KEEPING OUR CLIENTS
INFORMED

AMERICAN CLUB CIRCULAR (28/07/2012)

JUNE 28, 2012 : CIRCULAR NO. 19/12

American P&I Club

TO MEMBERS OF THE ASSOCIATION (PARTICULARLY THOSE DOMICILED IN THE EU)

IRAN SANCTIONS-EU COUNCIL REGULATION 267/2012-EXPORTS OF CRUDE OIL AND PETROLEUM PRODUCTS FROM IRAN - PROHIBITIONS WITH EFFECT FROM JULY 1, 2012.  PROHIBITIONS ON INSURANCE COVERAGE AND TRANSPORTATION. Members have previously been informed through Club Circular No. 07/12 of January 26, 2012, and by the International Group, of the impact of EU Iran sanctions prohibiting the transportation of cargoes of crude oil and petroleum products originating from Iran, and on P&I cover therefor once the EU prohibitions become effective on July 1, 2012.
 
While there has been some speculation in the media of a possible deferral of the implementation date for the prohibitions, the Council of the European Union issued a press release on June 25 (as attached) confirming that the exemptions relating to  pre-January 23, 2012 contracts for importing and transporting  Iranian oil and the provision of P&I insurance cover for the transport of Iranian oil by EU regulated insurers will cease, and such activities will be prohibited (as provided for under the EU regulation), with effect from July 1, 2012.
 
Although the American Club is not an EU-regulated insurer and not subject to the EU’s Iran sanctions, the US sanctions against Iran, to which the American Club is fully subject, like the EU prohibitions, generally prohibit the American Club from providing P&I coverage for the transportation of petroleum and petroleum products from Iran, irrespective of the domicile or identity of its Members or the destination of the cargo.  Members who are US persons are prohibited by US sanctions from trading with Iran.
Although the EU prohibition referenced above, which takes effect on July 1, 2012, would not apply to, and thus would not prohibit, American Club Members domiciled outside the EU, or those not subject to EU laws and regulations, from transporting crude oil and petroleum products from Iran as long as such cargoes were not destined for the EU, insurance coverage therefor would not be available from EU-based insurers as of July 1, 2012.  Insurance coverage for crude oil and petroleum product shipments is also not available from the American Club pursuant to US Iran sanctions laws. 
EU-domiciled Members are encouraged to exercise due diligence to ensure that they do not transport oil and petroleum products from Iran in violation of the foregoing EU prohibition, and are reminded that the American Club also does not provide P&I coverage for such transportation.
Such preventive measures and due diligence are necessary since any voyage or trade performed in violation of the EU and US prohibitions may constitute risks excluded by the American Club’s Rules: See Class I, Rule 3, Section 1.3 through 1.5.

Trade and insurance prohibitions

Pursuant to the provisions of Articles  11  1 (d) and  12 (2) of the EU regulation, EU-based   insurers will be prohibited from providing cover to any insureds in respect of voyages transporting crude oil or  petroleum products if they originate in Iran regardless of whether the final destination of the cargo is within or outside the EU.  US sanctions law imposes a similar prohibition on the American Club. 
A related EU ban in respect of the transportation of Iranian petrochemical cargoes, and the insurance thereof, entered into force on May 1, 2012.  US law imposes a similar prohibition on the American Club.  The carriage of such crude oil or petroleum products (which is in any event prohibited for shipowners domiciled within or regulated by the EU and/or the US, but remains permissible for a non-EU and/or non-US domiciled or regulated shipowners (non-US persons) performing voyages outside the EU and/or the US) will constitute risks that are excluded by the American Club’s Rules: See Class I, Rule 3, Section 1.3 through 1.5.
Members who may lawfully continue to transport such cargoes and who wish to do so may make alternative liability insurance or financial security arrangements with insurers or state/sovereign guarantee schemes or other financial providers which are not subject to the prohibitions contained in the EU regulation and under relevant US Iran sanctions laws and regulations. If Members intend to perform such voyages they are recommended to notify the Club in advance of performance and upon completion of the voyage. 

