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DECEMBER 1999 ISSUE 25 UK CLUB NEWS

Mutual remains best option

UK Club reserves have continued ‘At cost’ cover and shipowner income, reduced reinsurance costs to grow, the cost of P&I insurance control were the twin pillars upon and stable claims. The latter indicated to Members has been cut once again which the club system was firmly the success of loss prevention measures and the European Commission based. With reserve funds remaining across the P&I Clubs. shadow which threatened the under the control of a shipowner Mr. Palmgren said that although the International Group’s claim sharing board, attention could be focused on Club was stronger financially than ever and reinsurance arrangements has reducing cost rather than satisfying before, the Directors were determined receded. However, the Club is third party investors through payments to enhance this strength still further to continuing to develop a strategy of dividends. The P&I clubs’ spectacular virtually remove the only weakness of the to ensure that the essential features success in the past few years had been mutual system, i.e. the possibility of of the P&I system are maintained. due to substantial investment income unplanned supplementary or overspill calls. Writing in the UK Club’s 1998-99 on reserves being used to cut the It was also vital to take ongoing annual report, Chairman Nils-Gustaf premiums charged to Members. account of the commercial insurance Palmgren said the mutual club system Over the past five years, the cost market, particularly the fixed premium “remains the best option and one of P&I for UK Club Members had fallen alternatives. which must be preserved.” by a third, because of investment

UK voted Best P&I Club

On the 17th November the UK P&I Club Maersk Line who were named best found itself in distinguished company mainline operator and Wan Hai Lines at the Maritime Asia Awards dinner at judged best intra-Asian operator. the Grand Hyatt Hotel in Hong Kong. Hyundai Mipo dockyard won the Over 400 luminaries of the maritime award for best ship repair yard and

industry attended the gala dinner to Mitsubishi Heavy Industries the award INSIDE THIS ISSUE PAGE see the prize-giving. for best shipbuilder. Hong Kong report 2 The UK P&I Club was awarded the The Port of Singapore was named best New Directors 3 title "Best P&I Club" by the judges container terminal and China’s Dalian Stockholm report 4-5 and the award was collected by Herry Container Terminal as the best emerging Maritime industry charter 5 Lawford, the Asia Pacific chairman of container terminal. The best classification Mutual premium 6-7 Thomas Miller. society prize was awarded to ABS. Report and accounts 8 The title of maritime industry's An independent panel of judges Farewells 9 personality of the year was presented decided the award winners from a Crew’s Nigerian ordeal 10 to Mr. Frank Tsao Wen-king, chairman shortlist of 32 individuals and companies of IMC Holdings. nominated by Maritime Asia and Lloyd’s Other shipowner winners were List readers. T1.84 Club News Dec 99 aw 22/12/99 10:21 am Page 4

Hong Kong Directors’ Meeting

The October Annual General Meeting The Directors decided to order a 30 per fleets currently entered in the Club. and Club Board meeting were held on cent supplementary call in respect of US Oil Pollution the 25th of October in Hong Kong. As the 1998 policy year, instead of the The Directors noted the Managers' always the venue gave the Directors an originally planned 40 per cent. This was report on steps which had been taken opportunity to meet with the members the fifth year out of the past six that to assist Members in relation to in the region, and also those who the supplementary call had been compliance with the new California support the Club in its work. reduced below the planned level. contingency plan regulations. In relation to the COFR regulations, New & Retiring Directors Mutual Premiums the Managers confirmed that these had At the Annual General Meeting Messrs. The Board decided that mutual premiums not yet been finalised, but that the Andre (Suisse Atlantique, Lausanne), for the 2000 policy year would reflect California Office of Spill Prevention and Caroussis (Chios Navigation, London), the old advance call plus a planned 40 Response were issuing 'interim' COFRs, Hughes (P & O Cruises (UK), London), per cent supplementary call, but that to be substituted by real COFRs as and and Manthos (Admanthos Shipping only 75 per cent of the mutual premiums when the regulations took effect. Agency, Stamford) were re-elected to would be debited during the policy the Board of Directors. In addition three year. Three 25 per cent instalments will Hong Kong licence application new Directors were elected: Mr. Jorge be due for payment in four 25 per cent The Directors were advised that the Kamkoff of PDV S.A., Caracas; instalments to be paid not later than Association's application to the Mr. Heinrich von Rantzau of DAL Deutsche 20th March, 1st June, and 1st September Insurance Authority of Hong Kong for a Afrika Linien, Hamburg; and Mr. Kensatu 2000, and the fourth 25 per cent will licence had been successful. The Club’s Saito of Petrobras, Rio de Janeiro. be due for payment not later than 1st Hong Kong office can now become a The A.G.M. also marked the December 2001. This final instalment fully fledged branch office. retirement from the Board of would be subject to a mutual dividend Mr. T. Yamaguchi, in addition to Messrs. should it be decided in October 2001 Hull insurance facility Bandura, Grassi, Viney and Cdte. Ronaldo that the full instalment was not required. Since the last Board meeting, the new Machado who left the Board during the The supplementary premium for hull facility had launched and announced year. The Chairman thanked all of these the 2000 policy year would be estimated it would be trading under the name of gentlemen for their valuable at zero. See pages 6-7 for explanation Dex. Though the Club is not directly contribution to the affairs of the of mutual premiums. involved in Dex, the Board continues Association. to take an interest in developments. Reinsurance Arrangements for 2000 Reinsurance with Swiss Re The Managers reported that reinsurance Year 2000 issues The Board approved in principle a new negotiations for the 2000 policy year The Managers reported on the latest reinsurance contract with the Swiss Re were unlikely to be completed before stage of their Year 2000 continuity designed to underpin the Association’s December. The Board confirmed it planning and the steps that would be defences against any unplanned wished the oil pollution cover limit to taken to make sure that all Members supplementary or overspill call. be increased to $1 billion for 2000. and Correspondents were aware of the contact arrangements for the UK Club Investments Claims Review over the Millennium holiday. The Investment return had climbed back to The Managers had included within their Managers also reported on the level US$32 million since the July meeting. report a summary of the claims paid of support for "Safety Protocol". They This would produce an annualised return since the previous meeting, a commentary expressed disappointment that the of between 5 and 6 per cent,in line on a number of important cases and Safety Protocol had not been supported with the budget of a total investment news of developments in recent cases. by the charterers and asked the Directors return for the year of US$60 million. The Managers gave a verbal report of to use their influence to try and encourage the current status of the English court charterers to sign up. They said that Calls proceedings in the "DUBAI VALOUR". they would be contacting the oil majors The Directors decided to order no See pages 10 & 11 for a full account. in particular to see whether they could general increase for the 2000 policy be persuaded to give their support. year. However, they directed the Member quality Managers to take a strong line on In their annual review of Member Charitable contributions renewals to prevent further erosion quality the Board decided that renewal It was reported that the Chairman had of the general premium level. terms should not be offered to two approved contributions of US$15,000

