PHILIPPINE MARITIME LAW ANNUAL CONFERENCE 2012

Manila Diamond Hotel October 16 2012 16,

CONCERNS IN THE MARITIME INSURANCE INDUSTRY

Presented by: Carlos H. Yturzaeta

Member, Tech. Sub Committee on Marine-PIRA Chairman, Marine Underwriters Assoc. of the Philippines (MUAP) Email :carlos_yturzaeta@yahoo.com.sg

CONCERNS IN THE MARITIME INSURANCE INDUSTRY

1. Marina Circular MC-2009-22 Rules Governing the Mandatory Marine Insurance 2. Marina Circular MC-2009-24 Adopting a single National Classification Society at o a C ass cat o Soc ety 3. Establishing an Admiralty Court to handle Marine Cases 4. Issue on the substitution for recovery cases. 5. 5 Upgrading the Shipping Industry 6. Issues on the Bill of Lading 7. Issue on undervaluation of goods reducing the chances of recovery. 8. The ship-owner as one of the salvage buyers.
Note: MC 2009 22 was approved by the MARINA Board on October 19 2009 to be effective 2009-22 19, on February 20, 2010 MC 2009-24 was approved by the MARINA Board to be effective Dec 31, 2012 DEFINE: The Background IC Approvals for Facultative Placements Abroad

1st

MARINA CIRCULAR NO 2009 22 NO. 2009-22

Rules Governing the Mandatory Marine Insurance

Covering LIABILITIES arising from POLLUTION g and WRECK REMOVAL

Note: MC 2009-22 was approved by the MARINA Board on October 19, 2009 to be effective on February 20, 2010

DEFINE: The Background

IC Approvals for Facultative Placements Abroad

MAJOR OBJECTIVE
that all domestic shipowners/operators and all other shipowners/operators

operating ships in the domestic trade will be able to meet their financial responsibility .for any liability arising from pollution and wreck removal .
DEFINE: The Background IC Approvals for Facultative Placements Abroad

WHO ARE COVERED?

All persons, corporations, partnerships persons corporations partnerships, cooperatives and entities

operating any type of ships of 500 GRT and above using persistent oil and and, 2,000 2 000 GRT using non-persistent oil, i i t t il for hire or compensation in the domestic trade.
DEFINE: The Background IC Approvals for Facultative Placements Abroad

COVERAGE
Liabilities Arising from Pollution
- refers to liabilities, losses, damages, costs and expenses caused by or consequent on the escape or discharge or threatened escape or discharge of oil or any other substance from a Ship: P5M to P50M

Liabilities Arising from Wreck Removal

- refers to costs and expenses of or attempted raising, removal, destruction, lighting or marking of the wreck of a Ship, including any part thereof, or cargo, equipment or other property carried on the Ship : P5M-P20M P5M P20M
DEFINE: The Background IC Approvals for Facultative Placements Abroad

SOME ISSUES IN FINALIZING THE DRAFT POLICY On the Local INSURERS part
No ready facility to cover Pollution and Wreck Removal of Vessel d f l ll d k l f l No Policy Forms/Wordings approved by the Insurance Commission. y g pp y Policy wordings must be acceptable in the international market. Pricing/Premiums

DEFINE: The Background

IC Approvals for Facultative Placements Abroad

Proposed Solutions by PIRA

y g Policy Wordings PIRA as part of the technical working group will draft the policy wordings for its members comments and approval before submitting the same with the MARINA. Capacity Building PIRA will recommend to the MARINA for GSIS to take the lead in providing the insurance cover since what is at stake is the interest of the public. - members of PIRA will have a choice to accept a share or not. Pooling Arrangement - Small vessels can have a pool amongst themselves to provide for the needed cover and such fund may be managed by a Secretariat like that of the IOPC Secretariat. This will be initiative of local shipping companies.
IC Approvals for Facultative Placements Abroad

DEFINE: The Background

Proposed Solutions by PIRA cont PIRAcont.

