Leading London underwriters are making a fresh attempt to update the most widely used hull and machinery insurance policy.
The insurance market’s Joint Hull Committee has decided to review the Institute Time Clauses (ITC) of 1983, to see how they could be improved to meet current shipowner and underwriter needs.
Two previous attempts to modernise hull cover, through a 1995 version of the ITC wording and the International Hull Clauses (IHC) of 2003, have failed to attract much market support.
So most ships in the largest marine hull market are still insured on a 35-year-old wording — devised at a time when the biggest containerships ran to about 4,000 teu and the possibility of ships facing a cyber-attack would have been dismissed as science fiction.
A Joint Hull sub-committee, chaired by veteran underwriter Paul Newton, who is head of AXA's marine hull and liabilities in London, has been set up to review the hull wording.
Others involved in the project include Joint Hull chairman Peter Townsend, who is head of marine at AmTrust; Chris Turberville, Allianz’s London-based head of hull and liability; Iain Henstridge of Apollo Syndicate Management; and Neil Roberts, head of marine at Lloyd's Market Association.
The move to revise the London hull wording is just starting and it has yet to be decided whether the point of departure will be the 1983 ITC or the IHC.
“We don’t want to reinvent the wheel but, hopefully, reinforce the London market position as a centre of excellence,” Townsend told TradeWinds.
Whatever route is chosen, it is likely to be a painstaking process, taking at least a year, maybe 18 months, with shipowners, average adjusters and maritime lawyers consulted to avoid the problems that arose over the IHC.
The 2003 IHC wording had a well-attended launch in the Lloyd’s of London building, with underwriters confident they were offering shipowners wider, clearer and modernised cover that tackled concerns arising over latent defects and under-insurance, offering proportionate sharing of recoveries and adopting a model Bimco clause on general-average absorption.
However, the International Chamber of Shipping (ICS)'s insurance committee took the view that the new wording reduced cover compared with the 1983 clauses and argued that a large body of established case law made it preferable to stick to a known wording that most owners were comfortable with.
But the legal argument may have been weakened by the landmark UK Marine Insurance Act of 1906 being replaced by a new act in 2015.
The ICS was concerned that an inadvertent or relatively trivial breach of classification or the International Safety Management Code requirements could result in termination of cover. Shipowners could potentially also lose cover if a broker failed to pass premium through to underwriters.
The 2003 wording did not insure a final voyage to a demolition yard, in contrast to previous wordings, which provided cover for the scrap value of a vessel.
There were further concerns over requirements for the notification of damage and underwriters having the right to veto a shipowner nomination of an average adjuster.
In Scandinavia, the Nordic Marine Insurance Plan is regularly updated, with the current 2016 version due to be superseded next year. Older versions of the Nordic plan are withdrawn as new editions are agreed, avoiding potential problems from multiple versions continuing to be used.
But the idea that only the most recent version of a hull policy can be used is probably too radical a concept for the London insurance market.
