MRM. licensees. New CAMPAIGN. Anders Boman. Board Member. to obtain more members as

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1 The Swedish Club No July New SCOL: a web based business platform Anders Boman New Board Member Page Page CAMPAIGN to obtain more members as MRM licensees Page 4-9 AGM Keynote speaker Fredrik Sträng : Find your Everest and conquer Page 6-8 it! Page 22-23

2 Content No July Leader A message well received! 3 The Swedish Club MRM 4-6 Academy Out and about with MRM 7-9 International Group Progressing the Internatonal Group s heavy workload marketing & BUSINESS DEVELOPMENT Weather resistant Piracy Somali piracy today AGM Out and about 17 New Board member Managing Director s report Keynote speaker Panel discussion Out and about FD&D Security checklist 33 Stevedore damage Loss prevention Collisions and groundings P&I Cargo Club information Basic facts 39 Risk & operations New SCOL Club information Marine Insurance Course The Swedish Club is a mutual marine insurance company, owned and controlled by its members. The Club writes Protection & Indemnity, Freight, Demurrage & Defence, Charterers' Liability, Hull & Machinery, War risks, Loss of Hire insurance and any additional insurance required by shipowners. Head Office Sweden Visiting adress Gullbergs Strandgata Göteborg Postal address P.O. Box 171 SE Göteborg, Sweden Tel Fax swedish.club@swedishclub.com Emergency tel Greece 5 th Floor, 87 Akti Miaouli GR Piraeus, Greece Tel Fax mail.piraeus@swedishclub.com Emergency tel Hong Kong Suite 6306, Central Plaza 18 Harbour Road, Wanchai, Hong Kong Tel Fax mail.hongkong@swedishclub.com Emergency tel Japan Room 103, 6-1, 1 Chome, kaigan, Minatu-Ku Tokyo , Japan Tel Fax mail.tokyo@swedishclub.com Emergency tel Norway House of Business, 6th floor Postal address Tjuvholmen Allé 3 N-0252, Oslo, Norway Tel Mobile mail.oslo@swedishclub.com Emergency tel CEFOR Cefor reflections Club information News from Team Oslo Energy 45 News from Asia 46 News from Piraeus 47 News from Team I 48 News from Team III 49 Out and about Staff news 55 Club calendar 56 The Swedish Club Triton is published three times a year and distributed free of charge. The Swedish Club Letter is an editorially independent newsletter and opinions expressed by external contributors are not necessarily those of The Swedish Club. Articles herein are not intended to provide legal advice and the Club does not accept responsibility for errors or omissions or their consequences. For further information regarding any issue raised herein, please contact our head office in Göteborg. Editorial Advisory Board Peter Andersson, Susanne Blomstrand, Henric Gard, Birgitta Hed, Anders Leissner, Lars A. Malm, Lars Rhodin, Tony Schröder, Carola Weidenholm. Production co-ordinator Susanne Blomstrand. PR-consultant TRS Public Relations Ltd., London. Layout Eliasson Information, Göteborg. Cover photo IStockPhoto. Print PR Offset. 1107PR5200B The Swedish Club. Articles or extracts may be quoted provided that The Swedish Club is credited as the source.

3 Leader MD Lars Rhodin A message well received! Dear members and associates, The Swedish Club had a successful journey in 2010 with a most satisfying outcome. A net combined ratio of 87% underpinned the operating profit of USD 29.5 million, reflecting underwriting discipline, high quality members and a relatively benign claims environment. In fact, we had a better than expected turnout of the retention/risk transfer arrangement than the one modelled in the phase leading up to the restructuring of the programme. The overall result is of the benefit to members as our solvency has significantly improved over the past few years. This provides stability going forward. The mutual P&I framework is under review not only by the European Commission but also in the press and at conferences. It is interesting to note that most of the people who are critical of the current system have a vested interest in having that viewpoint. Most users, and beneficiaries for that matter, seem however to take a different position, appreciating the inherent cost benefits, service dynamics and the comprehensive cover afforded. It is of course troublesome that the cost for risk transfer is very efficient within the International Group troublesome if you want to compete and cannot considering current costefficiency. But who is there to benefit from the competition the way some of these critics want it to be? Certainly not the shipowners! Other interesting issues in the P&I probe debate are those about pricing and cover. The aspects connected therewith are however often forgotten in the equation. Pricing in a mutual context could have substantial advantages in circumstances of uncertainty and change. The approach to pricing would be quite different from a commercial operation s point of view when exposure patterns change. Pricing by the mutual takes more risk in these circumstances. There are also differences in exploiting information asymmetries and incompleteness in contracts. In the mutual system, we also have omnibus rules under which Lars Rhodin Managing Director shipowner directors can decide to cover claims that are not covered under the rules but ought to be covered. After all, mutual P&I is there to serve its intended purpose. Another point at issue is shipowners rights to limit legal liability, following incidents giving rise to claims. The subject was discussed in detail by an expert panel at our recent AGM and is featured in this issue of the Triton. Limitation recognises the overall benefits of conveyance for the society at large; it provides for clarity and makes it easier for the partners in the venture to manage the risks i.e. buy insurance. The appropriate levels of limit need to be discussed and reviewed in tandem with changes in society. However, when there is a limitation regime in place, it should be observed. Unfortunately, we have seen in recent years even government authorities making efforts to disregard legislation in force their own legislation. So much for predictability! On a final note, the Club is in process of launching a new Electronic Business Relationship Platform. The platform will enhance interactivity and provide new useful features to facilitate efficient information flows and transactions. The benefits to members of the initiative are well described in an article later on in this publication. We are set to make your business life easier. Yours sincerely, PHoto: Jonas Ahlsén 3

4 The Swedish Club Academy Maritime Resource Management Campaign to obtain more me Martin Hernqvist Managing Director The Swedish Club Academy AB Who would not want to offer seafarers personal and professional development while saving on costly accidents at the same? We believe all Swedish Club members would be interested in this. With recent reports linking genuine safety cultures and reducing insurance claims, to implementing MRM, the Club will intensify its efforts to gain more members as MRM licensees. What is MRM? In short, Maritime Resource Management is a training course currently consisting of 15 course modules. MRM deals with human factor issues such as leadership Thesis links fewer claims to MRM training Cathrine Waldebjer s thesis confirms MRM s positive impact on safety culture and claims frequency The number of licensed MRM training providers has increased rapidly over the past years but the Club wishes to see more members as MRM licensees and teamwork, effective communication, attitudes and culture. MRM is neither a technical course, nor a simulator course, and not much equipment is needed to carry out the course. The people running the course are called MRM Workshop Leaders and receive their workshop leader training through The Swedish Club Academy. Suitable people for this task could be Safety Managers, Quality Managers or similar. The basic 3-4 day MRM training course can be carried out in-house or wherever quality training can be provided; but the actual implementation that MRM really becomes part of the company culture is best carried out by the company itself with active, visible support from senior management. This can include bringing up MRM issues during officer conferences, such as focusing on recent course modules, or other areas identified as in need of improvement. It could also include analysing incidents using MRM Is there a correlation between resource management training and a low frequency of insurance claims? That was the question Cathrine Waldebjer, a student at Chalmers University of Technology, Department of Shipping and Marine Technology, tried to answer in her bachelor s thesis. The thesis, which was completed in June 2011, provides good news. A conclusion of the thesis is that there is a correlation between safety culture, resource management training and a low of claims. Six shipowners, all members of The Swedish Club, took part in a study, of which three had seafarers trained in MRM while the other three had not. The three shipowners who had seafarers trained in MRM took the three top positions for low claims frequency over the past ten years as well as in a ranking list measuring the level of safety culture at the company. The three shipowners using MRM all stated they had experienced a fall in the number of incidents and accidents since implementing MRM. It is encouraging to note, yet again, that most incidents and accidents do not happen randomly due to bad luck or act of God. Instead, most incidents seem to be a consequence of a system failure and a shipowner may therefore decide to run a system (i.e. a company) where failures frequently happen or a system where failures are rarely generated, and when they do, barriers are put up to protect the failures from turning into losses. To make a system change, it takes not much more than a belief and a commitment to safety and to use the tools that are readily available. 4

5 (MRM) mbers as MRM licensees terminology and submitting MRM-related news on a regular basis to the ships. The purpose is to make MRM a living system in the company. Ultimately, MRM aims at creating a company culture characterised by the highest levels of safety, efficiency and job satisfaction. Is it costly? No, it is not. The annual licence fee for all training material, support and further development, is a few thousand US dollars. Compared to the operating costs of a ship, including premiums, claims costs and deductibles, the licence fee for MRM is exceedingly small. And with MRM s potential in reducing claims and increasing efficiency, the savings achieved from the investment can be huge. What about results? With the contributing factors in most accidents related to human and organizational 15 years without navigational insurance claims Readers of this magazine may recall that in 2008 the Club highlighted Star Cruises quite extraordinary achievements in keeping navigational claims at zero, despite operating in some of the world s most difficult waters. The statistics presented at the time, which also showed that many of their competitors in the cruise business experienced a more normal frequency of claims, reached the media and attracted a lot of attention. Thanks to the high degree of implementation of resource management at the company, and its proven effect on safety, Star Cruises won the Safety at Sea International Awards in the training category, in June years have now passed and Star Cruises records are still the same no navigational insurance claims. However, changing a company s culture takes time and results should not be expected overnight. Following the start of resource management training and implementing it, it would be realistic to put up a time frame of some three to five years before clear results can be seen. issues, and since practically all training in our industry has traditionally been technical, we had high expectations of good results when MRM training was introduced. The first evidence of MRM s positive impact came from attitude measurements and course evaluations carried out in connection with the launch of the training concept in the 1990s. The most recent evidence, which serves as important encouragement, is a thesis investigating the correlation between resource management training and the frequency of insurance claims. Star Cruises, who has managed to keep up their quite extraordinary claims record for five more years, is yet another. Both these issues are addressed in separate articles below. How to get started? To offer members the best opportunities possible for starting and implementing MRM training we will offer a number of training events for prospective MRM Captain Gustaf Grönberg, Star Cruises. Photo: Jonas Ahlsén Workshop Leaders specially dedicated for The Swedish Club members. The first such event will take place at the Club s Gothenburg office on September More information about this event has been posted on The Swedish Club Academy s website and in an invitation letter sent to members. The Swedish Club has been committed to resource management training for nearly 20 years and we are passionate about MRM. We hope that this campaign will result in a large number of new members joining the MRM network and that the Club, together with its members, will be able to share the benefits of successful implementation. We wish all members a warm welcome. For more information and contact details for MRM matters, please visit: It can take less time, it can take longer, depending on the size of the company and the extent of multi-national employees onboard and ashore. As part of the campaign to gain more members as MRM licensees, we aim at learning as much as possible from those who have succeeded and introducing more support material that will help members and other MRM licensees to make the MRM implementation phase as short, smooth and efficient as possible. Gustaf Grönberg, Star Cruises Fleet Captain and Senior Vice President Marine Operations, explains why MRM training is so important: What the seafarer needs is a simple explanation about what is meant by human factors so he or she can better understand why it matters, and what needs to be done to improve safety and conditions of service. The MRM training provided by The Swedish Club Academy addresses the issue of human factors without confusing the seafarer or managers with fancy words and confusing terminology. An article published in DNV Cruise Update No. 1, 2011 where Star Cruises explains their commitment to safety and the measures they have implemented to achieve these good results, provides interesting and useful reading for all members. A pdf version of the article is found in the MRM in media section at 5

6 The Swedish Club Academy Maritime Resource Management Transatlantic incorporates MRM to further improve operations Captain Joakim Vonasek JV Maritime Consulting Särö, Sweden Statistics show that shipping companies that have successfully implemented an MRM culture have fewer incidents and accidents compared to other shipping companies. Captain Joakim Vonasek has been working for Star Cruises since He became a certified MRM Workshop Leader 2008 and launched JV Maritime Consulting, a specialized consulting business within Maritime Resource Management following year. The Swedish Club s P&I member, Transatlantic, has worked actively to incorporate and enhance the Maritime Resource Management (MRM) culture in their organization since The project aims at including MRM principles in everyday operations and improving safety in the company. Ultimately the whole project will be a cost-cutting exercise, benefitting its employees and clients. Implementing an MRM culture cannot be achieved by just taking part in an MRM training course. The training itself is a fundamental part in a process that consists of several components. The project was initiated by Senior Vice President, Balder Hansson and involvement and commitment from senior management is an absolute requirement for successful results. An open and interactive dialogue throughout the process between all parties onboard and ashore, is another important ingredient. Follow-up activities, such as assessments and progress evaluation onboard the ships and at the shore organization, are carried out to ensure that the desired cultural change really takes place. Implementing MRM at Transatlantic included the following steps MRM conference for all masters and relevant shore personnel to introduce the MRM concept, the objectives of the project and gain commitment. Ship visits to make sure that documents and course material were in line with and adapted to Transatlantic s operations. Amendments and updates of the SMS (Safety Management System) manuals to incorporate MRM, where necessary. MRM training courses for seafaring staff. Articles and MRM updates in Transatlantic s internal magazine. Annual visits to Transatlantic s ships to assess and evaluate progress. Participation in The Swedish Club Academy s Mariner Attitude Survey (MAS). MAS a useful tool The outcome of the Mariner Attitude Survey will be a useful tool for focusing on the most critical areas where improvements can be made. The benchmarking opportunities with other companies will give Transatlantic information about its strengths and weaknesses and using the Mariner Attitude Survey in the MRM project will be helpful in achieving the company s high goals of safety and job satisfaction. Statistics show that shipping companies that have successfully implemented an MRM culture have fewer incidents and accidents compared to other shipping companies. The author of this article, who has been contracted on a consultancy basis to act as a project leader and MRM workshop leader, hopes and believes that Transatlantic s initiative will not only produce good results for the company but also serve as an encouragement for other shipping companies who want to improve their operations. New MRM training providers Since the latest issue of The Swedish Club Triton, we have welcomed the following training establishments to the MRM network: Seek Research and Consultations Pvt. Ltd., Gurgaon, India BSM Crew Service Centre, Yangon, Myanmar BSM Crew Service Centre, Shanghai, China BSM Crew Service Centre, Jakarta, Indonesia Wallenius Marine, Stockholm, Sweden Transnet National Ports Authority, Durban, South Africa (BSM stands for Bernhard Schulte Shipmanagement. With the addition of the three crew service centres above, the BSM group now operates eight MRM training centres.) 6

7 (MRM) Photos: The Swedish Club Out and About with MRM March 2011 The second batch of pilot boat operators from the Swedish Maritime Administration receiving MRM training on the island of Arkö, Sweden. The MRM workshop leaders running the course were two pilot boat operators, Rosita Kjellberg-Green (fifth from left) and Pierre Sundberg (second from right). The workshop leader coach was Martin Hernqvist of The Swedish Club Academy (fifth from right). Continues 5 April 2011 Prospective MRM Workshop Leaders attending a train the trainer event at PHILCAMSAT in Makati City, Philippines. Ten training establishments were represented at the meeting and delegates came from China, India, Indonesia, Myanmar, the Philippines and Singapore. 6 April 2011 MRM Workshop Leaders attending a meeting at PHILCAMSAT in Makati City, Philippines. The main aims of the meeting were to provide a refresher for certified workshop leaders, discuss new course material and provide a forum for exchanging views to further enhance the standards of the course s contents and training. There was also a special focus on a new MRM module dealing with pilotage and VTS. 7

