Energy Review 07-2019

06 August 2019

July 2019 was quite a hot one – not necessarily because of the weather but rather what was dished up with international relations. Britain continues to send warships to the Persian Gulf as the situation with Iran becomes more and more prickly. Not surprising seeing as US sanctions against Iran are really biting and the country’s leadership has to show people at home that “you don’t fool around with Iran”.

The Trump administration has just sold billions of dollars’ worth of arms to Taiwan; Turkey has just bought millions of dollars’ worth of Russian military equipment – not really a loyal NATO member’s admission of solidarity; Turkey is also drilling in waters belonging to EU member Cyprus – not exactly smoothing the way for talks on joining that club; Germany’s chancellor is leading out of power; the EU’s top jobs are up for change; president (in name only) Maduro of Venezuela cannot last much longer; buyers of crude from Libya still do not know who is allowed to sell to them.

With all these issues heating up, the oil industry must be wondering how it will be affected by the consequences of current events. Certainly, the Strait of Hormuz must stay open because so much oil transits through here every day: more than 20% of the world’s consumption of oil and 30% of the world’s consumption of LNG. Add increased Iranian mischief in the Strait to the country’s accelerated nuclear programme and you have a toxic mixture for a volatile US to have to swallow. If military action breaks out, the Strait will probably close and that could push the price of a barrel of oil back to what it was in 2014. With all the associated complications with disrupted oil supplies, not even the Middle East oil producing countries would want that.

The cost of insuring oil tankers in the Middle East has increased tenfold. Further in our Insurance News section, we report on developments at Lloyd’s. Lloyd’s has gathered a group of industry heavy-hitters to sit on advisory committees which will help support and develop its strategy for the future. A framework for what is possible for the future was laid out in the prospectus called “The Future at Lloyd’s”. This makes interesting reading.

There have been quite a few newsworthy movements in the People section with Markel, Convex, XL Catlin, Liberty Mutual, Aspen, MS Amlin and others all acquiring new talent.

We hope our readers are enjoying a busy and prosperous summer and we look forward to discussing developments with you all.

Energy Casualties

Shell confirms two deaths at Auger TLP in the GoM

The US Coast Guard and the Bureau of Safety and Environmental Enforcement have launched an investigation into an incident at the Shell-operated Auger TLP in which two fatalities and one non-life-threatening injury were sustained.

According to Shell, the incident occurred on Sunday 30th June at about 10:00 a.m. (CST) during a routine and mandatory test of the lifeboat launch and retrieval capabilities at the platform, which is 214 miles (344 kilometres) south of New Orleans in the deep-water US Gulf of Mexico.

The Auger platform, which began production in 1994, was the world’s first tension leg platform, operating in the US Gulf of Mexico, moored to the sea floor 830 metres (2,720 feet) below. The platform’s life was extended in 2014 when it began producing energy from a nearby Cardamom field.

Of the two fatalities, one was a Shell employee and the other was a contractor with Danos.

The injured party, a Shell employee, was treated at a nearby hospital and released, the company said.

According to the company’s spokesperson: “In the over 40 years that Shell has operated in the deep-water Gulf of Mexico we have strived, above all, to ensure our people go home safely to their loved ones. It’s devastating when they do not. We deeply regret this loss of life within our Shell family and community.”

There has been no impact to the environment and the asset is stable and producing, the company said.

Insurers appoint Dutch marine engineer to salvage oil tankers in Gulf of Oman

Dutch marine engineer Boskalis said on 14th June that it had been appointed to salvage both tankers which were hit in the Gulf of Oman in a suspected attack.

Boskalis said the condition of the Front Altair tanker, carrying a cargo of naphtha, was still worrying, although the fire on the ship had been extinguished on 13th June.

The methanol-carrying Kokuka Courageous was in a stable condition, Boskalis said. Its crew had been able to return to the vessel, which was being towed to a port in the Gulf region.

The Norwegian-owned Front Altair and the Japanese-owned Kokuka Courageous were both hit by explosions on 13th June, forcing crews to abandon ship and leave the vessels adrift in waters between Gulf Arab states and Iran.

The United States has blamed Iran for the attacks, which drove up oil prices and raised concerns about a new US-Iranian confrontation, but Tehran has denied all allegations.

Shortly after the incidents the insurers of both vessels appointed Boskalis subsidiary Smit to salvage the vessels and their cargo, the company said without providing further details.

Nigeria pipeline fire kills two after vandalism

Two people died after a gasoline pipeline owned by Nigeria’s state oil company exploded in an area of Lagos, the commercial capital, the National Emergency Management Agency said.

The fire, which began in the early hours of 4th July, was later contained and extinguished while the pipeline was closed for repairs, the Nigerian National Petroleum Corporation’s spokesman Ndu Ughamadu said.

As many as 30 vehicles were burnt, Lagos-based Punch newspaper said, citing the emergency team.

Downstream market faces US$1.25 billion loss from Girard Point refinery fire

The beleaguered downstream energy market is set for a US$1.25 billion total loss as a result of the devastating fire and explosion at Philadelphia Energy Solutions’ (PES) crude oil refinery in Philadelphia on 21st June.

