Third - party liability

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assurance navires

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Shipowners' and carriers' liability

In the interest of offering its clients an alternative to the usual coverage provided by Protection and Indemnity Clubs, several years ago the French market brought standard insurance policies to the market that specifically cover the liability of shipowners and carriers, rather than additional clauses to hull insurance policies:

French marine insurance policy covering the shipowner's liability (with the exception of fishing vessels and yachts)
French marine insurance policy covering the fishing vessel owner's liability
French marine insurance policy covering the carrier's liability
French marine insurance policy covering the charterer's liability (other than bareboat charter)

These policies seek to provide as broad a scope of cover as possible. In fact, the cover they offer includes recovery claims for personal injury and physical damage against the vessel, either by co-contracting parties or third parties, following any occurrence.

For the shipowner, these liability policies offer the advantage of being fixed premium contracts and not variable premium contracts that may be subject to subsequent review.

Protection and Indemnity Clubs (P&I Clubs)

P&I Clubs, which are mutual insurance associations for shipowners, were first formed in the United Kingdom in the nineteenth century to cover the liabilities of shipowners and charterers that were excluded from the coverage offered by traditional marine insurers under fixed-premium policies.

Although P&I Clubs currently insure 90 percent of the world's ocean-going tonnage, they are facing increasing competition from traditional insurers for this business.

P&I insurance policies are renewed annually on February 20, the date that marks the beginning of the return to navigation in the Baltic Sea waters. At the start of each year, the board of directors of the P&I Club, which is made up of the major shipowners, meets to set a provisional premium (advance call) for the year. It is calculated to cover around 80% of the claims paid out in the previous year.

If this amount turns out to be insufficient at the end of the policy year, then a supplementary call is requested to balance and close out the books. Then, two or three years later, supplementary calls are levied if needed to cover the actual occurrences for the year in question. If the claims burden turns out to be less than premiums paid in, the surplus is set aside in the Club's reserve fund.

To cope with the increase in upper limits on coverage demanded by international covenants on the limits of liability for shipowners—the Convention of 1976 and its amendment in 1996—and at the request of international insurance regulators, the P&I Clubs set up free reserves that are controllable by rating agencies (Standard and Poor's, etc.).

In 2006, thirteen of the major P&I were members of the International Group of P&I Clubs headquartered in London. But there are other independent clubs.

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Pollution risks

The French marine insurance policy covering the shipowner's liability of ocean-going vessels covers any damage, loss or harm caused by pollution resulting from oil spills. Under this policy, French insurers cover the liability attributable to the owner of the oil tanker involved in the spill.

In addition, special coverage can be provided to satisfy the particular needs of certain assureds (offshore, inland water risks, etc.).

International Oil Pollution Compensation Funds (IOPC)

IOPC funds are part of an international regime of liability and compensation for oil pollution damage caused by oil spills from tankers. Under the regime, the owner of a tanker is liable for the payment of compensation up to a certain limit for oil pollution damage following an escape of persistent oil from the ship. If this amount does not cover all admissible claims, further compensation is available if the damage occurs within the territorial waters of a state that is a Member of the Fund.

Additional compensation may also be available from the Supplementary Fund if the state is a member of this Fund as well.

The new Supplementary Fund for oil pollution compensation went into effect on March 3, 2005 in the eight member states that had ratified the Protocol signed in London on May 16, 2003: Denmark, Finland, France, Germany, Ireland, Japan, Norway and Spain. For Portugal, it went into effect on May 15, 2005.

The Funds are financed by taxes levied on certain types of oil carried by sea. These levies are paid by the entities that receive these oil shipments after they have been carried by sea.

Consequently, the compensation mechanisms for oil pollution of the sea are broken down into three levels:

First level: Compensation is paid by the shipowner, with the maximum amount calculated on the basis of the tonnage of the tanker.

Second level: Compensation is paid by an IOPC fund which tops up, as needed, the compensation payable by the shipowner, up to a maximum of 203 million SDR (about 233 million euros). This maximum was set for accidents occurring on or after November 1, 2003.

Third level: The supplementary fund is endowed in the amount of 547 million SDR (about 629 million euros).

Accordingly, the total amount available for the compensation of victims in the states that have ratified the protocol of 2003 will be 750 million SDR (about 862 million euros) for each claim.

It should be noted that these new ceilings are not retroactively applicable and hence to do not pertain to Erika or Prestige for which compensation was limited to 135 million SDR (about 155 million euros).

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