8 The Swedish Club Academy Maritime Resource Management PhotoS: The Swedish Club 27 April 2011 Prospective MRM Workshop Leaders attending a train the trainer event at The Swedish Club Academy, Gothenburg, Sweden. Back row, from left to right; Capt Sjaak Sprong, Nederlands Loodswezen BV, Eric C. L. Goedhart, Nova Contract Maritime Academy, Philip Christiaan van Wijnen, P&O Ferries, Anders Brödje, Chalmers University of Technology and Paul Fairbrother, CSMART. Front row, from left to right; Capt Hans Van Driel, Nederlands Loodswezen BV, Simon Hughes, CS- MART, Karin Jersler, The Swedish Club Academy (Trainee) and Martin Hernqvist, The Swedish Club Academy. 11 May 2011 Courtesy visit to Novikontas Maritime College in Riga, Latvia. The college is the first MRM training provider in Latvia and offers stateof-the-art training facilities close to the city centre of Riga. From left to right; Aleksejs Bogdanecs, Aleksandr Chropenko, Martin Hernqvist, Dmitrijs Semjonovs, Orests Visnevskis and Janis Sticenko. 28 April 2011 MRM Workshop Leaders attending a meeting at The Swedish Club Academy. The meeting was the second MRM Workshop Leaders in April 2011 with a special focus on the new MRM module focusing on pilotage and VTS issues. The first meeting was held in Manila on 6 April. 8

9 (MRM) Out and About with MRM 12 May 2011 DS Scanmar s senior officer seminar in Riga, Latvia, on May 2011, included topics on passage planning, MARPOL, insurance and Maritime Resource Management. The event was jointly organized by Capt Frank-Uwe Schneider, Head of Fleet Personnel Department, DS Scanmar Crewing Services GmbH and Alexander Borisovsky of BIMS Ltd in Riga. Hans Filipsson of The Swedish Club discussed insurance issues while Martin Hernqvist of The Swedish Club Academy focused on MRM May 2011 The third batch of pilot boat operators from the Swedish Maritime Administration receiving MRM training in Norrköping, Sweden, on May The Swedish Maritime Administration s Director General, Ann-Catrine Zetterdahl, visited the course and expressed her support for the MRM training courses that fit very well with the current work on restructuring and improving the services of the Administration. MRM workshop leaders running the course were two pilot boat operators, Rosita Kjellberg-Green and Pierre Sundberg. 9

10 International Group Andrew Bardot Progressing the International G Andrew Bardot is Secretary and Executive Officer of the London-based International Group of P&I Clubs. The Group has 13 member clubs. One of its main roles concerns the operation and regulation of the clubs claimssharing system, commonly known as the Pool. All qualifying claims exceeding the current individual club retention of USD 8 million are shared between the International Group membership. This arrangement is underpinned by an extensive reinsurance programme. The Group provides a collective voice for the clubs in areas such as the development of international conventions and new regulation, together with other issues bearing on liability and insurance. In addition, the International Group acts a focus for sharing information on safety and environmental issues and other matters of broad concern. Such issues shape the work programmes of the Group s subcommittees and working groups. Matters now before the International Group are wide-ranging in scope, from EU scrutiny of the mutual system to trade sanctions and piracy. Photo: Jonas Ahlsén Once again EU competition authorities are investigating the workings of the International Group and the club system. Not surprisingly, this has required significant input from the Group collectively and from clubs individually over the past two years. Andrew Bardot: The latest investigation was officially The Commission has made a public declaration that it recognises the value of the club system launched in August of last year. In reality, however, we have been busy talking with the Commission since late We have put in an enormous amount of work, as have the member clubs. Fortunately, this dialogue has been conducted in a cooperative and positive manner by both sides. This latest investigation has a different character to that of earlier inquiries during the 1980s and 1990s - when the investigations arose from specific complaints in relation to certain aspects of the operation of the Group arrangements. This is not the case today. Now the Commission s interest is more a matter of due diligence, within the context of a much wider review being undertaken in the insurance sector. The present focus involves three main areas: quotations and release calls (both investigated previously) and the Group s reinsurance arrangements. As always, our great challenge is to help the European Commission understand the unique structure and functioning of the clubs and the International Group. The Commission s team may not be entirely familiar with the unique club system, but it is certainly familiar with mutuality - there are over 7,000 insurance mutuals in Europe although only a small handful operating true mutual structures like the Group clubs. Andrew Bardot and many others within the P&I community have worked hard to increase awareness and understanding of the club system: This work has gone on at the Group level, supported 10

11 roup's heavy workload by excellent work by delegates from Group clubs and representatives of owners, brokers and reinsurers. I believe we have made good headway. The Commission has made a public declaration that it recognises the value of the club system and that it wishes to seek improvements in its functioning, rather than challenge fundamentals. The Commission has made it clear that it has no desire to destroy or undermine the P&I system. It seems that the main focus of the Commission s interest, on this occasion, is the operation of release calls. Currently, the International Group is awaiting a formal communication from the Commission. Andrew Bardot: The ball is in the Commission s court. It has yet to state any formal concerns in writing. We understand that the investigating case team hopes to form a view as to where the investigation is going during the course of this year. For our part, we stand ready to continue the dialogue with the Commission at any time. Taken overall, I am reassured through my contact with the Commission. I feel that the outcome will not be detrimental to the club system as a whole. Trade sanctions: the complexities The many complexities associated with compliance with trade sanctions is another significant matter of concern. Andrew Bardot comments: In recent years the dominant issues involved Iran but, more recently, Libya and the Ivory Coast have also become concerns. Sanctions-related legislation in the United States and EU is obscure and can be difficult to interpret and apply. The most recent rounds of sanctions legislation have adopted a new approach, with the regulation of insurance seen as an effective way of controlling trade to and from target countries. Put simply, the view is taken that if insurance for such activities is made unlawful or sanctionable, no-one will assume the risk. Naturally, this causes many difficulties for insurers, given the difficulties when attempting to interpret the rules. Insurers can be held responsible for activities of which they have no knowledge. More generally, there have been enormous problems relating to Iranian trading companies insured within the Group. The lack of a clear interpretation of regulatory requirements has forced some clubs, reluctantly, to terminate cover for major long established Iranian shipping interests. Equally, the International Group has had its successes in promoting a more positive and better defined approach to sanctions legislation: In the United States, for example, we have obtained clarifications which are of considerable practical help to clubs and their members. We have also had our successes in Europe. In the EU context we contributed to the drafting process. As a result, EU Council Regulation 961/2010 is much clearer than the original draft which could have prohibited the insurance of virtually any ship trading to or from Iran. Turning to Libya, Andrew Bardot says: Here, sanctions are much more company/individual specific. It is for this very reason that they are somewhat easier to address, from the insurers standpoint. Piracy: immediate concerns By the measures of time and effort, it could be argued that Group resources devoted to piracy matters are disproportionate to the risks covered by the clubs. Yet, clearly, the International Group does have a central role in disseminating information, given that it represents more tonnage than individual shipowner associations. The Group worked very closely with shipowner organisations to develop of Best Management Practice guidance in this difficult area. The clubs take the view that ransom should not be covered: ransom is not a liability and, therefore, it should not be covered as a matter of course. That said, ransom may be covered on a discretionary basis. The International Group, together with all shipping organisations, understands that, ultimately, the long-term solution to piracy is the promotion of stable social structures in Somalia. In the immediate term, however, the clubs must confront a more specific concern: At the last renewal, clubs found themselves renewing cover for The clubs take the view that ransom should not be covered vessels which remain in the hands of pirates including one particular vessel in active use as a mothership. The reason, of course, is that liabilities do not automatically cease upon the successful hijacking of a vessel and the safety and well-being of hijacked crews remains paramount. The subject of armed security remains as controversial as ever. Andrew Bardot: In this sensitive area the International Group has followed the industry lead. Views on this issue are highly diverse. As we all know, IMO Member States and shipowners organisations initially opposed the idea of armed security. Now, however, they take a more neutral stance. Some states and shipowner organisations more recently veering towards positive support. All that can be said is that the clubs must remain receptive to members needs. Oil pollution exposure For decades the P&I community has lived with the ever-present risk of a major spill. Andrew Bardot: Happily, it has been rather quiet on this front in recent years. The International Group clubs put in place the STOPIA and TOPIA arrangements in To date, there has been no TOPIA claim and only one STOPIA claim. STOPIA increases the compensation available for spills involving small vessels. It may have been quiet, yet the impact of the Deepwater Horizon disaster, in the US Gulf, could have had a significant effect on all tanker owners trading to the US. President Obama called for a review of OPA 90 and of the shipowner limitation rights enshrined therein. The International Group prepared position papers 9 continues on page 12 11

12 Marketing & Business Development State of the Market / Internat Henric Gard Director, Marketing & Business Development 2010 was a solid year for the Club. Results were strong in all business areas and our financial portfolio also performed well. With free reserves, once again, at record level the Club is now on a very robust and solid foundation, ready to tackle the ever changing market environment and more weather resistant than ever before. This fact should reassure and comfort members as well as future members and brokers that The Swedish Club is a safe company to be with in the years to come. Knowledge sharing The Swedish Club Marine Insurance Course During this spring we concluded our 11 th Marine Insurance Course (MIC). Over the years the course has become increasingly popular and appreciated by members as well as brokers and other interested parties. This year we welcomed 32 participants from Hamburg to Hong Kong representing members, brokers, reinsurers and correspondents, for five days of lectures and workshops on marine insurance related topics and issues. Photo: Stefan Eliasson Weather resistant As in previous years we asked participants for feedback for us to improve and adjust topics and lectures where needed. The results from this year s class were again encouraging with 90% grading the presentations either good or very good. Using the feedback, adjustments will be made to fine-tune and refine the course further with the aim of maintaining and increasing the quality and knowledge-sharing even further for future participants. In this context I would also like to take the opportunity of thanking our fantastic staff for their hard work and dedication in organising everything from lunches to lectures and workshops. The MIC is a great way to visualise our hands-on approach and the true values that we can provide. P&I transforming from a small to a medium-sized club Our P&I business has continued to grow and by 1 June we noted 49.1 million GT for Owners P&I and Charterers Liability entered. Over the past few years we have transformed the Club from a relatively Progressing the International Group's heavy workload 9 continued from page 11 and undertook extensive lobbying activities in an effort to head off potentially damaging revision of the shipowner liability provisions under the Act. The Group was also called to give oral testimony before the Congressional Hearings in Washington. It was argued, successfully, that the offshore industry and marine transportation are two very different industries. We pressed the point that OPA 90 is a tried and tested system under which liability limits have been reviewed over time to almost triple the original limits. It has produced the desired results and it provides for adequate levels of compensation. Two Bills emerged - one from the Senate and one from Congress and both were hostile. Fortunately, they were withdrawn. Pool claims Following a large claims spike in , the clubs have experienced a series of more benign years in relation to large pool claims. Andrew Bardot: On the Pool claims front, 2008 onwards have been more favourable years for the pool and reinsurers but inevitably, big claims will occur, albeit more random and less predictable in pattern and frequency than smaller attritional claims. International lobbying The Group has been lobbying extensively over recent years with governments and regulators around the world. At the EU level, the Group succeeded in moderating the socalled Erika III package. Andrew Bardot: The draft Directive, produced under the direction of the French Rapporteur, contained some extremely hostile provisions, including loss of the right to limit or doubling of limitation amounts in certain circumstances and unworkable financial security requirements for shipowners. Following extensive engagement by the Group with the Brussels institutions and States representatives these measures were moderated and included in the Insurance Directive. Importantly, the demand for financial guarantees was dropped; entry into a Group 12

13 ional Group Andrew Bardot The interest in the Club from owners and brokers remains high and we therefore expect continued growth during 2011 and 2012, but as before we do not seek volume before quality. small to a medium-sized club. This has been an exciting journey and even more exciting is that the growth has taken place accompanied by good results. The interest in the Club from owners and brokers remains high and we therefore expect continued growth during 2011 and 2012, but as before we do not seek volume before quality. With the current shipping environment, all P&I clubs face a number of challenges e.g. the churn effect and supposedly low general increases in the next 1-2 years and it is therefore pleasing to be able to state that we have the house in good shape and owners as well as brokers should be safe and confident in opting for P&I entries with the Club. Capacity is plentiful but not the claims leading ability The benign claims environment that we saw in 2010 might not be around for all that long as we now see some early signs of a tentative increase in frequency but this has by no means materialised to anything like a trend yet. On the other hand slow steaming seems to be here to stay at least for the container segment, but we have also noted this increase in the bulk and tank segments, which we believe may have a continued stabilising effect on the claims environment in the next 6 to 8 months. The influx of following capital to the Marine market never seems to dry out. Still our marine portfolio remains stable and growing slightly. We have noted a continued keen and increased interest from owners and brokers to place their marine policies with recognised and reputable claims leaders able to put up guarantees and provide hands-on action and advice when casualties occur. This is very encouraging for us as we are a marine insurer geared-up, ready and able to handle complicated casualties in any jurisdiction. Energy proceeding according to plan, if not slightly ahead Last year s establishment of a new business line and an office in Oslo had been under consideration for quite some time and market developments in 2010 produced a commercial environment beneficial for the launch of Team Oslo Energy. During our discussions with prospective members and the broking community, it became obvious to us that there was a need for more local and long-term capacity. We have so far received a warm reception and support from owners as well as brokers, which we of course are very grateful for. Our first risk was underwritten 1 March and to date we are pleased to count around 20 risks underwritten. Our ambition is to build a broad and diversified energy portfolio and we hope that by the end of the year we will have built a portfolio of 25 or more members. Additionally we are convinced that our presence in Oslo will help us further penetrate and develop our Norwegian P&I and Marine portfolios. So all in all, things look promising at the moment and we will continue to build the solid financial fortress that gives our members and business partners a comfortable feeling of being a member of The Swedish Club, and as always rest assured, we are with you all the time, all the way. club is deemed sufficient. The Group also engaged extensively with the Commission, Council and member state transport attachés in relation to EU sanctions regulation. Other lobbying activities have focused on the US in relation to the Deepwater Horizon fallout and Iran sanctions. The future The International Group s composition may well broaden in future years. The Group has recently undertaken a review of its new applicant membership criteria. As a result of which the membership criteria have been updated and modernised with an increasing focus on solvency requirements. China P&I has in the past expressed an interest to become a member of the International Group and further developments are awaited with regard to an application for membership. In conclusion, Andrew Bardot is bullish The financial performance about the future: The financial performance of Group clubs is strong. They have of Group clubs is strong. very successfully rebuilt their reserves following the financial markets turmoil of On the underwriting and investment fronts, we can now say that the International Group s membership is in sound health. The Clubs continue to provide a first-class service to their shipowner members through their expertise in underwriting, claims management and loss prevention and the intellectual capital and expertise which is pooled through the Group structure provides an unparalleled benefit to shipowner members and to third-party victims of maritime incidents alike 13

