LMBC 79/2003

6th November, 2003

LMBC

International Navigating Conditions 1/11/03

Over the last 12 months a Sub-Committee of the Joint Hull Committee has carried out a review of the wording and application of the Institute Warranties navigating limits, coinciding also with the review of the International Hull Clauses.

Attached are the following:

y Introductory Notesy International Navigating Conditions (1/11/03)y Comparison Notes between International Navigating Conditions

(1/11/03) and Institute Warranties (1/7/76)y Suite of maps and colour keyy Breach of Navigating Limit Requirements Clause (JH 132)

Brokers should be aware that additional background information including guidance notes, any area specific insuring conditions for underwriters consideration and a risk evaluation indicator for the principle breach regions is being developed and will be circulated by the LMA prior to the commencement of the Northern Hemisphere Ice Season

Geraldine Wright

telephone 020 7397 0213/020 7397 0216

e-mail enquiries@lmbc.co.uk

Institute Warranties Review Project 2003

Introduction of the International Navigating Conditions 1.11.03

SUMMARY

❖ Changed from warranties to conditions

❖ New conditions for use within Part 2 of IHC, or with ITCH

❖ Technological and legislative developments addressed

❖ Areas clarified, grouped more geographically and anomalies corrected

❖ Wide consultation over 2 years

❖ New evaluation of hazards to be available

❖ Supporting information facility to be web based

• Objectives and Key Issues

The last major review of the long established Institute Warranties was in 1976.

In 2002, a Sub-Committee of the London Joint Hull Committee was establishedin order to consider modernising the principles, methodology and recognisedMarket practice relating to the application of geographical navigating limits.

The Sub-Committee comprises a number of hull insurance practitioners with considerable experience in the field of navigating limits and who have acted in a technical and advisory capacity within the Market for a number of years.

The composition of the Sub-Committee is as follows:

Richard Bridges Württembergische UKJason Page Markel Michael Thompson GE Frankona Tim Welsh AmlinRichard Young AtriumNeil Roberts LMA

Mark Edmondson Württembergische UK (Chair)

The initial observation and conclusion drawn by the Sub-Committee was that there is a strong case for the continued use of defined trading areas within standard contracts for hull and machinery and associated interests.

The key issues that were addressed by the Sub-Committee were:

Recognised traditional market practice specifically in relation to the formulation and application of any additional premium has been re-aligned in recent months to take account of the current legislative position.

2

In addition to establishing a new formal Navigating Limits clause, a primary aim of the Review Project and its final ‘product’, was to provide underwriters with a source of information to aid the risk assessment process on a case-by-case basis.

The review process encompassed a wide spread of factors including, inter alia, meteorology and changes in climatic conditions, vessel design, navigation and communication requirements and capabilities.

The Sub-Committee saw the need to rapidly develop and source technical knowledge in new areas. This has included wide consultation with a number of marine industry bodies and individuals who have provided a significant amount of technical input

The Sub-Committee recognised the usefulness of a statistical approach wherever possible, including attempts to quantify additional risk by claim frequency and magnitude trends.

However, adopting a statistical basis in order to support changes or assumptions as part of the review has only been possible up to a point.

Whilst some very useful information has been provided by third parties, most notably by SODES, it has been exceedingly difficult to integrate and assimilate statistical observations that have been made.

The width and volume of global data available was insufficient to draw any general or detailed conclusions from a risk assessment point of view. However, a quantitative approach has been attempted wherever possible.

The Review attempted to incorporate recognised current market practice as far as dedicated insuring conditions and express warranties were concerned. The intention was that wherever possible, these should be codified within the new Navigating Limits Clause.

As current practice has been to apply both generic and specific insuring conditions or express warranties on a case-by-case basis the Sub-Committee originally attempted to incorporate these provisions within the main body of the Clause. However, due to differing characteristics and requirements of specific breaches it was decided to draft a separate Joint Hull Committee endorsed Clause incorporating up to date requirements for both navigation and communication aids.

As with incorporating a standard set of insuring conditions or warranties with the Clause a number of inconsistencies prevented the introduction of a statutory compliance requirement.

For example, not all flag states are signatories to SOLAS and member states may adopt different interpretations of the provisions of the Convention as regards navigating and operational requirements.

In addition, since the Clause will be ‘multi-use’ (within Part II of the IHC and within policies written on ITC), this would introduce an illogical inconsistency as a result of Clause 14.4 within the International Hull Clauses.

