LAY-UP – MOBILE OFFSHORE UNITS

Liv Sand, Gard / Georg Nygaard, NHC

12 December 2016

LAY-UP OF MOBILE OFFSHORE UNITS

• Background

• WHAT

• WHY

• HOW

• Cefor Guidelines for Lay-up of MOUs related to the Insurance

Contract

• Checklist for evaluation of lay-up

BACKGROUND

WHAT?

The Nordic Marine Insurance Plan of 2013

Clause 3-26 (Ships laid up):

For ships which are to be laid up, a lay-up plan shall be drawn up which shall be submitted to the insurer for his approval. If this has not been done, or the lay-up plan has not been followed while the ship is laid up, Cl. 3-25, sub-clause 1, shall apply correspondingly.

Clause 3-25 (Breach of safety regulation), sub-clause 1:

If a safety regulation has been breached, the insurer shall only be liable to the extent that the loss is not a consequence of the breach, or that the assured has not breached the safety regulation through negligence. However, the insurer may not invoke this rule where the assured is the master of the ship or a member of the crew and the breach is committed in connection with his service as a seaman.

WHAT?

NMIP Part 1 – Common Rules

Chapter 3, DUTIES OF THE ASSURED

•Section 1, DUTY OF DISCLOSURE

- Full and correct information before contract is concluded

•Section 2, ALTERATION OF RISK

- Disclose changes during the insurance period;

Change of flag, manager, loss of class, special operations,

rebuilding of the MOU. Triggers new evaluation and agreement.

•Section 3, SAFETY REGULATIONS

- Adhere to and follow rules and regulations set by authorities,

class, flag, etc

- Prepare a lay-up plan

- Cl. 18-1 (e) 1 – well being equipped with BOP or other well pressure control equipment

- Cl. 18-1 (e) 2 – Prepare a move plan for MOUs not moving by own

propulsion

WHAT?

• Breach of a safety regulation – insurers only liable for a loss if the

loss is not a consequence of the breach, or if the assured has not

acted negligent.

• Focus: Safety being kept at an acceptable and manageable level

– not a premium discussion

• Prudent un-insured

WHY?

Why special focus on safety during lay-up?

• «Just parking of the MOU»

• «Risk is less than during operation»

When in operation there are many interested parties making sure that

safety is in focus;

- Operator (license holders)

- Petroleum Safety Authorities (sokkelstat)

- Maritime Authorities

- Flag state

- Classification Societies

- Own organization - Reputation

Operations manuals/procedures approved by various parties

WHY?

When in lay-up most of these parties are no longer involved

- Class and flag does not really have any requirements

Flag - minimum manning, not all flags does provide a guide for

this whilst in lay up. Norway (NMA) being one;“The company and the master are responsible for the safe operation of the ship. The NMA

will therefore not stipulate a minimum safe manning for the lay-up period. The size of the

crew will depend on several factors, e.g. lay-up location, level of security, hot or cold lay-

up and local requirements.”

Class – amends the status to «Laid up» if requested by the

owner, no initial survey at time of lay-up, some request annual

lay-up surveys, some do not.

Referring to insurance.

- Port authorities have limited requirements.

- Consultancy services, but this comes at a cost.

WHY?

• Reduced costs naturally in focus

• Cost vs safety

• Park and leave

• Minimal or no rules and regulations from authorities

Already seen damages – could easily been avoided?

OCCURRENCE 1, 22.11.15

OCCURRENCE 2, 02.06.16

• Semi-sub cold stacked and laid down on seabed

• 2 x drillships broke moorings, drifted and 1 collided with the semi-sub

• Minor damage, no breach of hull or impact on water integrity

Damage of U-

Light

(Aft – Stbd)

Damage of Vertical frame and its

bracings. Steering room (Aft – Stbd)

OCCURRENCE 3, 09.07.16

• Semi-sub cold stacked and laid down on seabed

• Monthy inspection revealed that a pump room had flooded

• Leaking sea chest valve caused water ingress

OCCURRENCE 4, 29.01.16

• NB 830 – today «Normand Maximus»

• Heavy weather, broke loose from quayside during outfitting at Yard

in Brattvaag, just north of Ålesund.

• The video demonstrates the power in strong wind

HOW?