Philadelphia Energy Solutions said it would close its South Philadelphia oil refinery complex following the fire and explosions which caused serious damage to the site. The fire started in a butane vat and was followed by a series of explosions which destroyed at least one key unit at the plant.

The CSB deployed a four-person team to investigate the explosion and fire that occurred early in the morning.

The CSB is an independent, non-regulatory federal agency whose mission is to drive chemical safety change through independent investigations to protect people and the environment. The agency’s board members are appointed by the President and confirmed by the Senate.

CSB investigations look into all aspects of chemical incidents, including physical causes such as equipment failure as well as inadequacies in regulations, industry standards and safety management systems.

Audit finds heavily corroded grating aboard Equinor’s Veslefrikk oldsters

Workers aboard Equinor’s Veslefrikk offshore platforms in Norway walk on a heavily corroded grating, are not properly protected from potentially carcinogen chemicals exposure, are exposed to noise-induced hearing damage, and to risks of “musculoskeletal” problems due to heavy manual valves.

These are some of the twelve irregularities identified by the Norwegian Petroleum Safety Authority (PSA) during an audit aboard the Veslefrikk A and Veslefrikk B platform in April.

The Veslefrikk field is 30 years old and it came on stream on 26th December 1989, as the first development off Norway to use a floating production unit. The field consists of a semi-submersible structure – Veslefrikk B – which is tied to a fixed steel wellhead platform – Veslefrikk A – and Equinor (then known as Statoil) in 2017 decided to prolong the field life till 2025.

During the audit, the PSA inspectors found heavily corroded grating in walkways and areas where workers regularly move, work and operate.

According to the PSA, interviews with workers revealed that there was great uncertainty about residual strength of the corroded grating and about the safety during travel and material handling in some areas.

“The corrosion had come so far that we considered the grating as unsafe to walk on…” the PSA report reveals.

These are areas where personnel regularly move, work and operate and handle heavy materials. Apart from the corroded gratings, the safety body found some handrails were “temporarily” replaced by scaffolding which, interviews have revealed, has been in place for “many years”.

The PSA noted that scaffolding is not designed for permanent use and should be subject to periodic checks. The PSA could not confirm if these periodic checks were being carried out.

Carcinogen chemicals, hearing damaging noise

Furthermore, the audit revealed, “it was not sufficiently ensured that personnel was not exposed to carcinogen chemicals at Veslefrikk.”

It also found that that use of respiratory protection “varied,” even during work which involves the risk of benzene exposure.

Apart from this, the safety body found that some workers were exposed to noise levels which could potentially damage their hearing. The safety body said that while some form of hearing protection was used in combination with time restricted “residence” in the noisy areas, this should not be seen as a permanent measure and “more robust” protection measures should be explored.

Overall, the safety watchdog identified non-conformities regarding risk of noise-induced hearing damage, risk of chemical exposure, risk of musculoskeletal disorders, time necessary for safety work, access to offshore crane, and deck gratings in gangways and deck areas.

Other non-conformities were related to materials handling, offshore cranes, launching arrangements for Veslefrikk A, maintenance of unsecured lifting equipment, maintenance of guardrails, and performance of lifting operations.

Equinor has been given a deadline of 18th August 2019 to report on how the non-conformities will be addressed.

Fire extinguished on offshore platform in Iran

An offshore platform, operated by Pars Oil and Gas Company (POGC), caught fire in the Persian Gulf, offshore Iran, on 12th June.

According to the Iranian oil ministry’s news agency Shana, the platform SPD9 in the South Pars gas field caught fire around 3:00 p.m. local time on 12th June, but it was later put out by fireboards in the area.

The news agency further reported, citing CEO of POGC, Mohammad Meshkinfam, that all the staff had evacuated the platform before the fire broke out, so there were no injuries reported.

Insurance News

Oil tankers steer clear of Middle East refuelling hub as attacks and insurance costs rise

Oil tanker owners are avoiding sending their ships to the Middle East’s main refuelling hub after a spate of attacks on vessels in the past two months ratcheted up tensions and highlighted the growing risks of operating in the region.

Strikes on tankers just outside the Persian Gulf in mid-June were the second in a month near the Strait of Hormuz, the chokepoint through which about a third of global seaborne oil moves.

Now demand for ship fuel at Fujairah, the United Arab Emirates coastal shipping hub close to the Strait, has waned as some tankers stay away, traders involved in the regional market said.

“Only expect issues to get worse before they get better,” said Matt Stanley, a senior broker at Star Fuels in Dubai. Fujairah is seeing “a significant drop in demand owing to war-risk premiums” that are levied by ship insurers, he said.

The root cause of the slump – whether ships are avoiding the Middle East altogether or just skipping Fujairah – is not completely clear. But since the attacks in early May, insurance costs have soared and some owners turned wary of sending their carriers to the region.

One of the largest, Frontline Ltd., even temporarily paused trading from the Persian Gulf.

Fujairah provides tankers with fuel, supplies and repairs as they ply the route from the Persian Gulf through the Strait of Hormuz to refineries the world over.