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each to earthquake relief funds set up UK Board welcomes by shipowner associations in Greece and Turkey. new Directors

Go ahead for Hong Kong branch

The Insurance Authority of Hong Kong’s grant of a licence to the UK P&I Club has opened the way to expand the Club’s regional office into a fully-fledged branch office with the necessary executive Mr Kamkoff and Mr Saito authority to respond quickly and effect- ively to a wide range of member needs. Three new Directors were welcomed The Rantzau Group comprises a The Club can offer the region’s ship to the UK P&I Club Board at the recent number of famous names. John T operators a distinct advantage over Hong Kong Directors Meeting namely Essberger, founded in 1924, specialises other P&I providers. It can now optimise Mr Jorge Kamkoff of PDV S.A, in the transport of all forms of bulk the service to Members in the Greater Mr Heinrich von Rantzau of Deutsche liquids. Deutsche Afrika-Linien (DAL), China market. There is no longer a Afrika Linien and Mr. Kensatu Saito a liner shipping company handling a requirement to seek decisions from the of Petroleo Brasiliero S.A. wide variety of unitised cargoes to London office as the responsibilities PDV S.A. is the Venezuelan State oil Africa; Transocean Shipmanagement afforded to local executives will enable company. The company operates crude GmbH providing management to Members to deal face-to-face with the carriers, chemical tankers, and asphalt these companies as well as external ultimate decision makers. carriers. They have been entered with clients. Mr. Heinrich von Rantzau is Only the UK P&I Club has branch the U.K. P & I Club since nationalisation the Managing Director of the Rantzau offices in Tokyo (established 1989) and of the Venezuelan oil industry in 1976. Group. He is also part owner with his Singapore (established 1998). The Club Mr. Kamkoff is Vice-President of PDV’s brother Dr Eberhard von Rantzau. also has offices in Shanghai, Beijing, Gas Division. The relationship between John T Taipei and Sydney. Together, they Petrobras is the state oil company Essberger and the UK Club dates back provide full service coverage across of Brazil and was founded in the early to the First World War when the the region. 1950s and its membership of the UK company’s founder and Dawson Miller Only one other P&I club has been Club dates from that time. Frota Nacional of Thomas Miller found themselves on granted a licence in Hong Kong. de Petroleiros (Fronape) is the tanker opposing ships in a naval engagement Chairman Nils-Gustaf Palmgren, division. Petrobras Transportes SA., of at Dogger Bank. The British destroyer describes the Club’s establishment as a which Mr Saito is a director, is a recently gave a nasty surprise to its opponent licensed insurer as, ’a further stage in formed subsidiary for management of as it was fitted with an experimental the commitment of staff and resources part of the owned Fronape fleet. six inch gun, but quickly it retired in to serving our Members in the region the face of superior forces.Thinking that has been developing over the past that the episode was an attempt to lure four years. The establishment of a them into a trap, the German ships retired branch office has widespread support also and thankfully no-one was hurt as within maritime and insurance a result of the skirmish. The two men communities, including the Hong Kong met after the war and John Essberger Shipowners Association, the China was able to tell the Club manager how Ocean Shipping Company and the unsporting it was for a destroyer to Hong Kong Maritime and Port have been carrying such an unusual Development Board.’ armament. The enduring relationship ‘This initiative adds a very major since that time has happily not relied component indeed to our network of Mr Heinrich von Rantzau on any further gunnery exchanges. offices, services and skills in the wider Asia Pacific region. No other P&I club will be able to match what we offer.’