3

The Sub-Committee recognised that whilst the new Navigating Conditions will form an integral part of the International Hull Clauses, the Conditions will also be applied to business written on other policy conditions

A Clause that can be commonly used with no inconsistency was an obvious requirement. The Conditions and associated Clause were designed for use as part of the new IHC and with ITC where necessary

The sub-committee considered the inclusion of new areas that are currently within recognised standard navigating limits.

There was some evidence that certain geographical areas currently not subject to any special consideration within current Institute Warranties, for example a number of rivers and tributaries in South America, required investigation.

Information collected to date in relation to these areas suggests that whilst there are issues surrounding trading to these locations, they are insufficient to warrant specific inclusion within any revised Navigation Limits at this time. Part of the Sub-Committee’s ongoing role will be to monitor such areas with a view to amending and updating the Limits if experience indicates that this is required.

The need for enhanced clarity

While it was agreed that fundamental changes would not be made unless required in drafting the Conditions, the Sub Committee has improved clarity lin two ways:

Firstly, the geographical limits were clearly defined by the more frequent and accurate use of co-ordinates and rhumb lines.

Secondly, new Navigating Conditions incorporate clearer coverage provisions and sanctions in the event of a non-notified breach

Warranty or Condition?

In line with current clause drafting and legal thinking it was agreed that wherever possible any re-drafted or new clause should avoid the use of warranties.

4

• The Final Product, Release and Circulation

The final ‘product’ effectively comprises three parts:

1. International Navigating Conditions 1.11.03

2. Insuring conditions (published as a Joint Hull Clause) that may be applied generally, but specifically of relevance in the event of a breach of standard navigating limits. This Joint Hull Clause incorporates updated general navigation and communication aid requirements that are in current use in cases of breach of navigating limits, and

3. Background information, guidance notes and any additional optional ‘area specific’ insuring conditions for the principle breach areas. Importantly, this will include a enhanced risk assessment tools for underwriters use if required and is a key feature of the review project.

The intention is that the background information will provide a point of reference that is capable of enhancement and up-dating where appropriate.

More specifically, the Sub-Committee, in conjunction with the Joint Hull Committee Secretariat, will aim to maintain and up-date the evaluation indicator in key areas as necessary, as a function of prevailing climatic and ice conditions, largely in response to information received from a number of sources established within the review project.

Accompanying the International Navigating Limits Conditions 1.11.03 are the new Joint Hull Clause on Navigational Aids, and notes that highlight the fundamental changes that have been made in comparison with the Institute Warranties 1/7/76.

These Clauses will be shortly followed by the release of background underwriting information including a suite of maps, additional optional insuring conditions, applicable risk weighting tools and appropriate weblinks. This information will be made available in advance of the 2003-2004 Northern hemisphere ice season.

Ultimately the Clauses, explanatory notes and additional information will be web based but at this stage all information will be circulated to marine hull contacts by e- mail.

The new Conditions and Clauses are clearer, more user friendly and encourage flexibility in the negotiation of additional premium and width of coverage. By the same token, the project has established a dedicated, evolving resource of information for consideration by underwriters as part of the risk assessment process.

5

The Navigating Limits Sub Committee would like to thank all those organisations and individuals that have kindly provided time and information to support the Project, in particular the following:

Canadian CoastguardCanadian Pilot’ Association (Capt Michel Pouliot) Clyde and Co.(Captain John David)Cooper Brothers (Andrew Cooper) CSL (Mike Bedford)Duluth Seaway Port Authority (James Sharrow) Fednav (Ann, Latimer, John Weale)Finnish Maritime AdministrationGroupe Desgagnes (Louis-Marie Beaulieu)Inserve (Simon Groves, Jon Gray, Rupert Bambach) Hill Taylor Dickinson (Chris Zavos, Phil Haddon)Lloyd’s Agency Department (Capt Andrew Cross, Sonja Fink, Bob O’Leary) Lloyd’s Register (Marian Grzybowski)Pohjola (Mårten Backström) Port of ChurchillTransport Canada (Jean-Paul Beaulieu)Quebec Transport Society/Association (Jocelyn Fortier) BMT Salvage Association (Michael Laurie, Mario Rossi) If…Helsinki (Harri Ek)Seascope (Mike North)St.Lawrence Seaway Management Corporation (Peter Burgess) SODES (Mark Gagnon)St Petersburg Russia (Mikhail Sidorenko)

INTERNATIONAL NAVIGATING CONDITIONS (01/11/03)

1. NAVIGATING LIMITS

Unless and to the extent otherwise agreed by the Underwriters in accordance with Clause 3 below, the vessel shall not enter, navigate or remain in the areas specified below at any time or, where applicable, between the dates specified below (both days inclusive):

Area 1 - Arctic(a) North of 70°N. Lat.