14 Piracy Somali Piracy today A situation going from bad created by leaders with a A key to understanding Somali pirate leaders is knowledge about Somali pirate leaders and how they have developed their criminal business model. In some respects Somali piracy has been regarded as the work of fishermen deprived of fish to catch and of simple criminals. But it turns out that the leaders who have developed the hijacking for ransom model are much more advanced. With a greater understanding of the adversaries, the international community can better design counter-piracy strategies and hopefully reduce the risk of piracy around the Horn of Africa. This article gives an outline of how piracy in its current form was developed, and also gives some examples of how Somali pirate leaders have been pro-active and dynamic in their response to anti-piracy. The early years of Somali piracy According to myth, the Somali coastal economy was wrecked by illegal fishing. Piracy started when desperate Somali fishermen targeted illegal fishing vessels from around While this narrative is partly true, there are a number of things that point to an early involvement of opportunistic criminals. Firstly, the main problem of Somali fishing was the meltdown of the Somali economy and the Somali state from , which destroyed logistics ashore and access to markets. Secondly, to underscore that the account of the desperate fisherman defending territorial waters is not straightforward, the vast majority of reported attacks on vessels off Somalia from 1989 onwards were mainly against cargo ships, while fishing vessels were only in the minority. The type of piracy that developed was armed robbery at sea, where ships were boarded and robbed of valuables and crew be- Hans Tino Hansen Managing Director & CEO Risk Intelligence, Vedbaek, Denmark With support of Senior Analyst Stig Jarle Hansen Hans Tino Hansen specialises in intelligence, terrorism, insurgency, organised crime and piracy as well as contingency planning. He led the development of the Four Circles Model for understanding the impact of and inter-relation between terrorism, insurgency, organised crime and piracy. He has advised a number of companies and governmental organisations at management level since the founding of Protocol in 2001 and as Risk Intelligence since He has also contributed to books on maritime security and is regularly consulted as an expert commentator by the international and Danish media. longings, close to the Somali shores. It was not until 1994 that the first hijack for ransom took place. Interestingly, and perhaps a shot below the waterline for the myth about foreign fishing vessels as the real culprits, the first vessels hijacked were two fishing trawlers owned by the Somali fishing tycoon Hassan Munya. The pirates, mostly from the Majerteen clan, operated out of Puntland on the northern coast of Somalia. The entrepreneurs In 2002 or 2003 a man called Afweyne came up with a business idea: to set up a business consortium to carry out more systemized 14

15 to worse! Maps: MaRisk by Risk Intelligence criminal business model hijacking for ransom operations against primarily international shipping off the Somali coastline. His model included setting up a consortium of investors, who would invest a small amount of US dollars against a future return of investment based on a share of the ransom paid by the foreign shipowners. The shareholding structure originally included shares with investments of as little as USD 1,000-2,000. Afweyne recruited two pirate leaders, who had taken part in the early years of Somali piracy, namely Boyah, who started in 1992 and Garad who started in They became captains under The three founders of Somali piracy Abdulkadir Mohamed Afweyne Afweyne, the leading pirate group leader. In 2006 Afweyne s group was destroyed by the Sharia Courts and he was rumoured to be have been injured in the fighting. He re-emerged in after the Islamic Courts and travelled to India allowing his oldest son Abdulkadir Mohamed Afweyne to take control of the local organization. He returned and resumed command. In August 2009, Abdulkadir Mohamed Afweyne was wounded in clan battles and was almost captured by coalition forces in In April 2011 he disappeared from the scene, but may return. Muhammed Abdi Garad Muhammed Abdi Garad is a veteran pirate leader from the Suleiman clan and pirate leader Abshir Boyah claimed that he first heard about Garad in Garad was headhunted by Afweyne as a pirate instructor in He kept a low profile after the defeat of Afweyne by the Islamic Court Union in Garad then resurfaced in Puntland in early 2007 operating out of Eyl, Garaad and Hobyo. When Boyah scaled down his activities, Garad filled the vacuum and became one of the strongest Somali pirate leaders. He is key to understanding the organization of all Somali piracy and has, at stages, cooperated with almost all of the major Somali pirate leaders. Afweyne and developed the tactics from their earlier experience. The pirates were recruited and paid based on a No Prey, no Pay system, essentially working on a commission-basis. Therefore, the total costs of launching an attack team of two attack skiffs including fuel, arms and ammunition came to no more than USD 4,000-5,000. Subsequently, the potential return on investment was enormous ransoms were around USD ,000 in Afweyne s group was called the Somali Marines probably to 9 continues on page 16 Abshir Abdillahi Boyah Born in Eyl on the east coast of Somalia, he dropped out of school in third grade and became a fisherman. Boyah based his outfit purely on the Majerteen clan, but added members from the Hawiye clan in That year his group was probably the first to take ransom money for hijacked ships. In 2003 he was headhunted by Afweyne. According to himself, he repented his time as a pirate at a public rally and became a born-again Muslim in May 2009, but he maintained that he kept contact with Afweyne. Named in the US Executive Order Annex of 13 April 2010 and 20 May 2010, Abshir Boyah was captured as he tried to flee from Garowe and later sentenced to prison in Puntland. 15

16 Piracy Somali Piracy today A situation going from bad to worse! 9 continues from page 15 give them an official-sounding name since Somali pirates had been successful in stopping ships in the Gulf of Aden while claiming to be coastguards or the Somali Navy in the years after the fall of Somali dictator Siad Barre s regime in The group operated out of Hobyo and Harardhere on the eastern coast of Somalia. The business model became very successful with several hijacked vessels including the LPG carrier Feisty Gas and Afweyne had proof of the concept of criminal entrepreneur. The first golden age broke down when the Islamic Sharia Courts Union interfered in the summer of 2006 and won control of most of southern and central Somalia. Market development When the Islamic Courts were militarily defeated by Ethiopia in late 2006, the pirates started coming back to the coastal areas in early January 2007 and resumed their activities, which included the hijacking of the Danish general cargo ship Danica White later that year. Ransoms had increased to about USD 725,000 for a cargo vessel and the business of piracy became increasingly important in relation to existing trade such as livestock exports. The successful returns on investment meant that while the Somali Marines were by far the most successful and largest group, other groups were formed by former lieutenants of Afweyne. Even Garad and Boyah set up their own operations but still coordinated their business in what was known as the Cooperation a sort of a pirate council. The business model was refined and the shareholding structure was further developed including shares for suppliers to the activities. The organized groups slowly ceased to exist and were replaced by dynamic consortia, where each hijacked vessel was controlled by a group of investors, which had contributed cash or supplies and were repaid according to the shareholding structure. In this way several pirate leaders could work together and maybe have interests in many hijacked vessels at the same time, while investors for each consortium might differ. Almost all leaders are entrepreneurs and should be viewed as dynamic and professional at what they do. A lack of understanding about this will lead to misinterpretation of how to effectively combat piracy. Piracy exploded in 2008 After the internal problems in Puntland led to a security vacuum during 2008, Somali piracy literally exploded in the second half of 2008, while most hijackings were conducted by groups or consortia headed by the abovementioned group of people. However, the success fueled an explosive entry into the market, where all sorts of people tried to organize piracy operations and some more amateurish than others. While there had been around three or four leaders in 2003, there were now perhaps 30 and the number increased. Some leaders stepped back and became investors and engaged in other illegal or legal business similar to that witnessed by organized crime in other places around the world. Maintaining the initiative Because of their "entrepreneurial" background and their ability to change the Somali pirate leaders can maintain the initiative against the international community and they are quick to take the initiative and develop new strategies. When the Gulf of Aden received greater security levels in late 2008 and early 2009 they quickly sought new (or rather cultivated old) hunting grounds and extended their range into the Indian Ocean and Arabian Sea. These were areas where security could not be increased by naval forces due to the vast size of the sea area. From March 2010, the campaign of the international naval forces against the Pirate Action Groups (PAGs) along the Somali coast forced a reaction from the pirate leaders. Prior to the campaign a pirate group could hold one (or more) ships and release it after a day period but suddenly they started losing PAGs and/or equipment on an almost daily basis and wanted to have one or more new ships hijacked before they released the existing ones. It became You know what you have but no longer know what you ll get. Finally, the success of citadels onboard ships prompted a response, where Somali pirates forced the crews of already hijacked vessels to force entry into citadels on boarded merchant vessels. Conclusion and trends Somali pirate leaders are a combination of old hands, a range of former lieutenants and newcomers, of which some have been very successful. Almost all leaders are entrepreneurs and should be viewed as dynamic and professional at what they do. A lack of understanding about this will lead to misinterpretation of how to effectively combat piracy. They are able to maintain the initiative in relation to anti-piracy operations and maritime security recommendations (BMP) and most likely the increased use of armed guards will also prompt a reply from the pirates. Somali pirates are risk-adverse, but their accepted levels of risktaking does not correspond with Western understanding of risks. For a pirate leader, a PAG is expendable, as long as he does not lose them all. Thus we should not underestimate the skills and ability of Somali pirate leaders to maintain the initiative and be innovators. The hijack for ransom business they have been running has been very successful for almost 10 years. 16

17 AGM Out and About Early Arrivals dinner at Gamla Ullevi 15 June Photos: The Swedish Club Elsebeth Grosmann-Huang (J. Lauritzen A/S), in the middle, talking with Anders Leissner (The Swedish Club). The Early Arrivals dinner was held this year in a restaurant at Gamla Ullevi stadium, located in the centre of Gothenburg. The tables were loaded with fresh seafood and the guests ate heartily. Ae Kyung Kim in good company at the dinner table. The Swedish drinking song Helan går was as usual well performed by our famous Swedish Club Snaps choir, from left Lars A. Malm, Henric Gard, Tony Schröder, Jakob Osvald and Lars Rhodin. The entertainment for the evening was Fröken Signe, who sang a lot of cover songs and the guests sang along. 17

18 AGM New Board Member Wallenius seasick skipper Wallenius Lines has been a member of The Swedish Club since 1981 and Anders Boman has been with them almost as long. In 1985, when he just finished his Economic studies at the University of Uppsala, he started at Wallenius Accounting department and since then he has held various positions within the Group. Last year he was appointed President of Wallenius Lines and now he has also been elected member of the Board at The Swedish Club. New Board Member Anders Boman, Wallenius Lines Carola Weidenholm Corporate Communications I landed in the shipping industry by pure chance about 25 years ago and soon realised that this was the area for me. It is a constantly changing business which has given me the opportunity to explore various positions in various parts of the world, says Anders. A dry sailor Anders Boman has been working both for Wallenius Lines and Wallenius Wilhelmsen Logistics (WWL). Right before he became President of Wallenius Lines in 2010, he held the position as Head of Region Europe and Deputy CEO at WWL. Prior to this he served as President for WWL Region Asia in Tokyo, Japan, between 2001 and 2005 and as Head of Ocean Services in Oslo, Norway. Before the merger between Wallenius and Wilhelmsen in 1999, Mr. Boman spent 14 years with Wallenius Lines where he held executive management positions. 18

19 Adding new perspectives Wallenius has a long and close relationship with The Swedish Club. For example, their former President, Christer Olsson, who is a well-known name for club members and employees, was Chairman and member of the Club s board from 1999 until Now it is Anders turn to join in and with his experience we can look forward to an even stronger mix of competence. When I ask him what he thinks his conboards the Board Photo: Jonas Ahlsén The shipping industry has had some tough years recently, which of course affected Wallenius as well. But Anders can look back on his first year as President with a certain content. Our business has had a decent year, recovering well from the earlier recession in the shipping industry. As Japan is a very important market for us, we have of course been affected by the earthquake and following tsunami on 11 March; but at the same time there is a growing demand for our services from other parts of the world, which keeps up the balance. So I can conclude my first year as both good and challenging as it should be. Even if Anders makes his living from the sea, he prefers staying off it. There is a reason; as soon as he gets on anything from a dinghy to a container ship, he becomes seasick. Even though I have been at Wallenius for over 20 years, I have never sailed on any of our vessels, says Anders with a laugh. I love the business but maybe not the sea so much! tribution to the board will be, he replies: This is already a board with a strong composition of members from a wide variety of highly reputable shipowners. I think my solid commercial background can add new angles to the discussions and I also represent a niche in the shipping industry that will further diversify the structure of the board. As we all know insurance is something you have to pay for but at the same time hope you never have to use. Sooner or later though, accidents occurs and both Wallenius and Anders himself have gone trough a few during the years. My experience of the Club s service is all good. Everything has run smoothly and without any delays. I see the company as a flexible partner that rapidly adapts to the situation, Anders explains. Today Wallenius has 13 ships, in total 637,000 GT, insured for P&I by The Swedish Club. Anders Boman in short Name: Anders Boman Title: President of Wallenius Lines Age: 48 Family: married to Eva, two children Hanna 19 and Henrik 15 Spare time: lots of hours are spent in the office or travelling but when he has some time off, he spends it with family and friends Background: President for Region Europe for WWL in 2005 with responsibility for Europe and Africa. In 2007 he was also appointed Deputy CEO for WWL he served as President of WWL Region Asia in Tokyo, Japan and as Head of Ocean Services in Oslo, Norway. Before the merger between Wallenius and Wilhelmsen in 1999, he spent 14 years with Wallenius Lines in various executive management positions. Of current interest: new member of The Swedish Club board Wallenius Lines in short Wallenius was founded in Stockholm in 1934 by Olof Wallenius and is now one of the leading shipping companies in the world. The business is concentrated on ocean transport, terminal services and logistic solutions. Together with international partners, Wallenius Lines controls some 135 vessels, of which 35 are wholly or partly owned or on long-term charter contracts. The fleet transports almost seven million cars annually and is responsible for one fifth of the car transportations by sea. The breakthrough for car transportation happened in the 1950s. While the world was recovering from war and the industry was working at full speed, Olof decides to develop an entirely new kind of vessel for carrying cars. That turned out to be very successful and was the starting point for the cuttingedge company we meet today. In the 80s the global economy was booming and so did Wallenius, that took the opportunity to modernise the company and substantially expand the fleet. Website: Watch out for protectionism Towards the end of the interview we get on to issues that the shipping industry need to address in the future. According to Anders the main word is costs primarily for energy, environment and investments. Our business is becoming more and more competitive every day. At the same time fuel prices are escalating and we have to develop new, more eco sustainable and cost-effective ways for sea transportation. Investment in newbuilding of ships is currently high and we can also see a challenge in the shortage of competent crew in a near future. The industry is already aware of these issues but I think we have to step up the pace, Anders concludes. He sums up by pointing out that the shipping industry has to beware of protectionism and always take the opportunity of emphasizing the importance of free trade around the world that is the foundation for our business. 19