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inspectors and a fall in those incurring Stockholm Report adverse reports (4 per cent), despite over half being more than 15 years old. Some 151 ships had undergone Underwriting condition surveys, mostly as a pre or Although the Board delegates the The UK P&I Club board meeting post entry requirement for new vessels. underwriting process to the Managers in Stockholm in July was attended About one third (54) of these ships were and does not itself make detailed by 28 Directors. The agenda subject to formal repair recommendations. underwriting decisions, it does, included items on the Report & The Directors noted the potential nonetheless, have a duty to monitor Accounts and other financial importance of digital photo records and the performance of the Managers matters, oil spill response plans, urged that each inspector be equipped against the underwriting policy that was ship inspection, the new hull with a suitable camera. set by the Board in October 1993 and cover option, the Maritime Industry published to the membership in January Charter, Year 2000 developments Overspill calls 1994. Specifically the Board seeks to and other Group matters. Following discussions between Group ensure that large fleets are not It was the last meeting for boards and managers, the UK Club had subsidising or being subsidised by Commandante Ronaldo of accepted that the method of allocating smaller fleets, that there is movement Petrobras. The Chairman thanked overspill calls between clubs should in the actual loss ratios from one side him for his contribution to the remain unchanged for the time being, of the Acceptable Loss Ratio to the Club’s affairs in four years as a although it was suggested that the other, and that net loss ratios of Director. contribution by tankers fitted with various ship types are in line with the segregated ballast tanks be reduced Acceptable Loss Ratios for those trade evidence that there was subsidy by one to recognise their inflated tonnage. types taken as a whole. ship type over another. The Directors However, the Club’s policy remained In accordance with this practice were also pleased to note that the fixed the elimination or reduction as far as the Board received their regular Annual premium Time Chartered results also possible of overspill call exposure through Report on the underwriting position continued to run satisfactorily. reinsurance or other financial instruments. of the Club. Although the results of the tests contained in the report were Investments Oil pollution cover satisfactory, there were signs that the Global growth stemmed primarily The Board confirmed their view underwriting results were on the point from continued strong US activity and that the limit of P&I club cover for oil of turning for the worse. At the improved conditions in Japan and Asia. pollution should be increased to at beginning of the eight year period After recent bond price weakness, least US$700 million, and possibly to under review (from 1990 onwards) total US and European bonds appeared to $1 billion. The matter being reviewed premiums were at an all time high. The offer good value. The Managers’ by all the clubs in the Group in time early 1990s had also seen a fall in the strategy was to overweight bonds in for the 2000 policy year. claims, as a result underwriting surpluses those markets while underweighting had gradually built up. The picture today Japanese bonds, and to remain Year 2000 was very different. There had not been underweight in Japanese yen and At the request of the Board, the a pure underwriting surplus for three overweight in dollars. The equity Managers presented the latest draft years and premiums had declined over strategy involved overweighting the of their own Business Continuity Plan the eight year period, partly as a result European region compared with for the Year 2000. This item had been of market conditions and partly as a America, while remaining relatively prompted by the Board’s Audit result of the decisions taken by the neutrally weighted in Asia. Recent Committee’s review of the measures Board to limit the growth of the free market action had resulted in equities taken by the Managers to achieve Year reserves by reducing supplementary being moderately overweighted relative 2000 compliance of their systems. The calls. Although the gap created by the to fixed income securities. The Managers continuity plan had identified three main fall in income had been more than aimed to maintain that position. issues: preservation of data; the Year covered over the intervening years by In the three months to 14th May, 2000 weekend testing programme; and the investment return, the pure there was a two per cent return on the the strategic options for continuance of underwriting deficit had gradually Total Fund, equal to investment income the business. The Managers explained increased. of US$18.3 million. that they were continuing to develop On the individual tests themselves the plan. They would be concentrating the Managers were pleased to report Fall in adverse ship reports over the next few months on the that the mutuality tests still held up in In the first five months of 1999, there arrangements for the claims and that there was no cross-subsidy between had been a small rise in the number of underwriting functions and the advice the large and small fleets and little ships (244) visited by the Club’s that would be given to Members on

