Notice of Cancellation
There appear to be a number of different approaches within the market toward handling Notices of Cancellation (NoCs) for War/SRCC risks. The JCC has provided some thoughts and commentary on what would be best practice below.
Lead markets, follow markets and brokers have distinct roles in the process.
Whilst the GUA schedule makes it clear that NoCs need to be approved by all market participants, each for their own share, this can be overridden by provisions within the slip/policy itself. If the Lead wishes to give notice, either for cancellation or to review terms they would therefore need to check for any specific provisions regarding cancellation for war or strikes and if none are applicable then the GUA Schedule would prevail.
Under the cargo GUA schedule, once the leader has decided to issue an NoC the broker should be instructed by the Lead to consult all followers to a) inform and b) ask whether followers support the cancellation, per 3.3.7 of the GUA cargo Schedule being one of the Alterations which may be agreed only by all Underwriters each for its own proportion severally and not jointly.
All followers that wish to cancel should advise the Broker (and may also wish to inform the Leader) that they agree with the Leader’s actions but do not need to issue their own notice at their own time; they just need to support the actions of the Leader. This avoids each follower giving notice for each line. It also avoids differing slip support in the event of a claim where notice may have been given at different times.
Increases in premium where no further changes have been effected are within the discretion of the Leader per 1.12 of the GUA Marine Cargo Schedule, and such new rates would apply for all parties.
To ensure the position is understood, Followers should check with the Leader as to the Leader’s intentions. If the Leader does not wish to give notice of cancellation but a Follower wishes to give notice for their own line, they can do so by notice to the broker in accordance with the terms of the appropriate notice of cancellation (and may also wish to inform the Leader). As provided under the GUA schedule, if the leader has given notice to review certain terms then this can be performed by the leader only, but cancellation would require notification to all followers, by the broker, and their agreement.
Advise followers on instruction from the leader, and also advise the client.
RMRS and IACS - Survey Certification
IACS removed the Russian Maritime Register of Shipping from their membership. This is believed to be effective in respect of survey certification and means that surveys cannot now be approved by RMRS.
Where there are concerns over the specific classification clause and/or RMRS vessels, brokers should liaise with clients and obtain specific agreement from underwriters in respect of coverage continuation.
About the Joint Cargo Committee
Representing the interests of those writing marine cargo and related risks within the London market, this committee comprises underwriting representatives from both the Lloyd’s and IUA company markets. The committee is also supported by experts from the Legal, Claims and UK Cargo market.
The Chairman is Richard Golder.
Role of Committee
The Committee provides a representative forum for appropriate discussion of current issues and challenges facing the marine cargo market.
Such requirements would include:
- promoting the principles of best practice in the cargo market
- suggesting alternatives to industry practice and proposing suitable solutions
- representing the interests of the cargo insurance market to governmental and other regulatory bodies and to the Corporation of Lloyd’s
- providing a forum for education and development of technical knowledge of all in the cargo insurance market
- promoting the London Market as the global centre of excellence for cargo insurance
- providing support and guidance to other Committees, principally the LMA Marine Committee
- developing new wordings to address evolving challenges facing the cargo market
- ensuring all current market wordings are updated in accordance with legislative changes.
Members' attention is drawn to the US Advisory in the links section. This was produced after months of liaison with industry and is non-mandatory. It will be for individual underwriting entities to review and decide how to best demonstrate appropriate due diligence. During the liaison, it was explained that sanctions breaches render insurance cover inoperable, AIS tracking is not in itself capable of preventing transgressions and that insurers do not have constabulary powers, so it is hoped that Flag States will demonstrate leadership.
Piracy: the Committee retain the services of SPS Global (previously IHS) to provide them with detailed briefings of the changing security threats around the world, which are regularly updated and available on the above tab.
Misappropriation: the recent experience of theft by misappropriation has led to a greater understanding of the developing operating methods and increased exposures of goods in store. Misappropriation Exclusion and Misappropriation Inclusion Clauses, including definitions of the perils faced, have been released as proposed measures and are available above.
Basis of Valuation: the increasing disparity between production and sales costs, where goods can be replaced has been recognised by the Committee, with an appropriate clause now finalised.
Cyber: the Prudential Regulation Authority (PRA) have asked insurers to identify, quantify and manage their cyber risks. The definition of cyber remains fluid.