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THE ATHENS PROTOCOL & THE IMPLICATIONS FOR
FINANCIERS OF PASSENGER SHIPS
Graham BarnesBankServe Insurance Services Ltd
SHIPOWNERS’ LIMITATIONS OF LIABILITY for PASSENGERS
Per passenger $ equivalent
ATHENS CONVENTION 1974 Consolidated and harmonized two earlier Brussels conventions on passenger liabilities that were adopted 1961 & 1967 respectively.
SDRs 46,666 US$61,000
1990 PROTOCOL - not ratified limits of liability considered too low
SDRs 175,000 US$230,000
1999 UK Government insured limit required of UK passenger ship operators
SDRs 300,000 US$393,000
2001 Canadian Marine Liability Act – Part 4 2002 Athens Protocol also being considered
C$350,000
2002 ATHENS PROTOCOL
Strict Liability to be Guaranteed SDRs 250,000 US$330,000
Maximum Limits IMO recommends SDRs 400,000 US$525,000 OR - states may ratify to higher limits Unlimited Unlimited
Current Passenger Liability Limits under the Athens Convention 1974 - SDRs 46,666 per passenger
Current Limits0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0 500 1000 1500 2000 2500 3000 3500
Passenger Numbers
US$
mill
ion
The 2002 Protocol to the Athens Convention will supersede the current provisions of the 1974
Convention 12 months from the date it is ratified by just 10 states
The EU is totally committed to the 2002 Protocol
ATHENS PROTOCOL 2002Liability without negligence for the first SDR
250,000 per passenger of claims for death and personal injury if the incident relates to a "shipping incident" (An incident that could not have occurred in a land-based hotel)
Guaranteed by a Compulsory Insurance for SDR 250,000 per passenger for death and personal injury claims, accepting direct action with no policy defences except wilful misconduct. Such insurance can be of any type or be combined with an acceptable guarantee.
Strict Passenger Liability Limits under the Athens Protocol to be guaranteed - SDRs 250,000 per head
New Compulsory Guaranteed Limits
Current Limit 0
200
400
600
800
1000
1200
1400
1600
1800
2000
0 500 1000 1500 2000 2500 3000 3500
Passenger Numbers
US$
mill
ions
ATHENS PROTOCOL continued
Maximum liability. IMO recommends a maximum liability limit of SDR 400,000 per passenger.
Unlimited liability in respect of death and personal injury claims for States that choose so in respect of actions in their courts.
IMO proposed Maximum Liability Limits under the Athens Protocol - SDRs 400,000 per passenger
IMO Proposed Max Limits
New Compulsory Guaranteed Limit
Current Limit0
200
400
600
800
1000
1200
1400
1600
1800
2000
0 500 1000 1500 2000 2500 3000 3500
Passenger Numbers
US$
mill
ions
Key elements of the P&I Club Mutual System
Members’ Funds payable by Club CallsEstablishment of the Pool accepting all
member Clubs’ liabilitiesPool reinsurance programme Strict indemnity principal limiting claims
to Shipowners’ Limitation of Liability Conventions
No conceivable risk of Overspill Claims
EXTENT OF P&I COVER
Liabilities to Passengers and/or Cargo
Liabilities to Crew
Pollution liabilities
Collision liabilities
Damage to Port installations
Removal of wreck
The Clubs’ DifficultiesIncreased risk to the upper R/I layers, causing
higher premiums for Pool R/I programme.
Risk of Overspill Claims will become a reality.
Guarantee requirement removes the clubs’ strict indemnity to shipowner principle.
Cause internal divisions between club members, eg between tanker owners and passenger vessel operators.
Maximum liability limits getting close to total capacity of world insurance markets.
Year Vessel Loss Location Pax Current Athens Protocol '02 Protocol '02Deaths Pax Liability Strict Pax Liability Max Pax Liability
SDR 46,666 SDR 250,000 SDR 400,000
2000 Express Samina Sinking Aegean 77 $4,725,567 $25,410,000 $40,425,0001999 Sleipner Grounding Norway 20 $1,227,420 $6,600,000 $10,500,0001996 Iohan Collision Sicily 283 $17,367,993 $93,390,000 $148,575,0001994 Estonia Sinking Baltic Sea 728 $44,678,088 $240,240,000 $382,200,0001991 Moby Prince Collision Livorno, Italy 141 $8,653,311 $46,530,000 $74,025,0001991 Salem Express Sinking Red Sea 1,400 $85,919,400 $462,000,000 $735,000,0001987 Herald of Free Enterprise Capsizing North Sea 150 $9,205,650 $49,500,000 $78,750,0001986 Admiral Nakhimov Collision Black Sea 398 $24,425,658 $131,340,000 $208,950,0001983 10th of Ramadan Fire R Nile 350 $21,479,850 $115,500,000 $183,750,000
Data compiled by Elysian Insurance Services (13 Feb 02)
SIGNIFICANT FERRY INCIDENTS ex third world
Year Vessel Loss LocationCount Deaths Injury Deaths Injury
