MARINE CIRCULARS

INDEX

Sr. No.	Circular No.	Date of Circular	Subject
1	M.Hull/Cir-1/2001	27th March, 2001	Marine Hull Insurance - New Rating Guidelines for Fixing Initial Rates on Ocean-going Vessels Effective Date : 1-4-2001
2	M.Hull/Cir-2/2001	20th June, 2001	Marine Hull Insurance - New Rating Guidelines for Fixing Initial Rates on Ocean-going Vessels Effective Date : 1-4-2001

M.Hull/Cir-1/2001                                                            Date : 27th March, 2001

Re : Marine Hull Insurance - New Rating Guidelines for Fixing Initial Rates on Ocean-going Vessels- Effective Date : 1-4-2001

1. As the Insurers are aware, the Committee has been fixing initial rates on Ocean-going Vessels as per the procedure spelt out in the Rating Guidelines which came into force in the Indian market on 1-4-1995.
2. Please note that the Committee has now evolved new Rating Guidelines, which will supersede the existing Rating Guidelines dated 1-4-1995. The new Rating Guidelines will take effect from 1-4-2001.
3. The Rating Guidelines, effective 1-4-2001, are enclosed at Annexure 'A'.
4. With the introduction of the these Guidelines, all Ocean-going Vessels, irrespective of Sum Insured, attaching to an existing fleet or bringing into being a new fleet on or after 1-4-2001, shall be rated as per the provisions contained in the said Guidelines.
5. Insurers may note that these Guidelines would be subject to the provisions of the Marine Hull Manual (updated as on 15th November 2000) insofar as applicable. Hence, these should be read in conjunction therewith.
6. As these Guidelines would be applicable in respect of all Ocean-going Vessels, irrespective of their Sum Insured, the option currently being exercised by the Insureds of obtaining facultative rates, terms and conditions on vessels with Sums Insured exceeding the relevant Automatic Reinsurance Capacity of the Indian market, would cease to exist from 1-4-2001.
7. The highlights of the Rating Guidelines are as follows :

   (A) Rates :

• The Matrices for basic Total Loss and Other than Total Loss rates, currently being followed in respect of different types of Ocean-going Vessels (viz. Dry Cargo Vessels, Bulk Carriers, Tankers/O.B.Os etc.) have been retained for H&M Sums Insured upto Rs.100 cores.
• Additional Matrices for basic Total Loss and Other than Total Loss rates have been evolved for different types of vessels with H&M Sums Insured above Rs.100 crores. These Matrices are applicable for different ranges of Sums Insured, as indicated therein.
• It has been decided to retain the existing provisions relating to modification in the basic Total Loss and Other than Total Loss rates for the Conditions of Insurance and/or Trading Warranty opted for a vessel being different from the standard ones.
• A combination of the Total Loss and Other than Total Loss rates modified as above, will give the Hull & Machinery (H&M) rate of the vessel.
• The existing provision for loading basic Total Loss and/or Other than Total Loss rates by a certain percentage for variation as compared to the Standard Value-per-Tonne/BHP has been done away with.
• Part II of the existing Guidelines, designed to arrive at the quotient of a fleet by taking into account various factors indicative of the fleet's size, underwriting results etc. stands deleted.
• Part III of the existing Guidelines, designed to determine the increase/decrease in the modified Total Loss and Other than Total Loss rates (arrived at under Part I) as per the Bonus/ Malus Graph, also stands deleted.
• Parts II & III of the existing Guidelines have been substituted by a provision, whereby Rating Level of the fleet to which a vessel is attaching, would be applied as under on the H&M Rate arrived at, as explained hereinabove.
• If the Fleet Rating Level is 100% or less : The entire Rating Level is to be applied on the H&M Rate of the new attachment.
• If the Fleet Rating Level is above 100% : Only the current year's penalty/reduction is to be applied on the H&M Rate of the new attachment.
• It may be noted that the vessels would continue to be rated as per the criterion of ownership.

  (B) Deductibles :

• The existing system of fixing Deductibles on Ocean-going vessels with H&M Sums Insured upto Rs.100 crores as contained under Section II : Initial Rating : Rules 5.A&B of the Marine Hull Manual, has been retained. However, the maximum deductible amount for any vessel has now been fixed at Rs.30 lacs.
• For vessels with H&M Sum Insured above Rs.100 crores, new slabwise deductibles have been laid down.

