Launch seminar Thursday 8 October 2015

Nordic Plan 2013 Version 2016 Trine-Lise Wilhelmsen Hans Jacob Bull Kaja de Vibe Malling

The work in the Standing Revision Committee (SRC) Starting point: NP 2013 based on NMIP 2010 Nordic Plan Agreement No. 3 Composition of SRC: Nordic SAs, Cefor, Nordic average adjusters Chair and secretary NIFS No. 4: Revision every three years SRC working from June 2014 to August 2015 with Revision of clauses/commentary Revision of commentary Deleting history in commentary

Overview of the amendments Concepts: «policy» = insurance contract Cl. 1-1; definitions Cl. 1-1/1-3; new rules on broker Cl. 2-2/2-3; «assessed insurable value» Sanctions (2-17) Chapter 3, in particular safety regulation Ch. 5 – Due date/subrogation

Overview of the amendments Chapter 7 and 8 (co insurance) Hull ins. (10-12) – average adjuster group Ch. 15 – several, mostly editorial Ch. 16 - simultaneous repairs Ch. 18 - substantial amendments by separate group Ch. 19 – several

Concepts; insurance contract «Policy» replaced with «insurance contract» Cl. 1-2 : «policy» upheld as the written confirmation of the insurance contract. But distinguished from «insurance contract» = individual agreement (policy and conditions) The point to avoid using «the policy» on the contract because formal policy often replaced with data processed insurance confirmation

The policy vs. The insurance contract

Concepts; broker Cl. 1-1 (d); «broker» = entity instructed by the person effecting the insurance to act as intermediary Cl. 1-3: Broker authority to act on behalf of person effecting insurance receive return of premium/settlements of claim But not to receive premium on behalf of the insurer

The broker is representing the person effecting insurance, not the insurer NHC DNK TSC GARD CODAN Etc.

Concepts; agreed insurable value Cl. 2-2/Cl. 2-3 Assessed replaced with «agreed» The parties may agree – as before The sum insured deemed to constitute agreed insurable value Taken from Ch. 18 For the purpose of clarity

Cl. 2-17 Sanction Limitation and Exclusion clause No insurer shall be deemed to provide cover and no insurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit may expose that insurer or his reinsurers to any sanction whether primary or secondary, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulations of the European Union, the United Kingdom, the United States of America, France, the Russian Federation, the People’s Republic of China or any State where the insurer or his reinsurers have their registered office or permanent place of business. In the event of the subject-matter insured having been engaged or engaging in any activity whatsoever that may expose the insurer or his reinsurers to any sanction whether primary or secondary, prohibition, restriction, law or regulation as described in sub-clause 1 above, the insurer shall be entitled to terminate the insurance by giving 14 days’ notice. Termination also applies to the rights of the mortgagee, but the insurer shall immediately notify the mortgagee of the termination.

Countries that introduced sanctions against Russia

Ch. 3; Cl. 3-15 (2) The insurer may stipulate safety regulations (3) Claims arising out of ice damage due to failure to exercise due care further reduction in liability (4) Held covered in conditional areas if notified

Ch. 3; Safety regulation, the Plan Cl. 3-22 last sub-clause deleted Cl. 3-22 new sub-clause instead of 12-5(f): When establishing the Safety Management System that is necessary to fulfil the assureds obligation to comply with the International Safety Management Code as adopted by IMO, the assured shall ensure that the system includes instructions and procedures for the use and monitoring of lubricating oil, cooling water and boiler feed water. Cl. 3-25, sub-clause 2 shall not be applied.

Ch. 3; Safety regulation, the Commentary Modernized and rewritten The issues: Specific duties vs. functional requirements The ISM code addressed in more detail: Status as a safety regulation; the Code per se, and not the individual instruction or procedure Causation if failure to supervise the system leads to repeated breaches of f.ex. look out procedures Burden of proof Negligence measured against breach of the Code

Ch. 3; Safety regulation, the Commentary; issues Safety regulation «stipulated in the insurance contract» The policy or also regulations in the Plan?

Panel: Safety Regulations Marthe Romskoug (Wilhelmsen Insurance Services) Nicolas Wilmot (Gard) Hogne Nesse (Høegh Autoliners) Frode Berg (Willis) Moderator: Hans Jacob Bull

Chapter 5 Settlement of claims - Amendments

Cl. 5-6. Due date The time limit is amended from six to four weeks “Compensation is payable four weeks after the date when the claim adjustment is or should have been issued.”

