17th August 2018, London, UK

Cyber Insurance – The Marine Insurance Requirement for the Modern World

Gareth Morrow examines a product that some experts predict could become almost as common in the Marine Insurance market as Hull and Machinery or Protection and Indemnity.

It was 4am on 25th June 2017 when the Chairman of the world’s biggest shipping company got a call saying that there was an emergency. He could have been forgiven for thinking that they had lost a ship or a crew member, but the truth was that they were faced with a crisis of a completely new kind: AP Moller-Maersk had been hacked.

The company’s onshore systems had been infected by the NotPetya ransomware, which stole all of the firm’s information and demanded that each user pay USD 300.00 in Bitcoin in return for access to their data. The company had to shut down all of their IT systems, meaning ships and ports stood still and employees could only communicate via Whatsapp (on their private phones, of course: all business contact information disappeared). AP Moller-Maersk had to reinstall their entire IT network, which took 10 days (a timescale praised as “heroic” by industry experts who speculate that such a task could usually be expected to take around 6 months) but the attack still came at a huge cost: an estimated USD 300m in losses caused by the disruption to APM’s ships and port operations.

Other notable incidences of cyber-attacks on the maritime sector include a GPS spoofing in the Black Sea in June 2017, which resulted in 20 vessels being given a false location on radar, and the hacking of COSCO’s US Operations in June this year. It’s worth bearing in mind that all three of these high-profile attacks have happened within the last 15 months: we are on the precipice of a new frontier of risks to operators in the maritime industry.

The attack on AP Moller-Maersk sent shockwaves through the shipping world and bought to the fore a risk that most people were mostly familiar with in connection with their personal lives: cyber-crime is probably most commonly associated with the hacking of bank accounts, however it is the fastest-growing method of crime in the world and is predicted to overtake the global trade of all illegal drugs, in terms of profitability, within 3 years. All industries must react to the increased risks by ensuring they are protected in terms of systems, safeguards and insurance coverage. In this respect the maritime sector is lagging behind others to an alarming extent.

It is inevitable that cyber-attacks in the shipping industry will become much more common as opportunities increase and hackers become more sophisticated… and smaller ship owners than AP Moller-Maersk and COSCO are just as likely to be targeted. We believe that now is the time to be proactive in ensuring that our clients are fully protected.

On and offshore operations are more closely linked than ever and ships are increasingly utilising new technologies. The knock-on effect is that most new electronic equipment is either directly or indirectly linked to the internet, which makes ships and their associated onshore IT systems vulnerable to attacks.

Cyber Insurance products have grown quickly in the wider insurance market in line with clients’ growing needs, but the marine insurance market has been slow to follow suit. Ship owners, managers and charterers may or may not be aware that they have very little insurance coverage against the risks of cyber-attacks. Standard Hull and Machinery policies include the Institute Cyber Attack Exclusion Clause [10/11/2003], commonly referred to as ‘Cl.380’, which excludes loss, damage, liability or expense caused by a cyber incident intended to inflict harm. This leaves ship owners without cover for their ship(s) if damage should occur as a result of a cyber-attack.

We at Oakeshott feel that our marine clients, like everybody else, should be protected against what is the biggest emerging peril of the modern world and we are pleased to advise that our partners at the Norwegian Hull Club are offering innovative and affordable solutions.

The Norwegian Hull Club currently offers two products for cyber insurance: Clause 380 buy-back and Marine Cyber Threat and Extortion. They explain as follows:

“Our Clause 380 buy-back insurance is a re-instatement of cover under the Marine and War policies, providing cover for incidents that would otherwise not be recoverable due to the Cl.380 exclusion in policies. Buy-back can be pro¬vided for H&M, IV, LOH and War, and we can offer a limit of USD 50 million per fleet. Norwegian Hull Club’s annual aggregate exposure is limited to USD 300 million.

Marine Cyber Threat & Extortion from Norwegian Hull Club protects against these dangers for the Assured and its related subsidiaries. It covers the costs of extortion payments, as well as crisis consultants and other actors deemed reasonable and necessary. These may include a negotiator, public relations consultant, interpreter, as well as a reward and other miscellaneous expenses. The cover can include Loss of Hire for the vessels and Business Interruption for the company. The Club offers a limit of USD 5 million, with cover provided for both the vessels and the on-land organisation.