Local officials say that there’s been no slump in refuelling from facilities at the port itself, but that only captures a fraction of the trade. Carriers are also supplied at anchorage areas – where four tankers were attacked in early May – and it is there that brokers and traders are reporting the drop-off.

There is no public data for overall sales, but the brokers and traders say there’s been a drop of about 15% since the May attacks, although their estimates vary sharply. One broker said bunker demand had declined by more than 30% to as little at 500,000 tons a month.

Facts Global Energy estimates sales have slumped to about 650,000 tons a month, a drop of about 13% compared with the period before the incidents.

Volumes reached as much as one million tons in 2016 but had been slipping since then.

Environmental rules

Officials at the port and in the local government declined to comment on the volume of ship-fuel being traded offshore.

The amount of refined products transferred into and out of storage tanks at the port probably reached the highest level this year during June, said William List, Director of Operations at the Fujairah Oil Tank Terminal. That did not include data on offshore bunkering, he said.

Government Economic Adviser Salem Khalil said any decline in bunker volumes would likely be due to new environmental rules that will take effect next year. Fujairah expects demand at the port to increase in 2020, he said.

Multiple challenges

The attacks are just the latest challenge for Fujairah, which has developed in recent years into a trading centre for crude oil and refined products, as well as fulfilling its traditional role as a refuelling hub.

Iran, the region’s main producer of the high-sulphur fuel oil which most ships use today, is under pressure from US sanctions which threaten buyers of the country’s oil with financial penalties. Demand for that type of fuel is also set to plummet next year when the United Nations’ International Maritime Organisation will require ships either to burn cleaner fuel or scrub their emissions.

Ships will not shun Fujairah entirely because there are few alternatives close by with the same range of services, the traders said. One possibility, though, is to go to Singapore for carriers which are making return trips from Asia. That can be advantageous for tanker owners anyway if they are considering sailing to West Africa to seek their next cargoes.

Vessels which go to Fujairah solely for fuel and servicing would be more likely to go elsewhere, the traders said. However, a large proportion of tankers sailing through Hormuz to load crude or fuel in the Gulf will probably keep visiting the port as those ships will have paid higher insurance premiums already, they said.

Pool Re secures £40 million non-damage business interruption retro cover led by Liberty Specialty Markets

UK government-backed terrorism reinsurer Pool Re has placed its new retrocession programme covering non-damage business interruption (NDBI) losses.

The cover, placed with Liberty Specialty Markets (LSM) as the lead market, protects Pool Re with a limit of £40 million and sits excess of both a £15 million placement attachment and separately, the member retentions.

Other key partners in Pool Re’s property damage retro programme, including Munich Re and AXA XL, also participated in the placement.

The Counter-Terrorism and Border Security Bill 2018, which was signed in February 2019, allows Pool Re to cover losses incurred if a business cannot trade or is prevented from accessing its premises in the wake of a terrorist attack that does not involve damage.

Before the law was changed, Pool Re could only reinsure losses incurred if a company’s premises had been physically damaged by terrorists.

Pool Re said the placement was made possible by the development of an in-house NDBI modelling capability, returns the majority of NDBI risk to the private market, and supports its long-term strategy to “normalise the market to the maximum, sustainable extent possible”.

The cover is focused primarily on non-damage denial of access caused by a terrorist attack.

Steve Coates, Chief Underwriting Officer at Pool Re, said: “This is the culmination of our longstanding efforts to both enable Pool Re to cover non-damage business interruption and to return as much of the risk to the private market as possible. Our actuarial team, in collaboration with the broker and counter-terrorism specialists, developed an in-house model for NDBI, which allows both us and our reinsurers, to quantify and evaluate the risk.”

Lloyd’s to require cyber cover clarity in re/insurance policies

Lloyd’s wants all insurance and reinsurance policies to state clearly whether coverage will be provided for losses caused by a cyber-attack, saying this was in the best interest of both brokers and customers.

Lloyd’s, the insurance market which covers risks from oil rigs to soccer stars’ legs, said all policies must provide clarity on cyber insurance by either excluding or definitely providing cover.

Lloyd’s action follows on from a recommendation by Britain’s financial watchdog, the Prudential Regulation Authority, which wrote to insurers in January saying they should have plans to reduce the unintended exposure which could be caused by unclear cyber cover.

A coordinated global cyber-attack, spread through malicious email, could cause economic damage anywhere between US$85 billion and US$193 billion, a hypothetical scenario developed as a stress test for risk management showed earlier this year.

Cyber-attacks have been in focus after a virus spread from Ukraine to wreak havoc around the globe in 2017, crippling thousands of computers and disrupting ports from Mumbai to Los Angeles.

Governments have repeatedly warned about the risks private businesses face from such attacks, both those carried out by foreign governments and financially motivated criminals.

Lloyd’s, the specialist insurance and reinsurance market, which includes 80-plus syndicates, said its underwriters should ensure that all policies starting in 2020 for first-party property damage should make the status of cyber cover clear.

For liability and treaty reinsurance the requirements will come into effect in two phases during 2020 and 2021, Lloyd’s said.

Lloyd’s to tackle emerging risks with new £53 million innovation facility backed by 12 carriers

Lloyd’s has launched a new initiative with £53 million capacity to expedite product development for new and emerging risks in the re/insurance marketplace. The move is a part of John Neal’s transformation strategy to prepare the market for the future.

