ESTABLISHIGN A NEW PROTECTION AND
\nINDEMNITY (P&I) INSURANCE INSTITUTION
\nIN TURKEY<\/p>\n
ABSTRACT
\nTitle of Dissertation: Establishing a New Protection and Indemnity (P&I)
\nInsurance Institution in Turkey
\nDegree: MSC
\nInsurance draws attention as a sector that is understood much better in terms of
\nits importance especially in recent years globally and in Turkey as well and this
\nsector is developing each day. In direct proportion to the development of
\ninsurance, the importance of marine insurance forming a special part of
\ninsurance has also come to the surface.
\nMarine insurance, as a field has unique characteristics that can dominant from
\ngeneral insurance principles from certain angles, and stands before us as a
\ndynamic field necessary to be reviewed and handled over and over again with
\nthe developments in the world.
\nIn Turkey, there have been various studies related to some of the fields of
\nmarine insurance. In this dissertation, components of Protection and
\nIndemnity Insurance will be dealt with comprehensively. Furthermore,
\nproblems and solution methods associated with club insurance practices are
\naddressed.
\nKEYWORDS: Protection and Indemnity, P&I insurance, National P&I Clubs,
\nIGPANDI, Liability, Third Party
\n(According to the English Law protection and indemnity insurance is called club insurance. This writer prefers to use
\nit as Club insurance in the first two chapters and will continue with P&I insurance.)
\niv
\nTABLE OF CONTENTS
\nDECLARATION …………………………………………………………………………………………………………… i
\nACKNOWLEDGEMENTS ……………………………………………………………………………………………… ii
\nABSTRACT……………………………………………………………………………………………………………….. iii
\nTABLE OF CONTENTS………………………………………………………………………………………………….iv
\nLIST OF TABLES………………………………………………………………………………………………………..viii
\nLIST OF FIGURES………………………………………………………………………………………………………viii
\nLIST OF ABBREVIATIONS……………………………………………………………………………………………..ix
\nINTRODUCTION………………………………………………………………………………………………………… 1
\nCHAPTER 1……………………………………………………………………………………………………………….. 5
\n1 Historical Development of Marine Insurance and Marine Insurance General Overwiev .. 5
\n1.1 Historical Development of Marine Insurance ………………………………………………………. 5
\n1.1.1 Marine Insurance in Europe………………………………………………………………………… 5
\n1.1.2 Marine Insurance in England ………………………………………………………………………. 7
\n1.1.3 Marine Insurance in Turkey ………………………………………………………………………… 9
\n1.2 Marine Insurance General Overview ………………………………………………………………… 10
\n1.2.1 Definition………………………………………………………………………………………………… 10
\n1.2.2 Sources of Turkish Marine Insurance Law …………………………………………………… 10
\n1.2.3 Types of Marine Insurance………………………………………………………………………… 13
\nCHAPTER 2……………………………………………………………………………………………………………… 15
\n2 P&I Insurance ……………………………………………………………………………………………………. 15
\n2.1 General…………………………………………………………………………………………………………. 15
\n2.1.1 Definition……………………………………………………………………………………………….. 15
\n2.1.2 Historical Development……………………………………………………………………………. 16
\n2.2 Legal Quality of P&I Insurance ………………………………………………………………………… 18
\n2.2.1 Mutual Insurance ……………………………………………………………………………………. 18
\n2.2.2 Financial Liability Insurance ……………………………………………………………………… 19
\n2.2.4 Passive Insurance ……………………………………………………………………………………. 20
\n2.2.5 Voluntary Insurance ………………………………………………………………………………… 20
\nv
\n2.3 Structure of the P&I Club …………………………………………………………………………… 20
\n2.3.1 The P&I Insurer……………………………………………………………………………………….. 20
\n2.3.2 Members……………………………………………………………………………………………….. 24
\n2.4 P&I Insurance Coverage ………………………………………………………………………………….. 26
\n2.4.1 General………………………………………………………………………………………………….. 26
\n2.4.2 Guarantee Period ……………………………………………………………………………………. 26
\n2.4.3 Risks within the Coverage ………………………………………………………………………… 27
\n2.4.4 Risks Excluded From Coverage………………………………………………………………….. 39
\n2.5 Reinsurance…………………………………………………………………………………………………… 40
\n2.6 Debts of the Parties in Club Insurance………………………………………………………………. 42
\n2.6.1 Debts of the Member………………………………………………………………………………. 42
\n2.6.2 Liabilities of the Club……………………………………………………………………………….. 45
\n2.7 Fixed Premium Insurers ………………………………………………………………………………….. 46
\nCHAPTER 3……………………………………………………………………………………………………………… 48
\n3 National P&I Institution…………………………………………………………………………………………. 48
\n3.1 Introduction ………………………………………………………………………………………………….. 48
\n3.2 Proficiency of Countries for serving Cargo and Hull & Machinery insurance………….. 50
\n3.2.1 Historical engagement ……………………………………………………………………………… 50
\n3.2.2 Technical Engagement ……………………………………………………………………………… 50
\n3.3 Reaching National Statistics…………………………………………………………………………….. 51
\n3.3.1 Preparing Initial Plans for Setting Up ………………………………………………………….. 51
\n3.3.2 Mother Tongue Advantages………………………………………………………………………. 52
\n3.4 Coverage ………………………………………………………………………………………………………. 52
\n3.4.1 Relations in IGPANDI and the World Market……………………………………………….. 52
\n3.4.2 Fixed Premium versus Mutual …………………………………………………………………… 53
\n3.5 Reinsurance…………………………………………………………………………………………………… 55
\n3.6 Tax Exception ………………………………………………………………………………………………… 57
\n3.7 Insurance Sanctions ……………………………………………………………………………………….. 57
\nCHAPTER 4……………………………………………………………………………………………………………… 60
\n4 Examples of National P&I Institutions……………………………………………………………………… 60
\n4.1 Introduction ………………………………………………………………………………………………….. 60
\nvi
\n4.2 China P&I Club……………………………………………………………………………………………….. 60
\n4.2.1 Overall Status………………………………………………………………………………………….. 60
\n4.2.2 Coverage and Relations…………………………………………………………………………….. 61
\n4.2.3 Correspondent Network …………………………………………………………………………… 62
\n4.2.4 Claims Handling……………………………………………………………………………………….. 63
\n4.2.5 Advantages of Being a Local Institution……………………………………………………… 64
\n4.2.6 Management Team………………………………………………………………………………….. 64
\n4.2.7 Current Situation of CPI…………………………………………………………………………….. 65
\n4.3 Korea P&I Club ………………………………………………………………………………………………. 66
\n4.3.1 Overall Status………………………………………………………………………………………….. 66
\n4.3.2 Coverage and Relations…………………………………………………………………………….. 66
\n4.3.3 Correspondent Network …………………………………………………………………………… 67
\n4.3.4 Claims Handling……………………………………………………………………………………….. 68
\n4.3.5 Advantages of Being a Local Institution………………………………………………………. 69
\n4.3.6 Management Team………………………………………………………………………………….. 69
\n4.3.7 Current Situation of Korea P&I…………………………………………………………………… 69
\n4.4 Japan P&I Club……………………………………………………………………………………………….. 70
\nCHAPTER 5……………………………………………………………………………………………………………… 72
\n5 Club Insurance Applications in Turkey …………………………………………………………………….. 72
\n5.1 General…………………………………………………………………………………………………………. 72
\n5.2 Turkish Merchant Marine Fleet ……………………………………………………………………….. 74
\n5.2.1 The position of Turkish merchant fleet within the world fleet……………………….. 74
\n5.2.2 The position of the Turkish merchant fleet compared to the fleets of the
\nneighbouring countries…………………………………………………………………………………….. 75
\n5.3 Mutual and P&I Club Insurance Regulations in Turkey………………………………………… 77
\n5.4 Problems about Club Insurance in Turkey ………………………………………………………… 79
\n5.5 Inquiry Study …………………………………………………………………………………………………. 79
\n5.6 Case Study …………………………………………………………………………………………………….. 82
\n5.6.1. What is the logic of P&I Clubs? How do they operate? …………………………… 82
\n5.6.2. What advantages does a Turkish P&I Club bring to whom?…………………….. 83
\nvii
\n5.6.3. What are the challenges to face in establishing and operating a Turkish P&I
\nClub? 84
\n5.6.4. What to do, and what not to do?…………………………………………………………. 86
\nCONCLUSION………………………………………………………………………………………………………….. 88
\nReferences……………………………………………………………………………………………………………… 94
\nviii
\nLIST OF TABLES
\nTable 1 Turkish Ships under the National Flag and Foreign Flags\u2026\u2026\u2026..75
\nTable 2 Turkish Merchant Fleet and the Neighboring Countries\u2026\u2026\u2026.\u202676
\nLIST OF FIGURES
\nFigure 1 Reinsurance Chart of International Group\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026..41
\nix
\nLIST OF ABBREVIATIONS
\nB.C. Before Christ
\nCLC International Convention on Civil Liability for Oil Pollution
\nDamage
\nCPI China Protection and Indemnity Club
\nD.W.T Dead Weight Tonnage
\nEU European Union
\nF.D&D Freight, Demurrage and Defense
\nGRT Gross Tonnage
\nHM Hull and Machinery Insurance
\nIDO Istanbul Sea Buses
\nIG International Group Clubs
\nIGPANDI International Group of Protection and Indemnity Clubs
\nILU The Institute of London Underwriters
\nIOPC International Oil Pollution Compensation Convention Funds
\nIUA The International Underwriting Association of London
\nKorea P&I Korea Protection and Indemnity Club
\nMIA Marine Insurance Act 1906
\nP&I Protection and Indemnity
\nTTK Turkish Commercial Code
\nTUGS Turkish International Ship Registry
\nx
\nUK The United Kingdom of Britain
\nUSA United States of America
\n1
\nINTRODUCTION
\nSince the ancient times of history, both commercial carriage and passenger
\ncarriage have been realized mainly over seas. In other words, maritime
\ntransportation of people and goods, has historically fulfilled the communication
\nfunction. Due to this characteristic, it is considered as being one of the fields that
\nhas significantly contributed to the development of world civilization. Similarly,
\nthe emergence of the insurance concept has also evolved in connection with
\nmaritime adventures. For that reason, the first insurance policy known from
\nhistory was a marine insurance policy.
\nIn the early part of the twentieth century, as the cargo carriage increased widely
\ntogether with the development of ship building techniques and development of
\nindustrialization and mass production, the importance of marine insurance, which
\nhad been already practiced since the prehistoric period increased in direct proportion.
\nWithin the same period, petroleum started to be used as an energy source, which also
\nbrought environmental damages around the middle of the century and added a new
\ndimension to marine liability insurances.
\nA marine adventure of a ship is a fact that is able to pose many risks. This may
\nbe the reason why it is called a \u2018marine adventure\u2019 in English and ‘deniz serg\u00fcze\u015fti’
\nin Turkish, due to its highly risky structure.
\nIt really depends on the existence of the insurance that maritime voyages,
\nwhich carry the characteristic of a full adventure, do not become adventures full of
\nfears for the ship owners. While risks of marine adventure can destroy the ship owner
\ncommercially if the ship, which is a big asset on its own, is lost, damages to the
\ncargoes on the ship and the losses likely to emerge from the liabilities against third
\nparties can bring out bigger effects for the parties that are responsible for the
\ndamages than the ship. On the one hand, that is what the financial dimension is and it
\nis another dimension to take into account that shipping can cause damages to all
\nstakeholders. There is no doubt that all living creatures will be affected from the
\n2
\nconsequences of the damages caused by ships likely to result especially from
\nenvironmental disasters. As a result of all these, it can be concluded that the damages
\ncaused by ship accidents are important in terms of states, people and even all living
\ncreatures.
\nThe above-mentioned features of the marine adventure make marine insurance
\nsimply obligatory for the parties whose interests are under risk. In addition, marine
\ninsurance is obligatory in terms of the contract parties in some international
\nagreements and state regulations. Especially, it is seen that Protection and Indemnity
\n(P&I) insurance is obligatory in various fields as it is liability insurance.
\nIn Turkey, there is such an obligatory insurance application in obtaining the
\nCLC-92 certificate regarding the 1992 Convention about the International
\nConvention on Civil Liability for Oil Pollution Damage. Again, there are similar
\nregulations for having an obligatory insurance application; however, case and
\ncontents of codes are different from the oil pollution responsibilities, in the relevant
\nlegislations for ships imported from abroad and the Turkish Environmental Act.
\nIt is seen that the maritime sector in Turkey is in a development process in
\nrecent years. In previous years, some tax exemptions facilitating the transfer of ships
\nto flying Turkish flag and clearing the way for construction of many ships by
\nsupporting the ship construction sector caused the Turkish merchant marine fleet to
\ndevelop and grow in tonnage. However, it cannot be said that these developments
\nhave significant reflections on the field of marine insurance in Turkey.
\nAlthough there are some studies to ensure knowledge about Turkish marine
\ninsurance, it can never be said that a limited number of previous studies is enough for
\na sea country like Turkey. Especially, the lack of a study that examines the
\ninsurance by putting primary marine insurance together and comparing it with each
\nother is really important.
\n3
\nIn this dissertation, P&I insurance, which forms an important part of marine
\ninsurance, will be addressed comprehensively and there will be information regarding
\nP&I insurance applications in Turkey. The Turkish Commercial Code will be
\nfrequently referred to as it has the characteristic of being the exclusive regulation in
\nTurkey in terms of marine insurance. On the other hand, English law, the dominant
\napplication will be reviewed. While reviewing English law, the Marine Insurance Act
\nwill be the centre of attention, but club rules or P&I institution rules as well as institute
\nclauses and club insurance determining the contract rules in cargo and hull insurances
\nwill also be analyzed. Expectations of the maritime sector actors related to the problems
\nand recommendations will be explained while giving information about P&I insurance
\napplications. The dissertation will be formed by five chapters.
\nIn the first chapter, there will be information related to the historical
\ndevelopment of marine insurance and the Marine Insurance Act 1906. Under the
\ntopic (sample nursing essay examples by the best nursing assignment writing service) of Marine Insurance Act, a general overview, sources, factors, types of
\nmarine insurance and characteristics of marine insurance contracts will be
\nexplained.
\nThe second chapter will be the chapter where P&I insurance will be analyzed.
\nAfter the historical background and legal features of club insurances are reviewed,
\nparties in the club insurance, club structure, scope of guarantee coverage,
\nInternational Group (IG) and debts of the parties towards each other will be
\naddressed.
\nThe third chapter is about advocating the establishment of a national P&I
\ninstitution. This chapter puts forward the following premise in support of the
\nestablishment of a national P&I institution; P&I insurance is one of the most
\nimportant services to national shipping, and therefore, such services should be
\nprovided within the nation. It will establish data records about marine incidents, and
\ncollect information from investigations, which is helpful for making risk analyzes.
\nOn the other hand, most of the countries have enough capability to service hull and
\n4
\nmachinery insurance. If both insurances were supported or served from the same
\nsources, claims would be handled proficiently and assessments of compensations
\ncould be performed very quickly.
\nThe fourth chapter will analyze the benefits and criticisms of the national P&I
\napplications. Being a participant of a club membership is creating some extra cost for
\nthe shipowners, such as having to share some huge risks coming from the other
\nmemberships\u2019 property. Not only small risks have to be taken, but also the
\nresponsibility for all the other members\u2019 risks because of being part of a mutual
\ninsurance system. In a national P&I model, if reinsurance arrangements are made on
\na package basis of one national fleet, rate levels will be quite competitive. A national
\ninsurer will find greater ease in obtaining a better spread of risks and more
\nreasonable terms and conditions of insurance, particularly in respect of premium and
\nterms of payments. On the minus side, for an ideal spread of risks a stable
\nmanagement, the size and number of vessels are among the most important factors.
\nNational portfolios are not large or diverse enough to provide a proper spread to
\nenable P&I to operate effectively. Eventually, the cost of localised P&I cover may go
\nup. There are some necessities for managing all claims, like access to an international
\nnetwork of correspondents and lawyers. There is a good example for understanding
\nhow they arrange to find success in Korea and other countries. The Korean P&I
\ninstitution is one unique example of how it is possible to manage a national P&I
\ninsurance.
\nIn the last chapter, club insurance applications in Turkey will be reviewed.
\nHow club insurance is regulated in the country, where it is obligatory, problems
\nrelated to the insurance and how the sector sees the insurance will be discussed.
\nIn the conclusion section, besides the general assessments related to the
\ndissertation, there will be solution suggestions and measures regarding the problems
\nidentified in the dissertation.
\n5
\nCHAPTER 1
\n1 Historical Development of Marine Insurance and Marine Insurance General
\nOverwiev
\n1.1 Historical Development of Marine Insurance
\n1.1.1 Marine Insurance in Europe
\nWhen considering the historical development of insurance, the earliest
\napplications similar to insurance in the world are seen to have come up in Babel in
\nB.C. 2000. This primitive insurance in which capital owners undertook a risk of
\ntheir caravans getting robbed for a certain fee were legislated later by the king of
\nthat era, Hammurabi. With the help of the act, it was made obligatory to share the
\nlosses of the caravans which encountered attacks, between all caravan owners. This
\nis accepted to be a first in land based insurance.1
\nWhen considering the beginning of marine insurance, it is seen that2
\nthe Rhodes
\nRules3
\nare accepted to be the foundation of modern general average4
\nas applied in
\nRoman Law in the ninth century before Christ. Again, it is known that Phoenician
\nMaritime Law regulating general average and marine insurance in general emerged
\nin the seventh century before Christ. There is information that maritime loans had
\nbegun to be applied in Roman Law in the third century before Christ.5 A maritime
\nloan contract was a contract where the payment of the debt and the interest
\ndetermining the loan amount of the borrower, called bottomry, depended on the
\ncondition that the ship arrived safely to the port of destination.
\nThe first applications similar to today’s insurance were marine insurance. The<\/p>\n
1
\nSoyer, B.,( 2001), Warranties In Marine Insurance, London: Cavendish Publish Ltd., p. 8, 9
\n2
\nZimmermann R.,( 1990), The Law of Obligations, Roman Foundations of the Civilian Tradition, , Oxford Pub., p.11
\n3
\nLex Rhodia de iactu
\n4
\nDamage to the ship or load in maritime trade
\n5
\nKoschaker, P., (1977), Introducti\u0131on to Roman Private Law, Ankara University Publications, p. 30
\n6
\nreason for this is seen to emerge from its natural characteristic, as the maritime trade
\ncarries a high risk. A marine insurance contract aiming to cover possible damages in
\nreturn for a certain premium is encountered in the beginning of 13th century in Italy.6
\nAt the beginning, insurance contracts were certified through notaries. However,
\nthis method was normally not suitable for the commercial life and gave place to the
\nmethod of issuing a policy.
\nThe word policy was used for the first time during that era as ”polizza” in
\nItalian meaning promising, entering into obligation.7
\nIn parallel with this information,
\nresearchers show that the first known insurance policy was issued for a ship named
\n”Santa Carla” sailing from Genoa, Italy to Mallorca on October 23, 1347.8
\nIn 1370,
\nreinsurance of a marine insurance policy was issued for the first time for a ship going
\nfrom Genoa to Brugges.9 However, issuing and delivering of the marine insurance
\npolicies commonly started as of the 15th century. In this sense, the first insurance
\ncompany was founded in Genoa in 1424. Marine insurance spread to Spain, France,
\nPortugal, the Netherlands, England and North Germany after that era.