(b) Barents Sea

except for calls at Kola Bay, Murmansk or any port or place in Norway, provided that the vessel does not enter, navigate or remain north of 72°30’ N. Lat. or east of 35° E. Long.

Area 2 – Northern Seas(a) White Sea.

(b) Chukchi Sea.

Area 3 - Baltic(a) Gulf of Bothnia north of a line between Umea (63° 50’ N. Lat.) and Vasa (63° 06’

N. Lat.) between 10th December and 25th May.

(b) Where the vessel is equal to or less than 90,000 DWT, Gulf of Finland east of 28° 45’E. Long. between 15th December and 15th May.

(c) Vessels greater than 90,000 DWT may not enter, navigate or remain in the Gulf of Finland east of 28° 45’ E. Long. at any time.

(d) Gulf of Bothnia, Gulf of Finland and adjacent waters north of 59° 24’ N. Lat. between 8th January and 5th May, except for calls at Stockholm, Tallinn or Helsinki.

(e) Gulf of Riga and adjacent waters east of 22° E. Long. and south of 59° N. Lat. between 28th December and 5th May.

Area 4 - GreenlandGreenland territorial waters.

Area 5 – North America (east)(a) North of 52° 10’ N. Lat. and between 50° W. Long. and 100° W. Long.

(b) Gulf of St. Lawrence, St. Lawrence River and its tributaries (east of Les Escoumins), Strait of Belle Isle (west of Belle Isle), Cabot Strait (west of a line between Cape Ray and Cape North)and Strait of Canso (north of the Canso Causeway), between 21st

December and 30th April.

(c) St. Lawrence River and its tributaries (west of Les Escoumins) between 1st December and 30th April.

(d) St. Lawrence Seaway.

(e) Great Lakes.

Area 6 – North America (west)

(a) North of 54° 30’ N. Lat. and between 100° W. Long. and 170° W. Long.

(b) Any port or place in the Queen Charlotte Islands or the Aleutian Islands.

Area 7 – Southern OceanSouth of 50°S. Lat. except within the triangular area formed by rhumb lines drawn between the following points

(a) 50° S. Lat.; 50° W. Long.

(b) 57° S. Lat.; 67° 30’ W. Long.

(c) 50° S Lat.; 160° W. Long.

Area 8 – Kerguelen/CrozetTerritorial waters of Kerguelen Islands and Crozet Islands.

Area 9 – East Asia(a) Sea of Okhotsk north of 55° N. Lat. and east of 140° E. Long. between 1st November and

1st June.

(b) Sea of Okhotsk north of 53° N. Lat. and west of 140° E. Long. between 1st November and 1st June.

(c) East Asian waters north of 46°N. Lat. and west of the Kurile Islands and west of the Kamchatka Peninsula between 1st December and 1st May.

Area 10 – Bering SeaBering Sea except on through voyages and provided that

(a) the vessel does not enter, navigate or remain north of 54° 30’ N. Lat.; and

(b) the vessel enters and exits west of Buldir Island or through the Amchitka, Amukta or Unimak Passes; and

(c) the vessel is equipped and properly fitted with two independent marine radar sets, a global positioning system receiver (or Loran-C radio positioning receiver), a radio transceiver and GMDSS, a weather facsimile recorder (or alternative equipment for the receipt of weather and routeing information) and a gyrocompass, in each case to be fully operational and manned by qualified personnel; and

(d) the vessel is in possession of appropriate navigational charts corrected up to date, sailing directions and pilot books.

2. BREACH OF NAVIGATING LIMITS

In the event the vessel is in breach of Clause 1 above, the Underwriters shall not be liable for any loss, damage, liability or expense arising out of or resulting from an accident or occurrence during the period of breach, unless notice is given to the Underwriters immediately after receipt of advices of such breach and any amended terms of cover and any additional premium required by them are agreed.

3. PERMISSION FOR AREAS SPECIFIED IN NAVIGATING LIMITS

The vessel may breach Clause 1 above and Clause 2 shall not apply, provided always that the Underwriters’ prior permission shall have been obtained and any amended terms of cover and any additional premium required by the Underwriters are agreed.

Comparison between International Navigating Conditions (1/11/03) and the Institute Warranties (1/7/76)

Area 1 - Arctic

1 (a) Navigating provisions unchanged.1 (b) Murmansk is accessible all year round and was unrestricted under IWC 1/7/76 .