A group of Lloyd’s underwriters from Tokio Marine Kiln, Beazley, MS Amlin, Talbot, Liberty Specialty Markets, Hiscox, Ascot, Chubb, Chaucer, Brit, Antares and Apollo have formed a product innovation facility which will develop new types of insurance for complex and non-standard risks, including intangible assets and supply chain risks, or mishaps caused by artificial intelligence.

The launch is aligned with ‘The Future at Lloyd’s strategy’ announced in May 2019 to build a new Lloyd’s market that will thrive in the future by providing greater value to its customers.

Lloyd’s said it is committed to nurturing a “safe space” for underwriters to experiment with new ideas in a controlled way, which balances the need for appropriate oversight with the risk of not innovating fast enough.

“Lloyd’s has a deserved reputation as the home of insurance innovation and I am delighted to see this initiative taking shape, which harnesses Lloyd’s unrivalled entrepreneurial spirit,” said Lloyd’s CEO Neal.

“In so doing The Product Innovation Facility aligns with our collective vision for the future of the world’s (re)insurance market. By incubating new product ideas and helping them to scale up over time, Lloyd’s will continue helping its customers to deal with rapidly evolving and emerging risks.”

According to Trevor Maynard, Lloyd’s Head of Innovation: “The Product Innovation Facility formalises underwriting at the centre of the Lloyd’s innovation ecosystem. Working closely with Lloyd’s innovation team the group has put forward this new concept of product development by agreeing to support one another’s initiatives with £53 million of capacity in the first instance. The facility is still open to other market participants to join.”

The Association of Insurance and Risk Managers (AIRMIC) has welcomed the move, describing it as potentially ground-breaking. “This initiative has the potential to break new ground, and we applaud Lloyd’s not only for the breadth of what is being considered, but also the extent of collaboration between syndicates to achieve an ambitious but important goal,” said AIRMIC’s Deputy CEO and Technical Director, Julia Graham.

Thomas Hoad, Head of Innovation at Tokio Marine Kiln, said: “We are fully supportive of the Product Innovation Facility and we invite risk managers, brokers and other interested parties to contact and collaborate with it. By accessing the best ideas and data from the Lloyd’s market, the group will bring forward new solutions for nascent risks, in direct answer to clients’ evolving needs.”

Tina Kirby, Head of Innovation & Product Development at Beazley, added: “The Lloyd’s market has always been at the forefront of innovation and syndicates work on new solutions for their clients daily. This initiative is to promote and facilitate collaborative innovation where non-standard risks might require different thinking and expertise.”

Lloyd’s gathers group of industry heavy-hitters as advisers for its future strategy

Lloyd’s has gathered a group of industry heavy-hitters – such as Evan Greenberg at Chubb, Dan Glaser at Marsh & McLennan, and John Haley at Willis Towers Watson – to sit on advisory committees which will help support and develop its strategy for the future.

“The Future at Lloyd’s” project is focused on offering better value for customers by providing cutting-edge risk management products and services, simplifying access to the market, reducing the cost of doing business, and building an inclusive, innovative culture that attracts the best talent, said Lloyd’s.

The strategy was launched on 1st May 2019 and is accompanied by a ten-week consultation period where market participants, customers and other stakeholders have been invited to offer suggestions.

A framework for what is possible for the future was laid out in the prospectus called “The Future at Lloyd’s” (see the six proposed ideas listed below).

“This is an exciting time for us all as we drive forward the next stage in Lloyd’s evolution and I am delighted that we have the support of a number of global industry leaders, as well as the market associations representing some of our key stakeholders,” Lloyd’s CEO John Neal said in a statement.

“Together with the feedback and insights we are gathering from our wide-ranging consultation, the advisory committees will play a critical role in providing guidance and advice as we develop and implement a blueprint for the future at Lloyd’s,” he continued.

Work will begin on building and delivering prototypes and full services from October 2019, with some operational in early 2020, said Lloyd’s.

Members of The Future at Lloyd’s global advisory committee (in alphabetical order) include:

  • Andrew Brooks, CEO of Ascot
  • Bruce Carnegie-Brown, Chairman of Lloyd’s and the advisory committee
  • Greg Case, CEO of Aon
  • Dan Glaser, President and CEO of Marsh & McLennan
  • Evan Greenberg, Chairman and CEO of Chubb
  • John Haley, CEO of Willis Towers Watson
  • Jon Hancock, Performance Management Director, Lloyd’s
  • Andrew Horton, CEO of Beazley and Chairman of the London Market Group (LMG)
  • Bronek Masojada, CEO of Hiscox;
  • John Neal, CEO of Lloyd’s
  • Peter Spires, General Counsel of Lloyd’s

Members of the Future at Lloyd’s London advisory committee are:

