Insurers warn on sulphur cap

As the International Maritime Organization's (IMO) 2020 sulphur cap draws closer, insurance broker Marsh has emphasised that non-compliance with the regulations could allow a ship to be declared unseaworthy, threatening to invalidate liabilit

The implications of the IMO cap will be widespread and there are plenty of questions that remain unanswered, one of which is the impact on insurance policies.

Marsh explains that non-compliance with the new global sulphur cap for shipping in 2020 could threaten a vessel's insurance cover, stressing that it is the responsibility of the flag state and the vessel could be at risk of losing its classification status on non-compliance.

"If a vessel fails to comply with the requirements of the MARPOL Convention, then it would effectively be in breach of the flag state national law, and the vessel's MARPOL certificate may be withdrawn, or at least suspended, by the flag state," Marsh said.

"Underwriters may claim that breaching international conventions and losing flag state convention certification status (and possibly having class withdrawn or suspended) is so fundamental to the risk that such a breach alters their understanding of the 'risk as a whole,' regardless of any link with the loss that happened," Marsh added.

While insurers do not anticipate a change in policy wordings, they may approach the insured with further questioning prior to binding business or renewal.

"Shipowners are advised not to assume that insurance cover will continue to remain in place under all circumstances following a breach of the MARPOL Convention Annex VI after January 1, 2020," Marsh added.

Industry participants have argued that, unlike the Ballast Water Convention (BWC), there will not be a "grace period" to allow market players to keep up with the change.

The delay in implementing the BWC, which entered into force nine months after the original implementation date, was due to technological and software limitations, but, in comparison, the technology needed to adhere to the 0.5 percent sulphur cap is readily available.

It has been suggested, therefore, that compliance with the sulphur cap will not be treated with the same soft-handed approach.

 

www.marsh.com

ww.imo.org

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