Norwegian Ports below 72º 30 N are clarified as unrestricted.Svalbard (major port Spitzbergen) and Bear Island are clarified as restricted.

Area 2 - Northern Seas

2 (a) Navigating provisions unchanged.2 (b) Clarified as only part of Chukchi Sea is above the North of 70º N Lat. restriction.

Bottom part of Chukchi Sea runs into Area 10 Bering Sea. (See Maps for further information)

Area 3 - Baltic

3 (a) The cut off point was Mo 63º 24 and is now Umea 63º 50N, a more significant port and more easily identified on maps. Its latitude matches that used in the Norwegian plan.

3 (b) & (c) Major change is the restriction of vessels in excess of 90,000 dwt. With only two exceptions, all current vessels smaller than 90,000 take a draft of less than 15m.

This is to take account of the increased use of Russian port of Primorsk. Hydrographic surveys of the approach from Seskar island into Primorsk indicate depths as low as 15m draft. Additionally, the berthing facilities at Primorsk can only accommodate ships with a maximum draft of 15m.

Hydrographic charts may be requested by underwriters to give an additional comfort factor.

3 (d) Line moved slightly above Stockholm to allow slightly different approaches. The facility to make unrestricted calls to Stockholm all year round is unchanged. Helsinki has also been included as an unrestricted port. Although ice can be an issue for this port, the pilotage and icebreaking facilities are excellent.

3 (e) Navigating provisions unchanged.

Area 4 - Greenland territorial waters

The only amendment has been the inclusion of "territorial" to clarify the extent of Greenland's waters.

The territorial limits are those defined by the United Nations under "Order No.191 of 27 May 1963 on the Delimitation of the Territorial Sea of Greenland" and essentially are three nautical miles from the boundary line.

Further details can be found within the UN website page:

w w w. U n.org/ D ep t s/los/L E GISLATION A ND TR E ATIES/PDFFILES/DNK_1 9 63 _ Order. p df

Area 5 – North America (east)

Areas 5 & 6 were dealt with by the old Institute Warranty areas 1 (a) (i), (ii), (iii) and (b) and (d).

North American waters have now been split into two distinct areas, East and West. The line of Longitude 100°W Long splits the continent in two and is a clear line of demarcation between the North America (east) and North America (west) Navigating Limits.

5 (a) The use of co-ordinates clearly and unambiguously define the limits of navigation. The co-ordinates 52° 10’N. Lat and 50° W. Long are unchanged from the old Institute Warranties. Reference to Atlantic Coast of North America its rivers or adjacent islands” has been deleted.

5 (b) The Gulf of St Lawrence and all the entry points to the Gulf of St Lawrence have been specifically named. The intention is to give greater clarity to underwriters as to where the Navigating Limits begin and end.

The St Lawrence River is included up to Les Escoumins (48° 21’N Lat and 69° 23’W Long) within 5 (b) as this marks the point where compulsory pilotage begins for further westbound navigation along the St Lawrence River.

The dates are unchanged. These correspond closely with the dates for the beginning and end of the ice season in an average winter.

5 (c) The St Lawrence River is navigable with a pilot year round as far as Montreal.To go west of Montreal requires entering the St Lawrence Seaway and this is dealt with separately in Area 5 (d).1st December is a good guide to the onset of the ice season and the removal of night navigation buoys. In an average year the St Lawrence River should beclear of ice by April. The dates are unchanged from IWC 1/7/76, and were retained as markers after consultation with charterers.

5 (d) The St Lawrence Seaway is a clearly defined navigable waterway which connects the St Lawrence River with Lake Ontario. It has been delineated separately as it merits separate consideration due to the risk of contact with lock gates and lock walls. The annual winter closing of the St Lawrence Seaway until the spring re-opening limits winter navigation and defines the trading season, hence no dates are specified.

5 (e) The Great Lakes are stipulated separately and merit consideration due to the risk of contact with locks and grounding as well as ice damage over the winter months. This remains a year-round exclusion as under IWC 1/7/76.

Area 6 – North America (west)

6 (a) This corresponds to Institute Warranty area 1(d). The area is now clearly defined in terms of latitude and longitude. The area to the west of 100°W Long is now referred to as North America (west). 54° 30’N Lat remains unchanged from the old Institute Warranties and is very close to the border between British Columbia, Canada and Alaska, USA.

6 (b) The Queen Charlotte Islands were excluded under IWC 1/7/76 and remain outside the revised Navigating Limits. They are now identified specifically as they are south of 54° 30’N Lat and so not included in 6 (a) above.