  • Amanda Blanc, Chairwoman, and Huw Evans, CEO of the Association of British Insurers (ABI)
  • Sian Fisher, CEO of the Chartered Insurance Institute (CII)
  • Malcolm Newman, Chairman, and Dave Matcham, CEO of the International Underwriting Association (IUA)
  • Roy White, Chairman, and Chris Croft, CEO of the London and International Insurance Broker’s Association (LIIBA)
  • Andrew Brooks, Chairman, and Sheila Cameron, CEO of the Lloyd’s Market Association (LMA)
  • Andrew Horton, Chairman, and Clare Lebeq, CEO of the London Market Group (LMG)
  • Bronek Masojada, Chairman of Platform Placing Ltd (PPL), the London market’s electronic placing platform
  • Jon Hancock, Performance Management Director, Lloyd’s and Chairman of the London advisory committee
  • Peter Montanaro, Head of Syndicate Capability, Lloyd’s
  • John Neal, CEO of Lloyd’s
  • Ben Reid, office of the CEO, Lloyd’s
  • Peter Spires, General Counsel, Lloyd’s

The six ideas outlined in “The Future at Lloyd’s” prospectus illustrate how the market could transform the way it delivers value to its customers.

They are:

  • A platform for complex risk which makes doing business easier and enables efficient digital placement of the most difficult-to-cover risks
  • Lloyd’s Risk Exchange through which less complex risks can be placed in minutes at a fraction of today’s costs
  • Flexible capital which can simply and effectively access a diverse set of insurance risks on the Lloyd’s platform
  • A Syndicate-in-a-Box, which offers a streamlined opportunity for innovators to bring new products and business into the market
  • A next generation claims service which improves customer experience and increases trust in the market by speeding up claims payments
  • An ecosystem of services which helps all market participants develop new business and provide outstanding service to their customers

AIG consolidates reinsurance into new AIG Re

American International Group has announced the formation of AIG Re, which consolidates the company’s assumed reinsurance operations, including Validus Re, AlphaCat and Talbot Treaty, into one global business.

AIG completed its acquisition of Bermuda reinsurer and specialist insurer Validus Holdings last July. The US$5.56 billion transaction added Validus Re, a reinsurance platform; AlphaCat, an insurance-linked securities asset manager; and Talbot, a Lloyd’s syndicate along with other entities.

To head the new consolidated reinsurance operation AIG Re, the company has appointed Christopher Schaper as CEO. Mr Schaper will oversee implementation of AIG’s assumed reinsurance strategy while continuing to develop, market and deliver reinsurance and capital market solutions to clients on a global basis.

Mr Schaper brings three decades of experience in the insurance and reinsurance industries to AIG. He joins AIG from Marsh, where he was CEO of the managing general agent businesses since 2016.

Prior to that, he served as President of Montpelier Re Ltd. and Underwriting Chairman of Blue Capital, Montpelier’s capital markets entity.

Previously, Mr Schaper held several leadership positions at Endurance Specialty Insurance Ltd., including Chief Underwriting Officer and Head of Reinsurance, and Head of Casualty Treaty Reinsurance.

Earlier in his career he held roles at Gerling Global Financial Products, Employers Reinsurance Corporation, Cigna and USF&G.

Mr Schaper will be based in Bermuda and report to Peter Zaffino, President and CEO, AIG General Insurance, and Global Chief Operating Officer, AIG.

Brazilian reinsurers Austral Re and Terra Brasis Re to merge

Brazilian reinsurers Austral Re and Terra Brasis Re have signed an investment agreement to merge their operations in order to create the second-largest domestic reinsurer in the vast South American country.

Together the companies would hold gross premiums of R$ 672 million (US$172 million) based on 2018 figures and become the fourth-largest local reinsurer in terms of shareholders’ equity.

Bruno Freire will become the CEO of the new company, and Rodrigo Botti will become the CFO.

Following the merger, the controlling bloc of the operation will be held by Vinci Partners, along with partners from the Brasil Plural group and the International Finance Corporation (IFC), the investment arm of the World Bank, which already has stakes in the two companies.

The reinsurer said it will maintain its strategic focus on serving the insurance industry in all the business lines with innovative solutions, risk management and the highest standards of corporate governance.

The completion of the deal is conditional on the approval of Brazil’s official anti-trust agency CADE, and the Private Insurance Supervisory Regulator (SUSEP).

Berkshire Hathaway opens French hub in European expansion

Berkshire Hathaway Specialty Insurance (BHSI) has launched a new office in Paris, and appointed François-Xavier d’Huart as Country Manager, as part of its strategic expansion in Europe.

BHSI has received the insurance licence to begin underwriting property, casualty, and executive & professional lines in France. The company expects to launch several other products later this year.

Mr d’Huart comes to BHSI with 15 years of industry experience. He was most recently Head of Client and Broker Management for France at AXA XL (previously XL Catlin). Before that he was Chief Executive Officer, Office Lyonnais d’Assurances and Interassur, at SATEC, and Head of Marine Cargo & Hull for Asia at AXA Asia.

An overview of the insurance implications of a mega box ship casualty

Article from Standard Club

A mega box ship casualty will result in a number of losses and third-party liabilities for an owner. This article looks at the major areas of P&I cover that respond to a major casualty incident.

P&I claims handling

From the outset, the club will work closely with our member and its hull insurers to ensure that prompt action is taken to try and avoid and mitigate any losses and liabilities.