\nApart from these, various legislations were enacted, which set down determined
\nrules regarding marine insurance in Europe in the 14th and 15th centuries. These can
\nbe listed as ;
\nBarcelona Charter (1434-5), Philippe De Bourgogne Charter (1458),
\nGenoa Charter (1498), Florence Charter (1522), Burgos Charter (1537), Seville
\nCharter (1553), Bilbao Charter (1560), Amsterdam Charter (1598), Flandres Charter
\n(1537).10
\nWithin the same periods, malicious behaviors of the insured led the insurers to
\ncome together and form associations. In this regard, the first insurance association<\/p>\n
6
\nSoyer. Supra. P.9
\n7
\nSoyer. Supra. p.9
\n8
\nBennet, H.,( 2006),The Law of Marine Insurance, second edition, Oxford University Press, p. 1.02
\n9
\nSoyer, B., Supra. P.9
\n10 Ibid. p. 9
\n7
\nfulfilling functions such as determining the conditions and premiums of the insurance
\npolicies, rescuing ships which had grounded or in danger was founded in Florence in
\n1552.11
\nMarine Insurance had been conducted by private individuals until the 17th
\ncentury and as these private individuals from time to time, had difficulty in paying
\nthe claims liabilities from time to time, insurance companies began to be founded
\nand spread as of the 17th century. In this context, lots of insurance companies have
\nbeen founded through charters of the kings in many countries in Europe and these
\ninsurance companies were granted the privilege to enter into a contract.12
\n1.1.2 Marine Insurance in England
\nInsurance was brought to England by Lombardian (Italy) merchants banished by
\nthe German King Freidrich II in the 14th century and then settled in London. It can be
\nsaid that the first insurance applications in England were carried out by Italians.13
\nThe Lombards possessed the marine insurance market during the period they resided
\nin London. At the beginning of the 16th century, when they left London, it can be
\nsaid that marine insurance applications had already become established in London.
\n14
\nAfter the Lombards, the foundations of Lloyd’s market, one of the most
\nimportant exchange markets of the world\u2019s insurance sector, were laid in the 17th
\ncentury by a person named Edward Lloyd through his coffeehouse located in Tower
\nStreet in London gaining reputation in terms of marine insurance.
\nThis coffeehouse was known as a place where ship owners, seafarers and
\nmerchants engaged in overseas trade came together. Customers used to come to this
\ncoffeehouse to execute their work related to insurance. This coffeehouse, where
\ninsurance conditions and tenders were passing around, was the most suitable place in<\/p>\n
11 Ibid p. 10
\n12 Ibid. p. 11
\n13 Ibid. P.12
\n14 Tetley, W., (2002), International Maritime and Admiralty Law, Canada: Covanswille,
\n8
\nLondon to underwrite an insurance for any kind of marine risk.
\n15
\nIn 1691, Edward Lloyd transferred his coffeehouse to Lombarel Street and
\nthus extended his business. He was reaching lots of information through his
\nconnections in different ports and sharing this information with the relevant persons
\ncoming to the coffeehouse. He began to publish ‘Lloyd’s News’ three times a week in
\n1692 in order to announce this useful information to a broader audience. This
\nnewspaper was later forbidden due to its political content. However, the tradition of
\nsharing information via newspaper continued with the newspaper named ‘Lloyd’s List
\nand Steamship Newspaper’ after Lloyd’s death.
\n16
\nAlthough, two insurance companies were granted the privilege to enter into an
\ninsurance contract through the charter of the King of England in 1720, this case did
\nnot affect the Lloyd’s market significantly. Insurers and brokers conducting insurance
\nactivities at Lloyd\u2019s coffeehouse established a community named Lloyd’s after the
\ndeath of Edward Lloyd (1769). After five years, this community was transferred to the
\nRoyal Exchange and in 1871 it became an association by an act legislated by English
\nParliament. In 1779, the first standard marine insurance policy, the \u201cShip & Goods
\nForm\u201d was issued. This policy was in use until the Lloyds Marine Policy Form took its
\nplace in 1982.
\n17
\nAn insurance association known as the ‘Institute of London Underwriters\u2019 was
\nfounded by marine insurance companies in 1884. The primary role of the association
\nwas to prepare insurance conditions applied by marine insurers. Another association
\nfounded in England was the ‘Salvage Association’ which was established in 1856.
\n18
\nThe International Underwriting Association of London (IUA) is the world’s largest
\nrepresentative organisation for international and wholesale insurance and reinsurance
\ncompanies. The IUA was formed on 31 December 1998, through the merger of the<\/p>\n
15 ICS, (2012), Marine Insurance, ICS Press, p.3
\n16 Ibid. P.4
\n17 Tetley, Supra.
\n18 ICS. Supra. p.11
\n9
\nInstitute of London Underwriters (ILU) and the London International Insurance and
\nReinsurance Market Association (LIRMA).
\nIn England, in the beginning, certain provisions of Lex Mercatoria originating
\nfrom Roman Law applied by all European merchants related to marine insurance,
\nwere applied. In 1601, the first written law was brought into force in England to
\nregulate marine insurances. Important provisions of Lex Mercatoria were included
\nin English Common Law. In 1906, the Marine Insurance Act was enacted to regulate
\nmarine insurance completely and is still in place today.
\n19
\nLegislation related to Lloyd\u2019s was made through an act in 1911. Today, Lloyd’s
\nis not an insurance company but actually a leading ‘insurance market’ holding insurers
\nand intermediates within its structure.
\n1.1.3 Marine Insurance in Turkey
\nThe first time insurance emerged in Turkey was, much later compared to the
\nwestern Europe due social, economical, regional and political reasons. Especially in
\nthe Ottoman period, they stayed out of insurance for many years and insurance
\nwas only able to develop after the Imperial Edict of Reorganization in 1839.20
\nIn 1870, after the big fire in Beyo\u011flu, three English insurance companies began
\nto work in Turkey. After this development, foreign insurance companies began to
\nestablish their agencies in the country. However, there was not any legislation to
\nregulate the practices of these insurance companies for a long time. The first
\ndomestic insurance company was established in 1925. This company is Anadolu
\nAnonim T\u00fcrk Sigorta \u015eirketi (Anatolian Anonymous Turkish Insurance Company)
\nfounded jointly by T\u00fcrkiye Cumhuriyeti Ziraat Bank and T\u00fcrkiye \u0130\u015f Bank.21 This was
\nfollowed by the establishment of Milli Reas\u00fcrans T.A.\u015e. the first domestic reinsurance
\ncompany in 1929.<\/p>\n
19 Tetley, Supra. p.
\n20 Nomer C.,&Yunak H.,( 2000) Sigortac\u0131l\u0131\u011f\u0131n Genel Prensipleri, \u0130stanbul, p.5
\n21 Helmis J., (1963). Deniz Sigortalar\u0131, \u00dclk\u00fc Bas\u0131mevi, \u0130stanbul, p.6
\n10
\nIn Turkey, surrounded by sea on three sides, although development of
\nmaritime business is adopted as a government policy, unfortunately it has not been
\nable to reach the desired levels. Likewise, the insurance sector is a newly
\ndeveloping sector having an increasing share in financial markets recently. As a
\nresult of these components, it cannot be said that marine insurance is developing
\nas it is in the west. Still, Turkey provides most parts of marine insurance from
\noverseas insurance markets.
\n1.2 Marine Insurance General Overview
\n1.2.1 Definition
\nInsurance contracts are divided into two main areas, land and marine
\ninsurances, depending on the risk. The insurances taken against the marine risks
\nwill be examined in this dissertation. Marine insurance is defined as ”One who has
\na benefit measurable with a price in salvage of the ship or the keep safe of cargo
\nfrom marine risks can have insurance on this benefit ” in article 1339 of the Turkish
\nCommercial Code. The English Marine Insurance Act 1906 (MIA 1906) on the
\nother hand, defined marine insurance as \u201cA contract of marine insurance is a contract
\nwhereby the insurer undertakes to indemnify the assured, in manner and to the extent
\nthereby agreed, against marine losses, that is to say, the losses incident to marine
\nadventure ”in section 1 entitled ‘description of marine insurance”. It is understood
\nfrom the definitions that two main factors are necessary to sign a marine insurance
\ncontract. These factors are benefit and risk factors.22
\n1.2.2 Sources of Turkish Marine Insurance Law
\nThe body of rules being in the forefront in terms of marine insurance law in
\nTurkey is the fourth chapter of V. Book of the Turkish Commercial Code (TTK).
\nThe chapter entitled \u201cInsurances Against Marine Risks” is covered from article 1339 to
\n1459 of the Turkish Commercial Code.<\/p>\n
22 Kender, R., &\u00c7etingil, E., (2003) Deniz Ticaret Hukuku, Ar\u0131kan Yay. \u0130stanbul, p. 129
\n11
\nIn the Insurance Act no. 5684, special provisions related to marine insurance
\nhave not been included. The rules valid for land insurances are also valid for marine
\ninsurance.
\nAnother important source for the marine insurance is general conditions.
\nConditions prepared by the Undersecreteriat of Treasury in order to be utilized in the
\ncontract having the characteristics of ‘general transaction terms’ regulating the
\nsubject of the insurance, insurance coverage, cases out of the coverage and rights and
\nobligations of the parties are named general conditions of the insurance. In the field
\nof marine insurance, there are two general conditions, namely ‘Cargo Transportation
\nInsurance General Conditions’ and ‘Ship Policy General Conditions’, which are still
\nin effect.
\nThe last paragraph of article 1266 of the Commercial Code states; \u201cApart from
\nthe issues written in the first paragraph, insurance policy contains insurance extended
\nconditions confirmed by the Ministry of Economics and Trade and printed in a way to
\nbe read easily; on the other hand a provisional policy contains a reference to aforesaid
\nextended conditions. In case the conditions contained in the confirmation and edition
\nin that paragraph are not fulfilled, the ones that are to the policy owner’s disadvantage
\namong the extended contract conditions, act of law are applied.\u201d
\nAgain in article 1264 of the Turkish Commercial Code, it is stated that the
\nabove mentioned provision cannot be amended as it would be disadvantageous for
\nthe policy owner and in case the provision is amended, acts of law will be applied
\nex officio.
\nThe fact that the insurance contracts should be signed in compliance with the
\ngeneral conditions is expressed more clearly in article 11 of the Insurance Act no. 5684,
\neffectuated on 14 June 2007 and entitled ‘Insurance Contracts’ as ”The main content of
\nthe insurance contracts is regulated in accordance with the general conditions to be
\napplied by insurance companies and approved by the Undersecreteriat. However,
\nspecial conditions can be utilized according to the characteristics of the work in the
\n12
\ninsurance contract. These issues are stated explicitly in a way not to lead to any mistake
\nin the insurance contract and under special conditions title\u201d, and the contracts signed in
\ncontradiction with this provision will be penalized by an administrative fine as stated
\nin clause (f) of article 34 of the same Act entitled ‘Administrative Penalty’, that is ”In
\ncase the regulation of general conditions is violated in contradiction to the first
\nparagraph of article 11, then one thousand Turkish liras…”.
\nIt is understood from this provision of the Act that signing an insurance
\ncontract in contradiction with the general conditions will be penalized with an
\nadministrative fine. However, it is also accepted in the doctrine that regulating the
\ninsurance contract in contradiction to the general conditions has no effect on the
\nvalidity of the contract.23 In other words, contrary to any general condition
\nprovision, it is possible to conclude an agreement and such contract is valid. Yet,
\nthe limits of freedom of contracts in terms of insurance contract are determined by
\nmandatory general provisions or Turkish Commercial Code provisions, which are
\nmandatory in favor of the policy owner.
\n24
\nAs explained above, both cargo insurance contracts and hull insurance
\ncontracts are to be signed in accordance with the relevant general conditions.
\nHowever, it should be stated that the validity of the contract will not be affected by
\nviolating the general conditions. The responsibilities of the insurer issuing a policy
\ncontrary to the general conditions for adapting the Turkish Commercial Code and
\nInsurance Act are covered.
\nIn today’s marine insurance market, as a country marketing insurance to many
\ncountries in the world, marine insurance legislation of the UK has a wider field of
\napplication. It is not different in Turkey that meets the majority of the needs for marine
\ninsurance from England. In this sense, another source for the contract of cargo and hull
\ninsurance application is the clauses prepared by IUA in compliance with the Marine<\/p>\n
23 Kender, R.,( 2008), T\u00fcrkiye\u2019de Hususi Sigorta Hukuku, Ar\u0131kan, p.43
\n24 Ibid. P.43
\n13
\nInsurance Act 1906. These clauses are included in the insurance policy and constitute
\nthe context of the insurance contract.25
\n1.2.3 Types of Marine Insurance
\nInsurance contracts are differentiated according to the criterion of meeting the
\nneeds in the doctrine. In this analysis, insurance contracts are classified as loss
\ninsurance and amount insurance. Loss insurance is mentioned when the risks that
\ninsurance holders encounter are realized and the damage they suffer are covered
\nconcretely. If loss insurance is related with disappearance of the possibility of
\ndecreasing or increasing of the active asset, ‘active loss insurance’ is mentioned and if
\nit is related with emerging or increasing of the liabilities in assets, ‘passive loss
\ninsurance’ is mentioned.26
\nIt is possible to consider marine insurance within the scope of loss insurance.
\nMarine insurance is grouped in various ways in the doctrine. According to an opinion,
\nmarine insurance is divided into three, namely hull insurance, freight insurance and
\nliability insurance.
\n27 In this group, they are divided as follows;
\nHull insurance; Freight and Loss of Hire Insurance, Ship Construction
\nInsurance, Hull insurance and Yacht Insurance,
\nCargo insurance; goods and value insurance,
\nLiability insurance; contractual liability insurance and third party liability
\ninsurance.
\n28
\nIn another classification made in terms of marine insurance, it is possible to
\ndivide marine insurance into two groups, namely property insurance and public
\nliability insurance.<\/p>\n
25 Kender, R., &\u00c7etingil, E., Supra. p.130
\n26 Algant\u00fcrk, D., (2006), Protection and Indemnity Insurance , 2nd edition, Ar\u0131kan, p.85
\n27 Turner, H., The Principles of Marine Insurance, 1986, 7th edition, Stone&Cox Limited, p.65
\n28 ICS, Supra, p.67
\n14
\n1.2.3.1 Property Insurance
\nInsurance is taken out against reduction in assets of the insured as a result of
\ndamage to the insured goods of an insurable interest. The insurable interest owners
\nin these insurances are mostly property owners.
\nInsurance types considered among the property insurance within marine
\ninsurance are:
\n1- Freight Insurance
\n2- Hull and Machinery Insurance
\n3- Profit Insurance
\n4- Cargo Insurance
\n1.2.3.2 Liability Insurance
\nThis insurance type is defined in the MIA as \u2018Any liability to a third party may
\nbe incurred by the owner of, or other person interested in or responsible for,
\ninsurable property, by reason of maritime perils.\u2019. It protects against the possible
\nlosses to both properties and health of the third parties that are damaged because of
\nthe incident caused.29
\nInsurance types to be accepted as public liability insurance in marine
\ninsurance can be listed as:
\n1- Collision Liability Insurance
\n2- Protection and Indemnity Insurance
\n3- Other Liability Insurances.
\nThe subject of this study will be Protection and Indemnity Insurances known as
\nClub Insurance.<\/p>\n
29 Algant\u00fcrk D.,Supra. p. 23
\n15
\nCHAPTER 2
\n2 P&I Insurance
\n2.1 General
\nThis marine liability insurance type, also known as \u201cProtection and Indemnity
\nInsurance\u201d or \u201cClub Insurance\u201d will be referred to as P&I Insurance in the following
\nparts of the study as commonly used in the discipline. P&I insurance was among liability
\ninsurance in the part of Chapter 1 related to marine insurance.
\nLiability insurance is an insurance type that protects against financial losses of
\nthe policy owner due to the damages to both property and health of the third parties
\nthat are damaged because of the incident caused by the insured.30
\nWhen considering marine insurance, the first thing that comes to mind is
\nwarranty, yet P&I insurance was addressed in the previous chapter as it is involved in
\nliability insurance and emerged later than other types of marine insurance. As a key
\nelement for the study, P&I insurance will be discussed in this part.
\n2.1.1 Definition
\nAs there is not any P&I insurance practice in Turkey yet, a definition can not be
\nfound in its legislation. However, it is known that P&I insurance can be concluded as a
\nliability insurance as per Article 1339 of the Turkish Commercial Code, \u201cAny person
\nwho has an interest measurable by money in experiencing maritime risks of the ship
\nor cargo safely may insure this interest.”
\nOn the other hand, there are not any definitions for P&I insurance in the MIA.
\nIndeed, when the wider scope of guarantee is considered, it can be clearly understood
\nhow difficult it is to define P&I insurance.
\nIn doctrine, Algant\u00fcrk (2006) defines P&I insurance as; An exceptional<\/p>\n
30 Algant\u00fcrk, D.,Supra. p.23
\n16
\ninsurance type that member ship owner insures expenses and liabilities against third
\nparties are not involved in hull insurance coverage in accordance with mutual
\ninsurance principles. Further, Acar (2008) defines P&I insurance as, An insurance
\nrelated to liabilities against third parties due to being the owner of the ship or operating
\nthe ship and some expenses necessary to be obliged to make.
\n2.1.2 Historical Development
\nIt is seen that the first P&I clubs emerged in England when protection
\nindemnity clubs are viewed. After all, the most developed country in the world in this
\nfield is England.
\nAfter the ”Bubble Act” dated 1720 known as cartel law in which authority to
\nconduct insurance activities was given to two companies. The insurance sector was not
\nsomehow balanced, ship owners were bound to two companies having authority to
\nconclude insurance. The insurance was expensive for the ship owners to purchase and,
\nfurthermore, not providing sufficient protection. This led ship owners to search for new
\ninitiatives. As a result of these searches, hull clubs were established as a solution. This
\nstructure, not seeking for any profits, was a good alternative for the cartels of this era.
\nThe Cartel Law did not affect the Lloyds sector, in which private persons concluded
\ninsurance.
\nWhen the Bubble Act in question was abolished in 1824, big companies
\nstarted to enter into the insurance sector and the competition with Lloyd\u2019s insurers
\nheated up .
\nEconomic challenges in England in the 19th century led people to emigrate to
\nthe United States and Australia. This emigration, which increased significantly in the
\nlast quarter of the 19th century was particularly realized by lots of people travelling
\nwith poor vessels. Naturally, the number of ships and seafarers increased in that
\nperiod. Within the same period (1846), the Fatal Accidents Act also known as the
\n17
\nLord Campbell Act came into force.31 With this act, compensation rights were
\ngranted for physical damages, including the ones who were destitute for dead.