20 AGM Managing Director s report Photo: Jonas Ahlsén 2010: The Swedish Club s year! Lars Rhodin, The Swedish Club s Managing Director, presented a highly encouraging report at the AGM in Gothenburg on 16 June. He described 2010 as a very good year our year! Performance at all levels met and exceeded expectations. The Swedish Club continued to make progress. It gained ground over the past three years, despite the worst financial and economic downturn in living memory. Photo: Jonas Ahlsén Lars Rhodin told Club members: We achieved a positive underwriting result in the crisis year of 2008, improved on it in 2009 when financial markets recovered and delivered a strong performance in The year ended with an excellent underwriting result and satisfactory investment returns. All business lines were in surplus and there was record growth in the Club s P&I portfolio. Our reserves reached a record level, at USD 150 million. Lars Rhodin told members that all financial targets for The Swedish Club were met in 2010, with a net combined ratio of 87 per cent (P&I, 93 per cent; Marine, 79 per cent) and an operating surplus of USD 29.5 million. Free reserves totalled USD million. He commented: It must be said that these outcomes were achieved in a benign claims environment. Yet, at the same time, it should also be recognised that a series of sound risk management decisions had a significant part to play. They had a powerful and positive influence on results. Factors producing good results The underwriting surplus for 2010 totalled USD 17.7 million, including a Marine Hull surplus of USD 10.8 million and a P&I surplus of USD 6.3 million. Even FD&D showed a positive outcome: USD 0.6 million. The factors producing good results included the use of new, high precision modelling tools. Lars Rhodin said that the Club s P&I model had demonstrated good accuracy, with the Marine Hull model showing even better correlation with the forecast outcome. The year in review Reviewing the year in detail, the Club s Managing Director highlighted the significant growth in the P&I book: We celebrated 100 years as a P&I provider in 2010 with a very strong performance. Our P&I portfolio reached a record level in The P&I book expanded by 10 per cent in numbers and 20 per cent in terms of GT. The tonnage entered for P&I, as at 20 February 2011, totalled 46.4 million GT. Progress here is evidence of the market s confidence in The Swedish Club and recognition of our steady advance over the past three years. P&I claims in review Turning to P&I claims experience during the year, Lars Rhodin noted an increase in claims frequency a trend now under active investigation. The focus of the increase is crew-related. As for Marine Hull claims, the frequency was down in at around 80 per cent of the anticipated level. Challenging events during the year included a piracy case which proved especially difficult to resolve. The vessel involved, the Voc Daisy, was taken by Somali pirates during April It took six months to achieve the release of ship and crew. Pool claims Turning to pool claims experience during the year, Lars Rhodin said that The Swedish Club s pool balance continued to improve, with no reported pool claim for the Club during the year. Lars 20

21 Lars Rhodin presented a highly encouraging report at the Annual General Meeting. Rhodin observed: We see no correlation between pool claims and the business cycle in shipping. Pool claims are random events. Report on The Swedish Club Academy AB Lars Rhodin also reported on The Swedish Club Academy AB, now responsible for developing the Club s global Maritime Resource Management (MRM) training network. He described the Academy s first year as a separate entity as highly successful. He added: During this initial period, the Academy was able to add a significant number of new licensees. The Swedish Club Academy now has 86 MRM training providers, in 33 countries. Mobile Offshore Units The Managing Director also commented on The Swedish Club s perhaps most important diversification since it began writing P&I cover a century ago: the decision to write Hull & Machinery, Increased Value and Loss of Hire cover for Mobile Offshore Units. Lars Rhodin: We have set up a new Team Energy, based in Oslo, and we have made good progress. We have already pulled a little ahead of our business expectations. Risk management tools Lars Rhodin also commented on the importance of the Club s sophisticated risk management tools and the introduction of the new Internal Capital Model. The latter satisfies the new Solvency II requirements and introduces greater precision in the modelling process. The Club is something of a pioneer in the area of ORSA (Own Risk and Solvency Assessment). The Club s first ORSA report will be ready to submit to the Board this September. Lars Rhodin added that the Club s reinsurance arrangements had been put on a new and more efficient footing during the year: These arrangements have been consolidated basically for all products we underwrite. Comments on external issues Addressing a number of external issues, Lars Rhodin touched on the opening of the EU s competition investigation, examining IGA quoting procedures, the operation of release calls and access to reinsurance. He said: Of course, many people would say that if it s not broken, don t fix it! Today, we have a very efficient system to lay off risk and acquire reinsurance on a collective basis. It would be hard to find an alternative way to buy reinsurance at such an advantageous price. Lars Rhodin then commented on problems concerning trade sanctions: Insurance organisations and banks have joined shipowners and traders, who all face serious difficulties when attempting to interpret sanctions. The struggle to find out exactly what is and is not permitted can be very frustrating. The Club has never been so strong Looking ahead, Lars Rhodin suggested that P&I pricing is likely to remain stable in the immediate period. However: We must not forget that the underlying liability trend runs against owners and clubs. Furthermore, there is a drive to erode traditional shipowner defences. In the area of Marine Hull, he expected increased claims frequency during a period of economic recovery. Lars Rhodin ended on a positive note: The Swedish Club has never been so strong. In two years our free reserves have increased by 50 per cent. The first quarter of 2011 also started well. 21

22 AGM Keynote speaker Making the impossible The world s tallest building Burj Kalifa in Dubai is 828 meters high. Walk to the top of it ten and a half times, then add snow, ice, heavy winds, -40 o C temperatures, oxygen deficiency, tiny tents, freeze-dried food, poor toilet facilities and no stairs or well-worn path to put your feet on and you have a pretty ordinary climb up Mount Everest or K2. That hasn t stopped Fredrik Sträng, keynote speaker at this year s AGM. When Fredrik was about 7, he realized he did not want an ordinary job. First he thought of becoming an archeologist like Carola Weidenholm Corporate Communications Indiana Jones forcing his way through impenetrable jungles and finding hidden Inca towns. But as he was active in orienteering and trekking, the idea of conquering the world s highest mountains took over, and when he was 17 he had made up his mind. I remember the moment exactly; I was sitting on a bus with a friend and told him about it. I don t think he really believed me but he was trying to be nice about it, says Fredrik. But there is a long period of preparing your body, mind and knowledge before you are ready. Fredrik started to climb smaller mountains to get experience and worked his way up. It takes time to move your limits and make the impossible possible. It is also important to step outside your comfort zone to know how it feels and learn your outer limitations. Mostly it is about learning to cope with pain to evolve and move forward, he explains. Making the right decisions At 22 he had his first real challenge the 5,895 m high Kilimanjaro. Seven years and several summits later he was prepared to reach the top of the world the summit of Mount Everest at 8,848 m. It is now Fredrik has been climbing for ten years, training and planning for this moment, only to be met by really bad weather, turning worse with winds at m/s. A few hundred meters from the top he had to decide whether to continue or return to Camp. This is when you need to be prepared. Should you give up your long-time dream, which you have worked extremely hard to achieve, when you are so very close? Maybe just a few meters further and then I make up my mind, and then just a few more? When do you take the final decision and then, is it going to be too late? You are exhausted, the snow is blizzarding, the air is oxygen-deficient, and your friends and the media are waiting to hear about your success when you get back. In this situation it is easy to make the wrong decision. Fredrik turned around 234 meters from his ultimate dream, realizing his limitations. And as he says: the mountain is always going to be there. Already the year after he made a successful attempt, just to continue on to reach the Seven summits in record 191 days (The seven highest summits on the seven continents) meters of difficulties If Mount Everest is the highest mountain in the world, K2 is certainly the toughest. Something Fredrik knows from personal experience. He went up to make a film about what drives people to conquer the most difficult places on earth and ended up with the documentary: A cry from the top of the world. It is the 1 of August Several teams had been waiting together for weeks in cramped tents at Camp 4 to get the right opportunity for the final climb. This was it. Tired but confident, Fredrik is very close to his next goal in life to reach the summit of K2. Right now he does not know he is about to experience the worst hours of 22

23 possible Fredrik s Photo: Jonas Ahlsén expeditions 1998 Mt. Kilimanjaro 5895 m 1999 Mt. Elbrus 5642 m, Mt. Blanc 4808 m 2000 Mt. Denali 6194 m 2001 Urus 5450 m, Pisco 5752, Artesonraju 6025 m, Huayna Potosi 6094 m, Pequeno Alpamayo 5370, Condoriri 5648 m 2002 Tocllaraju 6032, P5650 (5650 m), Alpamayo 5947 m, Vallunaraju 5686 m, Jangyaraju III-Oeste 5450 m 2003 Dhaulagiri 8167 m 2004 In Shackleton s trail sailing over Dragon Sound to Elephant island in the Antarctic and crossing South Georgia island on skis 2004 Khan Tengri 7010 m 2005 In Genghis Khan s footsteps sailing over Dragon Sound to Elephant island in the Antarctic and crossing South Georgia island on skis 2005 Mount Everest 8610 m, The North Ridge route in Tibet, with oxygen (unsuccessful summit attempt) 2005 Mount Shishapangma 8013 m, central summit 2006 Mount Everest 8844 m, The North Ridge route in Tibet, with oxygen 2006 Official 7 Summits in 191 days a record for Guinness World Record 2008 K2, 8050 m (unsuccessful summit attempt) 2009 Makalu, 8462 m 2009 Lhlose, 8516 m 2010 Gasherbrum 2, 8035 m 2010 Gasherbrum 1, 8068 m 2010 Cho Oyu, 7200 m (unsuccessful summit attempt) Documentaries he joined in 2004 In Shackleton s trail 2005 In Genghis Khan s footsteps Own documentaries 2007 Fredrik Sträng and the mystery of Mount Everest Summits 2009 A cry from the top of the world a documentary on the tragic accident at K2 in 2008 when 11 people died Photo: Fredrik Sträng his life in what turned out to be the most deadly expedition in history. They where about two hours behind schedule but the weather was nice and warm, which made people think they still would be able to reach the top and come back before dark. Appearances can be deceptive. The reason for most deaths was melting ice collapsing in an area called the Bottleneck. Fredrik s team rescued several people and was the only one without any losses. Out of 28 climbers only 17 survived. I have seen the best and worst in people under the most gruesome conditions; this is a trauma I will have to learn to live with. People tend to forget that they also have to climb down from the top, but a wellprepared first-rate climber will question every situation and knows when it is time to return even if it means not reaching the goal, he explains. The day after the lecture, Fredrik is going to the west of the Himalayas to climb Nanga Parbat this time it is 8,125 meters Fredrik in short Age: 34 Occupation: lecturer, mountaineer, adventurer, writer and documentary film-maker. He also runs the PEAK-IT Adventure Academy a 6-month adventure training camp Family: girlfriend Spare time: as it is vital to keep fit in his line of business, he runs, roller skis, skis, mountain climbs and cycles, as well as spend several hours in the gym. He also takes time to see friends and go on short vacations Background: he has worked in Telecoms and manufacturing Books: 2007, 7 berg + 7 kontinenter + 7 månader (7 mountains + 7 continents + 7 months), 2010, K2 på liv och död (K2 a life-and-death struggle) only published in Swedish Honours: he has climbed the seven + 1 summits in 191 days in 2006 (actually less than 7 months). Appointed Adventurer of the year in 2007 and 2010 Future projects: building a school in Nepal with the Save the Children Fund. Construction starts in spring Right now they are looking for the last sponsors to carry out the plan. In 2014 he intends to be the first to fly around the world in a solar-driven air vessel Website: to the summit and he is doing it alone. If everything goes according to plan, he will reach the top on 20 July around the time when this magazine will be in your hand! Fredrik concludes his message: I hope I can infuse energy and courage into people to challenge themselves and step outside their comfort zone, making them want to transform and achieve their goals. Maybe it is not climbing to the top of the world but finding their Everest and conquering it! 23

24 AGM Panel discussion Every P&I Club (and The Swedish Club is no exception) operates in an insurance environment dominated by a remorseless increase in shipowner liabilities. The rising cost of liability claims is a matter of concern to The Swedish Club and its members. Against this background, any erosion of rights of limitation could have a highly negative impact on owners and their insurers. Rights of limitation provided the main theme for a stimulating panel session during the AGM Members Day on 16 June. The Moderator was Thomas Kϋhl, Managing Director of Bremen-based Pandi Marine Insurance. The four panelists were: Lone Scheuer Larsen, Vice President at TORM A/S, Denmark; Erik Røsaeg, a Professor at the Scandinavian Institute of Maritime Law, Oslo; Brian D. Starer, a Partner of Squire Sanders, New York; and Andrew Bardot, Secretary of the International Group of P&I Clubs. Rights of limitation: Exploring the fundamental issues Brian D. Starer, a Partner with Squire Sanders of New York, has over 35 years experience as a practitioner specialising in marine casualties. He has served as casualty counsel in more than 100 shipping accidents worldwide. Brian Starer provided an insight into the complexities of limitation, using a hypothetical collision to make his points. Photo: Jonas Ahlsén Limitation encourages compromise Brian Starer s overview was headed Limitation of liability: a sword or a shield. He explored many issues surrounding the identification of best strategies for the parties. His scenario envisaged a collision in Chinese waters involving a large, modern containership (with a value of USD 120 million) and a newbuild dredger with a value of USD 400 million. Brian Starer reviewed the complexities of the incident, involving a Marshall Islands flagged container vessel and a large, Panamanian-flagged dredger. He briskly worked through the intricacies of the situation and readily acknowledged that the issues were both puzzling and confusing. He then told the audience that limitation of liability was too deeply entrenched to disappear: Is it redundant? I don t believe so. Limitation serves to keep freight and insurance rates under control. Shipping thrives on certainty! Limitation is often characterised as defensive, but it is also a valuable offensive weapon. An expert comparative knowledge of limitation regimes, combined with creative lawyering and innovative, out of the box solutions, can set up the dispute for a streamlined and less costly resolution. Limitation of liability breeds compromise. Brian Starer added that limitation considerations loomed large in many cases he had dealt with over the years. This wealth of experience led him to conclude that the right to limit often persuades the parties to conclude an agreement which avoids a full-blown legal battle: I believe that limitation encourages compromise and forces the parties to focus on the real issue resolution. It often produces the perfect result: all the parties go away unhappy! 24

25 Photo: Jonas Ahlsén In his opening remarks, Thomas Kϋhl promised presentations offering different and sometimes controversial views. The audience was not disappointed. Lone Scheuer Larsen is Vice-President, Insurance and Claims, at TORM A/S of Denmark, operators of one of the largest and most technologically advanced shipping fleets in the world. TORM, headquartered in Copenhagen, is focused heavily on the product tanker and bulk market segments. Lone Scheuer Larsen regards the right to limit as a mechanism encouraging people to do business. Photo: Jonas Ahlsén LLMC revision: Is this really necessary? Lone Scheuer Larsen shared Brian Starer s view that limitation encourages compromise between the parties, but she made the point that resolution may arise from discussions with a prevailing commercial, as opposed to legal, theme: Sometimes it is easier to enter into negotiations and make a deal. Legal costs are saved and we can all get on with business. Limitation has the effect of limiting legal battles. Limitation promotes risk awareness and clarifies risk-sharing between the parties: This fosters predictability and tradeability. Limitation and the availability of insurance provide a much sharper picture when setting the right price for the product. The process of obtaining cover is facilitated by limitation mechanisms. Lone Scheuer Larsen: There are definite advantages here. The insurer can perform the cost-benefit analysis and set the correct price for cover. In the absence of limitation, the cost of insurance could be much, much higher. Lone Scheuer Larsen then considered the relationship between the ability to limit and insure and the degree of riskaverseness: Studies have looked at whether the availability of limitation and insurance lowers the degree of risk aversion. Do you become less careful? I don t know, but some studies would appear to suggest so. A balance must be struck: If limitation limits are set too low, people may become less cautious. At the same time, if limits are set too high, people may become so cautious that they simply decide not to go into the business. In her concluding remarks, Lone Scheuer Larsen added: Limitation is here to stay, but I would prefer to see it regulated at a global level, through the international conventions. This offers more predictability and provides less scope for forum shopping. Turning to the mooted revision of the LLMC 1996 Convention - initiated by Australia - this panelist pointed out that only a few property and pollution claims (eight out of 595 cases in the 2000-August 2009 period) had exceeded limitation: I don t think this revision is necessary. 25