Loss of life and personal injury of crew

The crew’s safety and wellbeing is at the forefront of our minds when dealing with any casualty or major incident. Upon notification to the club of any such incident, usually a search and rescue operation is already underway.

The club, via its extensive global network of correspondents, will help ensure that the crew members receive the best level of medical treatment and are properly assessed before their repatriation home is arranged. The club is also able to draw on the services of CEGA, a specialist medical management company, part of the Charles Taylor group, in appropriate cases.

The cost of medical treatment and repatriation is covered under an owner’s P&I policy, as are the costs of the funeral for any crew member who may have died as a result of the incident.

P&I cover also responds to a member’s responsibility at law and/or under a collective bargaining agreement and the employment contract to compensate the crew member (or their family) for any injury or death in service.

Liability of the owner to crew for the loss of personal effects is also covered.

Collision liability

Typically, a ship’s hull underwriter will cover three-fourths of the liability of the insured ship in respect of loss of/damage to another ship and her cargo as a result of a collision. Generally, this means one-fourth of this liability is covered by the ship’s P&I policy (although other arrangements are often in place).

Hull underwriters and P&I will work together in respect of handling collision liability and the provision of security.


Over recent years there has been a significant increase in an owner’s liability for pollution caused as a result of a casualty or incident, such as an escape of cargo and/or bunkers. The club and the owner will work actively with organisations such as ITOPF to try and mitigate the effects of any pollution.

P&I cover will respond to an owner’s legal liability for such accidental pollution as well as steps to be taken to try and prevent and/or minimise any such pollution following an incident.

The club can also provide security by way of a letter of undertaking for P&I liabilities such as pollution and wreck liabilities to allow a ship to enter a port for refuge.

Wreck liabilities

P&I cover includes liabilities for or incidental to the raising, removal, destruction, lighting or marking of the wreck of the ship (or cargo or property carried on the ship). The value of the wreck and all stores and materials saved will be deducted from any reimbursement payable to members.

Cargo liabilities

A mega box ship has the capacity to carry a huge volume and variety of cargo which means that any casualty or incident involving a mega box ship has the potential for an extraordinary number of cargo claims.

Unless different arrangements are agreed in advance with the club, cargo liability cover is given on the basis that the contractual terms of carriage are no more onerous than those of the Hague or Hague-Visby regimes (or Hamburg Rules where applicable by law).

P&I cover also responds to an owner’s liability to discharge or dispose of worthless cargo (provided such costs cannot be recovered from any other party). Local and international regulations must be adhered to when disposing of damaged and often hazardous cargo which can make this process very complicated and expensive.

Cargo’s proportion of general average or salvage

P&I cover extends to the proportion of general average, special charges or salvage which an owner is or would be entitled to claim from cargo interests or another party which is not recoverable solely by reason of a breach of the contract of carriage.


SCOPIC (or Special Compensation P&I Clause) is an adjunct to the Lloyd’s Open Form salvage contract, designed to encourage a salvor to respond where there is a threat to the environment but where the traditional assessment of salvage remuneration may not provide sufficient encouragement.

Although P&I cover includes SCOPIC remuneration, owners should be careful to ensure that no side letters are signed with the salvors without first consulting with the club as such side letters could provide cover and could render any SCOPIC security provided by the club invalid.

Chubb latest to withdraw from coal underwriting and investments

Chubb has become the first major US carrier to cease underwriting risks for, and investing in, the construction and operation of coal plants.

Libya Update July 2019

(From Standard Club)

The situation in Libya remains volatile and highly unpredictable. Vessels calling at Libyan ports can expect delays and are reminded to contact vessel agents to notify them of their schedules prior to arrival.

Owners should also provide them with details of the cargo to be loaded or discharged which will be notified to the local authorities.

If calling at Tripoli, owners should provide this information as early as possible due to violence and unrest in city.

Currently, the following ports are open:

Marsa El BregaBenghazi
Al KhomsMarsa El Hariga
Es SiderRas Lanuf

Sirte and Dema remain closed.

Navigating the coastal waters of Benghazi, Dema and Sirte, including the militarised area south of 34 00N, should be avoided.

Turkish vessels

Our local correspondent advises that on 26th June 2019, the Libyan National Army’s military commander, Khalifa Haftar, ordered his forces to attack Turkish vessels and Turkish interests in Libyan territories or waters. Turkish members should avoid calling in Libya; however, any vessel carrying cargo loaded in Turkey should consider this as potentially at risk of attack.

Port security

The United States Coast Guard Port Security Advisory (2-19) issued on 16th May 2019, determined that Libyan ports are not maintaining effective anti-terrorism measures. All vessels arriving in the United States which have called in Libyan ports during their last five port calls, must take additional security measures listed in the advisory.

Failure to do so may result in delays or denial of entry into the United States.


The summer period and calmer waters of the Mediterranean bring higher risks of encountering vessels in distress carrying refugees fleeing Libya.

Italy has criminalised the disembarking of refugees in its ports under Decree n.138, 14th June 2019. Members are strongly advised to find alternative ports if possible, to avoid lengthy delays, potential fines and criminal penalties. Repeat offending could result in the confiscation of the vessel.