The Commentary to Cl. 5-13, sub-clause 2 Cl. 5-13 regulates the right of subrogation of the insurer to claims by the assured for damages against third parties. Sub-clause 2 regulates the situation where the insurer is only partly liable for the loss.

The Commentary to Cl. 5-13, sub-clause 2 New comments and examples (guidelines) in the Commentary to sub-clause 2 regarding allocation of common deductibles between liability and damage, and apportionment of recoveries in this respect

Ch. 7 Co-insurance of mortgagees Ch. 8 Co-insurance of third parties Overview Ch. 8 The Plan: All clauses have been reorganized and rewritten. Few material changes Ch. 8 The Commentary: Completely rewritten Ch. 7 The Plan: No alterations in the clauses Ch. 7 The Commentary: Partly rewritten.

Cl. 8-1 Rights of third parties against the insurer Main elements as before No automatic co-insurance – «explicitly effected» The third party does not have to be explicitly named The insurance covers «the third party’s interest» New «formal» elements «within the scope and overall limits of the insurance» Some elements have been moved/deleted Identification rules moved to Cl. 8-3 sub-clause 3 Handling of claims, etc. moved to Cl. 8-5 Previous protection against the insurer’s set-off deleted

Main rule: no right of subrogation Cl. 8-2 Protection of third parties against subrogation claims from the insurer The Clause is new Spells out when the insurer has a right of subrogation against a co-insured third party Main rule: no right of subrogation Exception 1: Specified in the insurance contract Exception 2: The co-insured has undertaken «an express contractual obligation» to remain liable for losses covered by the insurance

Cl. 8-3 Application of the rules in Chapter 3 and Cl. 5-1 The Clause is partly new Sub-clause 1: Corresponds to the previous Cl. 8-2 sub-clause 1 (the co-insured’s duty of disclosure) Sub-clause 2: No formal parallell in previous Plan (the co-insured’s duty of care) But: No material change Sub-clause 3: Corresponds to the previous Cl. 8-1 sub-clause 1 in fine (identification) The previous Cl. 8-2 sub-clause 2 is not repeated as being unpractical ole cl. 8-2

Cl. 8-4: Corresponds fully with the previous Cl. 8-3 Cl. 8-4 Amendments and cancellation of the insurance contract Cl. 8-5 Handling of claims, claims adjustments, etc. Cl. 8-4: Corresponds fully with the previous Cl. 8-3 Cl. 8-5: Corresponds fully with the previous Cl. 8-1 sub-clause 2 (first alternative, reference to Cl. 7-3, sub-clause 1)

Cl. 8-7: The Clause corresponds to the previous Cl. 8-4 Cl. 8-6 Other insurance Cl. 8-7 Independent co-insurance of mortgagees and named third parties Cl. 8-6: The Clause is new The insurance is subsidiary to another insurance taken out by the co-insured third party Cl. 8-7: The Clause corresponds to the previous Cl. 8-4 Applies both to mortgagees and other third parties; expressly said in the heading of the clause Needs an explicit agreement to be activated The co-insured party has to be explicitly named No identification with others But: unpaid premium

Ch. 8 Commentary The Commentary has been completely rewritten A new general introduction Explains the concept «the assured» Explains the relationship between the two Chapters 7 and 8 on «co-insurance» Explains the different interests a third party may wish to cover through co-insurance Modernized and more helpful comments to all the clauses in Ch. 8 All historic material and comparisons with Nordic ICAs have been deleted

Chapter 7 Co-insurance of mortgagees The Plan The Commentary No amendments made to the text itself The Commentary The general introduction to the chapter has been rewritten, and contains references to the Commentary to Ch. 8 The Commentary to the separate clauses has been carefully modernized All references to historic material and to the Nordic ICAs have been deleted

Panel: Co-insurance of third parties Örjan Karlsson (Stena Rederi) Marthe Romskoug (Wilhelmsen Insurance Services) Roar Sanden (Norwegian Hull Club) Moderator: Hans Jacob Bull