26 AGM Panel discussion Andrew Bardot is Secretary and Executive Officer of the International Group of P&I Clubs. As might be expected, he is an enthusiastic champion of limitation. He contributed to the panel session with a highly positive overview of the benefits of limitation: Everyone s a winner. Erik Røsaeg is a Professor at the Scandinavian Institute of Maritime Law, University of Oslo. He is the Chairman of the Norwegian Maritime Law Commission. Erik Røsaeg has been closely associated with the development of several liability conventions within the International Maritime Organization s Legal Committee. His published work is concerned with maritime law, contract law and a range of other commercial law subjects. Photo: Jonas Ahlsén Photo: Jonas Ahlsén Clearly, the current limitation system is working Andrew Bardot regards the right to limit as a mutually beneficial system. He told The Swedish Club s members: This is not a cosy arrangement just for shipowners. It is a commonplace structure in many industries beyond the maritime field. It works well for those it is intended to serve. It is certainly a common feature within existing and pending international conventions concerned with shipping. Limitation is a fundamental of The Hague Rules, The Hague Visby Rules and the Rotterdam Rules. It provides the basis for a fair sharing of risk between shipowners and those who benefit from shipping services. He added that although US legislators are often averse to international conventions, the ability to limit is applied under OPA 90. On the evidence outlined, Andrew Bardot observed: Clearly, the current limitation system is working. The right to limit is a trade-off against Do the benefits of limitation stay with owners? Erik Røsaeg opened his provocative presentation with a fundamental question: Is limitation necessary? In addressing this issue, he said: Limitation is an arrangement that is rarely invoked. As shipowners often pay more than they should, perhaps they are not as dependent on limitation as is often suggested? If limitation cannot be relied on, perhaps it provides a false sense of security? He went on to suggest that the integrity of the insurance system can be easily maintained by limiting insurance, rather than liability. It is not a human right to be able to insure against all possible liabilities. Developing this theme, in sharp contrast to Andrew Bardot s arguments, Professor Røsaeg stressed the unreliability of the system. He pointed to the fact that limitation laws are not universal. There is great variation in the tests for breaking liability limits: You can t rely on it! The ideal solution would be one system, but the differences strict liability (which confers certainty, including certainty of risk for insurance providers). Strict liability and limited shipowner defences benefit the victims: This is a key reason why the present system should be preserved, rather than undermined. In conclusion, Andrew Bardot maintained that current limitation arrangements promote the appropriate assessment of risk and the maintenance of capacity at sustainable levels: Limitation has survived the test of time and works for the mutual benefit of victims, shipowners and insurers. Limitation does encourage shipowners to act prudently and diligently. Modern risk management strategy is focused on asset protection. Erosion of the right to limit would encourage a more opaque industry a departure from the more transparent structures that limitation now fosters and respects. If it isn t broke, don t try to fix it. within the present system have produced a jurisdictional mess. Yet this mess is put forward as an argument in favour of limitation! I say that this is a mess we shouldn t tolerate. We have to have a clear framework. After all, that s the point of limitation. The problem is that it is impossible to create a clear and predictable limitation system. So, from the technical standpoint, even if we want one, we can t have one. Erik Røsaeg held up the Deepwater Horizon case as a prime example of the failure of the system. He then considered whether limitation was desirable: When liability is limited, what is the end result of this distribution of risk? Owners function in a market and, within that market, economists would say that the distribution of risk by liability rules is evened out by adjustments to freight rates, for example. Is it really the case that the benefits of limitation stay with the owners? 26

27 Questions, answers and comments from the floor Moderator Thomas Kühl commenced the open session with a question: Should limitation focus more on prevention? All four panelists offered a view: Erik Røsaeg Everyone should consider liability in terms of preventive measures and they do. It is very clear that, with the introduction of OPA 90, the standard of vessels trading to US waters improved. That s rational behaviour. Andrew Bardot OPA 90 did provide an incentive to improve standards, as do the international conventions. The conventions, however, have common tests and that is certainly the route to go. Brian Starer The system of limitation of liability is a valuable force, as it creates a format for going forward and framing the dispute. The system sets the parameters. Lone Scheuer Larsen A prudent owner, in acting prudently at all times, does not expect to need limitation. Yet in areas of strict liability the owner may be free of fault and it would be unfair to remove limitation of liability. Erik Røsaeg & Brian Starer Responding to a question concerning how the right to limit could be justified in the face of devastating pollution, as occurred in the Exxon Valdez spill, Erik Røsaeg made the point that all claims after an accident of such magnitude cannot be accepted at face value. Brian Starer argued that both the Exxon Valdez and Deepwater Horizon cases are poor examples on which to consider the functioning of the liability system. He added: The fact is that limitation of liability did not have a big role to play in how compensation was paid in the Exxon Valdez case, but it did set a framework. New blog section on the web The Swedish Club has launched a blog section on the corporate website This is where we ll be posting and discussing business-related topics. We are looking forward to your comments about our articles in this new section as well. On 16 June, we started a discussion on Limitation of shipowners liabilities immediately after the panel discussion at the AGM and we would like your opinions! Please visit the blog and leave a comment. Lars Rhodin & Erik Røsaeg In his concluding remarks, Lars Rhodin, Managing Director of The Swedish Club, considered limitation in terms of insurability and sustainability of cover. He commented: From the P&I perspective, limitation is a cornerstone. Erik Røsaeg added: I recognize the need for a limit, but my argument is that it is better to put it in the insurance cover, rather than in a liability regime. The open session ended with Lars Rhodin s final comment: We do not favour limiting liability in the cover. 27

28 AGM Out and About Photos: Jonas Ahlsén Divine entertained the guests after dinner. AGM Dinner on 16 June Managing Director Lars Rhodin welcomed all the guests to the AGM dinner, which, as usual, was held in the Banque Hall at Elite Park Avenue Hotel in Gothenburg. About 260 guests attended the dinner with traditional menu of poached salmon fillet and white asparagus followed by fresh strawberries with vanilla ice cream. After the dinner the guests were entertained by Divine which consists of three opera singers, Gabriella Lambert, Caroline Gentele and Jacqueline Miura. John P. Samartzis of J.P. Samartzis Maritime Enterprises Co S.A. and member of The Swedish Club s Board, was the guest of honour and received great recognition after giving the AGM's after-dinner speech. 28

29 Peter Cowling (the Election Committee and former member of The Swedish Club s Board) enjoying the company of Eva van Heek Lilljegren (The Swedish Club). Proposing a toast. From left: Frank Tu (China Shipping Container Lines Co Ltd), Bruce Hung (The Swedish Club Hong Kong), Min Sun (Pacific Bulk Logistics Ltd), Ruizong Wang (The Swedish Club Hong Kong), Zhen Li (Sinotrans & CSC Holdings Co Ltd) and Hua Li (Sinotrans Ship Management Ltd.) Fred Cheng (Shinyou Group) and his wife Sawako Cheng before the dinner. Lennart Simonsson, Chairman of the Board, proposed a toast. Suay Umut, Dünya Denizcilik ve Ticaret A.S., Istanbul, surrounded by Elisabeth Rydén, The Swedish Club and John Owen, The Swedish Club Piraeus. 29

30 AGM Out and About The Swedish Club Grand Classic at Delsjö Golf Club 17 June 2011 There was a cloudy sky and rain was pouring down when a bunch of golfers, started this year s Swedish Club Grand Classic golf competition, with a shotgun start, in the early morning of Friday 17 June. Although, the weather was bad there were happy faces among the 23 participants, divided into 6 teams. The proud winner of the Grand Classic 2011 was Ruizong Wang from The Swedish Club Hong Kong office. Photos: The Swedish Club The winners of the Best Team prize had 2 players in the top 5 and the team consisted of: From left Simon Chumas (Barlow Lyde & Gilberg, UK), Johan Brax (Brax Shipholding Rederi AB, Sweden), Erik Johansson (The Swedish Club, Sweden) and Nigel Russell (RFIB Group Ltd, UK). Winner of Closest to Line was Thomas Hammerstein (Swiss Re Europe S.A., Germany) and winner of Closest to Pin was a proud Fritiof Granberg (The Swedish Club, Sweden). 30

31 Photos: The Swedish Club The victorious team in red celebrating. The Swedish Club Mutual Cup 2011 a nail-biting experience Team International s goalkeeper in action. The traditional football match between Team Sweden and Team International, which always starts the AGM s festivities, turned out to be a truly nail-biting experience. After a very tight and tough game (this year there was a yellow card!) the result was a 2-2 draw. To settle the game, a penalty shoot-out took place. After 5 penalties for each team, the result was 4-4, but in the end, Team International were the winners with the final score being 5-4. In addition to the exciting game, the numerous spectators who had found their way to the pitch could enjoy food and drinks in the sunny spring weather. It was a tight Some of the spectators enjoying the game. From left: Joe Balls (OMNI UK), Aret Tasciyan (OMNI Ltd, USA) and Chris Goumas (Arion Enterprises Inc, Greece).. and tough game. 31

32 AGM Out and About Photo: Christer Hallgren The Nordic Watercolour Museum in Skärhamn. A day on the Swedish west coast going north A bus trip was arranged for Friday 17 June to visit Skärhamn, located on the island of Tjörn in Bohuslän, a province north of Gothenburg. We started by visiting the Nordic Watercolour Museum ( Akvarellmuseet ) and a guided tour of the exhibition with paintings by Emil Nolde ( ). Nolde was a German painter and one of the main representatives of expressionism. After the exhibition the bus took us to Klädesholmen and the restaurant Salt & Sill, where lunch was served. Salt & Sill is also Sweden s first floating hotel. Six cubic houses are built on pontoons and float outside the restaurant. Photo: The Swedish Club Photo: TSC Coffee break at the Nordic Watercolour Museum. From left: Sun Min, Pacific Bulk Logistics Ltd, PR China and Kjell Augustsson, The Swedish Club Hong Kong. Aysegül Domanic, Genel Denizcilik Nakliyati AS/ Geden Line, Turkey and Anders Leissner, The Swedish Club enjoying lunch and so were also Photo: The Swedish Club...Lars Rhodin, The Swedish Club, John Eleftheriades, Colonial Navigation Inc, US and Andreas Callitsis, Callitsis Shipmanagement S.A., Greece. 32

33 FD&D Security checklist Security for a claim a checklist The market continues to go up and down. Companies come and go. As a result, any prudent uninsured player must take steps to ensure they have security for the claim and ultimately will be paid. It is useful to have a quick checklist for steps that can be taken: 1. Under a time charter Can bunkers be arrested, who actually owns them? Are they in owners or charterers possession or control? Will they need to be discharged and stored, who will pay such costs for storage? Can a lien be exercised on cargo, similar to storage of bunkers? This will require cargo to be stored (on board the vessel, never ideal if an operator wants the vessel back in his control and operation) or ashore, which can be very expensive and raises issues with third party consignees acting in good faith, especially if they have already paid for the cargo. Please also seek local advice at the point of discharge. Exercise a lien on sub-freights, if freight has not yet been paid up the line to head charterers who have not yet paid the owner. A more effective method of operation, lien can usually be exercised in writing and notified to all parties. Please seek legal advice before so acting. 2. Under a voyage charter Lien on freights unpaid. Lien on demurrage or any monies due to be paid by charterers to owners. Lien on cargo. Check clause on suspension of discharge operations. 3. Action further afield Apart from immediate contractual obligations and remedies arising from there, we should look further afield. Can we take action in a local jurisdiction where a company is based? For example, if we are dealing with a Singaporean company can we take local action in the courts? Worth investigating. 4. Noting an interest on a ship s registry If opponents own other ships, can we take action against such ships assuming the associated ship arrest requirement is satisfied? This can be difficult, expensive and time-consuming. Another idea we have encountered is to register an interest/restriction on the registry of the ship owned by opponents so it cannot be sold without such a restriction being lifted. This is a highly effective method and provides security in a more informal and effective way. 33

34 FD&D Stevedore damage Have you checked your cell It s a fact that damage to vessels caused by stevedores is normally covered by terms of the Hull & Machinery insurance. However, damage caused by an isolated incident can quite often be well below the applicable deductible and the Hull & Machinery insurer will, therefore, not get involved. At the end of a time charter lots of damages often need to be repaired, which added together can vastly exceed the H&M deductible, but where no single incident has resulted in damage for which Hull & Machinery is involved. In such situations the Club s FD&D department is often asked to assist in potential recovery action against the time charterer. The concept of wear and tear Stevedore damage to vessels can prove very costly. Under time charterparties it is often the charterer who employs and assumes contractual responsibility for stevedores. As a starting point, therefore, the charterer is responsible for such damage to the vessel and should repair or indemnify the owner for repairs carried out. Whereas a time charterer is usually bound to redeliver the vessel in like good order and condition at the time of delivery, a common exclusion that can create a lot of uncertainties is ordinary wear and tear. It is an established principle that whether damage can be attributed to ordinary wear and tear is a question of fact which depends on the characteristics of the particular trade that the vessel is involved in. The concept of wear and tear will, consequently, be interpreted differently depending on what kind of vessel the matter concerns, i.e. a tanker or a container vessel. It has been submitted that specific damage shall be considered as having been caused by ordinary wear and tear if it is proven to be a result of an ordinary incident of trading in accordance with the charterers lawful orders 1. Anything outside the ambit of the latter should, arguably, be considered as potentially recoverable damage. Pre-existing wear and tear Difficulties may, however, be encountered when pre-existing wear and tear, which does not warrant repair prior to delivery into the time charter, has been aggravated to the extent that repairs are necessary but where it is difficult to show that the necessity of repairs has been prompted by further normal wear and tear it becomes Daniel Brand Claims Executive Team Göteborg III particularly difficult where it is not possible to refer the damage to one or more specific reported incidents. However, and to the extent where it is realistically possible, an owner that implements a routine to regularly inspect the condition of their vessel will always be in a far better position to distinguish between the damage caused by ordinary wear and tear and damage that is potentially recoverable from their charterer. Illustrating practical problems Most time charterparties contain stevedore damage clauses with, more or less, detailed provisions as to when and how stevedore damage is to be reported in order to be recoverable. The key to a successful recovery action is thus often that the owner has duly reported each and every stevedore damage to the charterer, preferably in combination with a detailed on-hire survey. The wording of these clauses can, however, sometimes cause problems and put an owner in a difficult position. For example, where the clause provides for an unreasonable notification period or is drafted for a particular trade but used in another trade. To illustrate the difficulties that an owner may face, picture a container vessel employed in liner trade with a time charterparty that includes a stevedore damage clause stipulating that any stevedore damage shall be reported to the charterer within 24 hours. Considering the fact that these types of vessels are in principle Kristoffer Lindqvist Claims Executive Team Piraeus constantly laden, preventing the master to inspect the condition of the vessel s cargo holds, it is close to impossible for an owner to satisfy the threshold of such a clause. Instead, it is the Club s recommendation that an owner considers including BIMCO s stevedore damage clause that stipulates that any damage shall be reported as soon as reasonably possible 2, which provides for a more realistic, and trade neutral, obligation. The inevitable question In the absence of a stevedore damage clause, the position regarding whether the owner or the charterer shall be liable, and bear the costs for repairs, is not clear. Even though a charterer generally has an obligation to redeliver a vessel in like good order and condition that were prevailing at the time of delivery, it has been submitted that the latter obligation is somewhat illogical considering that an owner of a vessel quite often has a corresponding obligation to maintain their vessel in good order and condition during the currency of a charter period. This issue leads to the inevitable question: Why should a charterer pay the costs for repairs at the end of the charter period if the owner, nevertheless, already has an ongoing obligation to pay for repairs during the currency of the charter 34 Footnotes: 1 The Pamphilos [2002] 2 lloyd s Rep BIMCO s Stevedore Damage Clause for Time Charter Parties 2008