• Planning of the lay-up

• Prepare a lay-up plan

• Duty of the assured

• No guide provided by insurers on how to lay-up a vessel, we are not

the experts

• Many consultants, including class companies, are offering to assist

in the planning and execution of a lay-up, if required.

Cefor guideline focus on the provisions laid down in an insurance

contract based on the Nordic Plan, and furthermore provides a guide

of what is important to include in the lay-up plan in relation to clause

3-26, being safety and security.

Result of the Nordic insurers’ wish to be pro-active in order to avoid

possible conflicts in case of an incident leading to a physical damage.

CEFOR GUIDELINES

Introduction

• Underlines that this is not a guide on how to lay up or preserve the

MOU.

• Stacking / lay-up = same meaning.

• Idle units vs operational units.

Insurance Implications

• Description of clause 3-26 and the corresponding commentaries.

• Approval only in respect of the four issues listed.

• Recommend that a lay-up plan also should include maintenance and

preservation (ref cl 18-19 Inadequate maintenance, etc).

• Must remain in class (but ok to amend to laid up status).

• Alteration of risk (cl 3-8), e.g. if different management during lay-up.

CEFOR GUIDELINES

When and how should insurers be advised and involved

• Notify insurers early in the planning of an upcoming idle period

• Laid up in the context of clause 3-26?

• Third party review?

• One insurer (Claims Lead/Leading Insurer) on behalf of all insurers

• Notify insurers if there are any changes to the lay-up plan and/or arrangements during the lay-up period.

• Notify insurers when a decision is made to reactivate the MOU.

Lay-up return

• Clause 6-6. Separate evaluation from the requirements of a lay-up plan.

Checklist for evaluation of lay-up

CHECKLIST FOR EVALUATION OF LAY-UP1) General; where the MOU is to be laid up

MOU lay-up position:

Latitude and longitude

Port/ city/ country

Geographical characteristics (including surrounding vessels, harbours, shallow banks etc.)

Geopolitical conditions (such as potential strikes, unstable political climate etc.)

Type of lay-up (describe condition; idle/ hot/ cold etc.):

Planned duration of the lay-up

Planned activities during lay-up (i.e. bunkering, moves, other logistics)

Involvement and follow-up including planned visits to undertake surveys by:

Classification Society, including class status

Flag state

Local port authorities

Any other third parties

Name of the person/entity responsible for implementing and follow-up of the lay-up plan 2) Mooring and stability

Evaluation of lay-up location (sheltered from heavy wind, currents and swells):

Weather forecasts, monitoring/statistics

Natural hazards

Third party approval of location and mooring arrangements:

Seabed analysis if applicable (jack-up rigs)

Considerations with respect to minimum distance to separately laid up units, anchored vessels or shore

Mooring watch/ mooring integrity

Emergency operations of mooring winches

Ballasting considerations

3) Supervision of the MOU

Security:

ISPS port status

Theft/ vandalism/ piracy

Power supply:

Dependent on type of lay-up (hot/cold), generator or shore supply

Emergency power arrangements

Emergency contingency plan:

Fire management

Water integrity

Navigation lights, fire and bilge alarms

Support from port authorities

Readily available supply of spares equipment 4) Minimum crew

Manning

Crew number and positions and functions / responsibility during lay-up

Own crew, regular crew or external service provider

MAINTENANCE / PRESERVATION

MAINTENANCE/PRESERVATION

In order to prevent damage occurring as a result of the MOU not being

in normal use…

..it is the duty of the owner to maintain, preserve and operate

machinery and other equipment in accordance with the manufacturers'

recommendations.

MAINTENANCE/PRESERVATION

Clause 18-19. Inadequate

maintenance, etc.

The insurer is not liable for costs

incurred in renewing or repairing a

part or parts of the hull, machinery,

plant or equipment which were in a

defective condition as a result of

wear and tear, corrosion, rot,

inadequate maintenance and the

like.

MAINTENANCE/PRESERVATION

In order to avoid any discussion about insurance cover..

..we recommend to inform insurers about the plan for preservation and

maintenance of the MOU and its equipment during in lay-up. And

furthermore maintain a log of such activities.

Maintenance / preservation is not subject to approval per NMIP 3-26.

QUESTIONS?