Leading insurance broker Aon has warned shipowners that record-keeping will be critical in ensuring they are reimbursed for IMO 2020-related fines by their protection and indemnity insurers.
Aon issued a note to clients stating that P&I cover for such fines would only be paid out by clubs on a “discretionary” basis.
The broker said that the more a shipowner was able to prove it has made every effort to comply the more likely it is that P&I insurers would pay out.
Breaching legislation
“Advice from across the industry has been consistent, record-keeping is key. Shipowners could be fined for missing or incomplete documentation, even if they have not broken the sulphur limit in practice,” Aon said.
“Cover for fines under P&I club rules is discretionary; whether a club will pay a fine for breaching legislation will depend on how far the shipowner appears to have adhered to the new regulations.”
The broker added: “The key point is that fines are more likely to be covered when the club feels its member has taken adequate steps to ensure that emissions are within compliant levels and correct documentation has been maintained.”
Cover for fines under P&I club rules is discretionary; whether a club will pay a fine for breaching legislation will depend on how far the shipowner appears to have adhered to the new regulations
Aon
Another IMO 2020 issue is whether failure to meet the IMO's 0.5% sulphur limit from 1 January would in effect mean a ship is out of compliance with the Marpol convention and, as a result, deemed unseaworthy.
Seaworthy vessels
Under the terms of P&I cover and other marine insurance, an unseaworthy vessel is not eligible for cover.
However, the International Group of Protection & Indemnity Clubs has said that IMO 2020 failings would not immediately invalidate cover.
“Whilst every case will depend on its individual circumstances, the International Group clubs wish to make it clear that an infringement of the regulations will not be characterised as unseaworthiness, and to the extent it were to be, it is not a necessary consequence that it would deprive a member of cover,” the International Group said.
