Title in Arial bold Subhead in Arial

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Solving the passenger compensation crisis
shipowners liability to passengers
Nick TaylorTradeWinds Marine Risk Forum
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Passenger Liability

• IG Club Entries
• GT 23,500,000
• 3.7 of all entered tonnage
• Main Components
• Ferries
• Commuter trade
• Long distance
• Cruise vessels

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Passenger LiabilityTrends

• In legislation
• Alignment with other transport sectors
• Ease of access to legal recourse
• Make the consumer pay for the risks associated
  with his choice of services
• In the Industry
• Bigger Ferries
• Bigger Cruise Vessels

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Passenger LiabilityWhat might have brought about
a crisis?

• Claims?
• Changes in the way Liability is assessed?
• Changes in Limits of Liability?
• Changes in the Underlying Risk?

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Passenger LiabilityHas the claims experience on
Passenger vessels provoked a crisis?
Deaths
PI Loss (US millions)
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Passenger LiabilityHave changes in the way
liability is assessed provoked a crisis?

• Three Regimes
• Domestic
• USA
• Athens Convention States

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Passenger LiabilityDifferences Athens 1974 vs
Athens 2002

• Introduction of strict liability for a shipping
  incident
• Two tiers of Liability
• Strict Liability
• Absolute Maximum subject proof of negligence
• with Compulsory Insurance to Strict Liability
  Limits supported by evidence of insurance
• Introduces the right of direct action against
  insurers
• War Terrorism subject separate Certification
  and Limits

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Passenger LiabilityAre changes in Limits
responsible for a crisis?
Aviation
Unlimited
Max Liability Limit per passenger - US
Unlimited
Strict
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Passenger LiabilityAre changes in Limits
responsible for a crisis?
SDR 1 US1.5
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Passenger LiabilityHas the underlying risk so
changed that it has provoked a crisis?

• Perception on part of Governments of failings
• in design/inherent stability
• re overloading/maintenance/human error issues
• Passenger Crew numbers on board Cruise Vessels
• Introduction of requirement for War Terrorism
  cover

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Passenger LiabilityWar Terrorism the cause
of a possible crisis?

• Initially no exemptions contemplated under Athens
  2002
• little room for manoeuvre
• Clubs resistance
• trying to derail the whole package?
• against the intent of the EU?
• with what degree of success?

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Passenger LiabilityWar Terrorism averting a
possible crisis

• Compromise solution brokered based on
• constructive engagement with all parties
• objective advice
• Achieved goals of
• moderating government ambitions
• ensuring all Athens exposures could be insured

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Passenger Liability What might have brought
about a crisis?

• Any Substantive Change?
• Claims? NO
• Changes in the way Liability is assessed? NO
• Changes in Limits of Liability? in Europe only
• Changes in the Underlying Risk? NO
• So why have the Clubs felt obliged to cut
  Passenger
• Liability limits in the cover they are offering?

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Passenger LiabilityAthens 2002 Limits in USD vs
Clubs sub-limit for Passenger Liability
SDR 1 US1.5
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Passenger LiabilityAthens 2002 what next?

• EU implementation seemingly on track target
  date 20/2/08
• Rolling in most sea-going passenger vessels
  involved in domestic trade
• Certification/Blue Cards
• Clubs expected to issue Blue Cards for non-War
  risks
• Marsh preparing the War Risks Blue Cards
• Would not the Clubs be the logical source?
• Cost / ease of acquisition / simpler regulation
• Options under review to be subject Regulatory
  approval

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Passenger Liability Blue Cards what next?

• Clubs will not offer a War risks Blue Card for
  Athens
• What about the next conventions due for approval?
• Bunkers ) all of which will
• Removal of Wreck ) require War Risks
• HNS ) certification
• But the clubs seem now to have foregone the
  opportunity for issuing a Universal Blue Card

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Passenger LiabilityIn Crisis?

• War and Terrorism solved
• no uninsurable exposure
• but Clubs have turned their back on the most cost
  effective way of certification
• What impact does the introduction of Passenger
  Liability limits by the clubs at Feb 2007 have?
• raises concerns amongst mortgagees
• limits - through the availability of insurance -
  the size of vessels that can be operated

at some cost to Owners
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P I cover as a whole In Crisis?

• First, a pollution sub-limit
• Now Passenger Passenger/Crew sub-limits
• What next?
• Cargo liability on large container carriers?
• Can the treatment of a minority be interpreted as
  indicative of deeper tensions in the Club
  system?

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