Norwegian Hull Club deals with cyber incidents in the same manner as any other risks we are obligated to handle - with the highest standards of service, quality, competence and efficiency. In this respect, our Clause 380 buy-back and Marine Cyber Threat and Extortion solutions - with superior levels of service and response at their core - are no different to any of The Club’s other products.”

The Norwegian Hull Club also work with their Marine Cyber Insurance clients to advise them on methods they can use to make their IT systems more secure and reduce their vulnerability to a potential security breach.

The information required, in order to provide quotations for Marine Cyber Threat and Extortion cover, is very straightforward: standard information about the fleet and its ownership and management including subsidiaries and all offices to be included in the cover. For the Cl 380 Buy-back, Underwriters would only need IMO numbers, values and the details of the H&M/War placement (wording, leaders, Deductibles).

Please don’t wait until you are the victim of a cyber-attack before taking action to protect yourself against a very modern method of crime. Please contact us at wecanhelp@oakinsur.com for quotations or to discuss further. We are able to provide detailed cover wordings upon request.

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25th May 2018, London, UK

General Data Protection Regulation (GDPR)

We at Oakeshott keep all our Data confidential and do not share our data with any third party/parties. Herewith we inform you that you may contact us at any time to ask for your data to be removed.

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17th October 2017, London, UK

Marine Insurance and Maritime Law Seminar in Varna, Bulgaria – 12th October 2017

Oakeshott Insurance, Guelder Rose and Thomas Cooper Law Firms have been organizing free seminars for ship-owners and cargo interests in Odessa since 1995. Oakeshott with MaxMarine and Thomas Cooper Law Firm have also done two seminars in Saint Petersburg.

Varna, Bulgaria became, last week, the third venue for combined effort of insurance and law specialists from the two firms.

Sergey Khassine of Guelder Rose and George Grishin and Gareth Morrow of Oakeshott read papers on the latest developments in their realms. Case studies of General Average, a large Cargo Claim and Salvage, vividly presented with photos and calculations, found a good response with the audience.

Attendees included local and international companies such as Navibulgar, Bon Marine, Ocean Marine, Donau Transit, Logitex on the shipping side, Willchart, Cargill, Simpson Spence Young, Visitship, Shippossible among Charterers and Alter Ego, Georgi Filaretov, Braemar, DZI, IPS Serives from the legal, shipping and surveying communities.

The traditional Insurance Knowledge quiz was well answered with the winner, at 8 correct answers of 8, receiving a memorable gift. Gifts were also presented to 10 runners up. 

Oakeshott and Guelder Rose are ready to continue insurance and legal cooperation with Bulgarian and international transport community.

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25th January 2017, London, UK

Oakeshott and Thomas Cooper To Host Marine Seminars in Odessa, Ukraine and St Petersburg, Russia

Oakeshott Insurance's Marine seminars are now a 22-years old tradition and we would to invite you, dear reader, to participate in one, either in Odessa on 22nd February or in St Petersburg on 27th June.

The main organisers are Thomas Cooper Law Firm and Oakeshott Insurance, the first Eastern European Lloyd's broker in 329 years.

We will be joined in Odessa by London P&I Club and Navigators P&I.

Our seminars are known NOT to have a fixed programme. It is a live talk between shipping and cargo interests, maritime lawyers and marine insurance people. Of course, we’ll be touching upon all  the latest issues, be it latest maritime law cases or insurance repercussions of MLC Convention coming into force. However, we are always ready to hear your questions and suggestions. Please send them, together with your participation confirmation, to wecanhelp@oakinsur.com / in copy to grishins@me.com, or to our Facebook page.

We will advise of the exact venues later, but can indicate, for previous guests of ours in Odessa, that this year's seminar will most likely take place at the same cosy place in Arkadia.

Hope to see you next month!

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23rd January 2017, London, UK

P&I Renewals

For our Russian-speaking clients, colleagues and friends: our Managing Director, George Grishin, has posted a helfpul and insightful video (in Russian) on our Facebook page, which explains how you could get the best possible deal on your 20th Feb P&I Insurance renewals. Check it out here:

https://www.facebook.com/george.grishin.3/posts/590143834514217

Please let us help your P&I renewals reach their full potential!

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3rd October 2016, London, UK

Fishing Vessel Arrested by Russian Authorities

We received info from a Russian Hull and Machinery underwriter that one of the ships we were placing with him had been arrested in Murmansk. Ship arrests are not uncommon and often it could just be a step taken by local port authorities to force ship owners to take responsibility for some fines or minor damages caused during berthing. On the other hand, it could be for something more serious.

