Substandard Shipping Solution Through Partnership.

Goal-Based Standards: New Concept for Maritime Industry

In June 2004, the Organisation for Economic Co-operation and Development (OECD) published a report titled The Removal of Insurance from Substandard Shipping. The report found that marine insurers are willing to play their part, alongside others, in support of the campaign to eradicate substandard shipping but it is the responsibility of the flag states and the classification societies to enforce maritime safety rules. I personally believe it is the responsibility of the marine industry, which will include IMO, governments and insurers, to work together and enforce better standards. If there is a weakness in the infrastructure it will be exploited by the substandard operators of the substandard ships. One of the strategic aims of the UK P&I Club is to maintain a high quality membership. In support of this aim, we must attract only ship owners and operators who run quality operations. We are looking for professional operations run by experienced and well qualified people who choose to do business with good quality companies e.g. charterers. The UK P&I Club insures about 20% of the worlds tonnage and we have found that the general condition and operational and maintenance standards of ships entered with the Club are getting better, however the improvements will have to continue. Quality momentum is not only desirable but unavoidable with more demanding legislation and regulation. In order to ensure we not only meet but exceed our aims, which will benefit the whole membership of the UK Club, the Underwriters, before offering P&I insurance, will perform a risk analysis of the potential new member. The analysis will include: Financial Expertise Previous Experience Age of ship Classification ISM certification A pre-entry survey if applicable

Financial Expertise Irrespective of the age of the ships offered for entry, The UK Club will not accept any new Member unless we are happy with the quality of the owner's management, The potential Member's background would be researched by an acceptable credit rating company and have an acceptable rating. There should be: no history of default or unreasonably late payment sound financial backing from a substantial parent company or first class bank a sound share value, if a public quoted company.

Other enquiries may also be made with Club UK Club Board Members, P&I Correspondents and the UK Clubs Managers' regional offices in order to obtain local or specialised knowledge of the applicant. Previous Experience We are looking for owners where the insurance premium we can realistically expect to collect covers the claims experience; i.e. there is no evidence of a run of heavy claims which will regularly exhaust the Clubs funds. Overage Ships The Club aims for younger tonnage - i.e. less than 20 years old. We do accept new members of older ships but only if there is a compelling reason, e.g. the fleet has good potential for future growth. An entry condition survey (pre/post) is required when the ship is more than 20 years old or when there are doubts about the condition of the ship. Classification The UK Club prefers IACS society classed ships but there is no rule against Non-IACS societies. ISM All owners and ships must be compliant where this is compulsory.

Pre-entry Survey A "pre-entry" survey is required for: all ships over the age of 20 years; all ships entered with a classification society which is not a member of the International Association of Classification Societies (IACS);

Occasionally a pre-entry survey may be required for other reasons e.g. the underwriting department may have insufficient knowledge about the prospective Member. We do not always require a survey if the ship: less than 20 years of age; the subject of a transfer of ownership within the same management; is a tug or a barge - although this is subject to size and trade as some tugs and barges trade deep-sea with quite substantial crews which would mean a survey is required;

Ideally the survey will take place before the date of entry with the Club so that a decision may be made on whether or not to accept the ship for entry before the proposed date of attachment. It may not always be possible to survey the ship before the date of entry e.g. there may be insufficient time or it may be impractical e.g. the ship may have been purchased with cargo on board or in transit. In this situation there are two options: to decline entry; or, to carry out a "post-entry" survey.

Post Entry Survey This may occur when: the ship is unavailable for a pre-entry survey, i.e. mid voyage; the Club surveyor is denied access by the current ship owner (this is most likely to be the case); the ship is immediately entering dry dock for repairs.

If we are unable to carry out a pre-entry survey and the entry is accepted subject to a post-entry survey, a time limit must be set for the survey to be conducted. This is usually 30 days but may be longer if the ship is in midvoyage or undergoing repairs. If the ship fails the survey the recourse for the Club is to potentially reserve cover under the Club Rules. In most cases we issue recommendations for repair based on attending surveyors defect list.