Bunkers

As stated in the FAQs, the EU prohibitions will apply not only to the carriage of crude oil and petroleum products as cargo but also to bunker stems of Iranian origin. Consequently it is not just tankers but potentially all vessel types which may be subject to EU trading or insurance cover prohibitions. Where it is known that bunkers intended to be stemmed to a vessel are of Iranian origin, such bunkers should not be loaded to avoid a violation of the EU regulation. Where there is any cause to suspect that bunkers might originate from Iran, or be blended with Iranian oil, Members are strongly recommended to request confirmation prior to stemming bunkers that the bunkers are not of Iranian origin or that such bunkers do not violate relevant prohibitions and, in the absence of such confirmation being received, it would be prudent to request an alternative bunker stem.

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AMERICAN CLUB CIRCULAR (20/11/2012)

NOVEMBER 20, 2012 : CIRCULAR NO. 31/12

RECENT CLUB PERFORMANCE.
DEVELOPMENT OF CLOSED AND OPEN POLICY YEARS.
PREMIUM REQUIREMENTS FOR THE 2013 POLICY YEAR.

At its recent meeting in New York, your Board reviewed the Club's present and prospective circumstances by reference to several factors. These included the near and longer-term implications of the current economic climate, emerging trends within the P&I environment, and the continuing difficulties affecting the freight markets.

Your Board also reviewed the development of closed and open policy years and, having considered the Club's position in light of these related perspectives, made a number of important decisions, including the determination of premium requirements for the 2013 policy year.

The remainder of this Circular describes the issues discussed by your Board, and the decisions it reached in consequence thereof.

Recent Club Performance

The American Club continues to make steady progress in accomplishing both its near and longer-term goals.

Although premium rates per ton have experienced some attenuation during the past twelve months as older, higher-rated vessels have been replaced by newer, lower-rated ships (commonly referred to as "the churn effect"), tonnage has remained stable, and the Club's retained claims exposure has developed encouragingly.

As to the latter, 2012 is emerging much in line with 2011. Although not as benign as the results for 2010, claims development for the two most recent years has nonetheless conformed to original projections.

Pool claims, however, remain a concern. Aggregate losses for both 2011 and 2012 to date are among the highest ever experienced. Large P&I claims, particularly those which fall within the Pool, are apt to be volatile. This makes the modeling of such claims difficult. The frequency and individual severity of large claims generally, and those entering the Pool in particular, may ultimately abate, despite the adverse regulatory and political climate within which such claims often arise, but present trends are unpromising in this regard.

On the investment front, the American Club has enjoyed good results during 2012. As of mid-November, the portfolio has earned a year-to-date return of 6.1%. This has added strength to the overall performance of the Club. It is hoped that investment earnings will continue to develop positively over the months ahead.

Given these trends, the American Club has been able to grow both its GAAP and statutory surpluses during the year. The Club's statutory surplus grew by approximately $4.7 million during the nine months to September 30, 2012 (to $69.7 million), while its GAAP surplus grew by just under $1 million (to $61.2 million) during the same period. Given a challenging business climate, this is a respectable result, auguring well for the future.

In counterpoint to these positive developments, the continuing crisis in the freight markets has also animated your Board's consideration of premium policy for 2013. It has been conscious of the need to limit any increase to a level which acknowledges the difficulties currently confronting Members, yet recognizes that claims and other costs are likely to increase, rather than diminish, in the future.

In reaching their decision in regard to premium rating for 2013, however, your Board first conducted a review of the development of closed and open policy years, as below.

Development of Closed and Open Policy Years
Closed Policy Years

The development of closed years continues as expected. The excess of assets over liabilities for closed years, which constitutes the Club's contingency fund, stood at approximately $60 million as of September 30, 2012, some 10% higher than it was twelve months earlier ($54.5 million).

Open Policy Years
2010

As of September 30, 2012, this year exhibits a surplus of $14.1 million, a year-to-date improvement of $3.1 million. Absent unforeseen eventualities, it is expected that the year will be closed without further call during the first half of 2013.

The release call margin for 2010 has been reduced from 25% to 5%.

2011

This year continues to develop in deficit, the September 30, 2012 figure being a negative $8.5 million, taking into account, inter alia, a conservative allowance for pooling costs. Nevertheless, given that further investment income will be credited to the year as it develops toward closure, and absent unforeseen eventualities, it is not expected that any further call beyond that originally forecast for the year will be required prior to closure, probably in the first half of 2014.

The release call margin for 2011 has been reduced from 25% to 15%.

2012

As mentioned earlier, premium and retained claims trends for the current policy year appear to be tracking those for 2011 at a similar stage of development. As of September 30, 2012, the year was exhibiting a deficit of $4.4 million, without significant support from the Club's investment portfolio.

