Club mooted to pay cost of oil spills
INTERNATIONAL Sureties (IS) of New Orleans has proposed to set up a ship-owners' mutual club of financial responsibility to cope with the requirements of the US Oil Pollution Act of 1990.
The Act requires that owners must have certificates of financial responsibility (COFR) by the end of this month if they want to sail to United States ports after December 28.
COFRs are issued for the purpose of demonstrating that owners and operators have financial ability to pay for removal costs and damages resulting from oil spills or releases of hazardous substances.
The amount of required financial responsibility is determined by formulas specified in the Act.
Share-a-COFR is being proposed by IS as a solution based on the shared resources of a large number of owners banding together in one form or another to meet the COFR regulations.
IS president Tucker Fitz-Hugh said participation by the protection and indemnity clubs (P & I) was desirable to obtain the best results, but would not be requisite.
He said it made no sense for owners to try to meet the COFR requirements individually because most would not be able to do so.
'It does, however, make a lot of sense for shipowners to join together mutually to solve their common problem,' Mr Fitz-Hugh said.
'Because of the administrative logistics behind our proposals, as well as what are likely to be underwriting requirements of the surety companies, it also makes sense for the P & I clubs to take an active role to work with their members to achieve a solution to the COFR problem.' He said the two commercial options available to owners to obtain their COFRs were an insurance scheme or a surety bond.
'It is fair to say that neither of the options is ideal, and both will be expensive.
'Thus, the choices available to a shipowner may well be limited to which is the lesser of the two evils.' He said the surety bond solution IS was recommending was designed to get around the P & I club rules.
Because of the clubs' position, the surety community was left with no choice but to underwrite bond requests by owners based on the ability of the owner to provide a bank letter of credit (LOC) in the amount of the bond.
Few, except the wealthiest owners, would be able to obtain LOCs from their banks in the amounts required based on OPA's tonnage schedule.
Mr Fitz-Hugh said Share-a-COFR could work because the US Coast Guard had indicated that it would be willing to issue a COFR to: A group of non-affinity owners based on the highest rated vessel in the group.
All owners in a P & I club based on a bond for the highest rated vessel in the club.
All owners in any combination of P & I clubs for the highest rated vessel in the group.
All shipowners in the maritime community based on a bond for the highest rates vessel calling at US ports.