Marine Builders’ Risks – 08.11.13 Knut M. Finckenhagen Vice President, Gard AS The Nordic Association of Marine Insurers

... then you look out the window to see what the weather is like ... Imaging waking up in the morning, putting on your slippers and walking out in the kitchen to put on the kettle ... ... then you look out the window to see what the weather is like ... The Nordic Association of Marine Insurers

The Nordic Association of Marine Insurers

Today’s topics A brief look at the international shipbuilding market The need for buying Builders’ risks insurance Builders’ risks insurance Cover NMIP, Chapter 19 Case study – Westland Shipyard vs. SMIL The Nordic Association of Marine Insurers

A brief look at the shipbuilding market Buzz group dialogue + flip over 5

Asia on the move

Global orderbook by cgt – 2013 (Sept. 2013) The Nordic Association of Marine Insurers

World shipbuilding supply & demand The Nordic Association of Marine Insurers

The need for buying Builders Risks insurance The Nordic Association of Marine Insurers

Builders’ Risks Insurance Builders’ risks insurance which covers newbuildings, from “keel laying” to delivery, including sea trials. Insurance coverage of conversions and rebuilding The Nordic Association of Marine Insurers

Wordings Standard wordings on “all risk” basis ICBR 1/6/88 - Institute Clauses for Builders’ Risks The Nordic Marine Insurance Plan of 2013, Ch. 19 Local wordings: Dutch Bourse Policy for Construction Risks 1947 (1995) German Marine Insurance Conditions for Shipbuilding Risks 1998 (amended 2004) American Institute Builder’s Risk Clauses Marcar 1/9/07 – “New” English builders risks clauses

We have a Plan!! Providing cover……….

Place of insurance (19 – 5) In the builder’s yard Other premises? What about transports? The Nordic Association of Marine Insurers

What is included in the coverage (19 – 9) The ”subject matter insured” itself The cost of planning and drawings Components, equipment and materials delivered and while at the yard’s premises Buyers equipment/material delivered and while at the yard’s premises (OFE) Bunkers and lubricating oil on board (sea trials) Bunkers Blue Card (BBC) The Nordic Association of Marine Insurers

Insurable value (19 – 10) FCV – Final Contract Value Construction work Additional work (changes) Owner Furnished Equipment (OFE) Yard profit § 19-10 Forsikringsverdi FCV – Final Contract Value Byggesum Tillegg/endringsarbeider Bestillers leveranser – OFE Subsidier/tilskudd Verkstedets fortjeneste, men ikke bestillers Ikke markedsverdi – kun reelle byggekostnader Hvis bygget ikke er ferdig er verdien som over minus ikke utført arbeid Ikke levert utstyr, deler og lignende Fradrag subsidier The Nordic Association of Marine Insurers

Insurance period (19 – 2) When does the insurance really starts? Keel laying Signing of the contract ‘First cutting of steel’ Value exposure at the yard Start of engineering work At launching §19-2 Løper fra tidspunkt som angitt i polisen Nevn koreanske forhold – fra launching The Nordic Association of Marine Insurers

Insurance period (19 – 2) cont. When does the insurance stops? Time of delivery as per the Shipbuilding Contract Delivery to buyer at a specific agreed location What about extensions? Automatic extension at additional premium Hva gjøres ved evige forlengelser Forandring av risiko Brann Egenandel Setter sikrede i en knipe ved å ”nekte” forlengelser – særlig ved tidligere skade på bygget The Nordic Association of Marine Insurers

The cover – Nordic Plan Perils covered (all risk basis) Physical loss & damage (19 - 14)-(ch. 12) Faulty design (19 – 15) Launching (19 – 18) Removal of wreck (19 – 19) Collision liability (19 – 20) Protection & Indemnity (19 – 20) Total loss (19 – 11) Sea trials (19 – 5) Escalation (19 – 7) Towage (19 – 27) War risk (19 – 30) The Nordic Association of Marine Insurers

Additional premium creators Value increase/decrease Period extensions/early delivery Tows Delay insurance Guarantee periods Delivery voyages War insurance (from waterborne)

Let us hope the insurance will be a success!!!! Launching at Niestern Sander - 2008 The Nordic Association of Marine Insurers

…….a success for whom??? The Nordic Association of Marine Insurers

Case study – Westland Shipyard vs. SMIL Situation Westland subcontract paintwork of potable water tanks to Goodpaint AS Goodpaint AS is adding thinner to the paint Remove paint and repaint the potable water tanks Westland have builders risk policy in force with SMIL Newbuilding insured under NMIP 1996 (version 2010) Claim submitted: NOK 5mill. Evaluation Claim recoverable (fully or partially) or not? Refer to clauses in NMIP to support your answer The Nordic Association of Marine Insurers

Main issues to consider Damage? Peril - causation? Loss recoverable? The Nordic Association of Marine Insurers

The Nordic Association of Marine Insurers