  (C) Increase/Decrease in Sum Insured :

• For abundant clarity, it may be mentioned that the provision contained in the Marine Hull Manual (Section I : General Rules & Regulations : Rule 18) in the above regard, will apply to all vessels, irrespective of their sums insured.

• Rating of Vessels with Sums Insured Exceeding the Automatic Reinsurance Capacity of the Indian Market.

Insurers will ensure that all vessels with sums insured exceeding the Automatic Reinsurance Capacity of the Indian market, insured by them as per facultative quotes, become part of the respective Committee-rated fleets at their expiring conditions of insurance, deductibles, trading warranties, net rates etc. on 1-4-2001 subject to the following :
i) Rate :
The expiring facultative rates would be subject to loading, if so warranted, by the same percentage as would be attracted by the concerned fleet during the underwriting year when the vessel attaches to it. However, no discount would be allowed to such vessels at the time of becoming a part of the Committee-rated fleet, even if the fleet's Rating Level otherwise so warrants.
 

However, rates on such vessel(s) would be modified at subsequent renewals like any other vessel(s) of the fleet, as per the terms of such subsequent renewals.

The premium and claim figures generated by such vessels in the past would not be taken into account at all. However, the premium and claim figures generated by them from the dates on which they become part of the Committee-rated fleets, would be clubbed with the fleet's statistics for renewal and other purposes, if any, as and when the renewal falls due.

The vessels would be subject to Increase/Decrease-in-Value Formula contained in the Marine Hull Manual, reckoning their TL rates at 75% of the expiring net rate.

ii) Deductibles :

If the expiring deductible of a facultatively rated vessel is found to be higher than the deductible otherwise applicable to a vessel in that range of Sum Insured, as shown under 5(b) of the enclosed Rating Guidelines, the same would be retained.

However, if the expiring deductible of a facultatively rated vessel is found to be lower than what has been decided for such a vessel, as shown under 5(b) of the enclosed Rating Guidelines, the expiring deductible would be enhanced taking into account the factors of its age (if over 20 years) and Fleet Rating Level as applicable to vessels with H&M Sums Insured upto Rs.100 crores, as per the relevant provisions contained in the Marine Hull Manual, subject to the maximum amount as prescribed under 5(b) of the enclosed Rating Guidelines.

(E) Compulsory Valuation by International Agencies :

• Insurers are required to insist on compulsory valuation for all vessels in the following cases :

1. at the time of attachment to a fleet; and
2. at the time of change in its sum insured for any reason other than currency fluctuation.

   The valuation will be done by one of the international agencies as per the enclosed list. (Annexure 'B')

(F) Time Limit for Submission of Application to TAC :

Effective 1-4-2001, Insurers are required to submit their Initial Rating Applications, in prescribed formats, to the Committee within 30 days from the date of commencement of risk and the Committee will advise the rates to the concerned Insurer within 30 days from the date of receipt of the said application.

Whilst on this, the Committee has taken the opportunity to amend the wording of Rule 3D contained under Section III : Renewals of the Marine Hull Manual, as under :

"3(D) ADJUSTMENT FOR CHANGE IN FIGURES :

Where the premium and/or claim figures submitted with the previous renewal(s) undergo any revision subsequently, for any reason whatsoever, so that the terms of such previous renewal(s) would have been affected, the rate is to be adjusted to what it would have been, had the revised figures been available originally and the Formula for Renewal then applied."

Insurers are requested to advise their operating offices suitably in the above regard.

SECRETARY

Annexure 'A'

RATING GUIDELINES  FOR INITIAL RATING

OF OCEAN-GOING VESSELS

(Effective Date 1-4-2001)

(Please refer TAC Circular M.Hull/Cir-1/2001 dated 27th March, 2001.)

Rating Guidelines for Initial Rating of Ocean-going Vessels

[Effective Date 1-4-2001]

1. GENERAL :

• These Guidelines apply to all Ocean-going Vessels registered under the Merchant Shipping Act 1935, irrespective of their Sums Insured and attaching to any existing or new fleet on or after 1-4-2001.