35 guides lately? Checklist Include a stevedore damage clause in the time charterparty, preferably BIMCO s Stevedore Damage Clause for Time Charter Parties Carry out a joint on-hire survey before delivery or at the beginning of the charter period. Instruct the master to comply with the provisions of the stevedore damage clause. If the charterparty does not contain such a clause the Master should be instructed to survey the hull and cell guides on a regular basis and immediately report any findings to the charterer, and Carry out a joint off-hire survey after redelivery or at the end of the charter period. owner or the charterer shall be liable. Such clauses would be in both the owner s and the charterer s interests as it will prevent costly litigation over uncertainties. Ordinary wear and tear or recoverable stevedore damage? Two positions one solution The answer to the question is not straightforward and there are two leading positions to consider. The first position appears to be that a charterer is not obliged to pay costs for repairs, but rather only to make sure that a vessel is redelivered free of cargo and in a clean condition. The latter position appears to be based on the notion that the obligation is limited to factors falling within a charterers actual control. Since a charterer, in general, can only give employment orders, it has been submitted that the obligation shall be limited thereto. The second position appears to be that a charterer is obliged to pay costs for repairs, allowing the owner to seek indemnity for damages caused as a consequence of the vessel following the charterer s employment orders. The latter position appears to extend a charterer s obligation to not only include factors that are within their control, but also factors that follows as a consequence of their employment orders. However, and in order to avoid any uncertainty, it is the Club s recommendation that an owner always tries to include a clause that clearly stipulates what type of damage, and under what conditions, the Photo: The Swedish Club The Club s recommendation It is also important for an owner to know that they generally have the burden of proving that damage was caused, as a consequence of them following their charterer s employment orders, during the currency of the charter period. According to the Club s experience, many claims fail or become unnecessary complicated and expensive to pursue simply because the owner is unable to provide sufficient evidence that supports their claim. It is, therefore, the Club s recommendation that an owner always carries out thorough on-hire and off-hire surveys, before and after the charter period. It is also important that an owner regularly inspects the conditions of their vessel and pays attention to obligations set-out in any stevedore damage clause in their charterparty. Depending on what kind of obligations such a clause will burden the owners with, the master should comply with the latter and issue damage reports to their charterer as soon as damage to the vessel has been discovered. Such reports will, later on, be valuable evidence in case a dispute arises with their charterer regarding costs for repairs. 35

36 Loss Prevention Collision and Groundings Collisions and Groundings The main reasons for collisions and groundings seem to be a less viable safety culture and a lack of experienced crew. Joakim Enström Loss Prevention Officer When radar was introduced, it was believed that it would mean the end of collisions at sea, but unfortunately that is not the case. Today s vessels are equipped with many different tools and technologies to prevent them from colliding or running aground, but unfortunately casualties still happens. Shipowners are currently investing more money than ever in training and equip ment. At the same time, the problem of inexperienced crew has never been more obvious than today, and it is difficult for shipping companies to find experi enced crew. Equally, in a harsh economic climate, it may not be a top priority to invest in implementing a sustainable safety culture. The cost of running vessels with inexperienced crew may prove to be substantial. Abstract of the findings Main areas of concern Level of crews experience Lack of properly implemented safety culture Communication Ignoring the Safety Management System Fatigue Consequences Loss of life Environmental damage Damage to property Loss of earnings Criminalisation of seafarers Remedies Implement a sustainable safety culture Buy in from top management in implementing Maritime Resource Management (MRM) Invest in further enhancing crews experience and competence Identify the root cause of casualties The immediate cause It is becoming apparent that many of the collisions happen because the com pany s Safety Management System and navigation procedures have been ig nored. If the system had been followed, it is likely that this would have prevent ed the collision. Simply having a Safety Management System is not enough, as there must be a belief at the company that it must always be followed. This also has to be transferred to the crew on the vessel. It needs to be one of the company s priorities to improve safety. Shoreside need to lead by example and ensure that their superintendents and safety departments are inspecting and verifying that correct procedures are implemented and followed. The difficulty is how to implement this. The immediate cause of a collision or grounding is usually that the OOW (Officer Of the Watch) did not follow the Safety Management System. To be more spe cific, the following issues are recurring: Poor lookout Inadequate bridge team management Assumptions Complacency Poor lookout a huge problem Having poor lookout is a huge problem and is usually a combination of different factors where the OOW did not look out of the windows, did not have a designated lookout, did not plot the target, or was confused by the informa tion that the radar or the Electronic Chart Display and Information System (ECDIS) provided, leading the officer to make the wrong decision. Most collisions happen in congested waters Another interesting statistic shows that, out of 277 collisions between the years 2000 and 2010, 193 occurred in con gested waters, 38 in coastal waters and 41 in open seas. Of the 193 collisions in congested waters, a pilot was onboard on 109 of these collisions. This means that a pilot was onboard during 53% of all collisions in congested waters. It is an unsurprising statistic that most collisions happen in congested waters, as most vessels will be at great est risk when approaching or leaving harbour because of traffic density and proximity to the grounding line, but it is a worrying statistic that a pilot is onboard on more than every second collision in congested waters. This em phasizes even more that it is imperative that the vessels use Maritime Resource Management (MRM), which also covers the interaction between captain and pilot. That there are sufficient resources on the bridge to cope with the extra information, traffic, communication with VTS and other vessels and monitoring the safe passage. The root cause has to be identified The immediate cause is usually not the root cause to why a collision or ground ing happens. For an unfortunate acci dent to hap- 36

37 USD ,03 0,025 0,02 0,015 0,01 0,005 No 0 0 Bulker Container Pass./Ferry Roro Tanker H&M grounding: cost & frequency as per vessel type , limit >= USD 10,000 Collision, 23% Contact, 7% Fire/explosion, 6% Grounding, 24% Heavy weather, 2% Machinery/equipment, 31% Other, 7% H&M: claims cost distribution , limit >= USD 10,000 USD Bulker Container Pass./Ferry Roro Tanker H&M collision: cost & frequency as per vessel type , limit >= USD 10,000 0,035 0,03 0,025 0,02 0,015 0,01 0,005 0 No pen, there are usually a chain of errors. If any of these errors had been identified and rectified, it is likely that this would have prevented the accident. In order to be able to remedy the real reason for the accident, the root cause has to be identified, because if the root cause is not identified there is a major risk of the accident recurring. Prevention So how can a shipping company mini mise the risk of their vessels colliding or running aground? First, the company has to recognise that this is a substantial risk, and that the company can have an influence on it. It is not enough hiring a crew with the correct certificates and having an approved Safety Management System; there needs to be a company culture that states that these are our values and that ensures that all employees are trained to know what is expected of them. One of the main problems is that the Safety Management System is often ig nored and technology and instruments provided are not utilised. The interest ing question is how can this be allowed? The overall conclusion is not very surprising The main reasons for collisions and groundings seem to be a less viable safety culture and a lack of experienced crew. The combination of these two, which concerns both the vessel and shoreside management, leads to navigational errors. To be able to prevent a collision or grounding, it is imperative that the operator believes that a venture in safety and training is an investment and not a cost. If the shipowner is willing to put money and time in their crew, it will most likely lead them to feeling more part of the company and the vessel, as well as an asset. It is also important to identify the root cause of the problem, because the immediate cause is prob ably just part of a greater failure in the system. Then, of course, the immediate cause needs to be acknowledged and rectified. These are issues that can be addressed through crew seminars, internal audits and concentrated campaigns to highlight recurrence. To be able to rectify the root cause, it is essential that top management implements a safety culture, believes in the entire safety concept and leads by example. In the office this needs to happen by the directors constantly instructing their departments to review the procedures so the real cause can be identified. There is also a problem with fatigue on vessels, as the number of crew members onboard always seems to decrease. This could be addressed with stricter safe manning requirements, which is a difficult political issue but something that cannot be ignored. The overall conclusion is not very surprising and shows that the companies with the fewest collisions and groundings are those that invest most in their shore-based organisation, training and equipment. This is an extract from a more comprehensive study that will be published by the Club. 37

38 P&I Cargo Inherent vice it s all a matt The Cendor Mopu' Colin Ferris Partner Keates Ferris, London Colin Ferris studied law at Oxford University and has been practising as a shipping solicitor since the 1980s. Colin s practice involves all manner of shipping related disputes including charterparties, cargo, commercial joint ventures, shipbuilding, used ship sales and oil and other commodities. Recently, he has been more involved in negotiating the premature end of a number of long term charters and scrapping related matters. It is an old and fundamentally just idea that a carrier of goods by sea, though he should reasonably be responsible for caring for cargo within his possession, should not be liable for any damage to cargo where such is the result of some inherent weakness in the cargo itself and which made it unfit for carriage in the first place. This defence was available under the English common law even to a common carrier (whose only other excuses from absolute liability for the damage to the goods he carried could be Act of God, fraud or act of the King s enemies). This fundamental exception to liability was incorporated (for insurance) in the Marine Insurance Act 1906 and (for carriage of goods) was later adopted into the Hague/ Hague Visby Rules (whose wording is now repeated in the new Rotterdam Rules). Nevertheless, although long established, the limits of this defence have not always been clear cut particularly where an apparent weakness in the cargo rubs up against outside factors that might be regarded as the cause of the damage. Definition The classic definition of inherent vice is that of Lord Diplock in Soya GmbH v White (1983) who said such means the risk of deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage without the intervention of any fortuitous external event or casualty. This definition however is only a starting point. Other factors may affect a voyage and damage to cargo may be suffered. To what extent are these other factors relevant? The old approach In the case of Mayban General Insurance v Alstom (2004) a transformer s joints were worked open by the prolonged violent action caused to the carrying vessel by the sea. The judge found that although this action constituted an insured risk, perils of the seas, a claim under the policy failed because the conditions were no worse than might reasonably be expected so the proximate cause of the loss was really the weakness of the cargo inherent vice. This case was criticised for unreasonably limiting the cover provided by insurance policies intended to cover the risk of perils of the sea. In effect, Mayban implied that the assured warranted the fitness for carriage of the cargo and if the cargo was unfit, the insurance cover was lost. A return to the true cause of damage An important recent decision to consider inherent vice is that of the Supreme Court in The Cendor Mopu (2011). This relates to the carriage of a rig on a barge. En route to destination the rig legs which suffered from metal fatigue were damaged. Cargo interests blamed the weather conditions and claimed under an all risks cargo policy which excluded insures liability for inherent vice. The insurers refused to pay arguing that the weather conditions were in fact within the normal range to be expected and so the damage was inevitable and the result of inherent vice. The first instance court found that the weak condition of the legs mean that loss en route was probable but not inevitable but that as the rig s legs were not capable of withstanding the normal incidents of the insured voyage, so the claim failed. The Court of Appeal disagreed, finding that the first leg was damaged and lost by being hit by a leg-breaking wave which increased stresses upon and led to the loss of the other legs. The cause of the loss was therefore perils of the seas an insured risk. The Supreme Court rejected insurers appeal and also decide that Mayban was wrongly decided. In the Supreme Court the judges focussed of, not on whether the cargo was capable of surviving a normal voyage (as in Mayban), but the true or most proximate actual cause of the loss in question. On this voyage that was the wave, not the legs inherent weakness. To find otherwise would in essence amount to implying a warranty of seaworthiness to the cargo and denuding the insurance policy of value. Inherent vice is therefore only 38

39 Club Information Basic facts er of timing Photo: istockphoto Offshore Production Platform. a defence where the sole reason for the cause of the loss is the nature of the cargo not some outside factor. It is not therefore about balancing risks or caused but deciding what in fact was the cause. The Cendor Mopu decision is very much about insurance in order to ensure that cargo has the reasonable protection of the cover taken out and paid for. It rejects the idea that the exclusion of risk for inherent vice means that goods are only insured if they are fit for carriage. It is also about causation and perhaps sometimes about luck. Provided there was an external cause of the damage, theoretical enquiries into whether or not the cargo would have survived undamaged in ordinary conditions is made irrelevant. So this reasoning means inherent vice can no longer be relied on by insurers to reject claims where (through inherent vice) the cargo would not have survived the voyage even without the particular external event provided that the damage has in fact been caused by an insured risk. A matter of timing To address reality rather than theory is to be welcomed even if luck may now play a part in whether a claim will succeed. In the subject case perhaps cargo interests were fortunate that a big enough wave hit their rig leg before it could collapse of its own accord. Cargo claims Although The Cendor Mopu is about insurance, inherent vice is also a defence to liability under usual contract of carriage terms. In the first instance decision in the The Cendor Mopu Blair J concluded that the exception meant the same in contracts for the carriage of cargo and insurance contracts. This means that carriers must look to the actual cause of loss rather than whether the cargo was capable of being safely carried. This clearly has serious implications as many claims may now be allowed which in the past might have failed. On the other hand other interrelated relevant defences still survive such as, insufficiency of packing and under charters, there may also be rights of indemnity if charterers have failed in their obligations as regards loading, stowing, lashing, etc. What no longer appears available however is a defence based upon the theoretical inability of cargo to survive an ordinary voyage where that weakness was not in fact the cause of the damage actually suffered. There is a clear case for treating 'inherent vice' differently in the different contexts of marine insurance and carriage by sea. For the present, however, such is not the case and the carrier by sea is having to bear the consequences of the courts' wish that marine insurers should be held more closely to account. Basic facts per 1 July 2011 Protection & Indemnity (including Charterer s Liability) Number of vessels 1,425 Average age 9.1 GT (million) 49.2 Freight Demurrage & Defence Number of vessels 741 Average age 8.3 GT (million) 28.8 Hull & Machinery Number of vessels 1,354 Average age 9.7 GT (million) 54.9 Loss of Hire Number of vessels 535 Average age 8.2 GT (million)

