Protection and indeminity shipping insurance premium rise 2015 – a review

( Source : IMO – Convention on LLMC )

 

Protocol of 1996

Adoption: 2 May 1996

Entry into force: 13 May 2004

 

Under the Protocol the amount of compensation payable in the event of an incident being substantially increased and also introduces a “tacit acceptance” procedure for updating these amounts.

The limit of liability for claims for loss of life or personal injury on ships not exceeding 2,000 gross tonnage is 2 million SDR.

 

For larger ships, the following additional amounts are used in calculating the limitation amount:  

  • For each ton from 2,001 to 30,000 tons, 800 SDR
  • For each ton from 30,001 to 70,000 tons, 600 SDR
  • For each ton in excess of 70,000, 400 SDR (US$634).

The limit of liability for property claims for ships not exceeding 2,000 gross tonnage is 1 million SDR.

 For larger ships, the following additional amounts are used in calculating the limitation amount: 

  • For each ton from 2,001 to 30,000 tons, 400 SDR 
  • For each ton from 30,001 to 70,000 tons, 300 SDR
  • For each ton in excess of 70,000, 200 SDR
  • mendments to 1996 Protocol
  • Adoption: 19 April 2012
  • Entry into force: 8 June 2015
  •  
  • The new limits are expected to enter into force 36 months from the date of notification of the adoption, so in 2015,  under the tacit acceptance procedure.
  •  
  • New limits:
    Under the amendments to the 1996 Protocol, the limits are raised as follows:
  • The limit of liability for claims for loss of life or personal injury on ships not exceeding 2,000 gross tonnage is 3.02 million SDR (up from 2 million SDR).
  • For larger ships, the following additional amounts are used in calculating the limitation amount:
  • • For each ton from 2,001 to 30,000 tons, 1,208 SDR (up from 800 SDR)
    • For each ton from 30,001 to 70,000 tons, 906 SDR (up from 600 SDR)
    • For each ton in excess of 70,000, 604 SDR (up from 400 SDR).
  • The limit of liability for property claims for ships not exceeding 2,000 gross tonnage is 1.51 million SDR (up from 1 million SDR).
  • For larger ships, the following additional amounts are used in calculating the limitation amount:
    • For each ton from 2,001 to 30,000 tons, 604 SDR (up from 400 SDR)
    • For each ton from 30,001 to 70,000 tons, 453 SDR (up from 300 SDR)
    • For each ton in excess of 70,000 tons, 302 SDR (up from 200 SDR).

 

RESULT

  • Shipping premium increases around 2015.
  • Insurance accounts for 37 percent of operating cost for ore carriers.
  • AS a result operating cost increases since insurance adds to operating cost.( Every year ship owner have to pay premium )

General cost classification of shipping is

1) operating cost

2) Periodic maintainance

3) Voyage Cost

4) Capital cost and repayment.

Since insurance adds to the operation cost , the big vessels have competitive advantage of low operation cost. Now in the supply, demand curve of the price and quantity of the ship – The marginal increase in price due to insurance premium will result in marginal decrease in quantity of the ship.

( Note : It will not reflect in freight rate because of the over quantity of the ship )

The increase in operation should be subsidized with some factor in shipping. It may reflect on

  • Stringent store supply
  • Reduction of manning
  • Super economic Speed
  • Hot lay up
  • Poor maintenance

 

 

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