• These Guidelines are subject to the provisions laid down in the Marine Hull Manual (amended 15-11-2000) insofar as applicable and hence, should be read in conjunction therewith.
• Insurers are required to fix rates on new attachments as per the procedure provided herein on provisional basis and forward a duly completed Marine Hull Initial Rating (MHIR) form to the TAC for approval, as prescribed under Section II of the Manual. Such applications should be submitted within 30 days from the date of attachment of risk and Committee will advise the rates to the concerned insurer within 30 days from receipt of the said application.

  2. RATING OF HULL & MACHINERY (H&M) INTERESTS :

  To arrive at the rates, a reference is to be made to the matrices of Total Loss (TL) and Other than Total Loss (OTL) rates given as annexures to these Guidelines, which correspond to different types of Vessels and Sums Insured.

These matrices have been laid down for the following slabs of H&M Sum Insured :

1. H&M Sum Insured not exceeding Rs.100 crores
2. H&M Sum Insured exceeding Rs.100 crores but not exceeding Rs.125 crores
3. H&M Sum Insured exceeding Rs.125 crores but not exceeding Rs.150 crores
4. H&M Sum Insured exceeding Rs.150 crores but not exceeding Rs.175 crores
5. H&M Sum Insured exceeding Rs.175 crores but not exceeding Rs.200 crores
6. H&M Sum Insured exceeding Rs.200 crores but not exceeding Rs.250 crores
7. H&M Sum Insured exceeding Rs.250 crores

The rates contained in the TL and OTL Matrices for various types of vessels are the Basic Rates for certain Age groups and Tonnage/BHP groups corresponding to :

1. Standard Trading Warranty viz. Institute Warranties 1.7.76 (i.e.'F'); and
2. Standard Conditions of Insurance viz. Institute Time Clauses Hulls 1.10.83.

A. Standard Trading Warranty :

The Matrices have been prepared for the Institute Warranties 1-7-76 i.e. Trading Warranty 'F'. * Wherever insurance for restricted Trading Warranties is sought, the relevant Matrix for "Other than Total Loss" Rates shall be reduced to the following percentages :

* Please refer Section II : Initial Rating : Rule 6 (i) & (iii) of the Marine Hull Manual for a description of the Trading Warranties.

The Matrices have been prepared for Institute Time Clauses Hulls 1.10.83.

However, cover will be available for other conditions of insurance also for which the relevant TL/OTL/H&M rates shall be modified as explained below :

1. ITC Hulls 1.10.83 with Clause 8 amended to include 4/4ths Collision Liability for which the H&M rate will be loaded by 3%, i.e. for additional 1/4th Collision Liability.

2. ITC Hulls 1.10.83 extended to include Protection & Indemnity risks as per Clause 9 of ITC Hulls Port Risks 20-7-87 or Clause no.10 of the ITC Hulls Port Risks including Limited Navigation 20.7.87 for which the H&M rate will be loaded by 3% .

• The sum total of Matrix TL and OTL rates, modified for Trading Warranty if applicable, would yield an H&M rate. This H&M rate is to be loaded as above to include cover for additional 1/4th Collision Liability and/or P&I risks. The H&M rate shall then be modified as explained under Rule 3 given hereinafter for Fleet Rating Level. Thereafter, the TL and OTL components are to be reworked in such a way that the TL component remains unaltered and the total effect of the loading for 1/4th Collision Liability and/or P&I risks and/or the effect of applying the Fleet Rating Level is reflected only on the OTL component.

• ITC Hulls Port Risks 20-7-87.

  Such a cover will be given when the vessel is to ply in any one named port only.

• ITC Hulls Port Risks including Limited Navigation 20-7-87.

  Reduction in the OTL rate will correspond to that Trading Warranty which will include the place(s) named by the insured to which the vessel is likely to go for any dry-docking or for such other purposes as envisaged in the clause.

For the covers mentioned under items (iii) and (iv) above, 6% loading is to be applied on the H&M rate i.e. 3% for the additional 1/4th Collision Liability and 3% for P&I Risks.