The Aleutian Islands are now identified specifically as part of this chain is south of 54° 30’N Lat. They were in any case excluded previously by virtue of Institute Warranty (4). Bering Sea transits are referred to in Area (10) below.

Area 7 – Southern Ocean

This deals with most of Institute Warranty (5) and removes a potential ambiguity under IWC 1/7/76 by excluding the sea area south of 50° S Lat.

The intent of the exceptions defined by 7(a), (b) and (c) is, as previously, to allow Southern Ocean voyages around Cape Horn. A rhumb line is a standard nautical term and the rhumb lines chosen allow for all known great circle routes through the Southern Ocean as well as calls to places in Chile, Argentina and the Falkland Islands.

Area 8 - Kerguelen / Crozet

These remote islands have been isolated from the Southern Oceans area for clarity. Unexploded mines dating from World War II are still a hazard in several parts of the Kerguelen archipelago.

Area 9 – East Asia

9 (a) and (b) Area was completely excluded for navigation under IWC 1/7/76. Now navigation is allowed between 1st June and 1st November. This is effectively the summer season when the area is ice free, ice being the peril of concern. This area has been defined as Sea of Okhotsk for clarification rather than simply East Asian Waters.

This area was excluded under the IWC 1/7/76 mainly because very little was known about it until post Soviet era information became available. The season for navigation is shorter than for area (c) due to the longer winter season within the region. The major port in the area is Magadan.

9 (c) The area was completely excluded. In order to better define the intended area for consideration the narrative “West of the Kurile Islands” has been added for clarity. The period for navigation is 1st May to 1st December which is the summer season. As with area (a) little was known about the area until the end of the Soviet era. The major peril is ice with the winter season being shorter than for area (a).

The major ports in the area are Kholmsk, Khorsakov, Vanino, and De Kastri.

Reference to any port or place in Siberia has been removed because Siberia as defined by the Russian Government is a landlocked administrative region.

The region covered by area 9 (a) and (b) is defined as Russian Pacific far east. Any other ports in the Russian Pacific far east outside of area 9 are either not excluded or covered under other areas.

Area 10 – Bering Sea

The old Bering Sea exclusion has been thoroughly revised. In contrast to the other areas, free passage is permitted on through voyages without recourse to underwriters, provided the stated requirements are fulfilled.

International Navigating Conditions (01/11/03)

Colour Key to Excluded Areas

Colour Area Dates Excluded

Various At any time

Area 3(a) 10th December to 25th May

Area 3(b) & (c) 15th December to 15th May for vessels less than or equal to 90,000 DWT, otherwise any time

Area 3(d) 8th January to 5th May

Area 3(e) 28th December to 5th May

Area 5(b) 21st December to 30th April

Area 5(c) 1st December to 30th April

Area 9(a) 1st November to 1st June

Area 9(b) 1st November to 1st June

Area 9(c) 1st December to 1st May

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A Joint Committee of the IUA and

Joint Hull CommitteeRoom 1085, Lloyd’s, One Lime Street

London EC3M 7DQTel: (+44) 020 7327 3333 Fax: (+44) 020 7327 4443

PRIVATE AND CONFIDENTIAL

Enquiries to: JH 2003/132

Neil Roberts 31st October 2003(Direct Dial 020 7 327 8375)

Navigating Equipment and Requirements

During the review of the old Institute Warranties, it became apparent that a generic navigation equipment wording incorporating up to date requirements for both navigation and communication aids might be useful for underwriters.

Members are advised that the attached wording is available for use in the event of a breach of navigating limits, in addition to any region-specific conditions which underwriters may consider appropriate.

Neil Roberts Secretary

A Joint Committee of the IUA and

JH13231st October 2003

Breach of Navigating Limit Requirements Clause

It shall be a condition precedent to the liability of the Underwriters that:

1. the vessel shall be equipped and properly fitted with:-

1.1 two independent marine radar sets

1.2 a global positioning system receiver or Loran-C radio positioning receiver in those areas covered by a Loran-C chain

1.3 a radio transceiver and GMDSS

1.4 a weather facsimile recorder or alternative equipment for the receipt of weather and routeing information

1.5 a gyrocompass, incorporating latitude corrections approved by manufacturers or their agents, when North of 70° N. Lat.

in each case, to be fully operational and manned by qualified personnel; and

2. the vessel shall be in possession of appropriate navigational charts corrected up to date, sailing directions and pilot books; and

3. the vessel shall adhere to all pilotage requirements, traffic regulations and controls as may be established by the applicable coastal state authorities.