Industry Review

Sanctions – Iran

IranThe partial lifting of sanctions against Iran following the conclusion last year of the Joint Comprehensive Plan of Action (JCPOA), finally took effect on Implementation Day, 16 January 2016. As a result, the EU lifted its prohibition on shipowners and their insurers engaging in most Iranian trades. The US also lifted secondary sanctions which had similarly prevented non-US companies from conducting business with Iran, but US primary sanctions prohibiting US domiciled shipowners and financial institutions from engaging in business with Iran have continued unabated.

The Club has been fully supportive of the efforts made by the IG to facilitate the full resumption of lawful trades to Iran, including the purchase of fallback insurance by the IG to cover in part the risk of reinsurance recovery shortfalls arising from the inability of US primary reinsurers to contribute towards Iran nexus claims, as well as agreeing to the mutualisation of shortfalls in excess of the cover provided by the fallback insurance.

North also supports the IG’s efforts to secure a long term solution to the problems presented by the continuation of US primary sanctions against Iran. The ideal solution would be for the US authorities to provide a licence to US domiciled reinsurers, which would legitimise their contribution to Iranian nexus claims under the IG’s GXL reinsurance programme.

Maritime Labour Convention

Ilo LogoThe Club fully supports the IG’s efforts to provide shipowners with a practical solution to their insurance and certification requirements under the Maritime Labour Convention (MLC). Although the MLC actually entered into force in 2013, the subsequent amendments which will take effect on 18 January 2017, will require relevant ships to display certificates confirming that insurance or financial security is in place for the costs of crew repatriation as well as for the payment of wages in arrears for four months following abandonment. Although these credit risk liabilities do not naturally fall within the range of third party liabilities traditionally covered by the Clubs, the IG was nevertheless quick to recognise that without a Club based solution shipowners would risk facing additional and costly insurance requirements from the commercial market instead. As a consequence, the IG clubs have agreed to absorb (but not to pool) such liabilities and efforts are now underway with those states which have ratified the MLC in order to agree the form of certification required as evidence of cover.

EU Referendum

EU Flag SmallThe recent UK referendum on membership of the EU resulted in a majority vote in favour of the UK leaving the EU. This will lead to a period of considerable uncertainty regarding the mechanism and duration of the future exit negotiations and the form of the UK’s relationship with the EU subsequent to exit. The Club is monitoring the situation in order to manage the risks and opportunities that arise and will engage with regulators when and where necessary. North will ensure that appropriate contingency measures are put in place to deal with the regulatory and legal consequences of the referendum outcome.