Ch. 10 General rules relating to the scope of the hull insurance Cl. 10-1, sub-clause 2, letter (a) The word “supplies” has been replaced by “provisions”: “The insurance does not cover: provisions, engine and deck accessories and other articles intended for consumption,”

Ch. 12 Damage Text and Commentary: Commentary: (Cl. 12-5 letter (f) is deleted) Cl. 12-14. Apportionment of common expenses Cl. 12-15. Ice damage deductions Commentary: Cl. 12-1. Main rule concerning liability of the insurer

Cl. 12-14. Apportionment of common expenses Text: second sentence is amended The words “common expenses which depend on the length of the period of the repairs” is replaced with “dry dock charges and quay rental” “each category”

Cl. 12-14. Apportionment of common expenses The Commentary is largely rewritten, in order to reflect current adjusting practice Relevant ”categories” of work The basis on which the common repair expenses shall be apportioned Examples of common repair expenses to be apportioned on a cost basis and expenses to be apportioned on a ”time required” basis Examples of excluded expenses

Cl. 12-15. Ice damage deductions A new second sentence emphasizing that the ice damage deduction comes in addition to the general deductible under Cl. 12-18, sub-clause 1, is added: “Damage due to striking against or contact with ice - excluding collision with icebergs on the open sea - is recoverable subject to a deduction stated in the insurance contract. To this shall be added the deductible referred to in Cl. 12-18, sub-clause 1.”

Cl. 12-1. Main rule concerning liability of the insurer New paragraphs in the Commentary regarding electricity consumption as a common repair expense Any extra electric power actually consumed due to repair work being effected = allowed as a common repair expense as per Cl. 12-1 The assured has the burden of proving the extent of loss, cf. Cl. 2-12, sub-clause 1 Practice

Panel: Chapter 10-12 amendments Sveinung Måkestad (Gard) Bjørn Slaatten (Average Adjuster) Hogne Nesse (Høegh Autoliners) Moderator: Hans Jacob Bull

Ch. 15, 16 and 19 amendments

Ch. 15 War risks insurance Several amendments (mostly editorial): Cl. 15-1. Perils covered (sub-clause 2) Cl. 15-3. Sum insured (sub-clause 2 letter (b)) Cl. 15-4. Safety regulations (sub-clause 2) Cl. 15-5. War between major powers Cl. 15-7. Bareboat chartering Cl. 15-8. Cancellation Cl. 15-22. Limitations to the cover The Commentary

Cl. 15-8. Cancellation Sub-clause 1 first sentence is amended by adding the words in brackets to clarify when the cancellation takes effect “In the event of a change of risk, the person effecting the insurance as well as the insurer is entitled to cancel the insurance by giving seven days’ notice (such cancellation becoming effective on the expiry of 7 days from midnight of the day on which notice of cancellation is issued by or to the insurer). (…)”

Cl. 15-8. Cancellation Sub-clause 2 is rewritten: The insurer will endeavour, to the extent practically and commercially possible, to submit a proposal for continuation of the insurance at the best available terms in the changed circumstances.

Ch. 16 Loss-of-hire insurance Cl. 16-12. Simultaneous repairs Text and Commentary First sentence is editorially amended A new last sentence in sub-clause 4 Clarify that the insurer’s liability in any event is limited to what would be payable in case the category of work for which he is liable had been carried out separately.

Cl. 16-12, sub-clause 4, last sentence ”However, the insurer’s liability shall not exceed the amount that would have been payable if the category of work for which he is liable had been carried out separately.”

Ch. 16 Loss-of-hire insurance Cl. 16-6 and Cl. 16-14 sub-clause 2 ”assessed” is replaced with ”agreed”, ref. clauses 2-2 and 2-3

Ch. 19 Builders´risks insurance Several amendments in the text, some of them are merely editorial

Cl. 19-2A. Premium in the event of a total loss New Clause Corresponds to Cl. 18-83 “If the insurer compensates for total loss pursuant to Cl. 19-13, sub-clause 1, or pays the sum insured pursuant to Cl. 4-21, he is entitled to the entire agreed premium. If the insurer compensates for total loss pursuant to Clause 19-13, sub-clause 2, he is only entitled to the proportion of the entire agreed premium that corresponds to the ratio between the compensation paid and the sum insured.”