ACTIVE ROLE OF DOTC, DFA & DOF Since the Philippines was a signatory to the 1992 Civil Liability Convention and the 1992 Fund Convention, DOTC can take this up with Dept of Foreign Affairs & Dept of Finance and layout a policy and procedures for the Philippines to participate actively in the deliberations Assembly. CONTRIBUTION TO THE IOPC FUNDS As a signato to the 1992 CLC & 1992 F nd Con ention the Philippine signatory Fund Convention, Government may develop a central mechanism that will ensure the regular accurate reporting of persistent oils and the remittance of the contributions to t such f d h funds. CASE STUDY The i ki Th sinking of S l 1 i 2006 carrying f l oil owned b P t f Solar in i fuel il d by Petron C Corp may b used be d as a case study to carry out the proper response in case of a future oil spill or threat.
DEFINE: The Background IC Approvals for Facultative Placements Abroad

2nd

MC 2009 24-Single Classification 24 Single Society

Classification Societies are non stock, non profit. E Every country h it own Cl ifi ti Society t has its Classification S i t It exist to assist government in promoting of safety of life and property at sea. If there will be a number of Marina accredited Classification Societies, there will be cut-throat competition rather than honest-to-goodness surveys. surveys
DEFINE: The Background IC Approvals for Facultative Placements Abroad

3rd

ESTABLISHMENT OF ADMIRALTY COURT

A dedicated admiralty court has to be established. Such S h court will hear cases related to t ill h l t dt martime industry, maritime insurance, subrogation, recoveries, salvage, general b ti i l l average and issues on shipping documents. d t

4th

SUBSTITUTION FOR RECOVERY CASES Some courts do not allow the insurance company to substitute the insured after payment of claim and waiver for purposes of subrogation claim.

5th

UPGRADE THE SHIPPING INDUSTRY In terms of:

Management, crewing, safety management systems and; day-to-day operations.

6th

ISSUES ON THE BILL OF LADING

No uniform wording is being used in the local shipping industry which could lead to different court rulings for the purpose of recovery. Limitation of liability is normally stated in the BL but several court decision has been rendered that this is not compatible with the Phil. Civil Code. Some BL do not have any written conditions at all or simply copied from foreign BL, which laws are not applicable in the Philippines. Time limitation or period of filing of claim cannot be ascertained since the Phils has not yet ratified the Hague Rules/Visby Rule of 1968, and since no enabling law, therefore, not enforceable in the Phils.

7th

UNDER VALUATION OF GOODS

This reduces or hampers the extent of recovery of insurance companies from the shipping companies and owners. Disputes arising between the Invoice p g value and the Shipment Declaration value y g may result to legal suits. This falls under the Principle of Utmost Good Faith on the part of the Cargo Owners.

8th

SHIPOWNER AS SALVAGE BUYER

As soon as the Insurance Company has paid off the vessel owner/ship owner for the total loss of a vessel, it has acquired the right to sell the vessel in order to recover a portion of the insurance proceeds thereby lessening the loss to the insurer. Shi Shipowner participating as salvage buyer of his i i i l b f hi own refloated/salvaged vessel decreases the ability of the Insurance Company to recover a reasonable amount to lessen its loss.

ACKNOWLEDGEMENTS
y p , Materials from Atty. Lito Lampa, Chairman of the Tech. Sub Committee of PIRA on Marine Insurance Materials from Annual Report 2007 of Internation Oil Pollution C P ll ti Compensation Funds ti F d Info from Ms. Arlene Garcia of UCPB Gen and Mr. Kent Cotoco of Oriental Assurance Co. Inc. Data from Atty. Vergel De Dios of Phil. Register of Shipping (PRS) Info from Messrs. Cristino C. Rivera, Tony Sy of Petron Corporation on the Solar I pollution case.