Husky accepts fines for 2016 Saskatchewan oil spill

Husky subsidiaryHusky Oil Operations has been fined US$2.5 million under the federal Fisheries Act and US$200,000 for a violation of the federal Migratory Birds Convention Act.

It was fined $800,000 under the Saskatchewan Environmental Management and Protection Act and assessed a 40% victim impact surcharge of US$320,000.

“From the outset of this event, we accepted full responsibility for the spill and we restated that today,” said CEO Rob Peabody.“We recognise this event had significant impacts on the cities, towns and Indigenous communities along the river. We appreciate the way they worked with us on the clean-up and their patience and understanding in the months following the spill.”

Husky has been doing business in the Lloydminster region for more than 70 years and it remains a cornerstone of the company’s operations.

“We understand that some people think we could have done better. After having such a long and successful history in this region, the event three years ago was a disappointment for all of us,” Mr Peabody added.

“It has been our goal to show through our actions that we learned from this event and are committed to being a good neighbour and partner.”

On 21st July 2016 a leak was discovered on a pipeline crossing the North Saskatchewan River. The pipeline was isolated at the river crossing and spill response crews were dispatched.

Approximately 225 cubic metres (225,000 litres) of crude blended with condensate were released, with about 60% of the volume contained on land. The cause was determined to be ground movement over time.

More than one million hours were worked on the clean-up response, involving about 2,600 personnel. At peak, more than 900 people were working simultaneously on the response.

Husky has used the lessons learned from this incident to improve its pipeline operations. These improvements include an updated leak response protocol, regular geotechnical reviews of pipelines and fibre optic sensing technology installed on all new large diameter and higher consequence projects.

CSB issues final report into fatal gas well blowout

On 12th June, the US Chemical Safety Board (CSM) released its final investigation report into the blowout which fatally injured five workers at the Pryor Trust gas well located in Pittsburgh County, OK, on 22nd January 2018.

The CSB’s final report identifies a lack of regulations governing onshore drilling safety as well as shortcomings in safety management systems and industry standards utilised by the industry. The report calls on regulators, industry groups, the state of Oklahoma and companies to address such gaps.

The CSB’s report determined that the cause of the blowout and rig fire was the failure of two preventive barriers which were intended to be in place to stop a blowout. Those were the primary barrier – hydrostatic pressure in the well, produced by drilling mud – and the secondary barrier – human detection of gas flowing into or expanding in the well and activation of the rig’s blowout preventer.

The report explains that unplanned underbalanced drilling and tripping operations allowed a large quantity of gas to enter the well, and safety-critical operations called “flow checks,” used to determine if gas is in the well, were not performed.

CSB Interim Executive Kristen Kulinowski said, “Our investigation found significant lapses in good safety practices at this site. For over 14 hours, there was a dangerous condition building at this well. The lack of effective safety management at this well resulted in a needless catastrophe.”

Industry best practices recommend always having two protective barriers in place during drilling operations. The investigation found that both of those barriers failed.

The final report outlines several factors contributing to the loss of barriers including a lack of planning, training, equipment, skills and procedures. The investigation revealed that there are no regulations specifically developed for onshore oil and gas well drilling.

Because oil and gas well drilling is exempted from the Occupational Safety and Health Administration’s (OSHA’s) Process Safety Management standard which governs safety for chemical processing facilities, OSHA has been utilising the general duty clause – which “protects workers from serious and recognized workplace hazards” – but fails to address the unique safety hazards associated with drilling for oil and gas.

The CSB urges OSHA to develop effective oversight that addresses the hazards unique to the onshore drilling industry.

Furthermore, the CSB found that the drilling contractor failed to maintain an effective alarm system. Likely due to excessive “nuisance” or unnecessary alarms, the entire alarm system was disabled by rig personnel. Ultimately, the lack of critical alarms contributed to workers being unaware that flammable gas was entering the well during operations before the incident.

Investigator Lauren Grim said, “An effective alarm system is a method to help workers become aware of hazardous conditions, like gas entering the well. With the alarm system off, the safety of the operation solely relied on workers either to visually identify signs of the gas influx or to calculate volume differences which could indicate gas influx – and in this case, neither method was effective, and workers were unaware of the very large gas influx into the well before the incident.

“As a result, the workers had little knowledge of the impending disaster.”

At the time of the blowout, three workers were in the driller’s cabin. Two other workers who were on the rig floor ran into the driller’s cabin during the blowout and fire. All five of these workers were killed.

Investigator Grim continued, “When the blowout mud and gas ignited, it created a massive fire on the rig floor. All five of the workers inside the driller’s cabin were effectively trapped because fire blocked the driller’s cabin’s two exit doors. Our investigation found that there is no guidance to ensure that an emergency evacuation option is present onboard these rigs or can protect workers in the driller’s cabin from fire hazards.”

As a result, the CSB is calling on the American Petroleum Institute (API) to address design improvements needed to protect driller’s cabin occupants from blowout and fire hazards.

The report also recommends to API to create guidance on Alarm Management for the drilling industry, to help ensure alarm systems are effective in alerting drilling crews to unsafe conditions.

