Club pollution cover level likely to stay at $500 million

Citation

(1999), "Club pollution cover level likely to stay at $500 million", Disaster Prevention and Management, Vol. 8 No. 5. https://doi.org/10.1108/dpm.1999.07308eab.005

Club pollution cover level likely to stay at $500 million

Club pollution cover level likely to stay at $500 million

Early indications suggest that there will be insufficient movement in clubs' positions to push the level of oil pollution cover offered by members of the International Group of P&I Clubs beyond its present level of $500 million for the 1999 policy year.

The boards of a number of clubs have already made a decision on whether the $200 million excess pollution cover purchased by shipowners in the market should be brought within the scope of the International Group's excess of loss reinsurance contract, so increasing the level of pollution cover offered by group clubs from $500 million to at least $700 million.

Although a number of club boards have yet to vote, early indications are that the status quo will be maintained. The boards of the London Club, the Britannia Club and Skuld were of the opinion that the level of pollution cover offered by the International Group should remain at $500 million.

Decision

However, the London Club said that its decision would remain unless there was overwhelming support from other clubs for an increase. Norwegian P&I Club Gard decided in 1997 to include the excess pollution cover purchased by shipowners within the scope of the International Group reinsurance contract. However, Gard managing director John Bemander said that as the present situation stood, with a number of major clubs having gone on the record as being against the present limit of pollution cover being increased, Gard doubted that a higher limit could be implemented for the 1999 policy year. Mr Bemander said the instruction from the Gard committee therefore was that the International Group should continue the process which it began for the 1998 policy year, of becoming more involved in the placing of the excess pollution cover purchased by ship owners.

Increasing cover

The Standard Club said it was in favour, in principle, of increasing the pollution cover offered by the International Group beyond the present level of $500m. The UK Club, the largest of the marine mutuals, is also in favour of the level of pollution cover offered by International Group clubs being increased to at least $700 million.

The UK Club is understood to believe that if the reinsurance capacity is available, as the P&I Clubs are the traditional insurers of third party liabilities, then the $200 million excess pollution cover purchased by shipowners should be brought within the scope of the cover which the clubs provide.

It believes there would be a cost reduction for those owners who already purchase the $200 million excess pollution cover and no real increase in cost for shipowners who would not otherwise purchase the excess pollution cover.

The International Group also remains confident of a reduction in the cost of its $2 billion excess of loss reinsurance contract for the 1999 policy year, following the latest in a series of meetings with brokers ahead of the contract's renewal.

However, the group has yet to reveal any figures on the possible reduction. Nor have there been any indications on how the contract might be structured for 1999. The group does not anticipate any difficulties in relation to the rollover to the new millennium in renewing the reinsurance contract. Discussions on the renewal are still at a relatively early stage and negotiations will continue with brokers Miller Marine and Greig Fester.

(Lloyd's Casualty Week, Vol. 314 No. 6, 6 November 1998)