FLOATELS HIRE AGREEMENTS
Floatel Insurance The Issues and the Solutions
BACKGROUND
Insurance companies like to know the history of a product or industry over a long period of time to be able to accurately calculate the risk and reward of that sector. If they have decades of financial data to assess and feel they understand the potential claims exposure of a business then their underwriters will be more relaxed on policy terms, competition will be strong between insurers and in turn premiums will be driven down.
Marine insurance dates back to the Edward Lloyd’s Coffee House back in 1688 and therefore in general ship and cargo fields insurers are very experienced indeed and as such placing cover in these areas is really a well trodden path with key insurers still predominantly being within the Lloyd’s arena.
EMERGING MARKETS
New exposures present certain difficulties but also opportunities for emerging markets and brokers who can gain the trade specific knowledge they need to understand new risks and therefore deliver products that suit those companies operating in these sectors.
The number of insurers actively looking to write business in the renewable sector is fairly limited but is growing as their knowledge is increased into the risk and reward of this exciting opportunity for growth.
Initial problems with floatels were as basic as whether the insurers would class a floatel as a vessel and therefore place cover under a standard Hull & Machinery policy, the problem being that a floatel didn’t match their generic description of an engine powered, self moveable seafaring mode of transport. Other options were then considered about potentially classing the floatel as a piece of Plant but then issues arose surrounding the relocation of the floatel as this didn’t fit with the standard Plant machinery movement covers.
These initial problems seem to have been pretty much resolved and there are now a number of insurers comfortable with the concept.
ONGOING ISSUES
However ongoing issues now surround the management of such facilities – it has become apparent that many operators have not really changed their working practice and training procedures to fit the risks presented in running a floating hotel. It is one thing to be in charge of a fishing vessel or supply vessel and a well experienced master would know these risks inside out, however if the same master was classed as being fit to manage a floatel whereby he would be overseeing such facilities as catering or leisure facilities, insurers would justifiably question his experience. The challenge for operators is to be able to demonstrate to insurers that crew have sufficient experience and expertise in both the off- shore sector and also in the operating and management of safely looking after guests onboard in every area provided.
Other issues faced centre around the fact that other than the management crew who will be pretty much permanently based on the floatel the guests will be high in number and constantly changing and the operator of the floatel needs to ensure that a suitable Protection and Indemnity policy is in place which encompasses all onboard even those classed as temporary guests. If they are not covering these exposures it needs to be clearly documented who is.
A further issue surrounds the relocation of the floatel; again it needs to be clear who is responsible for this and who is picking up any collision liability that may arise.
Finally attention must be made to the terms of any charterparty (hire agreement) in respect of the vessel, in terms of the respective liabilities of the parties for such matters as insurance provision, third party liabilities and indemnities. There are many forms of such charter agreement in circulation, some more favourable to one party than the other. As a developing industry many of the agreements being used have been adapted from other marine sectors, and are not always fit for purpose. Not only must the parties be comfortable with the provisions of such agreements, but so must their insurers. Advice should be taken if there is any doubt about the terms of such agreements.
RISK ASSESSMENT AND CONSIDERATION
In brief the solution to the above issues is to demonstrate to insurers that you have considered the risks involved in operating a floatel and that you have taken any action necessary to limit such risks, also work with insurers and brokers that have spent time to understand the risks involved, that can advise on risk management and training issues and that can present your business to the key insurers in an educated format, this will ensure correct cover is available and will ensure competitive premiums in a fairly restrictive market place.
DIRECT CONTACT AND ACCESS
Also look into the chain of people involved in placing your business it can sometimes be the case that a number of brokers and sub-brokers are involved in reaching the final issuing insurer – each of these placing brokers will be earning something from the deal so try to look for those brokers that have direct access into markets importantly having direct access into Lloyd’s markets and into Protection and Indemnity Clubs.
AndrewWakefield Henderson Insurance Brokers Ltd
www.hibl.co.uk
Andrew Oliver Andrew Jackson Solicitors
www.andrewjackson.co.uk
e
www.windenergynetwork.co.uk 29
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