\nAfter this act came into force when passenger transportation was dense, many
\npassengers and crew experiencing physical damages put the shipowners in a tight
\nspot as they claimed. Another issue challenging ship owners was that all of the
\ncollision damages were not paid by hull insurance coverage.32
\nThe aforementioned necessities formed a basis to put a structure similar to hull
\nclubs, which had emerged before, into practice and the ”Ship owners\u2019 Mutual
\nProtection Society”, the first protection P&I was establish in 1854 as a sequence
\nto the Britannia Club, which was a hull club before.33 This P&I was operating
\nunder the name of \u201cThe Britannia Steamship Insurance Association\u201d.34
\nTowards the end of the 19th century, increasing compensation claims regarding
\ncargo resulted in adding indemnity assurances among the protection P&I assurances
\nat this time. With this development, clubs started to turn to P&I clubs and began to
\nprovide both protection and indemnity assurance for the ship owners. 35
\nAs the Hague Rules were accepted in 1924, P&I took ‘defense coverage’ into
\nthe scope of P&I insurance.36
\nIncreasing liability risks and growing demands led P&I clubs to face capacity
\nproblems. P&I clubs desiring to overcome these capacity problems through
\nreinsurance signed the first pool contract aiming to share indemnity payments over<\/p>\n
31 Dover,V., (1975) A Handbook to Marine Insurance, London: Witherby, p.509
\n32 Hazelwood, J.S., (2010). P&I Clubs Law and Practice, 4
\nth edition, London: Lloyd\u2019s List, p. 7
\n33 Ibid. P.6
\n34 Algant\u00fcrk, D.,Supra. p.7
\n35 Arnould, T.,( 1981). Law of Marine Insurance and Average, 16th ed., London: Stevens&Sons,
\np.128
\n36 Algant\u00fcrk, D.,Supra. p.9
\n18
\na certain amount between six clubs in 1899.37
\nP&I insurance in other countries developed very much later than it did in
\nEngland. There is currently not any P&I club in Turkey. The P&I insurance need in
\nTurkey is met from abroad, especially from England.
\n2.2 Legal Quality of P&I Insurance
\n2.2.1 Mutual Insurance
\nMutual insurance is an insurance type in which the insured come together and
\nsecure themselves against certain risks. According to Article 1263 of the Turkish
\nCommercial Code; \u201cMutual insurance is a contract under which the insurer
\nundertakes to give indemnity against a premium in case of occurrence of a danger
\n(risk) prejudicing a person\u2019s benefit which may be measured by money or to pay
\nmoney or perform other actions due to life period of one or more persons or certain
\nevents occurred in their life”. According to the first paragraph of Article 3 entitled
\n\u201cEstablishment of insurance companies and reinsurance companies” of Insurance Law
\nno. 5684; \u201cInsurance companies and reinsurance companies which are going to operate
\nin Turkey have to be established as a joint stock or a cooperative. Insurance
\ncompanies and reinsurance companies shall not be engaged in other businesses
\nexcept insurance transactions and business which are directly related to insurance
\noperations.”
\nShip owners come together to secure their interest within the scope of club
\ninsurance in P&I insurance. This way, each one of the ship owners composing the
\nClub obtains a member title and deposits a certain amount of ‘premium’ to
\nindemnify potential damages. Premiums collected at the beginning of the policy year
\nare directed to investment. On the other hand, at the end of the policy year, all loss
\ncases are closed with the collected fund. If the money collected in the P&I fund is not<\/p>\n
37 Anderson P., et al., (2010). Marine Insurance: Module Three- P&I Clubs and Mutual Insurance, Lloyds Maritime
\nAcademy, p.19
\n19
\nenough for paying the losses, then the members are asked for additional premium. As
\nthe P&I club does not seek profit, additional premium is only collected for such a
\ncase. Again, according to the case, if the premium is not exhausted despite paying
\nfor all losses, the P&I club can take it as reserves or distribute among the
\nmembers.38
\nThere are also fixed premium insurers providing assurance given within the
\nscope of P&I insurance. However, primarily mutual P&I clubs will be addressed in
\nthe study and fixed premium insurers will be explained briefly.
\n2.2.2 Financial Liability Insurance
\nA member ship owner secures decrease likely to occur in his\/her passive assets
\ndue to the claims given to third parties. For that reason, a P&I insurance is a type of a
\nfinancial liability insurance.
\nIn order for the P&I club to make payment to the member, the member should
\nhave made payment to the damaged first.
\n39 This rule is called the ”pay to be paid
\nrule\u201d. As a result of this rule, the payment liability of the P&I club to the member is
\nequal to the money that has gone out of the pocket of the member.
\n2.2.3 Damage Insurance
\nWhen the risks of the insured are realized and the damage is indemnified
\nconcretely, damage insurance is mentioned. If damage insurance is related to
\ndiminishing of the asset or disappearance of increasing opportunity, ‘active damage
\ninsurance’ is mentioned; if it is related to emerging or increasing of passive assets,
\n‘passive damage insurance’ is mentioned.40
\nIn P&I insurance, P&I secures legal debts to emerge in the assets of the ship
\nowner. This damage to emerge in the assets occurs when a third party is damaged.<\/p>\n
38 Acar, S., (2008), Protection and Indemnity, Vedat Kitap, p.235
\n39 Ibid. p.248
\n40Ibid.338-342
\n20
\nExpenses that the P&I club undertake through this insurance are the amount
\nthe assets of the insured shipowners lose in value due to the damages of the third
\nparty.
\n2.2.4 Passive Insurance
\nFrom the definition above, it is a passive insurance as it secures damages
\nrelated to the emergence of passive assets in P&I insurance, which is a damage
\ninsurance or increasing of passive assets.
\nAs a result, P&I insurance is passive insurance, like all passive insurances, the
\n‘insurance price’ is not determined, because the damage for the third parties is
\nunknown in advance and it is not possible to detect it beforehand. 41
\n2.2.5 Voluntary Insurance
\nIt is determined whether an insurance is voluntary or obligatory according to
\nwhether there is an obligation to conclude that insurance or not.
\n42
\nP&I insurance is an insurance in which the member is not obliged to sign a
\ncontract as per a provision of law. In principle, it is an insurance that the member
\nconcludes to protect his\/her own assets and thus it is a voluntary insurance.
\n43
\nBesides, it can be necessary to have P&I insurance for the ship passing
\nthrough certain regions as per the legislation of that region. However, this case
\ndoes not eliminate the voluntary quality of the P&I insurance.
\n2.3 Structure of the P&I Club
\n2.3.1 The P&I Insurer
\nThe structure where the ship owners come together with the purpose of
\nsecuring the part of maritime risks that is not indemnified with other marine<\/p>\n
41 Hazelwood, J., supra. p.104
\n42 Algant\u00fcrk, D., Supra. p.86
\n43 Ibid. p.86
\n21
\ninsurances and which is based on mutual insurance understanding is called ‘P&I
\nclub’.
\nAs the P&I members are not company shareholders, they do not have rights or
\nroles to make capital commitment or participate in profits. The relationship among the
\nP&I members and the rights and obligations of the members are determined in Articles
\nof Association and the Rule Book. P&I members deposit a certain amount of
\npremium to the P&I club as per the Articles of Association and participates in the
\ndamages that other members encounter.44
\n2.3.1.1 General Assembly
\nThe superior body of a P&I club is the general assembly. All of the P&I
\nmembers are authorized to attend a general assembly meeting and each member has
\na right to vote. A general assembly meets in two ways, as ordinary or an extraordinary
\nassembly as in company law. The general assembly is conducted once a year. For the
\nissues that must be handled immediately, general assembly can be called for an
\nextraordinary meeting.45
\nPowers of a general assembly include:
\nboard of directors,
\ninspectors,
\nclub or merging it with another P&I club,
\nthe articles of association,<\/p>\n
44 Hazelwood, J., Supra. p.64
\n45 Acar, S., 2008, Supra. p.48
\n22
\nwages the members of the board of directors.
\n46
\n2.3.1.2 Board of Directors
\nThe Board of Directors is responsible for conducting the ordinary operations of
\nthe P&I club and developing them in every respect. The Board of Directors is
\nauthorized to incur every kind of expense when conducting the operations in
\nquestion.47
\nThe number of members of the board directors cannot be below 10 and over
\n35.48
\nA person to be assigned to the board of directors should be younger than 70
\nyears old.49<\/p>\n
Members of the board of directors are elected for three years by the general
\nassembly and have the opportunity to be re-elected. The board of directors meets
\nregularly, yet they can meet for extraordinary sessions if necessary.
\nThe principal tasks of the board of directors are;
\nin to amounts approval to be within lower
\namounts left for the authority of board of directors,
\nmember and the P&I club,
\nount and collection time,
\ning the processes regarding reinsurance,
\nclub,
\nthe administrative affairs within the P&I club,<\/p>\n
46 Hazelwood, J.S.,Supra. P.10
\n47 UK P&I Rules, No:15 A
\n48 UK P&I Rules, No:13
\n49 UK P&I Rules, No:14 A
\n23
\namendments in the P&I rules.50
\n2.3.1.3 Managers
\nDue to the need for professionalism in management of the clubs, managers have
\nbeen assigned to these roles from outside with the service procurement method.
\nManagement needs of the P&I clubs are met by associations. A P&I club can appoint
\na company, an association or administrative staff as P&I manager.
\n51
\nThe primary duty of the managers is to take executive actions in line with the
\npolicies of the board of directors. In this sense, the managers are responsible for:
\nthe board of directors,
\nthe board of directors and
\ninvestments.52
\n2.3.1.4 Correspondents
\nIt is very important for the P&I clubs to be at the side of its members
\nanywhere required. In this sense, P&I clubs perform their activities for a fast and
\nefficient service all around the world through their correspondents. The task of the
\ncorrespondents is a kind of counseling. Correspondents are neither agents nor<\/p>\n
50 Hazelwood, J.S., Supra. P.11
\n51 Ibid. p.21
\n52 Ibid. p.26
\n24
\nrepresentatives of the member or the P&I club.
\n53
\nP&I correspondents make efforts to take necessary actions immediately when a
\ndamage occurs or to shed light on the cause causing the damage.54 Apart from that,
\nanother task of the correspondents is to inform the P&I club about the developments
\nin the country they live.
\nThere are about 1000 correspondents working for P&I clubs all around the
\nworld today.
\n55
\n2.3.2 Members
\nIn the P&I insurance contract, the shipowners secure their liabilities and
\nexpenses against third parties, which are unusual by the hull insurance policy of their
\nships, in return for the premium paid is called member.56 Membership is a concept
\nrelated to mutual P&I clubs and in fixed premium P&I insurances the insured and
\ninsurer are mentioned.
\nAlthough the member is defined to be the ship owner here, it is necessary to
\nunderstand the concept of ship owner broadly as insurable interest. The definition of
\ninsurable interest is made in MIA as: Subject to the provisions of this Act, every
\nperson has an insurable interest who is interested in a marine adventure. In particular
\na person is interested in a marine adventure where he stands in any legal or equitable
\nrelation to the adventure or to any insurable property at risk therein, in consequence of
\nwhich he may benefit by the safety or due arrival of insurable property, or may be
\nprejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur
\nliability in respect thereof.<\/p>\n
53 Ibid. p.15
\n54 Ibid. p.16
\n55 Acar, S.,supra. p.54
\n56 Algant\u00fcrk, D.,Supra. p.34
\n25
\nIn other words, it is accepted that ship owners in case of association, ship share
\nholder, charterer, ship operator or manager, mortgage holder are included in the
\nconcept of having an insurable interest shipowner.57
\nJoint owners (association of ship owners);
\nIn case there is more than one consecutive or joint owners of the ship in the
\napplication for membership in the P&I clubs, this is called joint owners or
\nassociation of ship owners.
\n58 In this case, P&I membership is issued for names or
\ntitles for more than one person. However, tasks and rights in terms of the P&I clubs
\nare considered to be one. Some of these persons will be explained below briefly.
\nShip shareholder;
\nIn English law, the ship is considered to comprise 64 shares. Ship owners have
\nproperty rights in proportion to their shares in the ship. For that reason, each ship
\nshare holder has the right to insure the ship.59
\nLoss Payee;
\nAccording to Article 14\/I of MIA: Where the subject-matter insured is
\nmortgaged, the mortgagor has an insurable interest in the full value thereof, and the
\nmortgagee has an insurable interest in respect of any sum due or to become due under
\nthe mortgage.\u201d In this sense, a loss payee holder can insure his\/her ship as insurable
\ninterest owner.60
\nCharterer;
\nIn a bareboat\/demise charter, as the management of the ship belongs to the
\ncharterer, the charterer is not much different from the ship owner in terms of<\/p>\n
57 Hazelwood S.J., Supra p. 65
\n58 UK P&I Rules, No:10
\n59 Alganturk, D., supra. P. 36
\n60 Hazelwood, J.S., supra p.74
\n26
\nfinancial liability. In parallel, a charterer is not different from the ship owner in
\nterms of insurable interest and entering the P&I club.
\n61
\n2.4 P&I Insurance Coverage
\n2.4.1 General
\nWhen P&I insurance is mentioned, a comprehensive coverage comes to mind.
\nP&I clubs are divided into classes providing insurance coverage with different
\ncharacteristics. The primary coverages provided by the P&Is are collected under the
\nclasses of:
\n62<\/p>\n
A member is not obliged to participate in all classes. The number of effective
\nclasses determines the premium payable.
\n2.4.2 Guarantee Period
\nP&I insurance cover starts at noon on February 20 under normal
\ncircumstances and ends at noon on February 20 the next year. The reason why the
\ninsurance starts on February 20 is that the ice in the Baltic Sea is thawed on that day
\nand in the past ship owners, began to renew their commands on that date.63
\nTogether with this rule, ships registered in a P&I club can be insured for more<\/p>\n
61 Williams, R.,( 2008) Gard Guidance to the Statutes and Rules , Gard AS, p. 467
\n62 Ibid. p.70-77
\n63 Merkin, R., et al., (2008). \u2018Marine Insurance\u2019 in Southampton on Shipping Law, Informa, p. 341
\n27
\nthan one insurance year. Again, it can also be agreed that the insurance should
\ncontinue for a certain period of time.64
\nNotifications regarding the continuation or the termination of the membership and
\ninsurance conditions of the P&I club should be done before January 20. If there is a
\nnotification related to increasing the premium by the P&I, this should be done before
\nDecember 20, otherwise the policy should be renewed at the rates of the previous
\nyear.65
\n2.4.3 Risks within the Coverage
\n2.4.3.1 Protection and Indemnity Cover
\n2.4.3.1.1 Protection Cover
\na) Liability to indemnify damages or compensation for personal
\ninjury, illness or death of seamen or any other person, and hospital, medical or
\nfuneral expenses incurred in relation to such injury, illness or death.
\nLosses and expenses emerging from injury, illness or death of the crew,
\npassengers or other persons due to the faulty shipping or management of the ship
\nregistered under the P&I club, or negligence in, taking the necessary measures on the
\nship are within the P&I insurance coverage.66 Within the scope of this insurance, the
\npersons mentioned as other persons are any persons related to the ship or cargo other
\nthan the crew. These are dock workers, guides, substitute crew, surveyors, salvors at
\nsea, refugees and stowaways. Liability regarding these people is based on fault in
\ngeneral. Treatment of the injured persons, funeral expenses and carriage charges are
\nwithin the scope of the insurance. Liability of the ship owner against the crew resulting
\nfrom the contract or law is not regulated within this article but within the article below.<\/p>\n
64 UK P&I Rules, No: 16\/B
\n65 UK P&I Rules, No: 17
\n66 UK P&I Rules, No:2\/1,2,3,4, Skuld Rules No:7\/1
\n28
\nb) Liability arising under certain indemnities and contracts due to injury, illness
\nor death of the crew, passengers or other persons.
\nIn addition to the cover above, the kind of losses or expenses arising under law
\nor contract are within the scope of the guarantee.67
\nc) Repatriation expenses of crew of the registered ship,
\nCovering the repatriation expenses of the crew depends on realizing this with a
\nlegal justification. In this sense, when there is no reason for the insurance to be involved,
\nas in the case of a number of crew whose labor contract is terminated is returned to
\nhis\/her country, these expenses should not be covered.68 However, it cannot be said
\nthat all of these cases are excluded from the coverage. For example, repatriation
\nexpenses of a seafarer who has left the ship to go to the funeral of a relative can be
\ncovered.69
\nIn particular, repatriation expenses incurred because of the following reasons
\nare within the scope of P&I insurance coverage:
\nthe repatriation of the seafarer is necessary due to an injury, illness or
\ndeath,
\nthe repatriation of the seafarer is necessary due to the fact that the ship is
\ninvolved in a serious accident.70
\nd) Substitute expenses of the crew of the registered ship,
\nWhen a new seafarer replaces another member of crew leaving the ship in cases
\nof injury, illness and death as mentioned above, these expenses are paid within the<\/p>\n
67 UK P&I Rules. No: 2.14
\n68 Acar, s., Supra. p. 97
\n69 Skuld Rules, No: 7.1.6
\n70 Skuld rules, No:7, UK P&I Rules, No:2\/4
\n29
\nscope of P&I insurance coverage.71
\nParticularly substitute expenses due to the
\nfollowing reasons are within the P&I insurance coverage:
\nseafarer,
\non is necessary for the seafarer repatriated to his\/her country or
\nlanded for a reason arising from the law.72
\ne) Diversion expenses.
\nAs a rule, liability and expenses resulting or arising from deviation are
\nconsidered to be outside of P&I coverage. However, for treatment in cases of injury,
\nillness of ship men, losses or damages resulting from a deviation occurring due to
\nreasons such as presence of stowaways or refugees on the ship and salvage are
\ncovered within the scope of P&I insurance. Again, port charges and other extra
\nexpenses for landing of the persons aforementioned are included in the insurance.
\n73
\nf) Life salvage
\nIf life salvage is realized within a salvage process, this is indeed related to hull
\nand cargo insurances and considered to be a moral duty. Thus, this activity is
\naccepted as not to be entitled to any indemnification. However, charges and
\nexpenses, which are legally necessary to pay to the persons rescuing or trying to
\nrescue the ones on the ship are paid within the scope of P&I insurance. However, if
\nsome of these expenses are covered by hull insurance or cargo insurance, P&I
\ninsurance does not cover these.74<\/p>\n
71 UK P&I Rules, No:2\/4, Skuld Rules, No:7.1.10
\n72 UK P&I Rules, No:2\/4, Skuld Rules, No:7.1.10
\n73 Skuld Rules, No: 11, UK P&I Rules, No:2\/7
\n74 Williams, R., Supra. p. 192
\n30
\ng) Collision with other ships
\nHull insurance secures the liability arising from the collision and excludes a
\ncertain percentage of the liability in general. This proportion is 1\/4 of the liability.
\nHere, this 1\/4 proportion not secured by the hull insurance policy but by P&I
\ninsurance.
\n75 Similarly, P&I will cover any liability which exceeds the amount
\ncovered by the hull insurance.
\nP&I can provide other guarantees regarding the collision in addition to the 1\/4
\ncollision liability in return for extra premium.76
\nCollision losses with 1\/4 assurance by the P&I insurance are as below:
\nother ship (collided),
\nother ship (collided),
\nother
\nship,
\nSue and labour expenses.
\nIf two ships collide with each other, everybody will participate in the damage
\nwith the proportion of their faults. If the damage occurred due to a force majeure
\nwithout anyone’s fault, in this case each one bears his\/her own damage.
\nh) Loss or damage to property (fixed or floating objects)
\nDamages caused to ports, docks or similar fixed or floating objects by the ships
\nregistered under the P&I club striking them and the damages to the cargo due to
\nmuch events are within the scope of the P&I insurance coverage.77
\nAs the definition of a collision is two ships colliding with each other, ships<\/p>\n
75 Ibid. p.219
\n76 Hazelwood, J.S., Supra. P. 127
\n77 UK P&I Rules, No:2\/11
\n31
\ncolliding into fixed or floating objects are not considered collisions.