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how they should communicate with the Club backing for Lars Lindfors retires Association in the event that they maritime industry after 33 years encountered problems over the Millennium. The second part of the charter report by the Managers concerned The Directors agreed the UK Club should After 33 years as the UK Club’s work undertaken since the previous support the signing by the International correspondent in Helsinki, Lars Lindfors meeting to assist the Members in their Group of the Maritime Industry Charter retired at the end of September. After own Year 2000 contingency planning. on Quality. an early sea-going career Lars came The Managers also reported on the The Charter, promoted by the ashore in 1966 when he joined International Group’s effort to launch European Commission’s Transport Sjoassuransforenigen, which later the Year 2000 Safety Protocol. Directorate, defines quality standards merged with Suomen Meri/Finska Sjo, in respect of safety and protection of now part of the Industrial Insurance Directors’ responsibilities: marine environment and crew. The Company. Club Members and Audit Committee report standards, which are advisory rather Managers alike have benefited over The Chairman reported on the meeting than obligatory, are similar to those the years from Lars’ efficient and held in June with the partner responsible already imposed under Club rules. friendly professionalism. for the audit of the Association’s Some 15 organisations have already accounts, to discuss matters concerned signed the Charter, including BIMCO, with the supervision and control of the Intertanko, the International Parcel Tankers Managers, and the audit of the accounts Association, the European Community for the year ended 20th February, 1999. Shipowners’ Association and IACS. The Directors had before them the The Managers had also met with full minute of the Audit Committee a representative of the self-styled meeting which confirmed that no ‘International Commission on Sub- matters of real concern had been Standard Shipping,’ announced by the identified. The Chairman commented International Trade Federation. While that there had been a clear sympathising with the Commission’s broad improvement in standards during the objective of promoting quality among 4 years that the Audit Committee had sub-standard shipping, the Managers carried out their annual review. questioned whether it was better placed to make progress on this issue than the Hull insurance facility established bodies already involved. The Managers reported on the background and structure of a hull facility, which had been announced on 15th June prior to the Board meeting. The new facility brought together 3 partners; Swiss Re, one of the world’s largest reinsurers; Chartwell Re (owners of Chartwell Managing Agents Ltd.) and Thomas Miller & Co Ltd. The Managers undertook to make a presentation on the product as soon as the design phase was complete. The new facility was expected to launch in November in time for the 1st January hull renewals.

Compulsory insurance The Board received a report on the current position of negotiations within the IMO Legal Committee on measures to introduce a Protocol to the Athens Convention dealing with claims for As publishers and sponsors respectively, Nautical Institute President death and injury claims to passengers. Peter Russell (left) and UK Club Chairman Nils-Gustaf Palmgren (right) This report is due to be considered by enthuse over the new publication Managing Risk in Shipping at its all the International Group clubs. Trinity House, London launch.

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Mutual Premium - Better than Fixed Premium

Actual Premium Forecast Premium months after the end of the policy year. In the instance of reduced call... Additional This will reflect closely the cash flow Supplementary requirements of the old advance Traditional P&I Call Structure Call call/supplementary call system. Supp. Call @ 40% Advance Call (100%) 0% Under the old system, with its 100 @ 25% per cent advance call and 40 per cent New Mutual Premium & Mutual Discount planned supplementary call, 71 per cent (100/140ths) of the total planned Mutual Premium (100%) - 11% 0% premium was paid during the policy

Supplementary year, and 29 per cent (40/140ths) ten March June September December Premium months after the end of the year. 2000 2000 2000 2001 By comparison 75 per cent of mutual

UK P&I CLUB premium will be paid during the policy year, and 25 per cent ten months after the end of the year. At the time that the fourth instalment falls due to be paid, The Board's recent review of options of ‘advance call’ and ‘supplementary the Board will also declare a mutual open to the Association in the future call’ there will now be a ‘mutual premium’ premium discount, if appropriate, so came to the firm conclusion that the and a ‘mutual premium discount’. that Members will pay the net result of mutual system is in the best interest Although most Members fully under- the fourth instalment less the mutual of the Members, and should be stood that the old planned supplementary premium discount. strengthened and preserved. On call was merely a deferred instalment of The terminology ‘supplementary virtually any comparison with a fixed the planned annual premium, there is premium’ will continue to exist. However, premium system of underwriting the no doubt that for some the terminology thanks to the strong reserves and the mutual system comes out on top - ‘supplementary call’ denoted some kind new reinsurance arrangements with shipowner control, no profit insurance, of an additional penalty payment that Swiss Re the likelihood of the Club dedicated service and an unrivalled the Club required to balance its books. ever having to charge a ‘supplementary history of commitment to the shipping The change of vocabulary is largely premium’ - which would indeed be an industry are just a few of the advantages. cosmetic. But, it emphasises that the overrun in the planned premium Virtually the only area of potential Club has no intention of overrunning requirement - is remote indeed. weakness in the mutual system, when its call requirement, and that it has The concept of ‘overspill call’ continues compared with the fixed premium system, strengthened its financial defences to to exist, but again, with the Association's is in the exposure to an overrun in ensure that does not happen. strong financial position, its existing premiums through unplanned supple- Furthermore, unlike the fixed premium special Catastrophe reserve and mentary or overspill calls. In fact the system, the Member assureds of the Catastrophe reinsurance, and the new mutual Clubs in the International Group Club stand to receive a reduction in the Swiss Re protection. are well reserved at the moment, and final instalment of their premium (through Members of the U.K. Club therefore the possibility of an overrun in calls is the ‘mutual premium discount’) should have the benefit of virtual certainty of remote. This is particularly the case for the financial results permit. maximum cost, but with the possibility the U.K. Club. Nevertheless, the Board Had the new terminology applied in of a reduction in cost - one of the decided to further strengthen the defences past years, then instead of the reduced prime advantages of the mutual system against any further supplementary call supplementary call that has been ordered over the fixed premium system. through the new reinsurance arrangement by the Directors for six out of the past with the Swiss Re, announced recently seven policy years, there would have in the circular 21/99 that was sent to been a mutual premium discount in Members in November. those six policy years. Hand in hand with this new under- ‘Mutual premium’ will be debited in pinning of the Association's financial four 25 per cent instalments, three of strength is a change of vocabulary for them during the currency of the policy the Club's calling mechanism. Instead year itself and the fourth some ten

