A near 90-year prohibition on writing financial guarantees at Lloyd’s is being relaxed to allow syndicates to offer cover for ships’ crew.
The move recognises that new liabilities to seafarers are arising from the Maritime Labour Convention (MLC), which is due to enter into force on 20 August.
Lloyd’s is exempting the underwriting of seafarer-repatriation costs, following the insolvency of a shipowner, from a general ban on financial-guarantee business.
Special permission from Lloyd’s for MLC cover was recently obtained for Seacurus’s new CrewSeacure policy led by Brit’s syndicate 2987.
The general relaxation appears to pave the way for other syndicates to also write crew-repatriation risks.
The change potentially allows the reinsurers behind the $3bn reinsurance cover bought by the protection-and-indemnity (P&I)clubs in the International Group cartel to take on such risks. The P&I clubs have already been changing their rules to provide repatriation cover.
The CrewSure scheme, reported in TradeWinds in October, provides repatriation cover as required by the MLC, along with medical and personal-accident insurance, but is underwritten by various arms of the Munich Re group.
Individual syndicates planning to take on MLC-type risks will still need to get Lloyd’s approval to write this class of business.
The MLC, ratified by 35 countries accounting for 69% of the world fleet, has been described as a “seafarers bill of rights”.
While seafarers benefit, it also opens a huge new market for insurers with as many as 1.2 million seafarers covered by the MLC.
Lloyd’s is also recognising seafarer-abandonment insurance as a new class of business and allocated it the SA risk code.
The KP risk category is also being modified so it not only covers the reimbursement of costs arising from pirate seizure of ships or cargo but also covers costs involved in securing the release of crew.
Lloyd’s introduced a ban on financial guarantees in 1924 to stop syndicates becoming involved in chancy speculation such as insuring the value of used motor cars or covering foreign-exchange risks.
But a few guarantee-type risks remained acceptable such as provision of collision and general-average guarantees, mortgagee-interest insurance, reinsurance of surety bonds and provision of trade credit.
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