40 Risk & Operations New SCOL: a web based business platform Increasing speed, reducing cos & sharing intelligence The main priorities for the Club have always been to provide owners with sustainable insurance solutions that save time and money. If we take a look at the trading conditions for owners and the realities of business in general, you soon realise how important it is to have access to correct and timely intelligence. To make crucial business decision on the basis of outdated intelligence could prove to be costly indeed. Doing business or rather doing good business is very often a combination of correct information reduced lead times and low transaction costs. To meet the present and future needs in this respect, the Club introduced two new tools during the spring, which will facilitate our ability to forge even stronger business relationships. One of the tools launched is called Topical Issues. Under this heading on our website, we share intelligence with our business partners regarding the most relevant issues that currently affect shipowners. The initiative is very much a living thing and Topics continuously change. To share intelligence and allow business partners to draw down on the Club s combined expertise and experience, is becoming more and more of a priority to us. To effectively manage accurate and topical feedback in a timely way for our membership is a top priority and is clearly regarded as one of our many competitive advantages. The web-based business platform Another major launch is a completely new personalised version of our extranet, Swedish Club On Line (SCOL), which is up and running from 1 July The new SCOL is a platform where we share insurancerelated business intelligence with our business partners. The information shared Lars A. Malm Director, Risk & Operations is structured under four different headings: 1. Insurance 2. Claims 3. Records 4. Loss Prevention Under the above headings our members and brokers enjoy the benefits of 24/7 access to updated information. The available information consists of, among other things, advanced records analysis including volume adjusted claim frequency analysis, run-off triangulation, and benchmarking between your fleet and other relevant fleets as far as claims performance is concerned. Also included is advanced frequency analysis, which enables you to compare performance between different shipping segments etc. 24/7 one-stop shop The next step for the Club is to introduce the possibilities for our members and brokers to do business over the web. As mentioned at the start of this article, it s becoming increasingly important to reduce the cost of each transaction and increase the numbers of transactions. Us opening up for e-commerce is of course a step in that direction. We hasten to say that our business will remain a people-to-people business, but we are confident that introducing an accessory such as e-commerce will further enhance the strong relationships we as a Club enjoy with our business partners. So, what kind of business do we anticipate will be done over the web? The answer is basically all business, which to a greater or lesser extent consists of a lot of administration. Reducing lead times and the cost of transactions comes high on our agenda. It is important to help members and brokers become as efficient as possible. For example, keeping track of an insured vessel means that we will automatically know when that ship is going into an excluded area as such there would be no need for a notification. This obviously saves a lot of time and administration. Another example is a more simplified manner of administrating minor claims on the P&I and the Marine side. Efficient communication electronic notifications Efficient communication is critical. To this end we will introduce a new way, in addition to the already existing RSS and Twitter feeds, informing our business partners regarding issues of importance, alongside our new SCOL. A cornerstone of our new SCOL will be the electronic notification system. For example, when there is a document ready for collection (for example a Certificate of Entry or Bunkers Blue Card) the broker, or the member, will be notified. Similarly on the claims side there could for example be an H&M Adjustment ready to be picked up. Mobile phone application We were the first Club to launch a mobile website it is amazing to see how quickly others followed suit. In connection with the launch of the new SCOL we also launched our new mobile app, fully functional on The Swedish Club is now on Twitter You can now follow The Swedish Club on Twitter. We ll be posting the latest club news, updates, events and businessrelated topics. We are looking forward to your comments. Please visit com and search for theswedishclub to follow us. 40

41 ts Photo: istockphoto Our members and brokers enjoy the benefits of 24/7 access to updated information. sends it off to the client mission accomplished! any device, which contains very useful functionalities designed to simplify our business partners lives. Among others, you can manage documents vital to a vessel s trading (Certificate of Entry, CLC Blue Cards, Bunkers Blue Card etc.). Picture the hard working broker who is on his way to the office early in the morning. His mobile rings and the caller is his client (the owner) who desperately needs his Certificate of Entry. The broker goes to the Club s app logs on retrieves the document and The sky s the limit We are embarking upon a fascinating journey and we are happy to invite you all aboard. The features described above have mainly already been implemented and as such are reality. Having said that, the SCOL platform is designed, very consciously, to allow further expansion for sharing intelligence and e-commerce abilities. Our vision is that far more contacts between the Club and its business partners will be carried out electronically in future simply because it is more efficient and therefore it makes perfect sense. Having said this, we would like to emphasize that this is and will always remain a peopleto-people business. Taking this step with the new SCOL will in our mind only enhance the quality of those treasured person-to-person moments of interaction between our business partners and us. 41

42 Club Information Marine Insurance Course 2011 MIC Knowledge sharing For the eleventh year in a row The Swedish Club arranged Marine Insurance Course at the beginning of May. It is a very popular course with many applicants every year. There were so many this year that we actually had to decline some due to limited space. The course is a good introduction to the marine insurance business and to the Club. It is a good opportunity for meeting other people in the business, both members and The Swedish Club s staff, to discuss and exchange experience. The Class of 2011 was 32 participants of mixed nationalities gathered for a 5-day course in marine insurance. The first day consisted of an introduction to marine insurance and the Club. The Club held a City-Walk tour including dinner in the evening for the class to get to know each other. The second day consisted of the Protection & Indemnity part of the course. The third day dealt with Hull & Machinery and on Thursday there was a mix of different subjects, such as FD&D and Maritime Resource Management. Thursday always ends with a spectacular evening activity which includes a boat trip to the island of Donsö and dinner. The course ended on Friday with really appreciated workshops. The Marine Insurance Course is very well attended and has a good reputation among the members and participants. It is the perfect course for those new to the business, or people who need to freshen up their knowledge about marine insurance. We would like to thank everyone involved in this year s event. The dates for next year s course have not been decided yet. Please keep an eye on our website for more information. PhotoS: The Swedish Club Vital parts in the MIC-machinery Three ladies on the same boat, from left Wiebke Schütt (Wallem GmbH, Hamburg), Aysegül Domanic (Genel Denizcilik Nakliyat Geden Line, Istanbul) and Carina Sigersten (Fairwater Marine, Stockholm). Jenny Herlin, MIC Course Co-ordinator. Susanne Blomstrand, MIC Course Co-ordinator. The city walk on Monday evening started with drinks and appetizers in a building locally known as the lipstick. The lookout point, which is 86 m above sea level, gives a panoramic view of the city. Clement Haro from CMA CGM S.A, Marseilles and Mete Akbal, Kalimbassieris Maritime Denizcilik Ltd, Istanbul enjoying the view. 42

43 On a boat trip to the island of Donsö for dinner at Restaurant Isbolaget. Standing from left: Johannes Stratmann (Bernhard Schulte Shipmanagement, Hamburg), Nikolai Justus (Junge & Co Versicherungsmakler, Hamburg), Edward Grigg (Miller Insurance, London) and Florian Berend (Carl Redher GmbH, Seevetal) Sitting from left: Kai Wang (Grand China Logistics, Shanghai) and Victor Bogesjö (The Swedish Club). Class of 2011 gathered outside Restaurant Isbolaget on the island of Donsö. Discussions concerning Freight Demurrage & Defence with workshop leader Anders Leissner. Thursday evening at Restaurant Isbolaget. From left: Keith Jones (Aon Risk Solutions, London), Efrosini Giouroukou (Dioryx Maritime Corporation, Athens) and Angelos Defigos (Danaos Shipping Co Ltd, Piraeus). 43

44 Cefor Cefor Reflections years at the service of quality marine insurers Cefor, the Nordic Association of Marine Insurers, is celebrating its 100 th anniversary in Although The Swedish Club only has ten years of history with Cefor, the Club s membership through the merger of Cefor and GSK (the Mutual Marine Insurers Committee) as of 2001 marked a significant change for the Association. Not only did it unify mutuals and insurance companies in one organization, but Cefor also became a Nordic marine insurance association. The Norwegian fleet ranked fourth amongst the maritime nations in the early 1900s, with insurers in most coastal towns. General agents representing foreign insurers and insurance companies were looking for means for sound competition through the establishment of Sjøassurandørernes Centralforening i Kristiania the Central Union of Marine Underwriters in Kristiania, later known under its acronym CEFOR - in Compulsory tariffs and conditions became the primary focus for the new organization. Hull agreement With the outbreak of WW1 in 1914 and the ensuing rise in demand for tonnage, the shipping bonanza led to an increase in the number of Norwegian marine insurers from 18 to 77. In the post-war years market collapse, lay-ups and bankruptcies were followed by a new growth cycle, and the marine insurance market became more business-like with less traditional local bonds. A new voluntary hull agreement came to replace the fixed tariff. Withdrawal During WW2, special war risk schemes came into force for the large Norwegian fleet outside German-controlled waters, while the home fleet was covered by Norwegian insurers. With peace in 1945 a 75 per cent increase was proposed to cover the inflated prices and the effect of wear and Helle Hammer Managing Director, Cefor, Oslo tear during the war years. British insurers quoted much lower premiums, and consequently most Cefor members withdrew from the hull market altogether only to return in New offshore market Over the following decades the world fleet continued to grow both in number and ship size, there was greater sophistication but also some tragic losses. In 1973 the tanker market collapsed in the wake of another Middle East war, signaling the start of a shipping depression caused by a massive oversupply of tonnage. During the eventful years of the early 1970s, a new market for insurance opened up in the wake of offshore activities in the North Sea. To break down the London cartel covering the North Sea offshore market, a syndicate of seven Cefor members and four mutuals was established in 1972 (The Norwegian Oil Risk Pool). Going international Until the mid-1970s the Nordic markets were considered large enough for the resident marine insurers. The first foreignflagged vessels accepted by Cefor members were those owned or controlled by Norwegian owners. Norwegian insurance brokers also began to work specific foreign markets, and in time several foreign owners came to see the benefits of the Nordic claims leader system and the Norwegian Plan conditions. The Scandinavian Market Agreement (SMA) was established in 1983 to secure closer cooperation in international underwriting based on a leader-system in which any cover required two participating members as leaders. When the leading companies became so few and strong that they objected to having their market actions restricted by market agreements, the Norwegian Hull Agreement for domestic business was quietly put to rest in 1996 followed by the SMA in Merger of GSK and Cefor Market concentration through mergers and acquisitions towards the turn of the millennium led to a merger between GSK and Cefor with new by-laws also opening up membership for other non-norwegian Nordic marine insurers. This was mainly due to The Swedish Club, which had been a member of GSK for a number of years. Nordic development In recent years, efforts have been undertaken by Cefor to build a pan-nordic marine insurance association. In 2009 the Association adopted new English Statutes and a name change to The Nordic Association of Marine Insurers (Cefor). An important milestone was reached in November 2010, when Cefor and four Nordic shipowners associations signed an agreement to draft and present the first Nordic Marine Insurance Plan in Willingness to adapt In addition to developing and maintaining competitive Nordic insurance conditions, Cefor today continues to serve its members by making available appropriate statistics from the world s largest database on marine claims, offering tailor made education programs, and influencing the industry s framework conditions. Throughout its history, Cefor has proven to be willing to adapt to new market developments and demands from its members. At the core of its activities are always the quality and dedication provided by the Nordic marine insurance market, of which The Swedish Club remains an important part. 44

45 Club Information News from Team Oslo Energy Photo: istockphoto We are fairly confident that we will reach our targets for 2011 The hot renewal season from 1 March to 1 July is soon over. Local brokers and clients have given us excellent support since we started underwriting Mobile Rigs & FPSO s in February. We have received around 25 offers, and have written about 80% of these accounts. Competition for following lines has stiffened here in Oslo over the past couple of years. A number of Lloyd s Syndicates have either established a Branch Office or have signed an Agency Agreement with local underwriting agencies. Around 10 Lloyd s Syndicates have a presence in Oslo now, and all are hungry for a share of the Rig & FPSO accounts and various other lines of business. Local brokers are placing a larger proportion of their business with local markets this year, compared with recent years. Still, we have managed to get a decent share of most renewals this spring, typical lines are varying from 2-5%. The market conditions are still pretty favourable, even though leaders have shown signs of willingness to compete for prime accounts. In early 2011 we saw a softening of the market, but some large losses (the FPSO Gryphoon BI loss and the Accommodation Rig Jupiter 1 Constructive Total Loss) have Verner Rydning Senior Manager Team Oslo Energy recently had an impact and influenced lead markets to also charge increases this spring. We estimate that the Rig & FPSO premiums have gone up around 10% on average this year, and we have also seen some increase in deductible levels. We have added around 20 new energy clients since startingup underwriting and expect to receive 10 more accounts in this first year. We are fairly confident that we will reach our targets for So far, only one minor claim has been reported to us and we hope for a quiet second half of the year. Good news, so far, from Team Oslo Energy. 45

46 Club information News from Asia Photo: istockphoto Big bulkers will continue under pressure Vale Brazil, the largest VLOC in the world, DWT 400,000 metric tons, loaded with 391,000 tons of iron ore from Brazil is heading to Dalian, China on her maiden voyage. Rumours suggested that some shipping companies are trying to lobby China s Maritime Authorities to block the entry of such ships into Chinese ports because they fear that allowing such ships into China would destroy the shipping market. Many people in shipping are anxiously waiting to see how this chapter will unfold. Vale has ordered 35 ships of similar size. Some people believe these ships will be a big threat to the cape market, and reshape the dry bulker sector. Due to economies of scale these ships will out-perform the capes already on the market and put further pressure on the already very pressurised market. Many cape owners blame the three largest mining companies in the world for the state of the freight market. These mining companies monopolise the shipping of iron ore and they could influence the freight market through controlling the supply of cargo on the market. Many shipping experts have commented that the flat freight market resulted from over-builds in the past few years and the remaining large order-books in the future. The international shipping market is arguably the freest market where the fundamental principle of market economics supply and demand dictates the freight market. Ruizong Wang Managing Director Hong Kong Many will still remember that daily hire of cape shot over USD 210,000 per day in July Many newbuilding orders for large capes had been placed since then. After the market crash in the wake of the international credit meltdown, the Baltic Exchange Dry Index (BDI) dropped from over 11,000 points to less than 700 points. Many newbuilding deliveries were postponed or even cancelled. However the bad market was relatively short-lived. After many governments in the world took concerted actions to salvage the wrecked financial market and boost economies by announcing stimulus plans in early 2009, the freight market rebounded quickly. Iron ore imports to China broke records one after another in a few months. By April 2009, the BDI had bounced back to the 4,000 point where a cape could make over USD 50,000 a day. The newbuilding order books quickly swelled again. This coincided with the rapidly expanding shipbuilding capacity in China. Although the cargo volume continued to grow the tonnage growth out-paced the growth of cargo volume. In 2011 alone there will be over 300 large capes and VLOCs delivered to shipowners around the world, which is a ship a day on average. With such a phenomenal speed of tonnage increase it is difficult to keep supply and demand in balance. Economic history is cyclical, as is the, freight market. We have seen old tonnage being scrapped in recent months. The market will adjust itself. Some old tonnage will be phased out and gradually the market will achieve a new balance. 46