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Mutual Premium Examples

Traditional Call System Using the same calls performance as The traditional call system of levying an shown in the traditional call example advanced call and making an estimate above would provide the same saving for the supplementary call provided five from the estimated total cost. However, instalments for the total policy year’s call. since there is no outstanding supple- For example, let us assume a Premium mentary call, to arrive at the same Rate of US$ 1.00 (payable in 4 instalments result the Directors would apply a on or before 20th March, 20th May, Mutual Premium Discount of 10.72% 20th August, 20th October) and an to the Mutual Premium. Total call would Estimated Supplementary Call at the then = US$1.40 - 10.72% = US$1.25 start of that policy year = 40%. The By making the 4th instalment Estimated Total Cost would calculate payable on the 1st December of the Please note as US$1.00 + 40%, that is US$1.40. subsequent year, the discount of The figures quoted in these examples The advance call is paid on the usual 10.72% can be applied as a credit of are purely for ease of explanation and instalment dates and in the subsequent US$0.15 against that final outstanding should not be taken to imply future year the planned supplementary call is instalment reducing it from US$0.35 to rates or an indication of the Club’s reviewed in the light of the claims US$0.20. future finances. performance. If the Supplementary Call were to be reduced to 25%, then the total cost would calculate as US$ 1.00 + 25%, that is US$ 1.25. This equates to a reduction of 10.72% from original Mutual Premium Case Study Estimated Total Cost of US$ 1.40. This revised supplementary call would be The following case study shows the premium adjustment for a ship of payable in December as the fifth and 16,500 gross tons. final instalment of the policy year call.

Traditional Call System New Mutual Premium System Advance Call Calculation The new mutual premium system Premium Rate $1.00 x 16,500 gt =$16,500 instituted by the change on the rules (payable in 4 instalments through the year) for the 2000 policy year simplifies the Supplementary Call calculation forecast cost by setting a Mutual Estimated at 40% $16,500 x 40% =$6,600 Premium of US$1.40. This premium is ETC at start of year $16,500 + $6,600 =$23,100 payable in 4 instalments each of US$0.35. These are payable on or before the If adjusted to 25% upon review $16,500 x 25% =$4,125 20th March, 1st June and 1st September of the current year and 1st December Total Call $16,500 + $4,125 =$20,625 of the following year. Thus the total payments made in the current year are New Mutual Premium System the first three instalments of US$0.35 Mutual Premium Calculation which total US$1.05. Mutual Premium $1.40 x 16,500 =$23,100 When compared to the traditional (payable in 4 equal instalments of $5,775 call system, there is a small increase in three payable in 2000 and last payable in December 2001) the payments made during the course of the current year i.e. Mutual Premium Proportion payable in 2000 3 x $5,775 =$17,325 instalments totalling US$1.05 instead Proportion payable in 2001 1 x $5,775 =$5,775 of Advance Call instalments totalling US$1.00. The split between call payable Mutual Premium Discount Calculation in the current year and that payable in If Discount = 10.72%, $23,100 x 10.72% =$2,476 the subsequent year after review of the claims position has shifted from 71:29 Total Call $23,100 – $2,476 =$20,624 in the traditional call system to 75:25 in the new Mutual Premium system.

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UK Club Report & Accounts: free reserves at record level

A fall in estimated and forecast Investment USD 1 billion of overspill protection liabilities and strong investment There was a return of 9 per cent on cover which, together with protection returns meant that the free reserves invested funds, compared with 9.6 per from the UK Club’s catastrophe reserve, of the UK P&I Club for the year ended cent in the previous year. The UK Club raises the threshold for a catastrophe 20th February 1999 were 20% greater point out that, unlike some of the call to USD 3.3 billion. than the previous year’s record level. other clubs in the International Group, As a result, the Board had it does not attribute the investment Supplementary Calls decided in October 1998 to restrict income in the current year to the most & General Increase further growth in the funds by recent open policy year. The majority of Claims on the 1998 policy year reducing the supplementary call for investment income is allocated to the continued to follow the pattern of the 1997 policy year from 40 to 25 contingency account (which in turn earlier years, with reinsurance premiums per cent. It was the fifth time in six funds deficits arising on closure of showing a further downward trend. years that strong finances had policy years). Only a small amount of The supplementary call, planned at produced a reduction in the investment income appears against 40 per cent, was finalised by the Board planned call for supplementary each open policy year, reflecting the in October 1999 at 30 per cent. premiums from Club Members. The income which will be generated on The Board had imposed a general Board now expects to close this that policy year’s funds. increase of five per cent in premium policy year without making any ratings for 1999 to maintain the Club’s further call. Reinsurances financial strength. The impact was The year saw a reduction of some partly offset by the fourth successive Reserves 20 per cent in the cost of existing reduction in the cost of the International Total funds, excluding any allowance reinsurance arrangements, purchased Group’s reinsurance programme. The for future supplementary calls, were through the International Group of P&I planned supplementary call for the 1999 US$1,138 million (US $1,134 million Clubs. This followed the 40 per cent policy year remained at 40 per cent. in 1997/98). Outstanding claims stood cut achieved in 1997/1998 and the 15 at US$792 million, compared with per cent reduction in the previous year. US$844 million for 1997/1998. Free In addition to the Group reinsurances, reserves were, therefore, US $346 million. the Club has also bought an additional