Cl. 19-14. Damage/Ref. Chapter 12 A new last sentence is added in order to bring the text in line with the Commentary ”If the subject-matter insured or components etc. have been damaged without Cl. 19-11 or Cl. 19-12 being applicable, the rules in Chapter 12 shall apply, with the exception of Cl. 12-3, Cl. 12-4, Cl. 12-5 (d), (e) and (f), Cl. 12-6 and Cl. 12-15 to Cl. 12-18. Cl. 12-3 shall apply to rebuilding/conversion of the subject-matter insured.”

Cl. 19-21. Limitations on the liability insurance The Clause is amended to be verbatim the same as Cl. 18-98, sub-clauses 5 and 6 The words ”contractor or sub-contractor” is added in sub-clause 1 letters (a), (b) and (d) Editorial amendments

Editorial amendments in Ch. 19 Cl. 19-8. Deductible The words ”any one” is replaced with ”each” Cl. 19-16. Compensation for unrepaired damage The reference is changed from Cl.19-3 to Cl. 19-2 Cl. 19-17. Costs incurred in order to save time A new letter (c) is inserted

Nordic Marine Insurance Plan Version 2016 amendments Chapter 18

Amendments to Chapter 18 Amendments (and new rules) to previous Chapter 18 New Section 6 for Construction Risks Insurance

Changes in general rules “Policy” has been changed to “insurance contract” (Clauses 18-1, 18-32, 18-33, 18-38, 18-39, 18-40, 18-46, 18-48, 18-49, 18-54) 18-1 (a), 1st sub-paragraph deleted. The presumption that the sum or sums insured = assessed (now “agreed”) insurable value(s) is now a general presumption in the whole Plan. 18-1 (b), 2nd sub-paragraph is new. For MOUs under construction or conversion, ref. Section 6, the insurance covers perils as defined in Cl. 2-8 and strikes and lockouts.S

Changes in general rules 18-1 (e) Safety Regulation. A new number 3) is included. New special safety regulation for Construction Risks. Project plans and procedures for moves, lifts, offshore installation of components or modules shall be reviewed by a surveyor appointed by claims leader. Initial risk assessment will determine scope of survey levels required. If required by the claims leader, the surveyor shall issue a certificate of approval when he is satisfied with the preparations for the operation.

Changes in general rules 18-1 (h) Area of operation Amended in line with Trading Area (3-15) As per 3-15 unless defined in the insurance contract. The maximum deduction in Cl. 3-15, sub-clause 3, shall be USD 1,000,000.

Changes in Hull clauses 18-21 (e) Deleted - Losses that are not recoverable Same deletion as 12-5 (f) – Damage caused by contaminated lubrication oil etc. In line with amendments to 3-22 – Safety regulations. 18-34 (e) Basis for calculation of deductions Editorially amended. The reference to Cl. 3-15, sub-clause 2 is replaced with Cl. 3-15, sub-clause 3

Changes to Loss of Hire clauses «Assessed» is replaced with «Agreed» in 18-48 and 18-56.

Changes to War risk clauses Section 5 has incorporated all clauses from Chapter 15, amended as appropriate to fit war risks insurance for MOUs.

New Section 6 – Construction risks Background No available standard insurance conditions for construction of MOUs Bridge between construction and operational insurances Cover similar to the operational insurance In 2013, working group for CAR/MOU established with representatives from Cefor Energy & Offshore Forum, Norwegian Shipowners’ Association, Nordic MOU Owners and Norwegian Energy/Offshore Insurance Brokers. A sub-working group was appointed to draft the conditions (Haakon Stang Lund, Jan-Hugo Marthinsen and Frode Berg). Draft approved by the larger working group and later by the revision committee. It was published as a Cefor Form 15.10.2014.

Result: Same as for MOUs in operation, except for; Special CAR provisions Chapter 18 Common rules from the Plan Construction Risks Insurance (MOU/CAR) Same as for MOUs in operation, except for; 13 Clauses amending existing rules in NMIP. 6 Clauses for Supplementary covers.

Clause 18-1 b): Perils Construction Operation Covers all perils to which the interest may be exposed to, with the exception of: War risks (Cl. 2-9), except for Strikes and Lockout which is covered. Intervention by State Power Insolvency RACE II . Covers all perils to which the interest may be exposed to, with the exception of: War risks (Cl. 2-9) Intervention by State Power Insolvency RACE II

Clause 18-82 : Insurance period Construction Operation Agreed start to stipulated completion date. …. extension up to 9 months to actual completion date. Components, equipment and materials are insured from the time the risk is transferred to the assured. Agreed start and expiry.

