Cover for crew

The Maritime Labour Convention requires shipowners to have financial security in place to cover abandoned crew.

Mutualisation of insolvency risk breaks with traditional marine liability cover

Historically the financial consequence of abandonment of seafarers has not been an insured risk.

If a shipowner went bust and left the crew high and dry their only remedy for repatriation costs or unpaid wages was to exercise their lien, which had priority if the vessel then went through a judicial sale, so the risk of such claims fell on financiers rather than insurers.

The Maritime Labour Convention — which enters into force in August — transfers this risk in relation to repatriation costs from financiers to insurers, requiring shipowners to have financial security in place to cover such risk.

From the perspective of the P&I clubs and their shipowner members, mutualisation of insolvency risk is a significant departure from the traditional areas of marine liability cover provided by the clubs.

However, in light of the provisions of the MLC, the IG Club Boards have responded positively on extending cover provided to their members to meet the Maritime Labour Convention financial security requirements for repatriation.

The extension to cover does not include back wages; requirements for financial security in relation to back wages will not come into force until 2016, following further work by the joint International Maritime Organization/International Labour Organisation ad hoc working group.

Flag states owe seafarers the time and energy to ensure they are paid what they are owed. In the meantime, achieving a failsafe way of seafarers getting home is a significant achievement of the MLC.

for more maritime news see Lloyd’s List

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