UK Club – supplementary Investment returns % Funds and liabilities call performance % US Dollars 000s

14 1400

12 1200

50 10 1000

40 8 800

30 6 600

20 4 400

10 2 200

0 0 0 9293 94 95 96 97 98 95 96 97 98 99 95 96 97 98 99

Original estimated supplementary Total funds Discounted future calls

Actual supplementary called Future claims Discounted future claims

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Farewells

John Joslin claims handler for the UK Club and George, in his alternative role as As the longest previously for the Steamship Mutual bon viveur and restaurant critic, could serving member of and a major US reinsurer was a valuable always be relied on to guide his colleagues the Thomas Miller resource for Club members. He also on the best cuisine developing his own staff, John Joslin has took a leading role in the development rating system to rival the Michelin guide. built an unrivalled of the Club’s cover and service for the Whilst many of his claims colleagues list of friendships and links across the cruise and ferry industry. knew their onions, George knew his UK Club and its members. John joined The UK Club’s representation on the oysters as well. the firm in 1957 after completing his occupational diseases subcommittee is George's farewell party in character- national service. The length of his now supplied by Martin Turner. Martin istically discrete style was a who's who experience made John an invaluable and Tony had worked together in the of the shipping and insurance industries reference on precedent and history personal injury field before their in London and beyond. He plans to quoting examples dating back to times respective arrivals at the UK Club. devote his time in future to the simple before the enquiring member, broker Martin’s first challenge is the evolution retirement pleasures of grandchildren, or underwriter was born. During that of the occupational disease claims cases exotic plants and fast cars. time he collated an extensive library of from paper into computer-based files. The Levant connection endures with reference books, not just for the UK Club The focus of these cases on the long the appointment of Tony Kennedy to but sourced from all the International term career of afflicted individuals the claims specialist team. Tony previously Group clubs. In recent years he was rather than incidents falling on single worked with George in Syndicate 2 best known for his role in administering vessels makes this a challenging task. before moving on himself to take much of the essential documentation of charge of Area Group L2. the members’ P&I entries such as CLC George Mason Blue Cards, US pollution certificates George joined in Joe Pascucci and FMC passenger guarantees. 1984 as a senior Joe is another John’s core duties of member claims adjuster claims manager administration are to be taken on by from another liability who has served John McPhail. John is known to a good underwriter and soon the Club and its number of members already in his role became a syndicate manager with members faithfully as manager of the Club secretariat for Syndicate 2 which dealt primarily with for many years. He joined the San Directors meetings and prior to that as Greek, Turkish and Levantine members. Francisco office in 1986 having a claims handler in Syndicate 4. He built up strong friendships and previously been a claims manager for a relationships with members in Turkey and number of steamship agencies. Joe is Tony Murphy Syria. But his unshakeable faith in the role known for his extremely strong work Tony Murphy of the claims handler as the defender of ethic, vast knowledge of the West Coast distinguished the members' interests garnered respect maritime scene and his excellent grasp himself to the UK from all who dealt with him. of a wide range of P & I claims issues. Club and the P&I Admiralty cases, particularly collisions He is renowned as a tough negotiator, community in and general average were one of his one whom you would appreciate being general as the chairman of the specialities. George was always able to beside you in the proverbial foxhole. International Group Occupational spot the essential commercial issues in At the same time, Joe enjoys gourmet Disease subcommittee. Asbestos has a case rather than simply defining legal food and is a voracious reader. His solid always maintained the highest profile in arguments and come quickly to a work in managing the UK Club's first this area of claims with one American practical decision on how to proceed P & I office on the West Coast has won lawyer alone submitting suit on behalf with a case. An essential ability when him widespread praise. of 38,500 individual claimants. However, trying to disentangle the complex Joe has endeared himself to many industrial deafness and other ailments strands of major general average cases. of his British colleagues by being an such as ‘vibration white finger’ make It was this talent which led to his enthusiastic fan of soccer. He would often this a broad and complex area of claims appointment to the specialist PICT take the opportunity to attend games in handling. The long term degenerative claims team in 1992. George's work his visits to the London office. He also effect of these illnesses makes estimation for the UK P&I Club over the last fifteen coached local teams in San Francisco. of liability and consequent reserving years has built a valuable library of extremely difficult. documented experience which can Our best wishes to all these colleagues However Tony was no narrow continue to serve his colleagues and the for a happy and fulfilling retirement. specialist. His experience as a ‘people’ membership in the future.