Clause 18-83: Place of insurance vs. Area of operation Construction Operation Anywhere in the world. Yards, workshops and places for construction and assembling of main components shall be agreed with the insurer. Sea trials - MOU’s certificates. Offshore installation, hook-up and commissioning: Offshore location shall be set out in the insurance contract. As per 3-15 “Trading Area” or as stipulated in the insurance contract.

Clause 18-85: Deductible Construction Operation If the same casualty entitles the assured to compensation under “Damage” and “Supplementary covers”, only one deductible shall apply. Separate deductible for damage, loss of hire and collision liability. Ice damage deductible - if stipulated in the insurance contract.

Clause 18-86: Premium - total loss Construction Operation Entire agreed premium has to be paid for the total loss claim. Entire premium for the insurance period has to be paid, but if the insurance period is longer than one year, it shall nevertheless be deemed to be one year in relation to the premium following a total loss (Clause 1-5)

Clause 18-87: Objects insured Construction Operation The MOU, components, equipment and materials manufactured or procured for the Project. Costs in connection with design, drawings and other planning of the Project, and bunkers and lubricating oil on board. The MOU - all its equipment, bunkers and lubricating oil on board. Excluding articles for consumption, helicopters, blueprints, plans, specifications, logs, etc., and remote operated vehicles during operation. Objects temporarily removed or separated from the MOU

Clause 18-88 Sum insured - Insurable value Construction Operation The value of the project works not performed, and the value of components, equipment and materials not manufactured or procured The sum insured stated in the insurance contract shall be deemed to constitute agreed insurable value(s) unless the circumstances clearly indicates otherwise.

Clause 18-88 Sum insured - Insurable value and 18-84 *) Construction Operation Insurable value = Contract price, plus additional amounts in the insurance contract, value of the owners’ deliveries, and the value of any existing vessel or MOU. Prior to completion: Deductions for works not performed, and value of components, equipment and materials not manufactured or procured. *) Escalation : 110% Sum Insured = Assessed insurable value

Clauses 18-89 & 18-90: Total Loss Construction Operation Total Loss can be claimed if repair costs exceeds 100% of insurable value. Total Loss compensation = Insurable Value When MOU is lost without prospect of being recovered, or so badly damaged that it cannot be repaired. Condemnation: Cost of repairing the MOU will amount to at least 80 % of the insurable value / market value. Total Loss compensation = Sum Insured

Clauses 18-91 – 18-93: Damage Construction Operation Error in design, faulty workmanship or faulty material exclusion. Completed parts – same as under operation policy. For damage occurred and discovered onshore: No cover for costs incurred for saving time for temp. repairs or using (other) repairers. Time lost whilst taking tenders is not compensated. Error in design or faulty material exclusion for part/s which has not been approved by the classification society. Cover for costs incurred to save time. (20% rule). Compensation for time used to obtain tenders (in excess of 10 days).

Clauses 18-94 – 18-98: Liability (Supplementary covers) Construction Operation Supplementary cover: Unsuccessful launching. Removal of wreck and debris. Collision and striking liability. Third party liability - personal injury/loss of life, loss of or damage to an object belonging to a, except for: Liability insurable under another CAR clause, covered under other liability insurance or solely based on contract. Loss recoverable through social benefit, pension schemes, insurances required under collective agreements or obligatory occupational injury insurance etc. Collision or striking liability.

Clause 18-99: Delay in delivery (Supplementary cover) Construction Operation Supplementary cover for delay in delivery: Same as LOH for MOUs under operation, when the MOU, components, equipment and materials manufactured or procured for the Project has been damaged. Loss of Hire: Damage to the MOU, and Stranded Physical obstruction (other than ice) Consequence of salvage or removal of damaged cargo Consequent of a general average event (YAR 1994)

Panel: Construction risks MOUs Frode Berg (Willis) Roar Sanden (Norwegian Hull Club) Moderator: Hans Jacob Bull

Thank you! The Plan and Commentary are published on www.nordicplan.org Printed copies can be ordered from the Plan website Nordic Plan App is available free of charge