Aon Calls on P&I Clubs to Update Piracy Cover War Terms

Aon has issued a bulletin calling on the P&I Clubs – ‘Protection & Indemnity’ mutual associations that provide liability coverage for most of the world’s marine transport – “to remove their war risks exclusion to give ship owners greater coverage certainty in the event of a piracy attack.”

Aon points out that the “continuing attacks are highlighting the need to clarify ambiguity in club cover: currently, P&I clubs do not exclude liabilities arising from piracy, but the loosely defined exclusion of ‘weapons of war’ could return piracy liabilities to the primary hull war risks underwriters.”

Stephen Hawke, executive director at Aon, explained: “Piracy attacks have focused ship owners’ attention on the need for certainty of cover with the right insurer. Currently, the P&I war exclusion is open to interpretation, given that pirates invariably employ weaponry.

“This is giving cause for concern and the insurance industry needs to resolve this lack of clarity. With P&I clubs’ expertise in handling liability claims, it would be a positive solution – provided the cost implications are neutral – to shift primary P&I war risks cover from hull insurers to the P&I clubs.”

Aon said it is also asking P&I clubs to define their definitions of cover as follows:
– Is piracy covered by the club rules?
– When is piracy not covered by the clubs?
– How is piracy defined and how is it distinguishable from terrorism?
– What is the definition of “weapons of war?”
– Are ransom payments recoverable?

“P&I clubs must also provide advice on the following regularly asked questions by ship owners,” Aon said:
– Should an owner employ armed guards?
– Is cover prejudiced by the usage of armed guards and/or by security firm contracts?
– Where can an owner look for the best advice on security matters?
– If there is an attack should General Average be declared and why?

Source: Aon – www.aon.com