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Nigerian ordeal comes to an end for Ukrainia

The arrival of the 12,000-ton Maltese- The saga began with a claim by of the claimants accompanied by flagged Dubai Valour at Tenerife in Lonestar, who chartered the Dubai military personnel and backed by May, with the master and three officers, Valour to carry oil rig drilling parts a local court order, boarded the ship, marked the end of an extraordinary from Kandla, India to Port Harcourt or assaulted the crew and tried forcibly chapter of events, involving violence, Sapele in July 1997. Part of the deck to move her further upstream to an the threat of violence, harassment, cargo was lost in heavy weather in the unsafe location. After legal proceedings unsupported claims against owner Indian Ocean. The ship reached Nigeria against the Nigerian Port Authority and Gulf Azov Shipping and widespread later that month and the cargo was Lonestar, the Federal High Court in disregard of legal rulings. discharged early in August. Benin Province confirmed that the ship The ship had been detained illegally Lonestar Drilling Nigeria Ltd arrested could sail and the NPA signed an order at the Nigerian river port of Sapele the ship, claiming US $17 million for giving this immediate effect. since August 1997. This action the loss of drilling machinery and the Despite the activity of Lonestar tugs heralded 21 months of legal initiatives consequential damages which would which tried to prevent Dubai Valour from and negotiations by the Club and the allegedly result. An independent expert leaving the berth, she managed to sail owners to obtain the release of both advised owners and the Club that the but was fired upon downriver by armed the ship and its Ukrainian crew. true value of the lost parts was men in boats and the master was forced While 23 seamen were released in probably closer to US$200,000. to stop the vessel in the interests of the July 1998 after nearly a year in captivity, The bill of lading had, however, been safety of those on board. the master and his three senior officers claused to reflect that the deck cargo A pilot, backed by 20 to 30 armed had been forced to remain on board was carried at the Indian shipper’s risk. personnel, boarded the ship and the the Dubai Valour for a further ten The owners, therefore, had a defence master was forced at gunpoint to months. They were de facto hostages in to claim and potentially no liability. return the vessel upstream to an support of a routine cargo claim made Initially, Chief Idisi and Lonestar unsuitable berth adjacent to Lonestar’s by Chief Humphrey Irikefe Idisi and his accepted a US $1 million letter of offices in Sapele. The court order company Lonestar Drilling Nigeria Ltd. undertaking from the Club to secure releasing the ship was stayed and the The four men’s release was the release of the ship. They sought to Dubai Valour remained at this berth eventually secured by an agreement renege upon this agreement but the until the beginning of May 1999. to pay US $3 million into an escrow Federal High Court in Lagos ordered The owner’s and the Club’s lawyers account. However, as soon as the vessel the lifting of the arrest. However, the tried continually to secure the release and crew were free and safe, and ship was unable to sail as the local of ship and crew. Chief Idisi and before the money could be drawn agents appointed by Lonestar refused Lonestar claimed in the Benin courts down, it was frozen by an order of the to cooperate. that the crew faced ‘criminal’ charges English High Court. In September 1997, representatives over the loss of Lonestar’s cargo. The

From captivity to freedom

A rig deliberately rammed against The rig is pulled away from the ship At last – the Dubai Valour is on the Dubai Valour, effectively to enable her to sail. her way down the Benin River imprisons her. to freedom.

10 T1.84 Club News Dec 99 aw 22/12/99 10:21 am Page 13 d for Ukrainian seamen

Federal courts in Lagos, however, found water supplies. At one time, fresh which he would receive US $3 million. consistently in favour of Gulf Azov and water stocks, bunkers and diesel oil These monies were frozen in an escrow the Club. Enforcing these decisions, ran out, the air conditioning had to account in a London bank pending final however proved impossible, with be turned off and the refrigeration decisions by the English High Court. various local organisations appearing unit failed. The master was refused to accede to Chief Idisi’s opposition permission to go to hospital when The UK Club’s Loss Prevention to Dubai Valour’s release. suffering from enteric fever. Later, he Bulletin no.95, circulated in May Lawyers attempting to visit the crew became seriously ill with a high fever 1999, refers. in May 1998 were confronted by about and liver pains. The vessel continued to 15 threatening men with clubs and be surrounded by Lonestar employees knives. Chief Idisi personally assaulted who would not allow the crew to leave. one of the lawyers. When Russian In a human rights action, the Chief Embassy officials and lawyers, acting at and Lonestar were held to have Malicious and the request of the Government of the “grossly breached the fundamental violent acts Ukraine, attempted to serve the High rights of the crew”and to have alleged in writ Court’s release order the following subjected them to “torture, inhuman month they also were assaulted. and degrading treatment”. On behalf of Gulf Azov Shipping, Following further legal manoeuvres and Earlier this year, there were a series the Club has issued a writ against diplomatic initiatives, however, 23 crew of court applications, including the Chief and his companies. It were successfully released in July 1998, contempt proceedings against Chief alleges the defendants committed leaving the four officers on board. At Idisi and Lonestar. However, the owners ‘malicious and violent acts’, one point, Lonestar indicated they and the Club were faced with including wrongful arrest, would accept the cost of replacing all interminable delays, with the Nigerian interference with and detention of lost parts, plus US $3.5 million as an courts’ and authorities’ inability to the plaintiff’s vessel, breaching an out of court cash payment to cover enforce decisions and, more agreement to release it and false alleged consequential losses. As Lonestar importantly, the continued and imprisonment of its crew. failed to provide any documentary unjustified detention of the four The claim in the amount of US evidence to substantiate their claim, officers in unacceptable conditions. $9.3 million is to recover the funds the owner declined to settle at this They decided, therefore, that the only held in escrow, damages and costs grossly inflated level. way to procure the release of the men and to set aside the "settlement Problems for the crew over the 21 and the vessel would be to give in to the agreement" as having been entered months included poor health, in Chief’s demands and, under duress, sign into under duress. particular malaria, and low food and a ‘settlement agreement,’ pursuant to

