Ship owners are becoming increasingly concerned about the financial consequences of a rise in ship charterers filing for bankruptcy. In order to protect owners’ vital revenue streams from this risk, Marsh launched Charter Default, a product that provides a mix of fixed recovery guarantee and credit insurance, tailored to the ship owner’s particular requirements. Charter Default is backed by both insurers and an investment bank.
Covering both outstanding debt at the time of insolvency and the loss of future revenue for a set period, Charter Default de-risks important revenue streams, thereby assisting owners to attract better terms from lenders by reducing counterparty credit risk.
Nick Roscoe, a managing director in Marsh’s Global Marine Practice, said: “The risk of ship charterers defaulting has increased since the global financial crisis. Companies with ships on charter are exposed to loss of revenue if their charterer folds or administrators force a renegotiation of terms. This product provides a secure framework for owners to grow their business with new clients and in new economies.”
Working with insurers, Marsh has developed specific policy wordings that provide a range of options to suit the credit insurance needs of ship owners of all sizes and complexity. In particular, Marsh has secured significant additional capacity through a proprietary credit insurance policy with Lloyd’s syndicate, Chaucer. Policies are tailored to the needs of individual owners with flexible indemnity provisions and event triggers. These policies are designed to lock in anticipated profit and protect owners’ capital investment in their ships.
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