2003 SS Norway fire Miami 2,153 0 0 7 151999 Norwegian Dream Collision English Channel 2,400 1 24 0 01998 Ecstasy Fire Miami 2,565 0 8 0 141997 Vistafjord Fire Ft Lauderdale 569 0 6 1 01996 Universe Explorer Fire Alaska 1,066 0 1 5 551995 Regent Star Fire Alaska 875 0 2 0 71994 Nieuw Amsterdam Grounding Alaska 1,799 0 4 0 01994 Achille Lauro Fire Indian Ocean 900 3 8 0 01992 Royal Pacific ? Malacca ? 9 0 0 01991 Sovereign of the Seas Fire Puerto Rico 2,100 0 0 0 11988 Scandinavian Star Fire Gulf of Mexico 439 0 2 0 21988 Jupiter Collision Greece 600 2 ? 2 ?1986 Mikhail Lermontov Sinking New Zealand ? 1 0 0 01986 Emerald Seas Fire ? 1,296 0 41 0 31985 Achille Lauro Terrorism Mediterranean 400 1 0 0 0
SIGNIFICANT CRUISE SHIP LOSSES 1977 ONWARDS
Data compiled by Elysian Insurance Services (13 Feb 02)
Caused by fire, collison, grounding etc EXCLUDES INDIVIDUAL INCIDENTS eg slips & falls
Passenger Crew
CRUISE SHIPS GETTING BIGGER
0
2
4
6
8
10
12
14
16
18
2000 2250 2500 2750 3000 3250 More
Numbers of Passengers
Num
bers
of S
hips
Existing Fleet Newbuildings
Current I.G. Pool Insurance Program$4.5 billion approx. Club Limit (2.5% of 1976 London Convention Limits for property damage)
Overspill Claims uninsured by IG Reverts to Pool
(and all club members)
$2.03 billion the top $500 million layer only provides for one reinstatement
International Group Layers of Pool
Insurance/Reinsurance (4 X $500m layers)
$30 million Club & Pool Retentions
P&I Club members liable for Overspill Claims, payable on Catastrophe Calls Some P&I clubs insure their Overspill liabilities, often on a Finite Risk basis
AN R/I PROGRAM TO SATISFYALL PARTIES
$4.5 billion or 2.5% of 1976 London Convention Limits for property damage
OVERSPILL EXCLUDING PASSENGER LIABILITIES
NO OVERSPILL IF PASSENGER
LIABILITIES LIMITED TO
REINSURANCE
$2.03 billion Covers 3,500 pax at SDRs 400,000 per head
$2.03 billion
POOL R/I EXCLUDING PASSENGER LIABILITIES
NEW SPECIFIC POOL R/I
COVERING PASSENGER LIABILITIES
$1.23 billion Covers 3,500 pax at SDRs 250,000 per head
$30 million Club & Pool
Deductible & Club
A CHEAPER ALTERNATIVE
$4.5 billion or 2.5% of 1976 London Convention Limits for property damage
OVERSPILL EXCLUDING PASSENGER LIABILITIES
NO OVERSPILL IF PASSENGER
LIABILITIES LIMITED TO
REINSURANCE
OPTIONAL EXCESS PASSENGER R/I
$2.03 billion Covers 3,500 pax at SDRs 400,000 per head
$2.03 billion
POOL R/I EXCLUDING PASSENGER LIABILITIES
PRIMARY PASSENGER
LIABILITY R/I & Guarantee
$1.23 billion Covers 3,500 pax at SDRs 250,000 per head
$30 million Club & Pool
Deductible & Club
PROVIDING THE GUARANTEESINTERNATIONAL GROUP P&I CLUBS
U K
Gard
BrItan nia
Stan dard
Steam ship
W of E
Lon don
N of E
Sku ld
Am
Swed ish
Japan
Shipownr
New IG BERMUDIAN CAPTIVE INSURANCE COMPANY
Settle all claims under the Pool for IG Clubs also
Guarantor where required
1st layer $30m - $530m
2nd layer $530m - $1.03bn
3rd layer $1.03bn - $1.53bn
4th layer
R/I of CAPTIVE
Ex Passenger
Liabilities $1.53bn - $2.03bn
PASSENGER
LIABILITY
R/I
CURRENT FINANCING LEVELS ON PASSENGER SHIPS
US$22 billion approx. in financing cruise ships, both outstanding and committed financing new buildings.
US$ 3 billion approx. in financing ferries, outstanding and committed.
CURRENT FINANCING POSITION ON CRUISE SHIPS
$0
$1
$2
$3
$4
$5
$6
2002 2003 2004 2005+
Val
ue U
S$b
illio
n
0
2
4
6
8
10
12
14
Nos
of C
ruis
e S
hips
Ord
ered
TYPES OF FINANCING
Single Ship Financing - secured by Ship Mortgages and assignments of insurances
Corporate Financing - No Ship Mortgages
Lease Financing
REASSESSMENT OF THE LENDING RISKS
Availability of the required insurance enabling operators to trade.
Additional insurance costs which cannot be passed on to passengers in the ticket price.
Major fatal incidents causing bankruptcy of the operator due to insufficient insurance cover.
Lessors potentially liable for unpaid liabilities!Consolidation of the cruise lines has made second
hand values of cruise ship more uncertain.
MAXIMUM POSSIBLE LOSSES from a catastrophe exceeding insured limits
SINGLE SHIP MORTGAGE
Liabilities to Passengers primes the Mortgage on the Responsible Vessel.
Default and loss of the loan on the Responsible Vessel.
CORPORATE FINANCING
Liabilities to Passengers causing insolvency of the Operator resulting in bankruptcy or Chapter 11.
Default and loss of the loan - larger than a single ship financing.
SHIP LEASING
The Lessor becomes liable for Passenger Liabilities unrecoverable from the Operator/Lessee.
Lease default. Finance loss plus liability for amounts unpaid by lessee.
INSURABLE SOLUTIONS
SINGLE SHIP MORTGAGE
Passenger Liabilities priming the Mortgage on the Responsible Vessel.
Mortgagees Additional Perils (Passenger Liabilities) or (All P&I risks) on each ship mortgaged.
CORPORATE FINANCING
Passenger Liabilities causing insolvency of the Operator - bankruptcy or Chapter 11.
Additional Perils (Passenger Liabilities) or (All P&I risks) on all vessels in the Operator's fleet.
SHIP LEASING
The Lessor liable for Passenger Liabilities unrecoverable from the Operator/Lessee.
Excess Liabilities Insurance.
To what limit?