Nordisk Skibsrederforening

Nordic Marine Insurance Plan (NMIP) 2013

New Chapter 18 on the insurance of mobile offshore units (MOUs)

In the Norwegian marine insurance market, hull and machinery, loss of hire and war risk insurance have for a number of years been based on the Norwegian Marine Insurance Plan (NMIP), the latest version being the NMIP 1996, version 2010. This Plan also included separate chapters on the insurance of offshore structures (Chapter 18) and builder’s risk insurance (Chapter 19). By an agreement dated 3 November 2010, the Nordic Association of Marine Insurers (CEFOR) and the Shipowners’ Associations of Denmark, Finland, Norway and Sweden agreed to create a new Nordic insurance plan based on the NMIP 1996, version 2010, to be named “The Nordic Marine Insurance Plan of 2013” (the “Nordic Plan”). This Plan is now completed and will come into force on 1 January 2013.

As was the case with the previous Norwegian Plan, the new Nordic Plan is accompanied by a relatively detailed Commentary. The language of the Plan and the Commentary is now English, while the Plan will also be translated into the four Nordic languages. By contrast, the previous Norwegian Plan and Commentary were issued in both English and Norwegian.

Generally, the new Nordic Plan is based on the most recent version of the Norwegian Plan and the changes are relatively limited. There is, however, one important exception. Chapter 18, which previously was headed “Insurance of offshore structures”, is now headed “Insurance of mobile offshore units (MOUs)” and has been completely rewritten. The reasons for this are partly that the previous Chapter 18 to some extent was drafted primarily with drilling units in mind, and was therefore less suited to other units such as FPSOs, and partly a consensus that there was a need for a general update based on insurance practice in this area in recent years.

For the purpose of redrafting Chapter 18, CEFOR established an internal working group made up by insurers’ representatives to prepare a first draft before somewhat later establishing a Joint Working Party with representatives from insurers, MOU owners and brokers. Nordisk was represented both in the working group and the Joint Working Party.

When drafting the new Chapter 18, one ambition was that the chapter should become more comprehensive and, apart from the general provisions of Part I (Chapters 1 – 9) of the Plan, should include all important provisions otherwise found in Chapters 10 – 14 and Chapter 16, suitably amended to meet the insurance needs of MOUs. Accordingly, all relevant provisions relating to hull insurance, total loss and loss of hire are incorporated into the new Chapter 18. The exception is war risk insurance, where Chapter 18 only refers to the general Chapter 15 on war risks. As a result, the new Chapter 18 is about 25 pages in length, compared to about three-and-a-half pages in the old Plan.

Generally, the new Chapter 18 creates a complete regime for the insurance of MOUs, or at least as comprehensive a regime as can reasonably be expected from a set of standard terms. Chapter 18 is now subdivided into five sections. Section 1 – General Rules to the Scope of Insurance, refers to and makes appropriate amendments to the general provisions of the Plan (Chapters 1 – 9). With the exception of Section 5 – War Risk Insurance, the other sections, 2 – Hull & Machinery Insurance, 3 – Total Loss Insurances, and 4 – Loss of Hire Insurance, are standalone provisions (i.e., they do not refer to the corresponding chapters of the Plan). A general review of Chapter 18 is beyond the scope of this article, and we will limit ourselves to mentioning some of the most important points concerning Section 1.

§ 18-1 (a) deals with the insurable value/sum insured. This section states that the sum insured shall be deemed to be the assessed value, unless circumstances dictate otherwise. The rules allow the sums insured to be split for MOUs with disconnectable equipment. This means that the MOU and such equipment (e.g., mooring systems and risers) may be treated as separate insured objects with separate values when the MOU is away from the working location. When the MOU is on location, however, the MOU and the equipment will be treated as one insured object.

§ 18-1 (d) provides that the insurance terminates if the MOU loses Main Class, although if this happens while the MOU is operational the insurance will not terminate until the ongoing operations are completed. Item (e) sets out certain specific safety regulations, such as requirements for blow-out preventers (BOPs) or “other well pressure control equipment of standard issue”, and there are requirements to have – and comply with – a “move plan” for moving the MOU. Item (f) states that measures to avert blow-out etc. are not covered, but damage to the MOU as a result of such measures is covered.

Item (g) introduces some new limits on the insurer’s liability. Liability for loss mitigation/salvage costs is capped at USD 500 million, and collision liability is capped at the higher of USD 500 million or 50% of the sum insured. Finally, item (i) deals with waiver of subrogation and co-insurance. This provision is based on the concept that the insurer’s liability and rights of subrogation shall correspond to the contractual position of the insured, provided the contractual regulation in question is customary or has otherwise been approved by the insurer.

There is a great deal of enthusiasm for the new Nordic Plan in the Nordic insurance market, and it is hoped that a modernized, comprehensive Plan common to the already substantial Nordic insurance market will enhance its competitiveness towards the other main markets, both on the shipping and offshore side.

We trust the new MOU insurance regime will prove to be a better tool for the insurance of such units than its predecessor, and that the need for additional clauses etc. will be reduced. We look forward to assisting our members with any issues arising under the new Chapter 18 or otherwise in the time ahead.