Again, part of the deficit relates to a conservative allowance for pooling costs for the year as it develops towards maturity. However, as in the case of 2011, and again absent unforeseen eventualities, it is not currently expected that any further call beyond that originally forecast for the year will be required prior to closure.

The release call margin for 2012 year will remain at 20% of estimated total premium as is presently the case.

Premium Requirements for the 2013 Policy Year

In light of all the circumstances reviewed above, your Board has come to the conclusion that, while the results for 2011 and 2012 continue broadly to exhibit the more benign trends which featured so strongly in 2010, they have nonetheless been affected by a continuing lack of pricing power and mounting external costs, notably that of pooling. Other indicators also suggest that some allowance must be made for rising exposures over the year ahead, particularly those generated by simple claims inflation.

In addition, while the American Club has enjoyed solid investment returns in the recent past, the volatility of the capital markets remains a concern, and the use of investment income to subvent underwriting deficits should not be taken as a reliable expedient for the future.

As mentioned above, the deliberations of your Board have also been informed by the challenging financial environment in which Members are situated. In consequence, the decisions set out below are intended to reflect a balanced view of the business landscape which lies ahead, taking into account the related perspectives of Members individually and of the Club which serves their collective interests.

Accordingly, your Board has adopted the following policy as to premium etc. rating for the year commencing February 20, 2013.

Mutual Protection and Indemnity (P&I) Insurance

All expiring estimated total premium to be subject to a general increase of 10%. Any additional costs of the Club's reinsurance arrangements for 2013 to be charged separately. As in the case of the current policy year, such premium to be defined as estimated total premium for 2013. All estimated total premium to be debited in four equal installments due March 20, June 20, September 20 and December 20, 2013. Premium (call) to release to be charged as an additional margin of 20% of estimated total premium for the year.

Mutual Freight, Demurrage and Defense (FD&D) Insurance

All expiring estimated total premium to be subject to a general increase of 10%. Any additional costs of the Club's reinsurance arrangements for 2013 to be charged separately. As in the case of the current policy year, such premium to be defined as estimated total premium for 2013. All estimated total premium to be debited in two equal installments due March 20 and August 20, 2013. Premium (call) to release to be charged as an additional margin of 20% of estimated total premium for the year.

Fixed Premium Protection and Indemnity and Damage to Hull (DTH) Insurance

All fixed premium P&I and DTH entries (e.g. those for charterers' risks) to be subject to a general increase of 10%. Any additional costs of the Club's reinsurance arrangements for 2013 to be charged separately.

Fixed Premium Freight, Demurrage and Defense Insurance

All fixed premium FD&D entries (e.g. those for charterers' risks) to be subject to a general increase of 10%. Any additional costs of the Club's reinsurance arrangements for 2013 to be charged separately. Following the application of a general increase as set out above, Members' premium rates will be reviewed against the background of their individual loss records and other factors, including in particular the exposure which a Member's risk profile brings to the Club going forward, and further adjustments will be made as appropriate.

It will also be a condition for renewal that:

All premiums and other sums due to the Club be fully paid up-to-date prior to February 20, 2013 as a condition of continuing cover; and All outstanding survey etc. requirements be completed prior to February 20, 2013 as a condition of continuing cover. Summary

Your Board is aware that price increases are never welcome, particularly at a time when the freight markets are in such a parlous condition. Nevertheless, your Board remains resolute in its commitment to maintain - and indeed enhance - the financial standing of the American Club over the years ahead, particularly in light of the excellent progress it has made in recent past.

To recapitulate in brief the specific decisions reached, and described in greater detail above:

2010 not expected to attract any further call and intended for closure within the first half of 2013. Release call 5%. 2011 progressing in accordance with expectations and not expected to attract further call. Release call 15%. 2012 also progressing in line with expectations. No further call expected. Release call to remain at 20% over and above the current estimated total premium for the year. 2013 renewal to feature a 10% general increase for mutual P&I entries, plus additional costs of the Club's reinsurance, premium to be characterized as estimated total premium for the year and to be debited in four equal installments. Release call 20% of estimated total premium. 2013 renewal to feature a 10% general increase for mutual FD&D entries, plus additional costs of the Club's reinsurance, premium to be characterized as estimated total premium for the year and to be debited in two equal installments. Release call 20% of estimated total premium. 2013 renewal to feature a 10% general increase in fixed premium entries, plus additional costs of the Club's reinsurance. Such entries to include fixed P&I, Damage to Hull (DTH) and FD&D insurances.