\ni) Liability arising out of towage of or by an entered ship
\nTowage of the ship can be divided into two routine or not routine. Routine
\ntowages are towing activities with the purpose of entering into a port, leaving the port
\nor making a movement in the port.78 On the contrary, non routine towages express
\nrather open sea towages.
\n79
\nDamages caused to others during the routine towage of the ship to the port and
\nwithin the member’s liability are also included in the P&I insurance coverage.
\nHowever, to benefit from the coverage, it is necessary that this damage should not
\nbe a damage included in the hull policy.
\nj) Removal of wreck (Wreck Liabilities)
\nA wreck occurs when the ship becomes unserviceable and loses its ship feature
\nin one sense. In case the ship registered under the P&I club becomes a wreck, and per
\nthe legislation is required to perform removal of wreck, it is within the P&I cover
\nprovided that the operations are approved by the P&I club and the rights over the
\nwreck are not disclaimed and subjected to conveyance. The value of the wreck is
\ndeducted from the indemnity to be paid by the P&I club. Expenses involved in the
\nwreck removal of coverage are as follows:
\nthe ship,
\nided
\nwith in case of collision,<\/p>\n
78 UK P&I, Rule No:2.13, Skuld Rule No:23
\n79 Standard, Guide to P&I
\n32
\n80
\nk) Quarantine expenses
\nFor ships having epidemical dangers, measures like disinfection of the ship,
\nquarantine of the ship, or not being allowed to enter the port are applied. Among
\nthese measures, the quarantine obligation causes additional expenses for the ship
\nowners. If the ship registered under the P&I does not know that it will be subjected
\nto a quarantine obligation at the destination port when it goes on a voyage,
\nquarantine expenses due to an epidemical disease are covered within the scope of
\nP&I insurance with the following conditions.81
\nlosses of the quarantine and disinfection expenses encountered by the
\nmember are within this coverage,
\nknown or knowable that the ship will be quarantined at a port and yet
\nthe ship goes to that port, the expenses are not indemnified.
\n82
\n2.4.3.1.2 Indemnity Cover
\nRisks involved in the indemnity cover are the liabilities arising due to the
\nincome-generating function of the ship.
\na) Cargo liabilities
\nThe liability of the ship owner due to the deficiency of the cargo or subject of
\nthe transportation and damages or losses are secured by the P&I insurance. Various
\nreasons can cause damage to the cargo.
\n83 In addition, in case some other conditions
\noccur, P&I insurance can be valid in terms of this liability. These conditions are<\/p>\n
80 UK P&I Rules, No:2.15, Skuld Rules No:20, Britannia Rules No: 19
\n81 UK P&I Rules, No:2.16
\n82 Skuld Rules, No:21
\n83 UK P&I Rules, No:2.17
\n33
\nbriefly mentioned below.
\n84 should be issued in accordance with the provisions of the 1924
\nBrussels Convention. However, with the consent of the P&I club, another bill of lading
\ncan be used.
\ne over 2500 USD dollars is declared per piece for the cargo in the
\nbill of lading, the value exceeding this value is not indemnified.
\na cargo, which is likely to be broken is carried.
\nship without the consent of the P&I club, this damage is not covered by the P&I club. If
\nthere is a deviation without the knowledge of the ship owner, the ship owner
\nshould inform the P&I club about this situation immediately.
\ns of lading, damage to the cargo is not within
\nthe scope of the P&I insurance.
\ncargo, which does not comply with the contract of carriage is
\nalso out of the coverage.85
\nb) Liability arising from the damage to the cargo in case of collision (General
\naverage contributions)
\nIf the ship owner is responsible for the damages to the cargo on the other ship
\nas a result of a collision, this responsibility can be claimed from the P&I club.
\n86
\nThe
\nliability here is 1\/4 coverage in parallel with collision liability of the P&I.<\/p>\n
84 Carriage of Cargo Contract
\n85 UK P&I Rules, No:2.17
\n86 UK P&I Rules, No:2\/19, Skuld Rules, No: 17
\n34
\nc) General average contribution or salvage expenses of the cargo (General
\naverage contributions)
\nIf the general average share or salvage expenses of the cargo are not met by the
\nresponsible cargo or another party due to the carriers breach of the contract, these
\nexpenses are indemnified by the P&I insurance. The conditions related to bills of
\nlading mentioned in the indemnity of the damage regarding carrying of the cargo
\nshould also exist here.87
\nd) Ship\u2019s proportion of general average
\nP&I secures the ship’s proportion of general average and salvage under the
\nfollowing conditions:
\n&I insurance provides cover for the part exceeding the part secured by
\nthe hull insurance,
\nThe reason for the coverage being left out of the hull policy should be that
\nthe value calculated for the participation in ship’s proportion of general average or
\nsalvage expenses should exceed the value written in the hull policy.
\ne) Pollution (Guarantee) Risks
\nOil pollution experienced on March 18, 1967 in the Torrey Canyon disaster in
\nthe English and French seas can be seen as the reason for the emergence of
\nenvironment liability law. This big pollution incident showed that the polluted
\nenvironment can reach unrecoverable dimensions.
\nAfter the Torrey Canyon disaster world states sought to constitute an
\nindemnity regime against the damages to the environment. Within this scope, the<\/p>\n
87 UK P&I Rules, No:2
\n35
\n1969 Civil Liability Convention has included ‘strict liability’ and ‘compulsory
\ninsurance’ concepts into maritime law. With this convention entering into force in
\n1975, the owner of the ship causing the pollution was held strictly responsible and was
\nallowed to limit his\/her liability under certain circumstances for the damages arising
\nfrom pollution environment of the oil.88 On the one hand, strict liability of the ship
\nowner was issued, with the same convention, and indemnity of the ship owner was
\nguaranteed within the pollution liability by imposing an obligation to conclude
\ninsurance.
\nThe CLC 1969 Convention was a start in terms of regulations about the
\nenvironmental liability of ships and after that date, various conventions and
\nregulations emerged regarding the same issue. These regulations, also known as IMO
\nConventions, are listed below:
\nInternational Oil Pollution Compensation Funds regarding Establishment of
\na Fund for Compensation of Oil Pollution Damages dated 1971 (IOPC Fund)
\nWith this convention, an international fund was established to cover
\nenvironmental pollution damages. The oil industry was obliged to make
\ncontribution to this fund.
\nInternational Convention for the Prevention of Pollution from Ships
\n(MARPOL 73\/78)
\n1992 Civil Liability Convention Protocol (CLC 92) and 1992 Fund
\nConvention Protocol (Fund 92)
\nCLC 1992 was accepted to correct the deficiencies in the Fund Convention
\ndated 1971.<\/p>\n
88 Anderson, P.., Supra. P. 133
\n36
\nAll of these regulations are important for the P&I insurance, because the
\nliability regarding the damages arising from the pollution is on the ship owner, and
\nshipowner obliged to be insured. Insurance regarding the pollution in question is
\nprovided by the P& clubs.
\nThe scope of the coverage provided by the clubs regarding oil pollution is
\ndefined in the club rules as: ”The liabilities, losses, damages, costs and expenses that
\nthe member will encounter as a result of the discharge or escape from an entered ship of
\noil or any other substance, or the threat of such discharge or escape are within the club
\ninsurance coverage.” 89
\nWhen the club rules are examined in details, it is seen that the scope of the
\ncoverage is as below:
\nes arising from the pollution, which occurred during the
\ndischarge of oil or other harmful substance from an entered ship,
\nminimizing pollution or any resulting loss or damage together with any liability for
\nloss of or damage to property caused by measures so taken,
\nthe member or the club is involved,
\nsult of compliance with any order or
\ndirection given by any government or authority, for the purpose of preventing or
\nreducing pollution or the risk of pollution,
\nargo on the ship or to the property of the member due to
\nthe discharge or escape of oil from the ship, (These damages are within the coverage<\/p>\n
89 UK Club Rule No:2\/12, Britannia Rules No: 19, Skuld Rules No:19
\n37
\nas considered to be for the third parties. So, the pollution is not only considered to
\noccur outside of the ship.)
\nm the other ship
\nbecause of a collision.
\n90
\nf) Fines
\nFines imposed by competent courts or administrative authorities for the
\nmembers are within the scope of club insurance coverage. In order for a fine to be
\nconsidered within the club insurance coverage, the fine should originate from the
\nmember or crew of the entered ship or third parties for whom the member is
\nresponsible in terms of activities and behaviors as per law or contract terms.
\nFines within the scope of club coverage are listed as below:
\n1- Fines related to the notification or recording of the load on the ship,
\n2- Customs fines (fines regarding smuggling),
\n3- Immigrant fines,
\n4- Contamination fines,
\nThe club insurance coverage is valid in terms of fines provided that:
\nThe fine should be declared clearly in the club rules,
\nThe member should make necessary efforts not to incur any fines,
\ned by the crew are within club insurance coverage from the
\nmember by the imposing authority. Fines that are obliged to be paid by the crew not
\nrequiring the liability on the member are not within the scope. 91<\/p>\n
90 Williams, R., Supra p. 233
\n91 UK Club Rules No:2.22, Skuld Rules No: 20, Gard Rule No:49, Shipowners Rules No: 2.19
\n38
\ng) Confiscation costs
\nLosses and expenses following confiscation of the ship by any legally
\nempowered court or authority can be paid within the discretional power of the club.92
\nh) Sue and Labour and Legal costs
\nAfter a risk involved in club insurance coverage occurs, legal costs of the
\nmember are also within the scope of the guarantee. However, the costs should be
\nacceptable and preventive and reduce the total costs of the club.93
\ni) Omnibus Guarantee
\nIt is called omnibus rule when the club makes payment for a claim by using its
\ndiscretional power, although it is not obliged to pay. This is an accommodation
\npayment. The club already has a very comprehensive discretional power in terms of
\nvarious damages. It can be possible to pay a risk, which remains outside of the
\ncoverage.
\n94
\n2.4.3.2 Other Guarantees
\na) Freight, Demurrage, and Defence (F.D.&D.)
\nThis guarantee secures legal interests. When the member encounters a legal
\nproblem, the club steps in and pays the legal costs. Almost every club has rules
\nregarding this guarantee.
\nHowever, there are clubs named ‘defence clubs’ established to exclusively
\nprovide this cover.
\nThe freight and\/or demurrage in themselves are not covered here. F.D.&D.<\/p>\n
92 UK Club Rules No:2.22
\n93 UK Club Rules No:2.25
\n94 UK Club Rules No:2.22, Skuld Rules No: 20
\n39
\nguarantee covers defence costs related to freight and demurrage. Thus, this
\nguarantee covers all legal costs.
\nb) Strike
\nStrike insurance covers the losses arising from the strikes of crew. Retention
\nof the ship by the crew and operational expenditures during this period are secured.
\nClub demands a separate premium for this guarantee.
\nc) War
\nWar insurance left out of the scope of coverage in almost all insurance types are
\nwithin the club insurance guarantee. Clubs have special rules for war risks.
\nFurthermore, there are clubs established only to provide this cover.
\n2.4.4 Risks Excluded From Coverage
\na) Insurable interests within hull insurance coverage are outside of the coverage. In
\nother words, losses or damages that an entered ship or its equipment will encounter are
\nnot within the coverage, if they are covered under the hull policy. However, the club
\nrules can otherwise be stated.
\nb) Liabilities arising from carrying nuclear, explosive substances on the ship
\nregistered in the club are out of coverage.
\nc) Using the ship registered in the club for illegitimate operations are out of the
\nscope of the club coverage.
\nd) In case of double insurance, only one indemnity payment is made. For that
\nreason, in the exclusions title under club rules, double insurance is mentioned.
\ne) Costs regarding the repair or cleaning of the ship are out of the coverage.95<\/p>\n
95 Britannia Rules No:20, UK Club Rules No: 5, Skuld Rules No:30, North of England Rules No: 27, Standard Rules
\nNo:19
\n40
\n2.5 Reinsurance
\nReinsurance provider of the club insurance is an International Group which is
\nan association consisting of the clubs providing club insurance assurance
\n(International Group of P&I Clubs). The International Group has 13 members in total
\nwith eight from England, two from Norway, one from the United States, one from
\nSweden and one from Japan.
\nWith the International Group, the relationship between the clubs are regulated
\nthrough a contract. The International Group has a secretariat established in London.
\nThe basic purpose is to share the risk that each of the clubs poses among the group
\nmembers. Conditions related to this are regulated under the contract named pool
\ncontract. For a club to be a candidate member of a member of the International
\nGroup, it has to be established since five years at least and its financial status should
\nbe stable and creditable in its own country.96
\nThe International Group provides reinsurance for their members within the
\nconditions below:
\nAccording to that
\nRisks between 8 million dollars and 30 million dollars are shared between
\nthemselves in certain proportions as per ‘pool’ contract.
\nThe part between 30 million and 50 million dollars are within the coverage scope
\nwith reinsurance system called as Hydra.
\nInternational Group provides assurance with ‘excess of loss reinsurance’ from
\nLloyd’s sector for the losses between 30 million dollars and 2,050 billion dollars.<\/p>\n
96 Hazelwood, J.S., Supra. P. 368
\n41
\nLosses above 2,050 billion dollars are treated as per a contract attachment of cosharing agreement named overspill agreement. These claims are collected from a
\nfund named the Catastrophic Reserve Fund.97
\nFigure 1: Reinsurance Chart of International Group98
\nThere are three functions that the International Group fulfils.
\nThe primary and the most important one is reinsurance function. With club
\ninsurance, risks above 8 million dollars are within the scope of the coverage. Not
\nonly the clubs involved in the International Group but all clubs can benefit from the
\nreinsurance coverage (time to time including the clubs with fixed premium).
\nThe second function is ‘representation’ function. This function is fulfilled in
\norder to protect the interests of the clubs. Particularly, the International Group
\nrepresents the clubs in international organizations and operates as a pressure group
\nduring preparation of a legislation.<\/p>\n
97 https:\/\/monkessays.com\/write-my-essay\/igpandi.org\/Group+Agreements\/The+Pooling+Agreement, Last Visit: 15.08.2012
\n98 https:\/\/monkessays.com\/write-my-essay\/igpandi.org\/Group+Agreements\/Pool+reinsurance+programme, Last Visit: 15.08.2012
\n42
\nThe third function is to provide information exchange between the clubs.
\nSubcommittees working within the International Group inform the clubs who in
\nturn inform the members. This information exchange can be related to general
\nissues like oil pollution, physical damages and can also be related to instant
\ninformation like maritime security.99
\n2.6 Debts of the Parties in Club Insurance
\n2.6.1 Debts of the Member
\n2.6.1.1 Premium Payment Debt
\nIn club insurance, the basic debt of the member is to pay premium. The price
\ncalled premium or fee can differentiate in terms of fixed premium and mutual clubs. In
\nmutual clubs, premium, as stated before, is the amount arising as a result of sharing the
\nloss claim between the members paid by the club for the previous year. Here the
\nfundamental principle of equality of incomes and expenditures of the club works.
\nPremium is fixed in the clubs with fixed premiums and as will be stated later,
\nadditional contribution, release contribution or extraordinary contribution fees are
\nnot collected from the members as in mutual clubs. As a result of this, a certain
\ninsurance amount is determined for each coverage type in these clubs and indemnity
\npayment is made as limited to this amount.
\nIn mutual clubs, when incomes of the club are discussed, it is referred to
\ncontributions and investment incomes. Indemnities and operational expenditures
\ncompose the expenditures of the club. Premium can be collected with different names
\nat different times. These premiums will be addressed below briefly.
\nAdvance Calls: The premium is paid in cash once the member enters the club.
\nThis premium is determined according to the tonnages of the ship registered under
\nthe club. It is a premium characterized with basic contribution given for both<\/p>\n
99 https:\/\/monkessays.com\/write-my-essay\/igpandi.org\/About, Last Visit : 15.08.2012
\n43
\noperational expenditures and damages.
\nSupplementary Calls: The members can be asked for additional premium for
\nthe expenses of the club after the policy year ends. Particularly, it can lead to
\nadditional premium demand whose amount of damage is realized over the
\nexpectations and claim payments following the judgment decrees.
\nRelease Calls: As per the club rules, the member leaving the club makes
\nrelease payment with the purpose of being exempted from additional premium in
\nthe next policy year.100
\nCatastrophic Premium (Overspill Calls) : During the policy year, in case the
\nmembers demand indemnity claims with very large amounts, clubs demand
\ncatastrophic premium from the members. In order to demand this premium,
\nindemnity claims should exceed the source of catastrophic reserve fund created
\nwithin the International Group.101
\n2.6.1.2 Obligation of Notification
\nThe member should always share the information related to the quality of the
\nrisk as per ‘utmost good faith’ rule having an important place in English law which is
\nalso defined in MIA. In this sense, this obligation can emerge for the member before
\nthe contract, during the contract and after the contract. The first point where this
\nobligation emerged first is the application form constituting a basis for the contract
\nbetween the member and club in club insurance. A Member is responsible for
\ndeclaring the issues determining the risks in membership application form. A Member
\nfulfills notification liability before signing the contract in one sense by filling in this
\napplication form. A Member should also inform the changes declared in the
\napplication form having important influences.
\nIf a member insured the same risk with another club, he\/she should inform the<\/p>\n
100 Skuld Rules No:4\/5, North of England Rules No: 16
\n101 Skuld Rules No:4\/4, North of England Rules No: 13
\n44
\nclub about this double insurance. A Member should also inform the club about the
\naddress change. Otherwise, the notifications made to previous address is considered to
\nbe valid. In addition to these, if any risks involved in the coverage are realized, this
\nshould be reported to the club by the member immediately.
\nIn case the member doesn’t fulfill his\/her obligation of notification on time and
\nproperly, it is possible to encounter consequences like not paying or partly paying the
\nindemnities.102
\nAlthough it is stated above that it is necessary to share the information
\nregarding the quality of risks with the club, due to the widely and flexible application
\nof utmost good faith rule, it is necessary to consider the liability in question as every
\nkind of information to take into consideration in the premium account of the member
\nand entered ship. Regarding this issue MIA brought an arrangement, namely \u201cEvery
\ncircumstance is material which would influence the judgment of a prudent insurer in
\nfixing the premium, or determining whether he will take the risk.\u201d
\nCircumstances not required to be reported unless wanted by the insurer are
\nlisted in the same article of MIA. These circumstances are:
\nThe insurer is presumed to know matters of common notoriety or knowledge, and
\nmatters which an insurer in the ordinary course of his business, as such, ought to
\nknow,<\/p>\n
102 UK Club Rules No: 5\/N
\n45
\nexpress or implied warranty.
\n2.6.1.3 Obligation to Take Protective Measure
\nOne of the duties of the member to the club, is taking necessary measures to
\nprevent incurring of the damage and growing of the damage after it incurred. This
\nissue is defined in Article 78\/4 of MIA as; \u201cIt is the duly of the assured and his agents,
\nin all cases, to take such measures as may be reasonable for the purpose of averting or
\nminimizing a loss.\u201d Due to these measures taken and efforts to diminish the damages,
\nexpenses are secured by sue and labour clause. Measures like surveying the ship and
\nperforming necessary maintenance accurately are among the measures required to be
\ntaken.