DEFINE: The Background

IC Approvals for Facultative Placements Abroad

PHILIPPINE MARITIME LAW ANNUAL CONFERENCE

MANILA DIAMOND HOTEL October 16, 2012

Thank You ...Have a nice day

CARLOS H. YTURZAETA
Member, Tech. Sub Committee PIRA Chairman, Chairman Marine Underwriters Assoc of the Philippines Email Address: carlos_yturzaeta@yahoo.com.sg Mobile Phone Nos. 0917 536 0937
DEFINE: The Background IC Approvals for Facultative Placements Abroad

Case Study: The SOLAR 1

998 GT Laden with 2,081 tons of IFO Sank on Aug 11, 2006 at Guimaras Straits Owner: Sunshine Maritime Dev. Corporation Shipowners Mutual Protection and Indemnity Association of Luxemburg ( Shipowners Club) Covered under 1992 Civil Liability Convention- ships under 5,000 GRT up to maximum of US$7M limit of , p $ liability for oil pollution. The 1st to file a claim under the Small Tanker Oil Pollution Indemnifi tion Ag eement Poll tion Indemnification Agreement (STOPIA 2006) 2006).

INCIDENTS OF POLLUTION
1. 2. 2 3. 4. 5. 6. 7. 8. 9. 9 10. 11. 12. 13. 14. 15. 1991 March 7 1992 Dec 3 1993 Oct 9 1997 Feb 28 1997 Oct 15 1997 May 27 1999 Dec 12 2000 Jan 24 2002 Nov. 13 N 2005 Nov. 24 2006 Aug 11 2007 Nov 11 2007 Dec 07 2007 Dec 26 2008 Sep 27 Vistabella Aegean Sea Iliad Nissos Amorgos Evoikos Plate Princess Erika Al Jaziah 1 Prestige P ti N*7 Kwang Min Solar 1 - Philippines Volgoneft 139 Hebei Spirit Incident in Argentina King Darwin

DEFINE: The Background

IC Approvals for Facultative Placements Abroad

INTERNATIONAL REGIME INTERNATIONALREGIME

Three Intergovernmental Organizations
The 1992 Fund US$310.6 M per incident The Supplementary Fund US$1.147B per incident The 1971 Fund
Note: Established for the purpose of providing

compensation for victims of oil pollution damage resulting f d l i from the spills of persistent oil. h ill f i il
IC Approvals for Facultative Placements Abroad

DEFINE: The Background

THE LEGAL FRAMEWORK

y The 1992 Civil Liability Convention
- it provides a 1st tier of compensation which is paid by the owner of a ship which causes pollution damage.

The 1992 Fund Convention

- it provides a 2nd tier of compensation which is financed by receivers of oil in States Parties to the convention after sea transport. transport

NOTE: These two International Conventions were adopted under the auspices of the International Maritime Organization (IMO)

TYPES OF DAMAGES UNDER IOPC FUNDS

Property Damage Cost of Clean-up operations at sea & on shore p p Economic losses by fishermen or those engaged in mariculture Economic losses in the tourism sector C t f reinstatement of th environment Costs for i t t t f the i t
NOTE: A claims office is established in the country where
the oil spill occurred. IOPC also uses experts in different fields to assist in their assessments.

CLAIMS ON SOLAR 1 OIL SPILL AUG 11 2006 11,

CATEGORY CLEAN UP & PREVENTIVE MEASURES CAPTURE FISHERY MISCELLANEOUS TOURISM PROPERTY DAMAGE MARICULTURE TOTAL NO. OF CLAIMS 15 25,940 11 75 631 198 26,870 26 870 AMOUNT PHP 775,594,885 190,392,018 6,852,074 5,381.627 5,117,154 3,308,273 986,646,031 986 646 031 (10.8 Million Pounds Sterling) PERCENT 78.7 19.3 0 .7 0.5 0.5 0.3 100%

NOTE: Some claims are still pending with courts and

some are still under assessment by IOPC.

PETRON AS CARGO OWNER

Responded actively in the clean up cost and oil containment measures using its in house capabilityresources, equipment, supplies bilit i t li Spent close to about P250 million for clean up costs and preventive measurers including damages to 3rd parties. Was able to reimburse from the IOPC funds about 75% of its expenses. Petron is an annual contributor to IOPC fund based on its report of oil receipts.

Cargo Ship RENA, off Tauranga, North New Zealand. Oct. 5, 2011 ,