The Club Managers will be in contact with individual Members with their proposals for renewal over the forthcoming weeks.

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Keeping our clients informed.

AMERICAN CLUB CIRCULAR (4/10/2012)

STOWAWAYS HIDING IN RUDDER STOCK RECESS: AN UPDATE

Members may recall that, on April 8, 2001, the Club issued a Member Alert, entitled Stowaways Hiding In Rudder Stock Recess, which drew attention to the problem specified in the title of the alert. This problem, it would seem, persists. This alert is to remind Members to take proper precautions in order to prevent stowaways from boarding and hiding themselves in this manner. Our information indicates that, as previously advised, stowaways wait in port areas until after dark and then swim to the rudder stock, climbing it and hiding inside the recess. Having gained access to an external area of the vessel, they cannot then be easily found by the ship's crew.

It has been observed that most of these vessels come from Africa in ballast and, for that reason, the rudder stock recess stays above water. However, as the vessel rolls and pitches, the stowaways are exposed to the sea.

Recommendations

Members are advised to take all necessary measures as part of the Ship Security Plan (SSP) in accordance with the International Ship and Port Security (ISPS) Code compliance requirements.

The ship's crew should make all efforts to check that stowaways are not hiding in the rudder stock recess, particularly when loading or discharging cargo at ports or terminals in Africa. In general, it is the crew's first priority to check for stowaways onboard ship. However, attention should also be paid to ensure that no stowaways have accessed the rudder stock recess.

Typically, the crew can only access the rudder trunk via a manhole cover fitted in the aft peak tank. Since this tank is normally in ballast and/or filled with freshwater, examination of the rudder stock during a pre-departure stowaway search is not always practical. If access to the rudder stock recess cannot be gained via the aft peak tank, it is recommended that the crew use a small boat, such as a small rescue boat or paint raft, to check for stowaways in the rudder stock recess area.

It is also recommended that Members consider installing medial gratings above the openings to the rudder compartment to prevent stowaways from gaining access to the recess area in the first place.

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AMERICAN CLUB CIRCULAR (03/10/2012)

OCTOBER 3, 2012 : CIRCULAR NO. 25/12

TO MEMBERS OF THE AMERICAN P&I CLUB

Dear Member:

RELAXATION OF United States Sanctions Against BURMa (MYANMAR)

The United States has recently relaxed its sanctions against Burma (Myanmar), in consequence of the improving political climate there, and better bilateral relations. This means that the American Club may now, among other things, provide financial services to or involving Burma (Myanmar) (beyond its existing authorization), including P&I coverage for Members' trade with or voyages to, in and from Burma (Myanmar), subject only to limited restrictions on transactions such as those involving: the Burmese Ministry of Defense, including the Office of Procurement; and any state or non-state armed group; and any entity in which any of the foregoing own a 50 percent or greater interest; and certain Burmese banks and other entities that appear on the US sanctions "blacklist" - the List of SDNs and Blocked Persons maintained by the US Treasury's Office of Foreign Assets Control (OFAC). See, http://sdnsearch.ofac.treas.gov/

A copy of the relevant license issued by the Office of Foreign Assets Control is attached hereto.

For any questions regarding any aspect of the foregoing, including the limited restrictions recited above, or with respect to Burma (Myanmar) and other sanctions in general, please contact:

Charles J. Cuccia
Senior Vice President - Compliance & Enterprise Risk Management
Shipowners Claims Bureau, Inc., Managers
ph:          +1 212 847 4539
mob:       +1 917 215 2883
fax:         +1 212 847 4598
email:      charles.cuccia@american-club.com
 
The American Club Managers continue to monitor developments in regard to the residual US sanctions against Burma (Myanmar), as well as other developments regarding US economic sanctions, and Members will continue to be informed accordingly.

The American Club Managers continue to monitor developments in regard to the residual US sanctions against Burma (Myanmar), as well as other developments regarding US economic sanctions, and Members will continue to be informed accordingly.

eurorisk s.a.
Keeping our clients informed.

LONDON P&I CLUB RECEPTION (19/09/2012)

London P&I Club Reception at the Hellenic Yacht Club

Mikrolimano, Piraeus

Eurorisk Personnel in attendance...