\nIn the club rules, it should be stated that the member is obliged to have his\/her
\nship surveyed in a determined period of time by the surveyor assigned by the club.103
\nIt is necessary to fulfill repairment requirements detected during these surveys.104
\n2.6.1.4 Pay To Be Paid Rule
\nThe damage occurred for the third party should be paid by the member besides
\nthe debts and obligations mentioned above so that the club can make payment to the
\nmember.105
\nThis rule named as \u201cPay to be paid\u201d is among the liabilities of the member.
\n2.6.2 Liabilities of the Club
\nAs the member has various liabilities against the club, club has also some
\nliabilities against the member. Primary liability is to provide insurance coverage
\nagainst the liability of the member to pay premium.<\/p>\n
103 North of England Rules No: 30, UK Club Rules No: 5\/Q
\n104 North of England Rules No: 29\/5, UK Club Rules No: 5\/K
\n105 Hazelwood, J.S., Supra. P. 335
\n46
\nWithin the scope of the insurance coverage provided by the club, first of all
\nfulfilling the demands of the member should be mentioned. Within this frame,
\nactivities such as performing necessary determinations, suing necessary law suits and
\ntaking necessary steps are met by the club.
\nAnother liability of the club is indemnity payment. In order for the club to make
\nindemnity payment, a risk within the coverage of the club insurance should be incurred.
\nIn order for the member to have right for indemnity, he\/she should fulfill his\/her
\nliabilities. Another condition for the club to make indemnity payment is to be behaved
\nin accordance with the payment rule first.
\nBesides these liabilities of the club, there is a liability to provide financial
\nguarantee. This liability particularly emerges as to procure club guarantees and
\nbank guarantees rapidly to ensure that the ship with seizure or under seizure danger
\nstarts to move as soon as possible.106 In case of detention of the ship at any port, this
\nliability should be fulfilled immediately.
\n2.7 Fixed Premium Insurers
\nAn important recent development has been the proliferation of fixed premium
\nP & I insurers. The common perception is that such underwriters, although the
\nmutual P & I clubs usually have a good product for large operators, they can provide
\ncoverage and service that is tailored to the requirements of a small owner operating
\nin a less complex environment. In other words, not everyone needs a five star
\nproduct, including unlimited liability, a strong legal support, detailed representation
\nworldwide and practical Helpance claims. Some owners will be very happy with a
\nmore limited coverage and less sophisticated service demands. These owners are
\nalmost invariably small craft operators in a niche market that does not stray far from
\nhome and may not be able to share additional future calls. Fixed premiums insurers
\nbelieve that 10-15% of the total activity is to have a ship of their natural market and<\/p>\n
106 Algant\u00fcrk D.,Supra. p. 116
\n47
\nthe owners should not be entered with a mutual club. As a consequence, several
\nalternatives have emerged, therefore, some of which are now well established.107
\nSome insurers are reinsured fixed premiums to Lloyd. Underwriters favor
\nsmall vessels engaged in local trade and prefer to stay away from transoceanic
\nvoyages. These cover small tankers where the limits of the CLC
\n108 within their
\ncoverage limit and they will issue blue cards (confirmation of P & I cover to CLC
\nauthorities).109
\nThe distinction between protection and indemnity risks today is largely
\ntheoretical but originally covered passive protection to personnel and damage to
\nproperty, while compensation liability under the cargo owners under a contract of
\ncarriage. Today, most owners still get their coverage of liability insurance from P & I
\nclubs although it is possible to achieve with other underwriters, usually for a fixed
\npremium and the limits of generally low coverage than those offered by the clubs.110
\nTwo characteristics that distinguish the P & I clubs from other insurers are that they
\nare controlled and governed by their member shipowners, who provide the members
\nwith a degree of flexibility, and they are run on a nonprofit or mutual, basis making
\nthem economically attractive.111<\/p>\n
107Drewry Briefing Report., 1998, Marine Insurance Issues, Practice and Costs, Drewry Shipping Consultants Ltd.,
\np. 42
\n108 Civil Liability Convention 1992, shipowners have strict liability because of effecting oil spill for
\ncarring perminant spill hidrocarboans or another words; crude oil.
\n109 Drewry Brief Report, Supra, p. 42
\n110 Merkin, R., et al., Supra, P. 337
\n111 Ibid. P. 337
\n48
\nCHAPTER 3
\n3 National P&I Institution
\n3.1 Introduction
\nThe main objective of having a national P&I institution is to ensure that
\ndomestic shipowners\/operators will be able to meet their financial responsibility for
\nany legal liability arising out of any maritime related incidents.
\nA second objective is to ensure that there is adequate marine insurance
\ncoverage, secure legal liabilities and expenses for damage, or compensation of risks
\nas they are not covered under existing local regulations.
\nThis explains the interest of some of the local authorities why they see a need
\nto set up their own P&I institutions. Generally, domestic legal rules are the starting
\npoint of their focal demand; cabotage trade is second in the queue because some
\ninternational conventions have mandatory international insurance covers, which are
\nreally hard to find for shipowners due to insurance providers\u2019 higher risk assessment
\nprocesses. Typically, the age of cabotage vessels is high, and they are sailing in high
\ncollision risk areas like short sea shipping. Further, they have financially low trade
\ncapability; therefore, they have many sub-standard features for risk assessment
\ncriteria\u2019 for the International Group of P&I members. However, local legislations are
\nordering shipowners to have protection and indemnity insurance certificates. In other
\nwords, it is not easy for the cabotage ships and weak operators to find a relevant P&I
\ninsurance from five star clubs. Those ships have some legal liabilities, which come
\nfrom the national legislation but they are totally out of the IGPANDI risk assessment
\nscope.
\nThere are many aspects that would need to be looked at to establish a purely
\ndomestic P&I institution, not least the competition (law) aspect, if such a P&I
\nprovider would have to abide by EU and domestic competition law. Capital
\nrequirements would also need to be closely considered, particularly the future
\n49
\nSolvency II112 requirements if such a domestic insurer has to abide by those rules too.
\nWithout a reputation to speak of, since it would be a start up facility, it would have to
\nobtain the confidence of a sizable percentage of the national fleet as well, if it were to
\ninsure only nationally registered vessels. Since most of the oceangoing nationally
\nregistered vessels are insured through the IG Clubs, and with some non-IG providers,
\nit would be necessary to question whether such owners in adequate numbers would
\nbe prepared to leave the relative comfort of their existing P&I provider (if the word
\n\u201ccomfort\u201d can be used) to join a start up facility that would not only have no
\nexperience in the P&I world, but would be competing against the existing P&I
\nmarket, which can be quite cut throat!113
\nThere are many critical questions before setting up a national P&I institution.
\nThe following key questions have to be well answered before taking financial
\ndecision to set up a national P&I institution. What sort of levels of cover would be
\nprovided? For what risks? At what price? With what level of Club retention and what
\nlevel of reinsurance? Where would that reinsurance be placed? With what level of
\nsecurity\/rating requirements? How would the membership be serviced? Where
\nwould the Club be registered? What would the Club\u2019s policy be on its investments?
\nHow would the premium calls be structured? Would it be a mutual or a fixed
\npremium insurer?
\nIn this dissertation, the author will try to find answers to all the questions
\nespecially in conclusion.<\/p>\n
112 The Solvency II Directive 2009\/138\/EC is an EU Directive that codifies and harmonises the EU insurance
\nregulation. Primarily this concerns the amount of capital that EU insurance companies must hold to reduce the risk
\nof insolvency.
\n113 \u0130nterview with secretary of IGPANDI David BAKER date on 25.06.2012
\n50
\n3.2 Proficiency of Countries for serving Cargo and Hull & Machinery
\ninsurance
\n3.2.1 Historical engagement
\nMost countries have enough capability to service hull and machinery (HM) and
\ncargo insurance. This experience always gives an advantage to them to follow to
\nresolve new challenges. As already mentioned in the first chapter, the mentality of
\nmutuality appeared in the area of H&M Clubs. National H&M insurance providers
\ncould try to join together to share control of claims. This practice will support
\ndevelopment of a mutuality culture in the local market. Countries which plan to set
\nup a national P&I institution could start by this step and they might find success at
\nthe end.
\nHistorically, the concept of mutuality existed in the HM market. This reality
\nshows that it is the right beginning area for national insurers to train themselves for
\nthe next step. Therefore, the next step will be establishing a national P&I Club.
\n3.2.2 Technical Engagement
\nWhen the provider of the HM insurance and P&I cover are coming from the
\nsame origin as the shipowner, there will not be any conflict to resolve in finding a
\nresponsible party for claims, or disputes regarding which insurer should compensate
\na loss. A shipowner might prefer to get the insurance certificates from the same
\nprovider who issued HM and P&I at the same time. In this case, the shipowner\u2019s
\nintention is to try to protect himself from double insurance risk possibilities. The
\nsource of this problem comes from the covering of the same risks with two different
\ninsurance policies; all possible future claims negotiations can be resolved by having
\na different insurance from same provider. This method will be helpful to easily find
\nthe responsible party. All possible claims will be carried out with one provider, and
\nthey will be compensated on behalf of the shipowner; in fact all claims will be
\nhandled with safely compensated.
\n51
\nIn other words, if both insurers are supporting or serving from the same
\nsources, claims are handled with very simple settlements, and assessments of
\ncompensations will need only short time periods. This is an absolute comfort for the
\nshipowner to have the perfect insurance service. Additionally, there might be an
\noperational convenience for the insurer in the claims handling process.
\n3.3 Reaching National Statistics
\nP&I insurance is one of the most important services to national shipping and
\ntherefore such services should be provided within the nation. It will be easy to
\nestablish data records about marine incidents, and collecting information for casualty
\ninvestigation is carried out in a safe manner, and these data are helpful for making
\nrisk analyzes.
\n3.3.1 Preparing Initial Plans for Setting Up
\nPreparing the initial plan is important, and it is easy to reach the national
\nstatistics to create national policies by the recognized authorities who wish to be
\npioneering in order to form an association of owners of small and medium sized
\nships, which are operating on the coast. For example, this P&I institution, which will
\nprovide insurance cover to these ships by collecting a fixed premium, will go for 100
\nper cent reinsurance. The structure of the institution will be worked out after taking
\ninto account taxation and regulatory issues. All the outputs can be found from
\nnational statistics to choose the structure of the P&I, which could be mutual or a
\nfixed premium.
\nThere might be some alternative reasons for choosing the structure of the new
\nP&I facility, like in the case of small and medium sized vessels, claims will be lower
\nas compared to large ocean going vessels. So the recognized participants have
\nproposed to start with coastal ships in the initial plan.
\n52
\n3.3.2 Mother Tongue Advantages
\nNot only to analyze the statistics, but also during the operations,
\ncommunications between insurance provider and member or customer of the insurer
\ndialogs, using the mother tongue has an absolute advantage to find solutions for the
\nall possible situations like analyzing the data or asset to claims.
\nUsing the geographical advantage, a new provider needs to register in its own
\ncountry. In the first decades, it will serve local and regional potentials. Because of
\nthis, tax advantages are secondary unlike for most IGPANDI members.114
\n3.4 Coverage
\nLike the majority of Clubs, national P&I institutions cover their members or
\ncustomers for similar third party liabilities in respect of loss of and damage to cargo,
\ninjury, illness or loss of life of crew or passengers, pollution damage, collision
\nliability, fines, and wreck removals.
\n3.4.1 Relations in IGPANDI and the World Market
\nAs in market conditions, a national P&I institution should have a good
\ncooperation with the international P&I society. Although it may still not be a
\nmember of IG Clubs, the coverage provided by itself is, in principle, identical to that
\nprovided by a IG Club in respect of both scope of cover and possible service limits.
\nIn other words, nothing has to be served different from IG Clubs by national P&I
\ninstitution. It might maintain very close links with some major clubs in the pool
\nthrough a co-insurance arrangement.
\nInitially, national clubs might need some support from one of the IGPANDI
\nmembers. This support is like an umbrella for sharing its market experience and<\/p>\n
114 Some of the IGPANDI members has shifted their head Office to offshore countries instead of their
\nnatural origins, because of benefit from tax advantages.
\n53
\nmanagement knowledge. Finding a helping hand in the setting up period is getting a
\nunique advantage for the establishment of a new national P&I institution.
\n3.4.2 Fixed Premium versus Mutual
\nBoth systems have their own advantages, and they will need to be compared
\nvery clearly before starting the new institution.
\nA mutual insurance company, which is called a club, provides cooperative selfinsurance to its members. The membership is composed of a common interest group
\nwishing to pool their risks as well as for “at cost” insurance coverage. The club as a
\n“non-profit” mutual is therefore owned by the insured. As it has no shares to be
\nissued, it does not need to make profits or give dividends.115
\nMoreover, at fixed premium insurers, they generally tailor their policy and
\ncosts according to each shipowner\u2019s individual situation, and consensual agreed
\npremium for the policy year is fixed and final, so shipowner will never be asked to
\npay any supplementary calls.116
\nIG clubs just expect to provide having high standard ships and operators. It is
\nquite normal for a ship to be inspected with a condition survey, as it has almost
\ncertainly happened before being a new member. If ships do not reach the
\ninternational safety or security standards, then they will not be accepted until \/ unless
\nthe deficiencies are corrected. There may also be a review of the office of the ship’s
\noperator and the management team. Again, if the club is not convinced that the
\nacceptable standard is in operation, it is likely that coverage will be denied.117 Those
\nmentioned ships, which are seen as sub-standard by the IG, will need to carry
\ninsurance certificates on board for continuing their commercial trade. In this case,<\/p>\n
115 Find more: https:\/\/monkessays.com\/write-my-essay\/epandi.com\/ukpandi\/infopool.nsf\/html\/About_Home last visit: 18.07.2012
\n116 Find more: https:\/\/monkessays.com\/write-my-essay\/raetsmarine.com\/products\/ShipownersLiabilityPandI\/fixed-versus-mutual last visit:
\n18.07.2012
\n117 Anderson, P., (2011). Postgraduate Diploma in Marine Insurance 2010\/2011 Module Three \u2013 P&I
\nClubs and Mutual Insurance, LLoyds Maritime Academy, p. 22
\n54
\nthose small ships or their operators ask to have P&I from fixed premium insurers.
\nActually, they are not really sub-standard, but their current standard is below the IG
\nrisk assessment level. In reality, the ships under IG insurance are continued to be
\ndetained during port state controls118 because of their sub-standard technical
\nconditions. It does not mean that a ship by being entered in any Club membership
\nafter a Club\u2019s condition survey, will have port state control standards.
\nIt appears, however, that these vessels or ship operators may find insurers
\nwilling to provide liability insurance or they can navigate the ship without insurance
\ncoverage.119
\nThe historical background of the protection and indemnity insurance has
\ntraditionally and originally been based on the mutuality concept. Some of the fixed
\npremium providers have withdrawn after limited service in the P&I market.
\nGenerally, reinsurers prefer to use their underwriting capacity in the most profitable
\nareas instead of the limited income markets of third party liability insurance. So it is
\nnot easy for the fixed premium insurance providers to find acceptable rates of the
\nreinsurance offers.
\nThird party liability itself is really a huge responsibility for the ship owner and
\nhis insurer is carring out this responsibility on behalf of him. However, if you are the
\ninsurer and assured at the same time, you may have control yourself, and it may be
\npractically feasible to compensate possible claims. In fact, the commercial insurance
\nmarket process is different from this situation and it has to find profit at the end of
\nthe day. That is why countries prefer to set up their national P&I institutions in the
\nmutual concept instead of fixed premium. There are many examples where countries
\nhave set-up mutual systems like Japan P&I, Korea P&I, China P&I and Filipino P&I.
\nThe first three, P&I Clubs are considered to have capability to accomplish the<\/p>\n
118 Port State Control (PSC) is the inspection of foreign ships in national ports to verify that the condition of the ship and
\nits equipment comply with the requirements of international regulations and that the ship is manned and operated in
\ncompliance with these rules. Read more: https:\/\/monkessays.com\/write-my-essay\/imo.org\/blast\/mainframe.asp?topic (sample nursing essay examples by the best nursing assignment writing service)_id=159 last visit: 30.08.2012
\n119 Anderson, P., Supra. p.22
\n55
\nreinsurance requirement from their own reserves or local capabilities. It means it is
\nnot necessary for them to contact western reinsurers for obtaining reinsurance.
\nIn national P&I institution concept, providers choose mutuality instead of
\nfixed premium. The Indian maritime administration and competent authorities have
\nstarted to negotiate to set up a national P&I institution for their cabotage ships based
\non mutuality. Fixed premium itself is totally commercial, and local authorities or
\nnational structures take care of strong protection against possible risks, first rather
\nthan trying to have profit.
\nOn the other hand, a smaller tonnage vessel shipowner has to be part of a huge
\nrisks pool120, due to the memberships of the bigger tonnage shipowners in the same
\npool. His marine peril risks are maybe lower, but automatically he has to share huge
\npotential risks of big pool contributors with their properties and trade capacities
\nbecause of being party of the mutuality system. Additionally, he has gigantic risk
\ncover limits, which maybe never need to be used. Maybe it is not necessary for his
\ntrade to have those guarantee limits, and live together with five star standards. As
\nalready mentioned, IG has upper insurance limits, and some shipowners never need
\nto ask for the compensation limits and it is not cost efficient to have these limits
\nbecause of their lower trade capacity.
\n3.5 Reinsurance
\nThe balance of any P&I premium formula main outgoing expense will be
\nreinsurance premiums. Reinsurance premiums are fixed with the financial and
\ntechnical capability of the insurers, and there are differences depending on the
\nmarket conditions. Most of the time, insurers pay reinsurance premiums with their
\nlevy premiums at a ratio of 30-40 percent of their premium income. Market players
\nwho are party of the low market have to pay high premiums for reinsurance. In that<\/p>\n
120 Although the Group clubs compete with each other for business, it is to the benefit of all shipowners insured by
\nGroup clubs for the clubs to pool their larger risks. Pooling is regulated by the Pooling Agreement which defines the
\nrisks that can be pooled and how losses are to be shared between the participating clubs. The Pool provides a
\nmechanism for sharing all claims in excess of US$ 8 million up to, currently, approximately US$ 6.9 billion. Read
\nmore: https:\/\/monkessays.com\/write-my-essay\/igpandi.org\/Group+Agreements\/The+Pooling+Agreement last visit: 30.08.2012
\n56
\ncase, the insurance service costs more because of the financial and historical
\nbackground, and reinsurance premiums are higher. Initially, a new institution is not a
\ngood competitor in the market due to the need to pay huge reinsurance premiums.
\nThe International Group clubs organize an excess of loss reinsurance for the
\nclub\u2019s individual members. It is the largest of most existing maritime liability policy
\nand is headed by the Janson Green Syndicate at Lloyd. Participating underwriters,
\neach with a relatively low line are distributed around the world and this is probably
\nthe most complex political and international maritime market. (A notable absentee in
\nthe policy is Munich Re, which became a P & I reinsurer to the “alternative” (nongroup) P & I market.) The excess loss reinsurance suits the international market in
\nthat it has a share of U.S. $ 2 bn P & I industry without the need to develop the
\nexpertise necessary to manage the intricacies of P & I claims.121
\nIt is generally accepted that a large P & I account is necessary to provide
\nsufficient diffusion of risks and to avoid excessively volatile exposure to claims. The
\nquestion is how dire is the need of a portfolio for P&I to be self-sufficient and stable?