In this instance, having enquired with our clients, it was found to be something more unusual. The ship had been escorted to Murmansk by armed Russian authorities whom were alleging that the fishing vessel in question was caught working in Russian waters without authority to do so, an accusation vehemently denied by our clients. Some reports based upon satellite tracking info suggested the vessel did no such thing, whilst other conflicting reports said that the vessel may have spent less than an hour in Russian waters (but no more, as the tracking info rounds up by an hour and, according to reports, never showed its location as “Russia”). Ultimately it’s very difficult to tell whether the Russian authorities were right to act in the manner they did, although it’s worth noting that after our client’s domestic government responded to the incident, the EU saw fit to issue a statement condemning the actions of the Russian authorities and demanding the vessel’s immediate release.

It took about two weeks to free the vessel, through a combination of political and legal pressures and, sadly, as is always the case when dealing with government authorities, admission of guilt and payment of fines. We understand the incident cost our clients over USD 100,000 once legal fees were factored in.

Protection and Indemnity Insurance is interesting in that the high quality insurers will still “protect” their Insureds even if the incident is not related to an insured peril and this case was no different in that our P&I Insurers were ready to provide support via their correspondents and lawyers, if necessary. The Clubs and fixed premiums Insurers have networks of correspondents ready to assist wherever their clients’ vessels are in the world. The first step for a ship owner is to choose an experienced, hands-on broker whom has a strong relationship with Insurers. The second possible step is to establish a personal relationship, via the broker, with the Insurer. As with any business relationship, the closer the bond, the more inclined people are to go above and beyond the call of duty.

Due to the unpredictable and arbitrary nature of many of the incidents that can occur in the shipping world, there are some unquantifiable risks, like this, that cannot be insured. Our advice, tough as it may be to follow during a sparse and relatively low profit time in shipping, is for owners to try to keep a “rainy day” fund aside in order to resolve such matters, as you never know when your vessel could be detained on a whim by over-officious, petty, bored or even politically-motivated authorities.

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20th September 2016, London, UK

Oakeshott Insurance invite all underwriters interested in knowing more about the insurance markets of Ukraine and Uzbekistan to a meeting with representatives of these markets in London on 22nd September, 2016, starting from 17:00 at The Chamberlain public house, Minories, London EC3N.

Please contact Mr Samson Akande on 020 7680 1230 for more details.

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2nd September 2016, London, UK

Brussels "Sprouts" War Claim
(or how a terrorist attack at an airport can raise a potential Marine Insurance claim)

The crew of one of our clients’ vessels were transiting through Brussels airport on a journey from ship to home when terrorists struck there in March this year. Thankfully none of these gentlemen were injured during the attack, but their flights were cancelled and alternative travel arrangements had to be made, including accommodation whilst suitable means of repatriation could be found, resulting in expenses for our clients.

We arrange Hull and Machinery and Protection and Indemnity War Risks Insurance for our clients and we discussed the possibility of making a claim under this Policy for the expenses incurred as a result of the attack. Terrorism is a covered peril under this Policy but the devil is in the detail when it comes to insurance clauses and the claims handler from the insurance company, during our first meeting, had to confess that not only was this the first claim he had encountered of this ilk, he actually couldn’t say whether it was covered or not!

The Insurers initially took the stance that the claim was not covered because the wording of the clauses infer that for an Insured to make a claim for crew expenses as a result of a terrorist attack, they should be “on or around the vessel”. With this being a Marine War P&I matter, their opinion was that the clauses are intended to offer cover for the crew at sea and in the vicinity of the ship, not during transfer to or from the vessel. This, though, is very much an interpretation of a clause wording that is, frankly, not very clear for unusual cases such as the one at hand, and our argument was that since the crew were on duty at the time (they are not technically discharged from duty from the ship until they arrive home and formally do so), the wording still covers the crew at this point.

The matter is not finalised at this stage, but Insurers have agreed in principle to pay the client’s claim in the form of discounts from premiums, rather than a straightforward claim payment. This is because the Insurer is something of a giant and the rather commercial decision taken by the claims handlers and Underwriters may not stand up to scrutiny once passed up through their corporate claims approval structure. The relatively small claim amount and modest premium income also played a part in this decision. Now we work on the quantum, which will be determined in a large part by the Insured’s recovery from the airline. If the airline refunds the Insured, the amount would be deducted from the expenses incurred and, thus, the claim.

