particular operation. Usually, the maximum limit of indemnity of this cover is 14 days. It could be used as a supplementary cover to the standard loss of hire in which the deductible is 14 days.
Loss of Hire
Loss of hire insurance covers the total or partial loss of income or financial loss incurred as the result of the loss of use of a vessel following an incident that is covered under the Hull & Machinery policy, e.g. breakdown of machinery, collision, grounding, stranding, striking FFO etc.
A typical Norwegian Hull Plan covers the loss of income due:
Time loss is calculated from the time of happening of the incident and the time spent for repairs till the vessel resume the voyage or activity.
Time loss insurance will also cover the extra costs (sue & labour) incurred in connection with the temporary repairs and in connection with extraordinary measures taken in order to avert or minimize loss of time insofar as such extra costs are not recoverable from the hull insurer limited to 90 or 180 days depending on size of the fleet and the type of incident. The deductible is usually 14 days for such incident.
The Loss of Hire insurance also extends to cover the off-hire period caused by War Risks. Insurer will charge additional premium to cover the war risks loss of hire when the vessels trade worldwide except the war zone subject to declaration to insurer when the vessel trade to the war zone listed on the updated “Joint War Committed Listed Areas”. Assureds are warranted to declare all breach voyages to the insurers when their vessels trade to the war zone which is listed on the updated “Joint War Committee
SOL COVER or Shipowners’ Liability to Cargo Cover is a common term used to describe the insurance arranged to cover a carrier’s liabilities arising from a breach of contract of carriage, where such a breach deprives the carrier of the right to rely on defences or rights of limitation which would otherwise have been available to him.
There are numerous occasions when a carrier has to deviate from the normal route or the agreed B/L for various reasons. In these situations, there is exposure to cargo liability. Although such deviations to the B/L can be covered on the specific occasions by Liability Insurers, SOL cover provides for liberties to deviate under the policy period.
SOL cover includes a number of specific liabilities that are mainly excluded from the Liability Cover. A typical SOL example is geographical deviation or departure from the contractually agreed voyage; liability for loss of and/or damage to cargo arising out of such a deviation falls outside the scope of standard Liability Cover.
WHAT IS COVERED?
WHO CAN BE COVERED?
In general, carriers with a full Liability entry (including owner’s P&I and Charterers Liability) can apply for SOL insurance.
Increased Value Insurance
Traditionally, under the “Marine Insurance Act”, Marine Policy (Hull & Machinery Insurance) covers the market value of the ship which refers to the Shipowners’ “insurable interest”. Any cover in excess of market value was prohibited. However, in the past century, a demand has been seen by the ship owners for obtaining cover for additional costs associated with a Total Loss event, for example, the sundries for the ship replacement. Therefore, the Insurance Market started to recognize that the assured has an additional insurable interest beyond the vessel’s market value and in excess of the sum of insured under Hull & Machinery Insurance.
Increased Value Insurance was instituted as an additional cover, commonly known as “disbursement”, which insures an additional of 20% to 25% over the Insured Value of the vessel in case of her Total Loss. Due to the likelihood of a total loss event is relatively small by comparing with other risk elements in Hull & Machinery Cover, a lower premium level would normally be offered in Increased Value Insurance.
In addition, these days, many shipowners use Increase Value insurance to cover the part of Ship’s market value in order to save the premium costs.
In practice, it is normally a 20% of the market value of the vessel or 25% of the Hull Value under Hull & Machinery policy.
This insurance covers Total Loss (both Actual and constructive) against a list of peril insured which is the same as the period insured under Hull & Machinery policy. It also normally covers the following:
The premium rate is customarily lower than the Hull & Machinery rate in London Lloyd’s Market.
Innocent Owners Interest Insurance
A registered shipowner (the actual shipowner, usually refers to the lease finance company) who has bareboated out a vessel is exposed if Hull and/or Increased Value covers do not respond, due to the arrangements becoming void following an act by the bareboat charterer (disponent owner), being the assured. Innocent Owners Interest (IOI) Insurance pays the owner of a vessel up to the insured value.
In a bareboat charterparty there is a provision stating that the actual owner is entitled to the proceeds from Hull and Machinery cover and any Increased Value cover, in case of total loss or if the claim exceeds a set value.
Hull or Increased Value cover, in some instances, will not respond to a claim. For example, in a scenario, where an assured - in this instance the bareboat charterer – is in breach of warranties or acted with gross negligence. Since cover at that time is void, there is no payment from the insurers and, the actual owner of the vessel will not receive any proceeds. Innocent Owners Interest Insurance may be claimed only if normal cover becomes void and provides cover for the outstanding loan amount, and is a parallel cover for the actual owner’s own investments and exposure