• The sum total of Matrix TL and OTL rates, modified for Trading Warranty, if applicable, would yield an H&M rate. This H&M rate is to be loaded by 6% to include cover for additional 1/4th Collision Liability and P&I risks. The H&M rate shall then be modified as explained under Rule 3 given hereinafter for Fleet Rating Level. Thereafter, the TL and OTL components are to be reworked in such a way that the TL component remains unaltered and the total effect of the loading for 1/4th Collision Liability and P&I risks and/or the effect of applying the Fleet Rating Level is reflected on the OTL component.

• ITC Hulls Total Loss Only (including Salvage, Salvage Charges and Sue and Labour) 1.10.83.

  The Matrix TL rate itself would be the H&M rate for this cover.

P&I cover as per Clause No.9 of the ITC Hulls Port Risks 20.7.87 or Clause no.10 of the ITC Hulls Port Risks including Limited Navigation 20.7.87 can be granted in conjunction with this cover for which the TL rate shall be loaded by 4%.

• The Matrix TL rate which constitutes the H&M rate for the cover envisaged under item (v), is to be loaded by 4% if cover for P&I Risks is also sought. The so loaded rate will be modified to take into account the Rating Level of the fleet as explained under Rule 3 given hereinafter. The TL component would remain unaltered and the total impact of applying the Fleet Rating Level is to be reflected on the loading component for P&I Risks which will form the OTL component of the rate.

• ITC Hulls TL, GA, 3/4ths Collision Liability (including S, SC and S&L) 1.10.83 for which the Basic TL rate will be loaded as under :

3/4ths Collision Liability - 12%

General Average - 5%

• ITC Hulls TL, GA, 4/4ths Collision Liability (including S, SC and S&L) 1.10.83 for which the Basic TL rate will be loaded as under :

3/4ths Collision Liability - 12%

Additional 1/4th Collision Liability - 4%

General Average - 5%

P&I cover as per Clause No.9 of the ITC Hulls Port Risks 20.7.87 or Clause no.10 of the ITC Hulls Port Risks including Limited Navigation 20.7.87 can be granted in conjunction with the cover envisaged under (vi) and (vii) above for which the Basic TL rate shall be loaded as follows :

3/4ths Collision Liability - 12%

Additional 1/4th Collision Liability - 4%

General Average - 5%

P&I - 4%

The loadings, which constitute the OTL component, are not cumulative but are to be applied separately on the Basic TL Rate.

• The Matrix TL rate is to be appropriately loaded as above to include cover for P&I Risks and/or 3/4ths Collision Liability and/or 4/4ths Collision Liability and/or GA to get the H&M Rate. The H&M rate shall then be modified as explained under Rule 3 given hereinafter to take into account the Rating Level of the fleet. Thereafter, the TL and OTL components are to be reworked in such a way that the TL component remains unaltered and the total effect of the loading as above and the effect of applying the Fleet Rating Level is reflected on the OTL component.

• Owners' Clauses/Liners' Negligence Clauses/Additional Perils Clauses :

In respect of an existing fleet already enjoying additional cover in terms of either Owners' Clauses or Liners' Negligence Clauses or Additional Perils Clauses, if similar additional cover is sought on new attachments to the fleet, the same can be granted by loading the final OTL rate by 5%. The H&M rate shall then be modified as explained under Rule 3 given hereinafter. Thereafter, the TL and OTL components are to be reworked in such a way that the TL component remains unaltered and the total effect of the loading or the effect of applying the Fleet Rating Level is reflected on the OTL component.

3. Application of Fleet Rating Level :

The H&M rate arrived at as above will be modified to take into account the Rating Level of the fleet to which the vessel to be rated may be attaching as under :

1. when the Fleet Rating Level is 100% or less :

To apply the entire level to a new attachment's H&M rate.

• when the Fleet Rating Level is above 100% :

To apply only the current year's penalty/reduction to a new attachment's H&M rate.

• In case of vessel(s) attaching to new fleets i.e. fleets which might be coming into existence with the acquisition of the vessel (s) to be rated or fleets which have not completed 1 year, this provision will have no relevance.

4. RATING OF SUBSIDIARY INTERESTS :

For fixing rates on Subsidiary Interests, Insurers may refer to the provisions contained under 0Rule 30 of Section I : General Rules and Regulations incorporated in the Marine Hull Manual.