Interim Executive Dr Kristen Kulinowski said, “As onshore oil and gas extraction grows, it is imperative that the industry is using proven and reliable safety standards and practices.

“If some of these safety practices had been in place, this tragedy could have been averted. Our report lays out a strong case for recognizing the hazards in this industry and ensuring the safety of its workers.”

The CSB is an independent, non-regulatory federal agency whose mission is to drive chemical safety change through independent investigations to protect people and the environment. The agency’s board members are appointed by the President and confirmed by the Senate.

CSB investigations look into all aspects of chemical incidents, including physical causes such as equipment failure as well as inadequacies in regulations, industry standards, and safety management systems.

Chevron fined £5 million over fatal 2011 UK refinery explosion

The former owners of an oil refinery in Pembroke, west Wales, have been fined over an explosion in June 2011 which killed four contractors.

Chevron will have to pay a fine of £5 million and court costs of £1 million as part of a deal it struck with Valero Energy UK Limited, which bought the site shortly after the disaster.

Specialist tank cleaning firm B&A Contracts, which employed the contractors, was fined £120,000 and ordered to pay £40,000 in legal costs. Both firms were sentenced at Swansea Crown Court on 6th June.

Other than the fatalities, a fifth worker caught in the fireball survived but with life-changing burns.

The five workers had been instructed to pump residue from a chemical storage tank which normally contained a mix of amine and diesel but was going through a cleaning process. As they carried out the operation, flammable gases inside ignited.

The court heard that just days before the explosion one Chevron worker had carried out a gas test which should have alerted the refinery to the flammable atmosphere, but its results were either not properly communicated or not understood.

The court heard it was impossible to say for certain what had caused the explosion, but that experts believed it would have been either a static spark caused by the workers unearthed hosepipe or the presence of pyrogenic substances within the tank, which can ignite spontaneously when dry.

Chevron has previously apologised to the families of those killed in the blast.

In a statement the company offered its “deepest regrets” and “sincere apologies” for failing to do “what should have been done” to prevent the explosion and subsequent loss of life and injuries.

People on the Move

Liberty Mutual Re appoints AXA’s Jens Voges to new marine & energy underwriting role

Liberty Mutual Re, a part of Liberty Mutual Insurance Group, has appointed Jens Voges as Senior Underwriter and product leader of marine & energy within its London market risks (LMR) team.

Kadow takes over as AGCS marine and energy head as Buxton departs

Allianz Global Corporate & Specialty (AGCS) has promoted Ulrich Kadow to Global Head of Marine, taking over responsibility for the carrier’s global marine portfolio from Simon Buxton.

AXIS Re names Sweeting from Vibe Syndicate as Head of Lloyd’s Casualty Reinsurance

AXIS Re, the reinsurance business segment of AXIS Capital Holdings Ltd., has announced the hiring of Joe Sweeting as Head of Lloyd’s Casualty Reinsurance.

In this role, Mr Sweeting will be responsible for managing all aspects of AXIS Re’s casualty business at Lloyd’s, including portfolio strategy, new and renewal production activity and distribution development from reinsurance intermediaries.

He joins AXIS from Vibe Syndicate 5678, where he spent more than three years as a casualty treaty class underwriter.

Mr Sweeting is a chartered insurer and an Associate of the Chartered Insurance Institute.

Lloyd’s names Jennifer Rigby Chief Operating Officer

Specialist re/insurance market Lloyd’s of London has appointed Jennifer Rigby as new Chief Operations Officer.

Ms Rigby has been performing the role on an interim basis since March this year, following the departure of former COO Shirine Khoury-Haq.

Ms Rigby’s remit as Lloyd’s COO includes business transformation, global operations, data, IT, innovation and corporate real estate.

She joined Lloyd’s in May 2017 as Chief Information Officer (CIO) with responsibilities which included technology transformation, cyber security and innovation as part of Lloyd’s overall strategy.

Lloyd’s said, under her leadership, IT costs were significantly reduced, and she also delivered a number of key technology changes including the platform which underpins Lloyd’s Brussels, the recently launched European subsidiary.

Convex names former XL Catlin manager Middleton ceded reinsurance head

Stephen Catlin and Paul Brand have appointed former XL Catlin colleague Anne Middleton to lead the ceded reinsurance team at their Bermuda-headquartered start-up, Convex.

XL Catlin’s Will Steeds joins Apollo as Senior Political Risk Underwriter

Specialist re/insurer Apollo Syndicate Management has appointed William Steeds as Senior Political Risk Underwriter for Syndicate 1969.

Aspen hires Lloyd’s executive for global role

Bermuda-based Aspen Insurance Holdings has hired Lloyd’s executive Joshua Brekenfeld as Director of Global Corporate Development.

MS Amlin hires RSA marine expert Vogiatzidou for Dubai operations

Re/insurer MS Amlin has appointed Mary Vogiatzidou as Senior Marine Underwriter in its Dubai operations.

Most recently, Ms Vogiatzidou served as a senior hull underwriter in RSA Group’s marine division.

In her new role, Ms Vogiatzidou will be responsible for the continued development and growth of the marine business across the MENA region. She will report to David Overall, Senior Executive Officer, MS Amlin (MENA).

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