Containers: getting it right

Container Matters, the latest loss prevention video commissioned by the UK Club, is being filmed at various sets. Container Matters will urge shippers to order the right containers for the job, ensure they are in good condition, plan the packing to achieve correct and immovable stow, seal and secure the containers, and attend to their carriage to the docks. A separate shipboard version will concentrate on the integrated process: loading and stowing, securing and lashing, and handling during the voyage.

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Doing business in West Africa

Thomas Miller executives, working for type of activity. Ships are exposed advise on local port conditions and the UK P&I and other mutual clubs, are to banditry, extortion and theft of provide recommendations for actions used to carrying out their underwriting equipment. Crews are vulnerable and precautions for particular ports and and claims handling roles in various ashore to kidnap, assault, mugging cargoes. They travel frequently to the political, legal and economic contexts. and fraud. Illness and injury can be region to liaise with agencies, In few parts of the world are those difficult and dangerous to treat governments and other organisations, contexts as volatile and unpredictable safely as medical resources are often to improve senior level relationships as in West Africa. desperately limited. Security is scant and to monitor lawyers, surveyors and The region encompasses 19 countries, in nearly all ports, leading to other experts. For example, ministerial which use four European languages and a pilferage and large scale theft of discussions have helped to reduce levels range of national and tribal languages cargo. Lack of facilities also leads of customs fines in the Benin Republic and dialects. The coastline from Senegal’s to wet damage and various other while contact with harbourmasters has border with Mauritania to Angola’s border forms of deterioration. Operators’ facilitated the handling of dock with Namibia runs for about 4,000 miles. agents are frequently exposed to damage claims. These countries tend towards the liabilities allegedly incurred by Members seeking guidance on any bureaucratic and formalised systems but operators themselves whilst calling West African matters should contact a lack of resources to carry through policies at ports, e.g. customs fines. Finally, Andrew Jones tel +44 171 204 2503 leads to irregular, inconsistent and even stowaways present a major and as Area Director for L3 Group fax bizarre practices. Legal systems cannot cater complex problem. +44 171 204 2103 or Jeremy Barrett effectively for maritime cases. It follows tel +44 191 516 0937. that P&I practitioners find problems in a • Ship arrest number of areas, particularly:- In most countries, anyone can arrest a ship quite easily. However, obtaining • Commercial procedures its release is much more difficult. Exporters and operators cannot rely Local custom and practice can make Supporting on infrastructure, such as efficient things very difficult for the outsider inter faces between ship, port, as there is often a decided advantage UNICEF at warehouse and land transport. The to the local residents or interests happy xmas! limitations contrast with the with whom the owner may be in Christmas increasing sophistication of trading dispute. The UK Club is making a donation to the arrangements in Asia, the Americas international childrens’ charity UNICEF and Europe, such as multimodalism Factors like these make posting long- rather than sending Club Christmas cards and through bills of lading etc. An term advice about operations and to members, brokers and other friends. innovative approach may be required providing guidance on local organisations, This support goes towards helping to complete the job on time or to agencies and professionals in West children in areas hit by natural disasters budget. However, doing this without Africa extremely difficult. and other catastrophes. Bulletins on detailed knowledge of established The UK Club, however, has their work can be obtained on their local procedures is to tempt fate. dedicated and experienced executives website www.supportunicef.org. who have built up specialist knowledge Staff and managers of the UK Club • Security of the area over many years. As part of and Thomas Miller wish our members The sources and subjects of threats Area Group L3, they deal with a wide and friends in the P&I world a happy vary according to the country and range of local expertise in claims cases, Christmas and a prosperous New Year.

UK Club News Published by: For and on behalf of the Managers of: Editor: Nick Whitear Thomas Miller & Co Ltd Tel: +44 171 204 2334 International House Fax: +44 171 621 9761 26 Creechurch Lane e-mail: nick.whitear@thomas miller.com London EC3A 5BA The United Kingdom Tel: +44 171 283 4646 Mutual Steam Ship Fax: +44 171 283 5614 Assurance Association http://www.ukpandi.com (Bermuda) Limited