\nIndeed, is there an optimal size of a P & I Club? The issue is further complicated by
\nthe pooling agreement, which absorbs all claims in excess of U.S. $ 8 million and the
\nshield of the IGA122
\n. In the 1980s two P & I Clubs have ceased their activities. The
\nmain victims were the non-IG Oceanus Group, which collapsed when its reinsurance
\nunderwriters withdrew, and the member of the group, Sunderland Club, which was
\neasily absorbed by the IGA colleague, the UK Club. This shows that the IGA looked
\nafter its own and the owners could count on the greater security of the International
\nGroup.123
\nBoth examples show that reinsurance is one of the most important issues of
\nP&I management.<\/p>\n
121 Drewry Report., Supra., P.67
\n122 International Group of Agreement
\n123 Supra.,Drewry, p.71
\n57
\n3.6 Tax Exception
\nToday, most shipowners procure their P&I insurance directly from foreign
\ninsurers. State treasuries do not have any income coming from the P&I insurance
\nmarket because the service providers are already located outside of their jurisdiction.
\nIn that case, a new establishment of a national P&I facility may have some tax
\nexception in the domestic market. There will not be any changes for the state
\ntreasuries\u2019 incomes, never having had this benefit from abroad, nor in local
\npotentials. However, using this kind of tax practice technique may help the new
\nnational P&I provider to stand on its own capabilities.
\n3.7 Insurance Sanctions
\nThis concept is very new in the global market. Provision of P&I insurance is
\nused as a political argument as part of economical sanctions for blocking trade from
\na target country. India has decided to create its own P&I insurer because of
\nsanctions from the Iran conflict. They have dealt with Iran for a long period of time
\ncarrying cargo, but currently they do not have P&I cover because of sanctions
\nagainst Iranian trade.
\nEU and the USA have taken a decision to make sanctions against Iran,
\nespecially its oil trade. Most of the carriers have confirmed they will not ship oil
\nfrom Iran. It is clear that the EU sanction to ban insurance has imposed a new
\nstranglehold on shipping. The banning of insurance specially for tankers creates a
\nrelatively special position, as almost 95% of tankers are insured by a P&I club,
\nwhich is a member of the IG, and which in turn dominates the market.
\nShipping lines have to have liability insurance on board according to relevant
\ninternational conventions in order to trade with Iran or attempt to find cover
\nelsewhere. The insurance sanctions have a deep impact on the tanker industry, not
\njust for the EU controlled fleet, which is being subject to a total trade and insurance
\nprohibition, but also on the great majority of tanker owners around the world who are
\n58
\ncontracted to lift Iranian oil regardless of destination. According to Liz McMahon\u2019s
\narticle in Lloyd\u2019s List, the IG has recently updated itself to follow EU sanctions
\nagainst Iran with information to the members concerned. Non-EU regulated clubs
\nare not directly affected by those sanction decisions, but their reinsurance
\narrangements are EU regulated. Consequently, non-EU regulated clubs are
\nnecessarily being part of the sanctions as well, because of their reinsurer relations
\n(Lloyd\u2019s List, 2012).
\nFor shipowners, P&I insurance is looking like a ticket for their trade. Asian
\nplayers have long term contracts to carry crude oil from Iran. For trying to keep their
\ntrade potentials, Asian insurers have increased their own reinsurance for continuous
\ntrade from Iran.
\nAfter all those developments, the Iranian government will now provide
\ninsurance cover for any foreign ships entering its territorial waters. Therefore, the
\ngovernment took a decision to provide a sovereign guarantee but said insurers must
\nlimit cover to $50 million.
\n124
\nUnfortunately, the Indian Shipowners Association moved to set up its own
\nmutual P&I Club after the sanctions against Iran because of the need to cover their
\ncurrent trade with Iran. \u201cThe move to set up an Indian P&I association assumes
\nsignificance in the context of the recent decision of the Europe-based P&I Clubs to
\nrefuse cover to ships carrying Iranian cargo from July 1.\u201d125
\nCountries need to protect their trade and their fleets against all possible
\nsanctions. P&I insurance is starting to be used as a political argument. However, oil
\nspills can occur even in innocent countries which originally are not part of the
\ncurrent conflicts. For example, Iranian crude oil may be carried from Iran to China.
\nDuring this voyage, an incident may happen and spilled oil may affect the Sri Lanka
\ncoasts. How is it possible to say that there are sanctions against Iran and this damage<\/p>\n
124 McMahon, L., Iran Offers Insurance Covers to Oil Shipment Moving, Lloyds list no.60722,
\n20.07.2012
\n125 https:\/\/monkessays.com\/write-my-essay\/thehindubusinessline.com\/industry-and-economy\/logistics\/article3533123.ece last visit: 01.09.2012
\n59
\nis without any guarantee. Therefore, countries should to set up their own P&I
\nfacilities because of these possibilities.
\n60
\nCHAPTER 4
\n4 Examples of National P&I Institutions
\n4.1 Introduction
\nThe International Group of P&I Clubs covers 90% of the world\u2019s P&I
\ninsurance market while the remaining 10% is covered by others, basically called as
\nsmall contributors of the market. It is clearly apparent that many of the others (most
\nof them are fixed premium institutions) can compete with the IG Clubs in terms of
\npricing, security and services provided. This chapter will mainly focus on some of
\nthese alternatives. They are really solid, viable businesses. Some are worth being
\nmentioned for their potential (much as China P&I Club or Korea P&I Club) or for
\nthe alternative they offer in particular areas.126
\nOn the other hand, the Japan P&I Club is part of the IG and an atypical P&I
\nClub. However, it is closer to a “national” club, despite being a member of the
\nInternational Group of P & I Clubs. In fact, even if it makes efforts to add tonnage of
\nTaiwanese, Singaporean or Korean ships, the majority of vessels entered in its
\ncontrol are still Japanese. The club has its own “coastal” membership (payment of
\nfixed premiums) for members who are not international traders.
\n4.2 China P&I Club
\n4.2.1 Overall Status
\nChina Shipowners Mutual Association, commonly known as the China P & I
\nClub or CPI, was established in 1984. Since then it has seen a spectacular
\ndevelopment and improvement in aspects such as tonnage entered, membership,
\nmanagement and service levels in such a short time. With the full support of
\ngovernment agencies and maritime communities, the CPI has already become a
\nmajor P & I Club in the Asia Pacific, offering suitable P & I cover and<\/p>\n
126 Omni sectoral report 2011
\n61
\ncomprehensive professional services. Nowadays, the members of this association are
\nvery diverse, not only limited to mainland China, but also include eminent owners in
\nHong Kong, Singapore and other parts of Far East Asia.127
\nCPI has adopted a policy of prudence and consolidation in underwriting. Its
\nmain concern is the benefits of mutuality: providing excellent service in a non-profit
\norganization. The tendency to increase the reserve Fund shows that the financial
\nsituation of the club has been growing stronger over the years.
\nCPI reported that for February 20th of 2011, the Association had 135 members
\nwith a total of 1043 registered vessels totalling 27.8 million GT. The total tonnage
\nregistered increased by 3.79 million GT, an increase of 15.79% over the previous
\npolicy year. In the 2010 policy year, 207 ships, totalling 7.02 million GT, were newly
\njoined in the Association, among which 95 ships, totalling 4.27 million GT, were
\nnewbuildings, accounting for 61% of the newly entered tonnage.128
\nThe legal and management infrastructure of CPI is very similar to the IG P & I
\nClubs located in Britain and Scandinavia. According to its statutes (by-laws) and
\nrules, the general membership and Board of Directors are the governing bodies of the
\nInstitution.
\n129
\n4.2.2 Coverage and Relations
\n4.2.2.1 Coverage
\nAs the majority of clubs, CPI covers its members for similar liabilities towards
\nthird parties for loss and damage of goods (cargo), injury, illness or the loss of life of<\/p>\n
127 Read more https:\/\/monkessays.com\/write-my-essay\/cpiweb.org\/ last visit: 04.09.2012
\n128 CPI Annual Report 2010
\n129 Bye-law rule:34
\n62
\nthe crew or passengers, oil pollution damages, collision liability, fines, and wreck
\nremovals.
\n130
\n4.2.2.2 Relation with IG
\nThe CPI has a co-operation with the international P & I society as a coinsurance provider association for their members. Although the CPI is not a member
\nof the pooling agreement, coverage by the CPI is, in principle, identical to that
\nprovided by a pool club regarding both scope and limits. CPI maintains close
\nrelations with some dominant clubs of the pool through an agreement of coinsurance.
\n4.2.2.3 Relation with Hull Insurance
\nMutual Hull cover is also offered to its members for reducing costs and to fully
\nprotect their interests, and the scope of coverage is similar to the related international
\ninsurance clauses.
\n131 As already mentioned in chapter three, providing members both
\nHM (Hull and Machinery) and P&I insurance together is giving unique advantage to
\nthe shipowner for resolving all possible claim challenges. In this respect, CPI has
\nmutual hull cover as well.
\nAdditionally, FD&D coverage and Time Charterers Liability cover are being
\noffered to members as well.
\n4.2.3 Correspondent Network
\nCPI reported that it has built up a global network of correspondents reaching a
\nnumber of about 200, covering all major ports in the world in 2011. Having
\nunderstood the important role of correspondents, CPI has established a strong
\nnetwork of correspondents from the beginning of its foundation.<\/p>\n
130 CPI Rule Book. Rule:3
\n131 https:\/\/monkessays.com\/write-my-essay\/cpiweb.org\/ last visit: 05.09.2012
\n63
\n4.2.4 Claims Handling
\n4.2.4.1 Service
\nThe claims services are centralized at the headquarters in Beijing with
\nmanagers, executives and support staff, divided into three divisions. Corresponding
\nto the management union is the headquarters. There are two representative offices
\nand a designated service company with claims processing teams based in Dalian,
\nShanghai and Hong Kong taking care of local members there.
\n4.2.4.2 Additional Services
\nCPI has served to Help its members with FD & D services, drafting of
\ncontract terms, and advisory services. Other loss prevention services are required by
\nindividual members for financial safety. One of the most important services for
\nmembers is to ensure continuous financial safety during arrest of ships or detention
\nin the port in any condition. Shipowners hope to expect continuous trade with
\nminimum cost conditions from their insurers.
\n4.2.4.3 Letters of Guarantee
\nAccording to a CPI declaration, currently, a letter of guarantee from the CPI
\nis not only one of the three officially accepted forms of security by the Supreme
\nCourt of China, but it is also accepted by many government agencies and different
\napplicants around the world. In case of difficulty of CPI, co-insurance Clubs are also
\nready to help by providing a pool member letter of guarantee. In addition, the CPI
\nhas an agreement with the financial guarantee from the Bank of China, Bank
\nNational de Paris (BNP) in France and other facilities with bond insurers, reputable
\nlocal or other financial institutions in Hong Kong, the Philippines and Singapore. All
\nof these security measures have proven effective and fast when needed.132<\/p>\n
132 https:\/\/monkessays.com\/write-my-essay\/cpiweb.org\/ last visit: 05.09.2012
\n64
\nHaving effective letters of guarantee is of vital importance for the P&I
\ninstitution members or clients for protecting their trade. Every P&I institution has to
\nhave effective letters of guarantee to cover safe trading lines for their
\nmembers\/clients.
\n4.2.5 Advantages of Being a Local Institution
\nIt has to be easy to resolve problems for CPI, because it is the only local P &
\nI Club in mainland China. The CPI can make use of its benefits and privileges as the
\nlocation advantages to its members for offering lower cost services, such as a lawyer
\nin the internal courts, who is legally approved to release arrested ships immediately.
\nAll those related advantages are not only existing for the CPI, but are also real for all
\nsubstantial national P&I institutions.
\n4.2.6 Management Team
\nAs mentioned before, realizing that only a good management team can
\nguarantee an acceptable service quality, the P&I institutions have always focused on
\ntraining staff for keeping them dynamic. When the CPI management board
\nmembers\u2019 backround was checked, it was discovered that it is now being managed
\nby a team of managers and staff who have expertise in law, insurance, accounting
\nand seamanship. Some of them have acquired qualification as claims proficients and
\n\/ or proficiency in maritime law in British universities, and many of them have
\nundergone training in the P & I Clubs and London-based international law firms
\nabroad.
\nThey all have well educated backgrounds and impressive market experiences.
\nQualification of management team is very important for members because of cost
\nefficiency. This criteria has to be the minimum level for a national P&I institution
\nsetting up business.
\n65
\n4.2.7 Current Situation of CPI
\nCPI stated that underwriting work has made significant progress since the 2010
\npolicy year. The volume of tonnage entered has maintained a high growth rate.
\nDue to a flat shipping market, competition in the insurance market has become
\nmore severe. In such circumstances, the Institution still maintains an increase in
\nentered tonnage, due to the high quality of service, solid financial position and the
\ncompetitive price the institution has offered for the past 10 years. These factors have
\ngained wide recognition among the majority of Chinese shipowners.133
\nIt is clearly understandable from the annual report of CPI that in aspects of
\nunderwriting and marketing, the CPI has done extensive work in research, screening,
\npromotion and Assessment. To ensure the quality of members, the Institution
\ndemanded from each new applicant to observe their operations, and explain the rules
\nto themselves.
\nIt is interesting to note that despite a tonnage of only 28 million GT in 2011
\n(slightly smaller than the Swedish Club had at the same time), free reserves of the
\nclub were at a record of 686.2 million dollars. Only seven clubs in the International
\nGroup of P & I Clubs have free reserves greater than this figure. The total assets
\nwere $ 723 million in 2011.134<\/p>\n
133 https:\/\/monkessays.com\/write-my-essay\/cpiweb.org\/en_gongzuohuibao\/annalsindex.jsp read more from annual report 2012
\nlast visit 01.09.2012
\n134 Read more: https:\/\/monkessays.com\/write-my-essay\/cpiweb.org\/cpien_index.jsp last visit: 01.09.2012
\n66
\n4.3 Korea P&I Club
\n4.3.1 Overall Status
\nThe Korea P & I Club was established on January 26, 2000 in order to provide
\nreliable P & I insurance to support the Korean shipowners in accordance with the
\nShipowners\u2019 Mutual Insurance Associations Act of 1999.
\nPrincipal owners, such as Hanjin, began to enter in the club in 2005, and coinsurance with the IG clubs started. Entered tonnages passed 1 million GT in that
\nyear. Only three years later, in 2008, tonnage had reached more than 5 million GT.
\n135
\nSince 2011, the Korea P & I Club has an independent club offering P & I
\ncoverage limits up to $ 300 million. Members of the Korea P & I Club are Hanjin,
\nHyundai Merchant Marine, STX PanOcean, SK Shipping, Chang Myung, Korea
\nLine, Korea Shipping, Sinokor, Pan Korea Line and Boyang.
\n136
\n4.3.2 Coverage and Relations
\n4.3.2.1 Coverage
\nThe KP&I has the same principles of coverage as found in international P&I
\ninsurance law and practice.
\n4.3.2.2 Relations with IG
\nThe Korea P & I Club also has aimed to attract larger vessels through a new
\nexperience by sharing coinsurance agreements with a common IG body. It already
\nhas a co-insurance with IG, but this is based on the Korea P & I Club taking the first
\npart of each loss, with higher cost incidents being covered by its partners. But this<\/p>\n
135 https:\/\/monkessays.com\/write-my-essay\/kpiclub.or.kr\/eng\/About\/history.htm last visit: 03.09.2012
\n136 OMNI 2011 annual P&I report, page 47???
\n67
\nquasi-free structure could be supported by a system between the Korean Club and IG
\neach taking a specific percentage of risk.
\n137
\n4.3.2.3 Relations with Hull Insurance
\nAs reported by Trade Winds (2011), the Korea P & I Club, founded ten years
\nago, aims to become a much larger, more international club as part of a “Vision
\n2020” strategy. However, KP & I did not yet intend to enter the market of the hull
\ninsurance according to its strategic planning.
\n4.3.3 Correspondent Network
\nThe Korea P & I Club has an extensive network in the world ports and Korea P
\n& I Club is suggesting to its members and captains to seek advice and Helpance
\nfrom the Club\u2019s correspondents on the list published by the Club, when they are in
\ntrouble or facing unexpected difficulties.
\nThe KP&I Club maintains a worldwide network of surveyors and
\ncorrespondents who have different experiences in claims management. When the
\nvessels of the club members are arrested in any country because of cargo claims,
\ncollisions, and oil pollution, correspondents may still be available to Help members,
\nas in the case with IG rules. Currently, the KP&I club has about 590 correspondents
\nin all major ports around the world and can provide corresponding services from
\nneighbouring ports if there are no designated contact points in any specific port.
\nPrincipally, the Club prefers to work with a local correspondent who always tries to
\nprovide faster and better service with full knowledge of local laws and excellent
\nexperience.
\n138<\/p>\n
137 Trade winds, 28.10.10, Korea P&I Club aims to double tonnage by 2020
\n138 https:\/\/monkessays.com\/write-my-essay\/kpiclub.or.kr\/eng\/Services\/claim.htm last visit: 04.09.2012
\n68
\n4.3.4 Claims Handling
\n4.3.4.1 Service
\nAccording to the Club policies, when accidents happen, a claim team provides
\na fast interest in order to protect the interests of club members, including the
\nappointment of experienced surveyors to determine the cause and extent of damages.
\nIn addition, if necessary, the claims team appoints a competent lawyer who has
\nexperience in the initial phase. To provide timely legal services, KP&I Club has a
\nlegal consultant contract with three law firms named Choi&Kim, Yoon&Yang and
\nKim&Chang. In addition, the club has potential to appoint other firms depending on
\nthe nature of claims or incidents. In cases abroad, the Club has contacts to appoint
\nsurveyors and lawyers through its local correspondents to protect the interests of club
\nmembers. KP&I is known for its claims team providing faster action and better
\nservices to protect the interests of members in the market.
\n4.3.4.2 Additional Services
\nKorea P & I Club has intended to expand into areas such as freight, demurrage
\nand defence, and time charterers responsibility. It aims to move from being a fixed
\npremium provider to a mutual insurer, but as already mentioned, it did not intend to
\nenter the market of the hull insurance.
\n139
\n4.3.4.3 Letters of Guarantee
\nThe previous information lead to one strong reality about KP&I that it really
\nhas a strong financial structure and growth capacity. KP&I\u2019s renewal results for 2012
\nwith the expansion of the limits of cover up to 10 billion dollars and strengthening its
\nability to issue a letter of guarantee to attract larger vessels in overseas trades shows
\nthe entry of large shipping companies and overseas fleets is on the right track. The<\/p>\n
139 Trade winds 01.11.2010 Korea P&I Club hoping to land new quote-share deal
\n69
\nrenewal result will be a driving force for the development and continuous motivation
\nof the Korea P & I Club to expert growth for years to come. 140
\n4.3.5 Advantages of Being a Local Institution
\nKorea P&I club managing director BS Park says the message from owners is
\nthat they want a local, Korean language P&I because of easy communication, but
\nthey also want to see the same limits in KP&I like the group clubs offer. 141
\nThe advantages of using local language have been mentioned previously in
\nthis dissertation.