Brussels "Sprouts" War Claim 
(or how a terrorist attack at an airport can raise a potential Marine Insurance claim)

Военные риски на море: а что по поводу аэропорта?
Или Страховая Брюссельская капуста

Гарес Морроу, Оукшотт Иншуранс, Менеджер по убыткам

Команда одного из наших судов делала пересадку в Брюсселе в марте 2016. Произошел теракт. Наши моряки не пострадали, но их рейсы отменили, они остановились в отеле, понесли прочие расходы.

Мы, Оукшотт, обеспечиваем для этого судовладельца страхование Военных рисков – по каско судам и ответственности (War risks Hull and P&I). Возник вопрос:  терроризм по условиям страхования покрыт, по суть-то, как всегда, в деталях. Претензионист нашего страховщика во время наших первых переговоров сказал, что впервые встречается с таким случаем и не вполне уверен, покрыт ли он страхованием.

Позже Страховщики решили отклонить претензию, сославшись на формулировку условий: убытки по членам команды покрыты, если происходит террористический акт «на или в районе судна». Страховщик утверждал, что покрытие не распространяется на период переезда на судно / с судна. Но ведь это – только его мнение!

Оукшотт утверждал: члены команды были на работе, по их контракту, они не считаются в отпуске или в увольнении до их прибытий домой. А поэтому – риск считается покрытым.

Пока до конца убыток не урегулирован. Но, в принципе, страховщики согласились оплатить его, только не напрямую, а в виде скидки со страховой премии. Интересно: это огромная страховая компания, и морские претензионисты просто опасаются, что их вышестоящие товарищи убыток не пропустят. Сумма не очень велика, важен принцип. Мы теперь обсуждаем детали, сумму к урегулированию. Ясно, что какую-то сумму оплатит авиаперевозчик, тогда наш страховщик возместит разницу между расходами и возмещением от авиакомпании.

Вот так мы и боремся за интересы своих партнеров!

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25th May 2016, Denia, Spain

To P&I lovers and admirers, here is a good P&I article from OpenSea.

https://opensea.pro/blog/p-and-i-clubs?utm_source=facebook&utm_medium=post&utm_campaign=pi-clubs

Our Managing Director, George Grishin, comments as follows:

Well done, Vasiliy / OpenSea!

Having worked in the P&I industry for 32 years, I can't say that I have seen a similar comparison. It is short, crisp and quite logical. The only problem with using it is as follows:

Most of the "large" shipowners, say, operating/owning more than 10 vessels, are already Club members. Some of them go the diversity route and use 2 or even 3 Clubs. As we all know, price competition between the Clubs is very limited to to the operation of IG Club Agreement. Basically, it forbids a new Club to undercut the "holding" Club premium during the first year after transfer. Also, Release Calls charged by the Clubs are sometimes prohibitively high. So, it is not easy for a large shipowner to use your analysis.

As regards smaller shipowners, they tend to operate smaller-sized vessels. In this sector competition between Fixed Premium and Mutual sectors is very high. I still remember how some of the first Fixed Premium entities were set up, amongst much criticism as mutuality seemed to be the best solution for a shipping company.
It is no longer the case. You have Fixed Premium companies offering P&I at lower cost. FP usually operate as an agency on behalf of larger Insurers. This means that their Free Reserves are comparable and sometimes much higher than those of the Clubs. Same goes as regards ratings. Claims services are very similar as regards speed / accessibility / guarantees issuing.

Also, there are lots of National FP entities which technically do not fall into the above two groups. China and Korean P&I started like one. Turkish, Greek, Indian P&I....some have grown, others not. The Russian Insurance market has at least 8 good P&I insurers some of which write international business.

In a nutshell, as a broker and former P&I underwriter, I am glad for the present-day diversity of the P&I scene which offers a bit for every Owner, Operator and Charterer.

As a Lloyd's of London insurance broker, I am ready to help owners navigate in this seemingly limitless, but very friendly Ocean of P&I insurance.

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24 May 2016, Kiev, Ukraine

Reinsurance Seminar

+380 44 374 04 12, wecanhelp@oakeshott.com.ua

http://www.oakeshott.com.ua/index.php?i=photoalbum

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28 June 2016, St. Petersburg, Russia

Marine Law & Insurance St. Petersburg, Corinthia

wecanhelp@oakinsur.com