THE ATHENS PROTOCOL

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THE ATHENS PROTOCOL THE IMPLICATIONS FOR
FINANCIERS OF PASSENGER SHIPS
Graham Barnes BankServe Insurance Services Ltd
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Herald of Free Enterprise
EstoniaNorwegian Dream
Express Samina
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SHIPOWNERS LIMITATIONS OF LIABILITY for
PASSENGERS
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The 2002 Protocol to the Athens Convention will
supersede the current provisions of the 1974
Convention 12 months from the date it is ratified
by just 10 states

• The EU is totally committed to the 2002 Protocol

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ATHENS PROTOCOL 2002

• Liability without negligence for the first SDR
  250,000 per passenger of claims for death and
  personal injury if the incident relates to a
  "shipping incident" (An incident that could not
  have occurred in a land-based hotel)

• Guaranteed by a Compulsory Insurance for SDR
  250,000 per passenger for death and personal
  injury claims, accepting direct action with no
  policy defences except wilful misconduct. Such
  insurance can be of any type or be combined with
  an acceptable guarantee.

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ATHENS PROTOCOL continued

• Maximum liability. IMO recommends a maximum
  liability limit of SDR 400,000 per passenger.

• Unlimited liability in respect of death and
  personal injury claims for States that choose so
  in respect of actions in their courts.

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THE PI CLUBS HAVE SAID THEY CANNOT PROVIDE THE
INSURANCE THAT THE ATHENS PROTOCOL 2002 REQUIRES!
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Key elements of the PI Club Mutual System

• Members Funds payable by Club Calls
• Establishment of the Pool accepting all member
  Clubs liabilities
• Pool reinsurance programme
• Strict indemnity principal limiting claims to
  Shipowners Limitation of Liability Conventions
• No conceivable risk of Overspill Claims

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EXTENT OF PI COVER

• Liabilities to Passengers and/or Cargo
• Liabilities to Crew
• Pollution liabilities
• Collision liabilities
• Damage to Port installations
• Removal of wreck

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The Clubs Difficulties

• Increased risk to the upper R/I layers, causing
  higher premiums for Pool R/I programme.
• Risk of Overspill Claims will become a reality.
• Guarantee requirement removes the clubs strict
  indemnity to shipowner principle.
• Cause internal divisions between club members, eg
  between tanker owners and passenger vessel
  operators.
• Maximum liability limits getting close to total
  capacity of world insurance markets.

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Current I.G. Pool Insurance Program
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AN R/I PROGRAM TO SATISFYALL PARTIES
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A CHEAPER ALTERNATIVE
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PROVIDING THE GUARANTEES
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CURRENT FINANCING LEVELS ON PASSENGER SHIPS

• US22 billion approx. in financing cruise ships,
  both outstanding and committed financing new
  buildings.
• US 3 billion approx. in financing ferries,
  outstanding and committed.

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TYPES OF FINANCING

• Single Ship Financing - secured by Ship Mortgages
  and assignments of insurances
• Corporate Financing - No Ship Mortgages
• Lease Financing

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REASSESSMENT OF THE LENDING RISKS

• Availability of the required insurance enabling
  operators to trade.
• Additional insurance costs which cannot be passed
  on to passengers in the ticket price.
• Major fatal incidents causing bankruptcy of the
  operator due to insufficient insurance cover.
• Lessors potentially liable for unpaid
  liabilities!
• Consolidation of the cruise lines has made second
  hand values of cruise ship more uncertain.

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MAXIMUM POSSIBLE LOSSES from a catastrophe
exceeding insured limits
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INSURABLE SOLUTIONS
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