\n4.3.6 Management Team
\nThe staff are employed by the Club. However, the CEO, responsible for the
\noverall management and operation of the Club (executive management director) is
\nelected through open competition.142
\nAll of the managers and experts are well educated and have strong market
\nexperience in maritime law and\/or claims assessment.
\n4.3.7 Current Situation of Korea P&I
\nThe Club is independent and is owned and operated by the ship-owners
\n(members) and Ship-owners\u2019 Association. Principally based on non-profit making
\nand non-corporate tax paying, it is operated as a special organization, to some extent
\nsovereign guaranteed and underwritten by the Republic of Korea. The Club has to
\nreport certain important matters to the Ministry of Transport and is also subject to
\nregular auditing by the National Financial Agency Service. Like other insurance<\/p>\n
140 Trade winds 28.10.10 Korea P&I Club aims to double tonnage by 2020
\n141 Trade winds, 01.11.2010 Korea P&I Club hoping to land new quote-share deal
\n142 Email interview between Korea P&I management CEO Mr. B.S.PARK 11.09.2012
\n70
\ncompanies and banks in which the Government put some amounts of funding as key
\nstart-up capital (without possession of any share or shareholder rights by the
\nGovernment), the Korean government gave some start-up capital for KP&I. The
\nmajor part of KP&I\u2019s reinsurance is placed at Lloyd 143
\nKorea P & I lists among its main benefits the lack of language barrier and time
\ndifference. As a non-profit organization focused on Korea, KP & I is not directed by
\ncommercial managers; therefore, the Club says it can offer more competitive call
\nrates than other clubs.
\n144
\nThe Club\u2019s approximate total levy of premium is around $ 30 million in 2012,
\nwhich is $4 million more than the previous year. The Club\u2019 free reserves rose more
\nthan expected to $ 18 million, about $ 6 million more than at the year of 2010.
\nCurrently, Korea P & I Club covers about 870 ships with around 10 million GT (one
\nmillion GT more than in the previous year). Plans for the future are even more
\naggressive, with tonnage objectives for 2020 being 20 million GT and around $ 100
\nmillion for premium.
\n145
\n4.4 Japan P&I Club
\nThe Japan P&I Club has long been the only Asian representative within the
\nIG.146 The Japan P & I Club is the only organization in Japan underwriting P & I
\ninsurance for oceangoing vessels and Japanese coastal vessels. It was founded on
\nOctober 2, 1950 in accordance with the Shipowners’ Mutual Insurance Association
\nLaw. The Japan P&I Club became a member of the International Group of P & I
\nClubs in 1976 and joined the other clubs in the pooling agreement of the<\/p>\n
143 Ibid, interview
\n144 Asian maritime march april 2011 KOREA P&I BOOST ASIAN PROTECTION MUSCLE<\/p>\n
145 Trade winds, 09.03.2011, Korea P&I Club expands by 20% in a year
\n146 Asian maritime, march april 2011, KOREA P&I BOOST ASIAN PROTECTION MUSCLE
\n71
\nInternational Group of P & I Clubs in 1989. The Japan P & I Club celebrated its 60th
\nanniversary in October 2010.147
\nThis club is already part of the IG, which is why it will not be discussed in
\ndetails in this study.<\/p>\n
147 Read more: https:\/\/monkessays.com\/write-my-essay\/piclub.or.jp\/E_rep\/gaiyo\/gaiyo.html last visit: 14.09.2012
\n72
\nCHAPTER 5
\n5 Club Insurance Applications in Turkey
\n5.1 General
\nToday, many countries of the world have current clubs which have been
\nestablished and operating in the market. Turkish shipowners, the state or foreign
\nowners have not had an established P & I insurance club so far in Turkey. Therefore,
\nthe Turkish owners obtain their needs for liability insurance from clubs established
\noverseas.
\nIn this context, the Turkish shipowners generally prefer to procure club
\ninsurance from the British P&I clubs. The British clubs market is inflexible for
\nTurkish shipowners in terms of small tonnage vessels which are under 10000 GT.
\nThe Turkish merchant fleet does not only have large vessels, but also small-tonnage
\nvessels and those ships are not at all suited to the IG. The IG market has provided the
\nsame amounts of protection limits for all types of vessels without regard to
\nparticulars of the ship. However, some types of ships have different risk potentials,
\nand never need the existing limits, which are provided by the IG Clubs. Having those
\nlimits is a part of the fixing of the premiums in Clubs\u2019 insurance policies. A ship may
\ncarry less risk than a floating platform, which has a high risk potential for
\nenvironmental pollution, however, this related ship is insured to the upper limit at
\nalmost equal risk premiums. In short, some ships have high-risk and others have lowrisk, but they pay nearly same premiums to purchase the same pool of P & I
\nprotection, which lead to injustice for small and medium sized vessels of Turkish
\nshipowners.
\nSelection of the club for a Turkish shipowner is sometimes complicated and it
\nis changed depending on various conditions. Sometimes there is not even any
\nalternative choice for the shipowners. During the acceptance process of the club
\nmembership, the club will evaluate to ask for the premium with the possible potential
\n73
\nburden of risks, and when the club thinks that the candidate shipowner will bring a
\nserious charge for club is financial body, in this case the club does not accept the
\napplication.
\nIn fact, over the time, clubs have two different structures. The first group
\ngathers lower limit risks and others collect high potential risks. Due to the structure
\nof the non-profit clubs, competition between clubs may never be considered as
\nexisting, but they do compete with each other. However, a combination of
\ncompetitiveness shows its face when low potential risks are collected in good
\nvolumes; they have fluctuating movements depending on the size of the damage. In
\nthis case, large and financially strong clubs can provide a wide range of covers and
\nlimits with lower premiums.
\nWhile shipowners in Turkey, with large tonnage and ships carrying less risk,
\nprefer their ships to enter the British P&I clubs or other more powerful clubs;
\nnevertheless due to the above-mentioned reasons, owners of small tonnage or having
\nold ships are turning to some different alternatives. Consequently, they may select a
\nfixed premium P&I insurer or have to enter clubs which are asking high premiums
\nwith limited covers.
\nSome of those fixed premium insurers are notorious institutions working with
\ninadequate capability to handle damage claims. These companies are not preferred
\nby the owners, especially due to their bad reputation of compensation payments.
\nParticular club insurance, which is asked from the maritime authorities of
\ncertain countries to have club insurance on board, has to be provided by accepted
\nP&I club list. Authorities in some countries have accepted the insurance certificates
\nwith a “reputable club list” due to the sheer fact like Singapore and Turkey.
\n74
\n5.2 Turkish Merchant Marine Fleet
\n5.2.1 The position of Turkish merchant fleet within the world fleet
\nIn 2011 the Turkish merchant marine fleet tonnage under foreign flags
\namounted to around 12 million DWT. As of 1 January 2011, vessels of 1000 GRT
\nand above, the total tonnage of Turkish shipowners, both under Turkish flag and
\nforeign flags, reached 19.6 million DWT. (Table 1)
\nAs of the beginning of 2011, regarding the Turkish shipowners\u2019 ships of 1000
\nGRT and above, around 40% percent of these ships were registered under the
\nTurkish flag and 60% were registered under foreign flags (Table 1).
\n148
\nAt the end of 2011, Turkish registered ships alone reached a number of 1245
\nships and a total tonnage of 9,7 million DWT with an average age of 21.149 The
\ntonnage area of 0-1000 DWT of the Turkish fleet registered mostly fishing vessels,
\nfishing boats and pleasure yachts.<\/p>\n
148 https:\/\/monkessays.com\/write-my-essay\/denizticaretodasi.org\/DetoPortalIng\/Default.aspx?tabid=567 last visit: 18.09.2012
\n149 Source: statistics of General Directorate of Merchant Marine
\nhttps:\/\/monkessays.com\/write-my-essay\/denizcilik.gov.tr\/dm\/istatistikler\/ResmiIstatistikler\/ last visit: 19.09.2012
\n75
\nTable 1:<\/p>\n
5.2.2 The position of the Turkish merchant fleet compared to the fleets of the
\nneighbouring countries (Table 2 (National Registry data))
\nThe capacity of the Turkish merchant fleets and the neighbouring countries is
\nshown in Table 2. Greece is in the first place being among the three largest merchant
\nfleets of the world, and Turkey is in the third place in this region.
\n76
\nTable 2:<\/p>\n
The number and tonnage of the ships in Turkey are adequate for
\nimplementing a national P & I institution when comparing this potential with the
\ncountries in the region. This club may be not only national, it may also provide the
\npotential for the regional demands. This situation can be acceptable as a substantial
\nsize in terms of club insurance. However, the quality of members as much as
\nquantity of members, is also important for club insurance. The majority of the
\nTurkish merchant marine vessels are small and old. According to data, the average
\nage of the Turkish merchant fleet was 21 years in 2011.150 In 1999, this figure was<\/p>\n
150 Ibid, last visit: 24.09.2012
\n77
\nconsidered to be 17. Merchant marine fleet renewals and reconstructions have
\nbecome a necessity.
\nDue to, the above-mentioned reasons, having P & I insurance is becoming
\nproblematic for the Turkish shipowners. However, it is worse because shipowners
\nare prevented from gathering intelligence to verify the existing problems in the
\nmaritime sector. There is another reality why some shipowners have insurance which
\nis only because it is mandatory and because of the legislation.
\nTherefore, to know whether they purchase sufficient protection for a paid
\npremium is also not possible.
\n5.3 Mutual and P&I Club Insurance Regulations in Turkey
\nIn Turkey, due to the absence of a P & I club, current legislation does not
\ncover to explain specifically the club insurance. Insurance risks, which are covered
\nby a club, are all referred to the in Turkish Commercial Code (TTK) as marine risks
\nin general. However, in this code, the club insurance terms, and limits, are not
\nspecifically determined. These insurance coverage areas are already mentioned as
\nextremely large insurance covers.
\nInsurance Law No. 5684 permits procurement of “vessels liability insurance”
\nfrom abroad. This indication is understood to be a provision related to P&I insurance.
\nHowever, at the moment there are not any available arrangements in legislation about
\ndefining P&I insurance, explaining insurance limits and determining solutions to
\nproblems that may arise due to carrying out insurance business outside the country.
\nAlthough P&I insurance is not regulated specifically in national law, in recent
\nyears, it has been entered into legislation as a necessity due to the impact of
\ninternational agreements. The following arrangements are examples in this regard:
\nIn Penal regulation of Article 21 of the Environment Code, it is expressed
\nthat, after any pollution incidents in Turkish waters, vessels are responsible to pay
\n78
\nadministrative fines. A letter of guarantee given by a P&I insurer is acceptable for
\nprevious payments for releasing the detained ship.
\nRegulation on The law of Development of Maritime Trade Fleet and
\nPromotion of the Ship Building Facilities has an Article, namely “Obligations of
\nInsurance and Class”. Ships are imported under this regulation, and have to have a
\nP&I insurance certificate on board. This P&I insurer should be an acceptable P&I
\ninsurer for the Turkish Maritime Administration.
\nThere is a regulation on the requirement to obtain insurance cover for
\nvessels against maritime claims and supervision thereof since July, 2011. The
\npurpose of this regulation is to set out the obligations and requirements of vessels
\nflying the Turkish flag. Vessels, regardless of the flag state, arriving in or sailing out
\nof ports, terminals, anchorages and other port facilities in Turkish territorial waters,
\nmust obtain insurance cover against maritime claims and to establish policies and
\nprocedures for their supervision.
\nTurkey is part of the Civil Liability Convention 1992 (CLC 92). In the
\nRegulation of Issuing CLC 92 Certificates, identified ships are obliged to undertake,
\nin accordance with arrange CLC-92 certificate from IG clubs, or the club has to be
\non the Turkish Maritime Administration determined clubs list.
\nThe Turkish Straits Maritime Traffic Regulations Application Instructions
\ninclude another application for P&I. In Article 12 of this Directive, the ship cannot
\npass through the Turkish straits without having P&I club insurance corresponding to
\nthe requirements laid down.
\nAs can be seen, an insurance type is undefined in the legislation of Turkey;
\nhowever, the same legislation requires it under certain circumstances.
\n79
\n5.4 Problems about Club Insurance in Turkey
\nIt has already been mentioned about the problems of the shipowners not
\nfinding appropriate insurance from the market and paying higher premiums for P&I
\ninsurance applications in Turkey. P&I Insurance awareness has started to develop in
\nthe Turkish maritime industry in short time period. The clubs having a very wide
\ndiscretion to indemnfy claims is known in the market. Claims traffic is not the main
\nfactor for processing how to use the discretion of the clubs, it is the members\u2019
\ncondition.
\nTherefore, to be strong in the eyes of the club, owners have to defend their
\nrights against the club. It is essential for an efficient utilization of insurance. This can
\nbe performed by Turkish shipowners by working existing together and being
\ninvolved in management of the certain clubs.
\nPerhaps recognition of the right in the Turkish courts to directly sue based on
\npossible unfair behaviour of the clubs may be a solution. However, the recognition of
\nthe right to directly sue may also have a negative impact. It has led to increased
\npremium rates for Turkish owners at the same time. This situation may cause them
\nto exit from the Turkish registry to foreign flag quickly .
\n151
\nHowever, there may be no legislation about pleading right against clubs in the
\nTurkish courts now. This is definitely recognized, especially with regard to third
\nparties damage, but not in terms of shipowner. Otherwise, the sense of justice is
\nincompatible with waiting and following of the injured third party pleading against
\nthe club where the club is located.
\n5.5 Inquiry Study
\nRegarding the determination of the maritime sector\u2019s attention for the
\nestablishment of a local P&I insurance club by the Turkish maritime administration,<\/p>\n
151 Acar, Supra 2009
\n80
\nan inquiry was carried out with maritime and insurance industry representatives to
\nmeasure the club expectations in the two sectors.
\nIn the related inquiry, 26 Turkish flag shipowners participated. Questions
\nwere asked about shipowners\u2019 insurance problems in the survey area of their current
\nclubs and dimensions about a local club. The shipowners which answered the
\nquestionnaire\/inquiry were a large proportion of having a say in the maritime sector.
\n\uf0b7 Are you satisfied to run with your current P&I insurer club?
\nThe question was addressed to shipowners to observe if they were satisfied to
\nrun with their current P & I insurance clubs. Three of the 26 owners expressed they
\nwere very satisfied, 14 of them stated they were satisfied, six of them revealed some
\nproblems, and three of them were dissatisfied with their current P&I clubs. Here,
\n35% of participant shipowners were dissatisfied with their current clubs. Even such a
\nrate a strong representation of ship owners group means that there is actually quite a
\nhigh rate of dissatisfaction with their current clubs in the maritime sector.
\n\uf0b7 How do you communicate with your current club?
\nWhen shipowners were addressed the question of communication capability
\nwith their clubs, 20 participants replied; “I’m communicating through
\ncorrespondents”, 6 participants said; “I’m having a direct connection to my club”.
\nThe means of shipowners\u2019 communications with P&I insurers are largely being
\nprovided by the correspondents in Turkey. It was also asked how club
\ncommunications were in terms of the activities of correspondents. In this respect the
\nresponse was largely positive. Only one shipowner could not communicate at all, and
\ntwo of them said \u2018communication is bad\u2019. It is clearly understandable that
\ncorrespondents\u2019 activities are strong enough to be greatly enhanced in Turkey. Yet
\nanother result is, Turkey has qualified human sources for P&I insurance to satisfy
\noperation of P&I institution.
\n\uf0b7 What is the most important factor affecting the choice of your club?
\n81
\n17 shipowners responded to this question that the most important factor was
\nattention to the club’s financial position, and five members stated that the club’s
\nprestige was important. As can be seen, prestige in the sector and financial structure
\nof the club are important for a large proportion of shipowners. The club must have
\nsufficient financial strength to compensate the claims for compensation. The prestige
\nof the club is related to the nature of providing financial security of the club. There is
\nspecial importance of these points where it is necessary to provide a letter of
\nguarantee. In fact, here the shipowners are seen to expect a financially strong and
\nreputable structure in the event of the establishment of the Turkish club. Even if the
\nfinancial situation criteria can be achieved quickly, the prestige gain of the club is a
\nphenomenon that takes a period of time. Therefore, it can be expected that the
\nTurkish shipowners would stay out of the local club for a long time.
\n\uf0b7 When the Turkish club is established, would you join this club?
\nIn this context, the shipowners were asked for their attitudes about what they
\nintend to do when a local P&I club is established. The majority of shipowners (20
\nshipowners) stated that if the conditions were appropriate, they may regard a local
\nclub positively. Only three participants expressed unconditionally that they would be
\nincluded. However, three other shipowners stated that they would adopt a course of
\naction corresponding to the attitude of the rest of the industry.
\nIt is understandable that shipowners engaged in maritime trade are thinking of
\ntheir short-term commercial interests, so the fact that there is a suspicious approach
\nto a new club can be acceptable. The shipowners were stating as a main concern for
\nnot participating in a local club that it will take time to acquire market prestige for
\nthe new club, and they may think that they could find themselves in difficult
\nsituations in this process.
\n\uf0b7 Is the government support needed for the establishment of the Turkish club?
\nAs for governmental support for establishment of the club is necessary or not,
\n17 shipowners answered that state funding must be found, at least in the setting up of
\n82
\nthe organization. Nine members stated that a club can be established with the
\nmaritime sector\u2019s own efforts and at all stages without state support.
\nShipowners largely believe that the Turkish P&I club cannot be established
\nwithout support of the State. Structured as a mutual shipowners\u2019 club, such an
\ninstitution takes decisions on premiums to be paid as well as which damage claims
\nto be paid together.
\n5.6 Case Study
\n5.6.1. What is the logic of P&I Clubs? How do they operate?
\n5.6.1.1. P&I insurance is an indemnity insurance, to indemnify owners for the
\nliabilities. It provides a very comprehensive coverage for loss claims of third parties
\nrelated to the operation of the ship. Claims include cargo damages, crew demands,
\ncollision, wreck removal and pollution.
\n5.6.1.2. It is traditionally executed by cooperative type organizations named
\nas ‘clubs’ as mutual insurance.
\nEach insuree is the member of the provider club and has voting rights
\ndepending on the tonnage and can be selected for the executive board of the club.
\nClubs do not provide insurance to make profit. On the contrary, in order not to pay
\nhigher premiums to the insurance companies seeking profit, they work to provide
\ninsurance coverage that they would obtain from them at cost. Claims ruled to the
\nmembers as a result of the lawsuits of the third parties are paid from the club safe
\ndeposit box; then these monies are shared among the members as ‘contribution
\nmargin’. Contribution margin is something like premium, but the amount is not
\nknown in advance; it changes according to the accounts of that year.
\n5.6.1.3. The 13 largest P&I clubs of the world are based in London under the
\nname of the International Group of P&I Clubs. The majority of these clubs, which
\nhave been operating for 100-150 years, are English.
\n83
\nThe most important duty of the IG is to provide reinsurance from the Llyod\u2019s
\nmarket and big reinsurance companies for all of the clubs with a single contract.
\nThus, it significantly decreases reinsurance costs of the clubs. This decreases the
\ncontributions collected from the club members. The 13 clubs have collected premium
\namounting to 2 billion USD per year by the end of 2007.
\n5.6.1.4. There are some insurance companies that provide the same coverage
\nfor fixed premium and with known methods in the P&I market. There are big
\ninsurance companies behind some of those but the financial power of some is not
\nclear. These companies generally insure ships that are not in demand by big clubs;
\nfurthermore they make use of dissatisfaction against big clubs. The coverage is
\ngenerally more restricted, due to the amount limit. As it does not bring profit, none of
\nthose companies have a long history in P&I market.