47 Club information News from Piraeus Photo: istockphoto Well prepared to tackle the rough times ahead Tord Nilsson Area Manager Team Piraeus The spring was long and quite cold in Greece this year but now summer is here with somewhat warmer temperatures. Temperatures in Greece have really soared regarding the Government s austerity measures. The heat on the government from the people of Greece and the rest of Europe is quite immense and Mr Papandreou is trying to keep everybody as happy as he can, while at the same time taking Greece through a time when reducing debt is the name of the game. Banks and governments in Europe are looking for the measures to bite and the people in Greece are trying to get the politicians and government to shoulder their part of the problem and soften the measures a bit. There have been a lot of strikes and demonstrations in the last couple of years. One good thing seen recently is that demonstrations have been of a more silent type like we have seen in Spain and France. The Global economic recovery seems to have taken a breather and there are signs that the trillions of dollars put into economies around the world stopped the decaying process for a while but may not have cured the underlying problem. Many countries face a similar problem more money is being spent than being earned and the balance needs to be borrowed. Future spending will therefore be less than if the budget was balanced. The US, Japan, and other large economies have deep holes in their pockets as do a lot of medium and small economies. In this part of the letter I was going to talk about insurrections in the Middle East and all the treacherous weather we have seen recently, but realised that it would be a bit too much doom and gloom. For The Swedish Club the sun has been shining for quite some time and continued to do so during the first few months of this year, although it seems like we have seen a bit less inflow of new business this year than last year. The insurance business cycle seems to be at a crossroads as this year has so far been a year with big losses for reinsurers and there are many companies that are bracing for reinsurances increases next year. We feel that we are well prepared to tackle the rough times ahead. Our finances are quite good, we have staffed the offices properly and we have made the necessary investments in IT systems. All we need now is to continue to attract new members. 47

48 Club Information News from Team I Photo: istockphoto Historical step Since the last edition of the Club s magazine Triton, Team Göteborg I held its now annual third Club breakfast meeting in Oslo on 6 April and our fifth annual Club lunch seminar in Istanbul on 12 May. Oslo and Istanbul are fantastic places and so are their shipowners. The Oslo event was remarkable as it was our first breakfast meeting since making our historical decision to venture into the energy sector, which attracted old and new friends to the seminar. Another historical step for the Club was taken when it held its first ever lunch seminar in Copenhagen. The number of attendees exceeded expectations and we felt warmly welcomed and appreciated; the main speaker was Hans Tino Hansen from Danish-based company Risk Intelligence ApS. He held an enlightening and eye-opening seminar on Somali Pirate Leaders maintaining the initiative beyond armed protection. The numerous questions from an interested audience afterwards was proof of that! An article about Somali pirate leaders can be found on pages On the service side we are pleased to advise that the team has been further strengthened by recently employing Victor Bogesjö Tony Schröder Area Manager Team Göteborg I as Claims Executive on the Hull side. Victor started with the Club as an Assistant Claims Executive on 1 September He has a law degree and is an active participant of the Swedish Sea Rescue Society based in Fjällbacka north of Gothenburg. He is part of our strong team committed to providing topquality service. On the claims side we can now gradually see the effects of the world economy recovering and trade picking up an observation in particular on the hull claims side since the beginning of January Although it is, as a matter of course, not uplifting, it is all (unfortunately) in line with expectations and are therefore not a cause for concern. Summer is here and another extraordinary and enjoyable Annual General Meeting has passed. After having had the opportunity of recharging our batteries during the coming summer vacations we will continue to focus on the path that we are constantly on building trust. We will do our best to keep on excelling by engaging fifth gear, or perhaps more appropriately as it is put in nautical terms: Full Speed Ahead! 48

49 Club information News from Team III We have no reason to assume that claims won t return to expected levels Photo: istockphoto Peter Andersson Area Manager Team Göteborg III We noted a resurgence of activity among our members in Q4 2010, which continued into The Team III portfolio is the same as German shipping, dominated by container tonnage, hence our optimism, although we also have an increasing number of tankers, bulkers and heavy lift vessels in our portfolio. We are also seeing organic growth from existing members entering into new shipping segments which is partly a result of our marketing efforts for diversification and growth. Recovery for some segments may be a bit further down the road. Our 2011 renewals have so far generally occurred without major adjustments due to a better than expected performance from the majority of the covered fleet. This pretty much follows the global market trend of lower than expected claims outcomes. The competition amongst underwriters for volumes is as fierce as ever, regardless of if it is in Germany, Cyprus, the UK, the US or elsewhere. Despite the fact that the marine insurance market is saturated, new capacity is being deployed and has increased pressure on premiums. Naturally the gap is widening between those underwriters chasing market shares and revenue and those with a more cautious approach to underwriting. With the rise in shipping activities and global trade we have no reason to assume that claims won t return to expected levels. In recent months we have followed the dismantling and transformation of the Bremen based heavy lift specialist Beluga Shipping. Damage cannot be undone but let us hope the remaining fleet, as well as the vessels under new managers, sail towards a bright future and others can maintain the educational support previously provided by Beluga. Then, of course, we received the news of the cessation of underwriting by MSMI, the hull and machinery arm of North of England. MSMI is recognized for its good services by ex members now seeking new havens for their fleets. From summer 2010 onwards, we have noticed an increased frequency of requests for trading in Arctic waters. Ice navigation requires by necessity a different set of skills than navigating in open waters and even minor incidents and breakdowns may escalate into serious ones. Cold winters in Scandinavia pose challenges to shipping in the Baltic Sea and this winter was particularly demanding in this respect. We recorded a number of ice-related damages to vessels calling at St Petersburg and nearby ports. Overall we have reasons to be pleased with developments and performance of the team fleet although the hull claims results need a good second half to become entirely satisfactory. 49

50 Club Information Out and About Rise and shine! Breakfast Meeting in Oslo, 6 April 2011 This was our third consecutive annual breakfast meeting in Oslo always held at the splendid location of the Norwegian Shipping Club. In attendance from The Swedish Club was Managing Director Lars Rhodin, together with Henric Gard and Tony Schröder and of course the man of the year Verner Rydning, who is now head of Team Oslo Energy. Lars Rhodin went on to describe the events and results of the Club during a great year indeed for the Club. This was followed by Verner Rydning, a very familiar face in the Norwegian energy market and needed little introduction. He updated the audience about the Club s new venture into the energy field most prominently mobile offshore units and FPSOs. This year s breakfast meeting was very well attended and, as we are now part of the energy market, also drew attention from Norwegian brokers dealing with this particular sector. Member Luncheon in Piraeus 11 May 2011 The Club held its Annual Greek Member s lunch at the Piraeus Marine Club on 11 May. Over 50 guests attended the event. Before lunch, members were briefed on the Club s latest developments in a presentation by Managing Director, Lars Rhodin. 50

51 Club information Out and About Club Evenings in Hamburg and Bremen April 2011 In Hamburg, from left: Sanne Hauschildt, NSB Niederelbe Schiffahrtsgesellschaft mbh & Co KG, Birgitta Hed, The Swedish Club, Heike Warnke, Junge & Co Versicherungsmakler GmbH. The traditional Swedish Club Evenings took place in Hamburg and Bremen on 13 and 14 April. Once again a record number of people attended the two events. In addition to providing opportunities for shipping business and marine insurance professionals to gather and exchange news and views, Lars Rhodin contributed to the cheerful atmosphere by sharing good news about the development of our Club and Anders Leissner gave an interesting presentation on sanctions from a P&I Club perspective, including some general advice to the audience. Thank you everyone for showing up and making our Club Evenings memorable and to the staff of Hafen-Klub, Magellan Travel and Park Hotel Bremen for your efforts and great service. In Bremen, from left: Thomas Ruminski, Pandi Marine Insurance Vermittlungs GmbH and Hans Filipsson, The Swedish Club. 51

52 Club Information Out and About Club Seminar in Istanbul 12 May 2011 The traditional Istanbul lunch seminar was, as usual, held at Swissotel Bosphorus. The seminar was, as always, well attended with representatives from members and other business associates in the Turkish market. After mingling with the Club s staff, overlooking the Bosphorus, guests enjoyed the lunch and a short presentation by Lars Rhodin. From left: Anders Leissner, The Swedish Club, Esra Umut Gülerer and Mehmet Ali Gülerer, Dünya Denizcilik ve Ticaret A.S. From left: Tony Schröder, The Swedish Club, Ülkem Gürdeniz and Ufuk Teker, Omni Ltd. Suay Umut, President of Dünya Denizcilik ve Tikaret and member of The Swedish Club Board in company with Lars Rhodin, Managing Director. Club Seminar in Copenhagen 18 May 2011 Hans Tino Hansen from Risk Intelligence ApS caught everyone s attention with an interesting speech on Somali pirate leaders. The Swedish Club held a lunch seminar in Copenhagen, Denmark on 18 May. After a general presentation on the Club s state of affairs by Lars Malm, Henric Gard and Tony Schröder, Hans Tino Hansen from Risk Intelligence ApS caught everyone s attention with an interesting speech on Somali pirate leaders. The seminar was well attended with representatives from the Danish maritime sector including members and other business associates. With such a warm welcome on the Danish market, the Club has already started planning for next year s event in Copenhagen! For further information about Somali pirate leaders, please refer to article on page 14. From left: Sören Wang, Incontact Brokers A.S. and Claus Andersen, Container Shipping A.S. 52

53 Club information Out and About Ingvar Lorensson (left) from Rederi AB Donsötank and Kenneth Nilsson from Setterwalls law firm (right) talking with Tony Schröder (The Swedish Club) at the booth. Donsö Tanker Meet 21 and 22 June 2011 The Swedish Club attended the 2011 Donsö Tanker Meet, the shipping exhibition on Donsö Island which was arranged for the second time by local shipping companies and volunteers from the Island. 220 exhibitors from the shipping sector had set up their stands in Donsö s sports arena. The Swedish Club was of course represented by a number of staff attending over the Daniel Eriksson, (Fairwater Marine AB) (left) and Annika Börjesson, (MAQS law firm,) visited Örjan Karlsson and The Swedish Club s booth. two-day event. The exhibition was very well organized as was the excellent three-course dinner, which was held in the picturesque surroundings of Donsö harbour and was attended by over 600 seated guests. The next event will be on 3 and 4 September 2013, and no doubt we will pencil the dates in our calender. The surplus from the exhibition will go to a foundation, which will promote activities on Donsö island for children, young people, and the elderly. The Swedish Club had a competition in the booth, in which you could win very nice prizes. Questions, answers and winners are published on our website com/news/circulars/out and About Team Oslo first energy seminar in Aunan, Norway Team Oslo Energy hosted a two- and a half-day seminar in Aunan, Norway, in early June. Participants were a mix between energy brokers and clients. Topics on the agenda included various energy insurance-related questions and issues, as well as an update from Mr Eric Bruusgaard about Fred Olsen Drilling and Fred Olsen Production. Participants also had the chance of fishing in the Orkla River, well-known for its stock of large, wild salmon. Henric Gard, from The Swedish Club s head office, caught a 7 kilo salmon. 53

54 Club information Out and About Göteborg Half Marathon 21 May 2011 The Göteborg Half Marathon, which has grown to be one of the greatest long distance races in the world, took place on 21 May. For the fourth time, The Swedish Club participated with a team of runners, this year put together by 48 members, business partners and employees of the Club. In preparation for the race, (not the only preparation though!) The Swedish Club Team gathered the evening before the race for a pasta dinner generously hosted by Holman, Fenwick & Willan. As we all know, there is nothing like a glass of good wine to accompany delicious pasta dishes, but on this evening, for obvious reasons, our glasses were only filled with water. This year s race was the 32 nd with 59,417 runners signing up, of which 43,026 finished the race. As always, the race was run in sunny spring weather, which made the event enjoyable not only for the runners but also for the hundreds of thousands of spectators cheering them on. To further encourage the participants, more than 50 bands were playing along the track. This really helped to keep the pace up, but unfortunately the bands did not play fast enough to enable any member of Christoffer Ahlqvist (no 2782), Transatlantic Bulk 1904 AB, had the best time in The Swedish Club Team. He completed the race in 01:30:53. Congratulations! The Swedish Club Team to compete for the victory. The race was won by Albert Kiplagat Matebor of Kenya, in a record time of After reaching the finishing line and a well-needed shower, team runners met for the traditional Post-Race Banquet, co-hosted by The Swedish Club and Transbulk 1904 AB. This year s banquet was held in beautiful surroundings at Rosencafeet Trädgårdsföreningen. Weary runners stumbled in, but after treatment with cold beer, Italian food and entertaining speeches, they all danced out into Gothenburg s nightlife. Sign up for 2012! Run with us next year! For further information about the race please visit The Swedish Club Team was this year represented by runners from: Admiralty Law Office of David J. Farrell, JR, South Chatham, USA Aon Benfield, Hamburg Conti Reederei, Munich Georg Duncker GmbH & Co, Hamburg Holman Fenwick & Willan, London, Paris, Piraeus NSB Niederelbe Schiffahrtsgesellschaft bmh & Co KG, Buxtehude Polaris Insurance Services AS, Oslo The Swedish Club, Gothenburg Transbulk 1904 AB, Gothenburg We would like to take this opportunity of thanking all members of The Swedish Club Team who made a donation to The Swedish Sea Rescue Society. PHOTOS: Marathonphoto 54

55 Club information Out and About / Staff News James Mackay (no 9741) from Holman Fenwick & Willan, London in good shape. Staff News Head office Gothenburg Francoise Fouchier- Matte Senior Claims Executive, P&I joined Team Göteborg III on 20 June She holds an LL.M. from the University of Bordeaux and a postgraduate diploma in Maritime Law from the University of Brest and has about 10 years experience of P&I claims handling. Prior to joining the Club, Francoise worked for Skuld in Oslo and Paris and has been a partner of France P&I in Paris. Caroline Johansson HR Assistant joined Human Resources on 1 April She holds a Master s degree in Business Administration and previously worked with HR matters for about two years Patrik Almström Claims Executive has resigned from the Club after six years of service. We wish him all the best in his future career. Lisbeth Josefsson System Support retired from the Club on 27 May 2011 after more than 40 years of dedicated service to the Club and its members. We wish her all the best for the future and a happy retirement. HONG KONG Lisbeth Larsson Accounting Officer retired from the Club on 30 June 2011 after 46 years of dedicated service to the Club and its members. We wish her all the best for the future and a happy retirement. Andrew Bates Claims Manager, FD&D/P&I joined the Club s Hong Kong office on 16 May He is a New Zealand national and holds a Bachelor of Law degree from the University of Canterbury, New Zealand and is a qualified barrister and solicitor in New Zealand and solicitor in the UK. Andrew has about 10 years experience from in-house legal work and P&I and has previously worked for the Kuwait Petroleum Corporation. The Swedish Club Board Members, elected by the employees Sabine Diedrichsen, Aon Benfield, showing her medal after well-performed race. Fritiof Granberg, to the right, resigned from the Club s Board in connection with the Board Meeting on 15 June. He has been a member of the Board since 1995 and is succeeded by Jakob Osvald (to the left). Jakob joined the Club in 2002 and holds an LL.M. from the University of Lund. 55