The UK Club managers have extensive powers to survey ships and to make recommendations for their maintenance or repair. The Member is obliged to make the ship available for the survey and to comply with the recommendations made by the Managers. The surveys performed under this requirement are called condition surveys and will always be performed by an independent firm of surveyors. To ensure that the standards of operation and maintenance of entered ships remain high the UK Club has a ship quality programme which includes a ship inspection scheme. Ex ships Captains and Chief Engineers are employed by the UK Club undertake visits to Member vessels through out the world. The inspectors will assess: Cargo worthiness Quality of the manning Service and Maintenance Safety standards, particularly crew safe working practices Operational performance Pollution control

Cargo worthiness Cargo accounts for about 40% of the Clubs large claims. While there is a clear downward trend in such claims from 193 valued at $53 million in 1995 to 98 worth $30 million in 1999 the sheer scale means the area demands the closest attention from the inspectors. In 2001, one ship in ten incurred comments on cargo worthiness, half the level of 1995. These encompassed securing and hatch packing (12% each), covers/pontoons, cross joints and compression bars (8% each), packing channel and access hatches (7% each), lifting gear (6%) and container lashing, ventilators, coamings, drain valves and hydraulics. Manning The STCW 95 amendments of February 1997 helped push comments made up to 22% of visits as inspectors drew masters attention to the higher standards required. However, this was followed by a steady reduction, indicating good progress towards the 2002 deadline for further STCW 95 amendments.

Service and maintenance Standards of service and maintenance have come under increasing scrutiny because of the impact of cost saving measures, particularly the widespread deployment of smaller and cheaper crews. A trend towards major maintenance work being done during mandatory dry-dock periods has been associated with a downward trend in the use of riding crews. In the past five years, formal comments have fallen very slightly too around 15% of visits. The update of nautical publications and charts and problems with bridge and pilotage procedures accounted for more than half of comments in this area. Clearly there is still room for improvement. Safety Engine room safety and fire hazards attracted 24% of comments, safety procedures 29% and fire-fighting equipment 14%. According to analysis the most comments related to factors known to the crew the people most likely to suffer the consequences of accidents caused by deficiencies. A culture of safety awareness still seems to be a challenge for many crews. UK Club Loss Prevention Director Karl Lumbers explained: These sevenyear trends provide indications of positive developments in the quality of the Clubs entered tonnage. However, there remains plenty of room for improvement, not least in cargo worthiness, where better measures are sometimes quite easy to put into effect and in personal safety where the consequences of unsafe installations and practices can be massive. Operations Operational performance deficiencies have concerned auto pilot, echo sounder, radio equipment, main propulsion and bow thruster not working; hatch closing device problems; spare gear shortage and detention by Port State Control. The period also saw a steady reduction in such comments. Pollution Pollution accounts for only 5% of the Clubs large claims by number but 17% by value. In 1996-97, comments made reached around 20% of visits. This coincided with MARPOL Annex 1 Amendments coming into force, requiring all ships to have a shipboard of oil pollution emergency plan (SOPEP). Oil leaks and SOPEPS accounted for half the pollution comments in the seven-year period 1995-2001. Encouragingly, the volume of comment has halved in the past four years.

The six categories the inspectors report on also provide a confidential benchmarking facility where the Members can compare the performance of their ships with that of the Club as a whole. The ship inspection programme aims to: Identify ships below the Clubs acceptable standard Suggest better maintenance and operational practices Improve crew P&I awareness Encourage communication between head office, ships staff and superintendents Improve risk awareness and encourage risk management on board which could prevent claims arising and thus financial assist the member and the membership of the Club.

We are confident that if all P&I clubs are as diligent and discriminating in their selection of members as the UK Club, substandard ships and their operators will be assigned to the history books.