\n5.6.2. What advantages does a Turkish P&I Club bring to whom?
\nFor the Insurance Sector
\n5.6.2.1. It is hard to gain advantage directly because of the following:
\ni. If the club will be a mutual pool, it will aim to decrease the insurance
\ncost of the providers, not to gain profit. It will provide insurance at cost but not
\nprofit.
\nii. If the club is a fixed premium insurer, it will either not profit or have a
\nlittle profit. Otherwise, it cannot compete with the big clubs. However, it can gain
\nprofit in the sector of other fixed premium insurers (ships with smaller tonnages
\nand\/or standards).
\nFor the Shipping Sector
\n5.6.2.2. There is no direct advantage at first sight of the club being Turkish,
\nbecause ship owners prioritize their expectations, instead of being nationalistic in
\nselecting the club. (See Par. 5.6.3.1).
\n84
\nIf a foreign club meets these expectations, they do not hesitate to prefer that
\nclub.
\n5.6.2.3. On the other hand, explaining to a Turkish club and achieving the
\ndemands can be easier for Turkish ship owners. Because, the clubs have such
\ndiscretionary powers to fulfill these demands that can not be seen in other types of
\ninsurance.
\nIt is a very important issue to search how satisfied Turkish ship owners are
\nwith the services of the foreign clubs.
\nFor the Law Sector
\n5.6.2.4. A policy should be followed imposing the claims handling of the
\nTurkish club to be established in Turkey as far as possible. If so:
\ni. Legal accumulation regarding maritime law and insurance in Turkey
\ngets richer.
\nii. Turkish Corporate Arbitration gets stronger.
\niii. Turkish attorneys get stronger.
\n5.6.3. What are the challenges to face in establishing and operating a
\nTurkish P&I Club?
\n5.6.3.1. A club that does not meet the following two requirements will not
\nhave competitive power:
\ni. Low prices (contribution – premium), and
\nii. Quality of services (claims handling – letter of commitment).
\nLow Prices
\n5.6.3.2. If the club will be a mutual pool, the ships within the scope of the
\npool will be much less than the international clubs, and collected contributions can
\n85
\nbe inconsistent. Compared to the big clubs, in some years much less contribution can
\nbe collected, but in some years, it can be necessary to collect more.
\n5.6.3.3. If the club will be a fixed premium insurer, Turkish insurance
\ncompanies can be reluctant to invest their funds in a field that does not bring any or
\nonly little profit.
\n5.6.3.4. Reinsurance is highly important for both a mutual pool and a fixed
\npremium insurer. This should be provided from abroad. Reinsurance will be
\npurchased more expensively when compared to the big clubs and many fixed
\npremium insurers. This is a factor creating an impact which is challenging for raising
\nthe prices and decreasing the competitive power of the club to be established.
\nQuality of service (claims handling – letter of commitment)
\n5.6.3.5. A club that is not able to give a world-wide, high quality claims
\nhandling service does not benefit the ship owners. Besides, how cheaply the claims
\nof the third parties (cargo damage, collision .) are handled affects the price of the
\ninsurance. Handling the claims cheaply or expensively depends on the
\nprofessionalism of the central claims office of the club and the correspondents.
\n5.6.3.6. Claims are handled with the help of commercial correspondents who
\nshould be responsible for duties like survey and legal correspondents who should be
\nresponsible for things like litigation.
\nTherefore, there is a necessity for a correspondent network ready to serve in
\neach of the important ports of the world. Regarding this, it can be considered to make
\ncontracts with the correspondents existing in the current network of the big clubs;
\nhowever, it should not be more expensive to get service from them.
\n5.6.3.7. As the third parties have the ship arrested as being the first thing in
\ncase of any kind of disputes, a guarantee should be provided to release the ship. Both
\nthe third parties and the courts accept letters of undertaking (LOU), depending on the
\nreputation of the club. This reputation is gained through recognition of the club and
\n86
\nrating scores. If the letter is rejected, the club or the ship owner can receive a letters
\nof guarantee from a bank in that country in order to provide a counter guarantee.
\nBank commissions can be an important item playing a role in the rise in the prices.
\nRegarding this, cooperation with one of the biggest clubs can be achieved. Letters of
\nUndertaking issued by the national P & I provider would probably be more easily
\naccepted in other countries if they were guaranteed by the government.
\nGovernmental guarantees always have stronger backing than bank guarantees.
\n5.6.4. What to do, and what not to do?
\nWhat to do?
\n5.6.4.1. Big ship owners should be willing to participate in administrative
\nfunctions of the clubs. Here is the place for real influence in every kind of
\nrelationship between the club and the ship owner (insurer and insured). This should
\nmake limitless contribution indirectly to both that ship owner and the Turkish
\nshipping sector. Ship owners can have themselves selected to the administrative
\ncouncil by collecting the votes of the other ship owners with a proxy method, even if
\ntheir own marine fleet is not sufficient.
\n5.6.4.2. In order to establish a Turkish club, creating a pool insuring the ships
\nwith government funds can be a correct point to start. \u0130DO is a good example
\nbecause of the sailing area of the company ships. They are sailing in cabotage.
\nInstead of having these insured under the big clubs, ensuring only reinsurance from
\nthose big clubs can be cheaper. It can be understood that whether it is the case or not,
\nthrough a cost benefit analysis performed by using retroactive premium and
\nindemnity records, the scope of the pool can be expanded with the participation of
\nother big fleets.
\n5.6.4.3. High quality with low prices depends on the quality of the
\nmanagement. In the establishment of a P&I institution, it is inevitable to have a
\nprofessional management. This contains technical specialty and good relations. Fund
\n87
\nmanagement, reinsurance regulations, claims handling and marketing are among the
\nmanagement tasks. Although it is unnecessary to be conservative about foreign
\nmanagement, it is fair to consider that as a transition period to train local staff.
\n5.6.4.4. For a Turkish club to be established, providing convenience in the
\nsubjects like corporate tax, and benefiting from the funds can affect the competitive
\npower, as it will decrease the cost and the price. As duties are currently not collected
\nin this field, because Turkish ship owners are still provided insurance from foreign
\nclubs, such a convenience will not decrease the state\u2019s tax incomes.
\nWhat not to do?
\n5.6.4.5 With an amendment in Insurance Law, including the club insurance in
\nthe scope of obligatory insurances, can make a positive contribution to the
\nenhancement of Turkish clubs. However, this impact should not be as big as in the
\nother insurance types. Furthermore, it is a slippery field requiring attention. If the
\nTurkish club does not meet the requirements of Turkish ship owners (See Par.
\n5.6.3.1), escaping to foreign flags can start to get insurance from the foreign clubs
\nwhich can lead to problems like lower tax incomes.
\n88
\nCONCLUSION
\n1- It is seen that marine insurance track back to Roman Law before
\nChrist and marine insurance contracts aiming to indemnify possible losses for a
\ncertain premium are encountered in the beginning of the 13th century in Italy.
\nMarine insurance law in Turkey is included in the fourth paragraph entitled
\n\u201cInsurances against maritime risks\u201d (art. 1339-1459) of the 5th Book in the Turkish
\nCommercial Code.
\nMarine insurances are described in Article 1339 of the Turkish Commercial
\nCode as \u201cAny person who has an interest measurable by money in experiencing
\nmaritime risks of the ship or cargo safely may insure this interest.” From the
\nprovision of the article, it is understood that interest and risks are the necessary
\nfactors for insurance. Maritime risks are any kind of risks related to a marine
\nadventure. The one to suffer physical damage by being exposed to maritime risks can
\nbe defined as interest owner in terms of marine insurance.
\nInsurance contracts in Turkey are signed in compliance with the general
\nconditions approved by the Undersecreteriat of Treasury. There are two general
\nconditions in place, ‘Cargo Freight Insurance General Conditions’ and ‘Ship Policy’,
\nin the field of marine insurance. Another source for the contract in freight and hull
\ninsurance practice is the clauses prepared by the International Underwriting
\nAssociation composing the content of the insurance contract.
\nHull insurance is a marine insurance type covering a decrease of the ship
\nowner in his\/her property, likely to occur as a result of a damage or loss to the ship.
\nIn practice, hull insurance provides an insurance with a ratio of \u00be in terms of
\ncollision liability, reasons taken in assurance coverage in the UK market. The upper
\nlimit of the protection provided by the hull insurance is the insurance value of the
\nhull. The insurance value in hull insurance is the full value of the ship subject to the
\nowner\u2019s interest. The insurer and insured can agree how to determine the value of
\nship in the contract and it usually is for a certain amount of money. If the ship value
\n89
\nis not determined in the contract, the value of the ship when the risk starts is taken as
\na basis.
\n2- P&I insurance is defined as an exceptional insurance contract in which
\na member ship owner insures liabilities and expenses against third parties not
\ncovered by hull insurance in accordance with mutual insurance principals. A
\nmember, the party of the club insurance contract, is the ship owner who secures
\nindemnity for liabilities and expenses of his\/her ship against third parties not covered
\nby the hull insurance policy in return for the premium s\/he has paid.
\nClub insurance is a mutual insurance. In this insurance, ship owners come
\ntogether to secure their interests within the scope of the club insurance. Therefore,
\neach of the ship owners composing the club gets member ships and deposits a certain
\n‘premium’ to the club to meet potential losses. Premiums collected at the beginning of
\npolicy year are directed to investment. On the other hand, at the end of the policy
\nyear, all loss cases are closed with the collected fund.
\nIf the money collected in club fund is not enough to pay the losses, then the
\nmembers are asked for additional premium. As the club does not seek profit,
\nadditional premium is only collected for such a case. Again, according to the case, if
\nthe collected premium is not used up despite paying for all losses, the club can put it
\nin reserve or distribute it among the members.
\nRights and liabilities of the club and members are determined in a deed of
\npartnership and the Rule Book. Again, in the deed of partnership, there are
\nconditions for acceptance of the member to the club, termination conditions of the
\nmembership and regulations related to management.
\nClubs are separated into classes providing insurance cover with different
\nfeatures. The main categories of insurance that clubs provide are collected under
\nclasses of, Protection, (Indemnity), F.D.D ( Freight, Demurrage, & Defence), Strike
\nand War.
\n90
\nThe reinsurance provider of the club insurance is the International Group of
\nP&I Clubs, which is an association consisting of the clubs providing club insurance.
\nThe basic purpose of this association is to share the risk that each club carries among
\nthe group members. Conditions related to this are regulated in the contract named
\nPool Agreement. Other than the reinsurance function of the International Group, the
\ngroup has the function of representing its members in international platforms and
\nproviding information among its members.
\nIn club insurance, the basic liability of the member is to pay premium. In
\nmutual clubs, premium is the amount emerging as a result of sharing the claims
\nlosses, which the club has paid within the year for the members. Another
\nresponsibility of the member is to inform the club about the risk type. This
\nresponsibility can arise before the contract, during the contract and after the contract.
\nAmong the duties of the member towards the club, there are preventing losses from
\noccurring, named protection measures, and taking necessary actions to prevent
\nincreasing losses after the damage occurs. The club is on the other hand, liable to
\nthe member for meeting the demands, paying the claims and providing financial
\nsecurity.
\n3- There has not been any P&I clubs established in Turkey until now.
\nTherefore, Turkish ship owners meet their needs for P&I insurance from the clubs
\nestablished abroad. Turkish owners gets insurance mostly from English clubs. The
\nEnglish P&I club sector is a sector which is not flexible and in this sector insurance
\nis maybe provided with a different amount for every kind of ship with considering
\nthe characteristics of the ship. However, as a result, ships with smaller tonnage have
\nto purchase insurance in higher limits than their needs (by paying more premiums).
\nWhereas the owners of ships with greater tonnage and less risks among
\nTurkish ship owners tend to register their ships in English clubs and other relatively
\nstronger clubs, ship owners with smaller tonnage and old age, comprising the
\nmajority of the Turkish merchant marine fleet, prefer generally fixed premium
\ninsurers or the clubs less recognized worldwide. P&I insurance policies issued by
\n91
\nthese clubs with bad reputation are not accepted in certain fields152 per the list
\n(recognized club list) published by the Turkish Maritime Administration, the
\nauthority for marine matters in Turkey. The clubs which appear on the aforesaid list
\nare determined via Assessment reports published by international credit rating
\ninstitutions on a yearly basis regarding the financial situation of the clubs and
\nannotations prepared jointly by the Undersecreteriat of Treasury and Turkish
\nMaritime Administration using the credit ratings of the clubs. The Turkish Maritime
\nAdministration currently includes the clubs with the credit rating of ”BBB” and
\nabove obtained from independent credit rating institutions.
\nAlthough there is not any legislation issued for P&I insurance, P&I insurance
\nhas entered into Turkish legislation as compulsory as a result of international
\nconventions agreements in recent years. It is inevitable for this legislation to increase
\nas environmental responsibilities expand. In relation to this development, the
\ndefinition and scope of insurance type should be involved in the Turkish Commercial
\nCode and the establishment type should be included in the Insurance Law in terms of
\na possible local club initiative. Actually, it is possible to establish a club
\ncooperatively within the scope of the regulation in Article 3 of the Insurance Law no.
\n5684. However, the provision regarding the number of partners which cannot be
\nbelow 200 in this article, is an obstacle for the establishment of a club according to
\nthe aforementioned article. The regulations to be made considering the structure and
\ncharacteristics of the club in terms of establishment and operation should be included
\nin this Law.
\nP&I insurance is not an existing insurance type in Turkey. This field, even in
\nthe insurance sector, is a field that very few correspondents have a grasp of. In direct
\nproportion, many ship owners do not have enough knowledge of the characteristics
\nof P&I insurance. The fact that ship owners do not have sufficient knowledge of the
\nscope of the insurance coverage they purchase in return for the premiums they pay
\nmay result in paying higher premiums for the insurance not providing any claim<\/p>\n
152 In club insurance required for ships bought within the scope of the credit received from abroad to obtaining CLC 92
\ncertificate in terms of tankers and again per relevant legislation.
\n92
\npayment. One of the things which initially is necessary to do about this subject is to
\norganize training activities in order to give information regarding P&I insurance by
\nthe Turkish Maritime Administration, maritime sector and even insurance sector.
\nEspecially, sharing the reports published by the clubs in renewal periods with the
\nmaritime sector at certain intervals will make the ship owners act more consciously.
\nIn order to ensure this sharing, it could be proper to create a committee where the
\nrepresentatives of the maritime sector are involved with the Chamber of Shipping.
\nThis will contribute to the shaping of the ‘Recognized club list’ published by the
\nTurkish Maritime Administration that the problems faced in the field of P&I
\ninsurance are conveyed to this committee first and then to the Turkish Maritime
\nAdministration. At the same time, the work of this committee will give positive
\nresults in terms of directing the ship owners to certain clubs.
\nThe fact that ship owners focus on certain clubs is important to show their
\nstrengths. This will have positive impacts on both the premiums to pay and
\nindemnities to be recovered.
\nThe opinion to establish a mutual club with the participation of Turkish ship
\nowners is brought forward frequently by various interests in Turkey diversely. This is
\na well-intentioned opinion, yet hard to bring into action in a short time. A Turkish
\nclub to be established may provide knowledge accumulation and raise
\nprofessionalism in this area. A Turkish club can be a national source of pride,
\nproviding guarantees abroad. However, establishment of a local club is not
\nconsidered as a first solution to solve the problems related to the P&I insurance
\nneeds of the maritime sector in Turkey. Ship owners are highly reluctant to invest in
\nestablishing a local club.
\nEven if such a club is established with government funds or support, the ship
\nowners are likely not to be involved in an organisation which is new, unknown and
\ninexperienced. Yet, from the results of a questionnaire made by the Turkish Maritime
\nAdministration, it is understood that the ship owners will mostly approach a Turkish
\n93
\nclub with caution (even though 35% of the ship owners who participated in the
\ninquiry stated that they have problems with their clubs).
\nSome of the reasons for keeping the interested people away from a local club
\nopinion are insufficient size of the Turkish merchant marine fleet, containing mostly
\nold and small tonnage ships and low awareness of insurance in the sector.
\nBesides, there is not sufficient statistical data to allow for making proper
\nanalysis regarding what kind of a club to be established in the maritime sector can
\nprovide assurance. It should be ensured that a study should be started by the Turkish
\nMaritime Administration to fulfil the need of data in question and at least, premium
\npaid by the ships registered under TUGS to the clubs, their claims and damages
\nrecovered.
\nThis is the case for mutual clubs, yet the issue can differ for fixed premium
\ninsurance. Fixed premium insurance is an activity which can be conducted by any of
\nthe insurance companies currently operating in Turkey. However, the work of the
\nmutual clubs without profit making purpose will lead the ones desiring to do fixed
\npremium insurance business to continue this activity with very low profits in terms of
\ncompetition and the insurers will prefer to invest in the fields that bring more profits
\nwhen they face a situation incompatible with the realities of life. However, an
\ninsurance company owned by government can provide club coverage with fixed
\npremium insurance. A decision of a public authority in this direction will be enough
\nto achieve that.
\nParticularly, the progress of this system may in time be followed by starting
\nto provide P&I insurance coverage for the ships used in internal waters, ships owned
\nby the government, sea busses and ferries. Such a structure will raise the knowledge
\nlevel and will help to fill the deficiency of qualified manpower existing in Turkey in
\nthe field of P&I insurance. Furthermore, it will help fulfil the need for data to some
\nextent.
\n94
\nReferences
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\nhttps:\/\/monkessays.com\/write-my-essay\/thehindubusinessline.com\/industry-andeconomy\/logistics\/article3533123.ece
\nhttps:\/\/monkessays.com\/write-my-essay\/kpiclub.or.kr\/eng\/About\/history.htm
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\nhttps:\/\/monkessays.com\/write-my-essay\/denizcilik.gov.tr\/dm\/istatistikler\/ResmiIstatistikler\/<\/p>\n","protected":false},"excerpt":{"rendered":"
ESTABLISHIGN A NEW PROTECTION AND INDEMNITY (P&I) INSURANCE INSTITUTION IN TURKEY ABSTRACT Title of Dissertation: Establishing a New Protection and Indemnity (P&I) Insurance Institution in\u2026<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8827,10099,10540,10536,10892,10538,10539,10537,10891],"tags":[10549,10616,10615,7687,10627,8857,10552,10295,10548,10622,8907],"class_list":["post-132585","post","type-post","status-publish","format-standard","hentry","category-australia-essays","category-buy-essay","category-cheap-essay-writers","category-get-assignments-done","category-page-paper","category-phd-essay-writers","category-research-paper-writing-service-for-any-topic","category-study-bay-essay","category-write-my-assignment-ireland","tag-ai-plagiarism-free-essay-writing-tool","tag-australian-best-tutors","tag-best-trans-tutors","tag-buy-essay-uk","tag-cheap-dissertation-writer","tag-help-with-writing-an-essay","tag-help-write-my-paper-ai-free","tag-homework-for-you","tag-online-essay-writers","tag-phd-essays","tag-write-my-essay-for-me"],"_links":{"self":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/132585","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/comments?post=132585"}],"version-history":[{"count":0,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/132585\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/media?parent=132585"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/categories?post=132585"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/tags?post=132585"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}