5. Deductible :

1. H&M Sum Insured not Exceeding Rs. 100 crores :

Deductibles shall be fixed as per Section II - Initial Rating - Rule 5 of the Manual which is to be applied with following modifications :

Deductibles on such vessels to be worked out as per the said Rule by taking into account appropriate loading for age exceeding 20 years, wherever applicable, and/or loading for Fleet Rating Level, if warranted. Thereafter, the existing limitation in terms of vessel's age and sum insured are to be taken into consideration, wherever applicable. However, in cases where the deductibles worked out on the above basis would be seen to exceed Rs.30 lacs, the same would be pegged at Rs. 30 lacs.

• H&M Sum Insured Exceeding Rs.100 crores :

The deductible would be as below :

H&M Sum Insured	Deductibles (Rs.)
H&M Sum Insured above Rs.100 crs but not above Rs.125 crs.	35 lacs
H&M Sum Insured above Rs.125 crs.but not above Rs.150 crs.	35 lacs
H&M Sum Insured above Rs.150 crs.but not above Rs.175 crs.	50 lacs
H&M Sum Insured above Rs.175 crs. but not above Rs.200 crs.	50 lacs
H&M Sum Insured above Rs.200 crs. but not above Rs.250 crs	50 lacs
H&M Sum Insured above Rs.250 crs.	50 lacs

6) Increase/Decrease-in-Value :

The provision contained under Section I : General Rules and Regulations : Rule 18 of the Marine Hull Manual will apply to all vessels irrespective of their Sums Insured.

7) Compulsory Valuation by International Agencies :

• Insurers are required to insist on compulsory valuation for all vessels in the following cases :

1. at the time of attachment to a fleet; and
2. at the time of change in its sum insured for any reason whatsoever.

   The valuation will be done by one of the international agencies as per the enclosed list (Annexure 'B').

ANNEXURE 'B'

(Ref.: TAC Circular M. Hull/Cir-1/2001 dated 27th March, 2001)

LIST OF INTERNATIONAL VALUERS

1. M/s. C.H.Rugg & Co., 24 Street, Merry Axe, London EC3.
2. M/s. T.W. Tamplin & Co., 18/20, South Work Street, London SE1 1TJ.
3. M/s. Mullion, Orient House, 42/45, New Broad St., London.
4. Cleaves Maritime Valuations Ltd., P.O. Box 107, Regent House, 89 - Kingsway, London WC2 B 6 EB (Tel 01-242.)
5. Eggar Eorrester Ltd., Rodwell House, Middlesex Street, London EI7 HU, (Telex 811671 CHENEG.)
6. M/s. Davies and Newman Ltd., New City Court, 20 St. Thomas Street, London SE 1 9RJ ( TLX 892141 ).
7. M/s. Pike Ship Sales Ltd., 51, High Street, London E11.
8. M/s. Galbraith's Ltd., Galbraith House, 88, Fenchurch St., London EC3M DNEC3.
9. M/s. Tatham, Bromage & Co. Ltd. 46 St. Mary Axe, London, EC3.
10. M/s. Hyde J.E. & Co. Shipbrokers, Baltic Exchange Chamber, St. Mary Axe, London EC3.
11. M/s. Keellock C.W. & Co. Ltd., Shipbrokers, 27, St. Mary Axe, London EC 3.
12. M/S. Lambert Brothers Shipping Ltd., Lambert House, 43 Worship St., London EC2A 2LB.
13. M/s. Fearnilay and Eger, S.Befragt Ingsforretning A/S. P.O. No.355, Radhusgt, 27 = OSLO -1 .
14. P.F. Bassoe A/S & Co., Radhusgaten 27, P.O. Box - 1768 Vika (Norway) 0122 Oslo 1 (Tlx 76766 basson).
15. R.S. Platou A/S, Norway.
16. Joachim Grige & Co., Norway.
17. M/s. Nippon Kaiji Kentel Kyokai, Tokyo
18. M/s. Hihon Kentei Kyokai, Tokyo.
19. M/s. Pacific Marine K/K, Tokyo.
20. Lehmann Junior, 41, Stockholmsgade, DK-2100, Copenhagen, Denmark (Tlx16555). TLX 16555.
21. Wallem Shipbroking (Hong Kong) Ltd., Hopewell Centre, 48th Floor, 183, Queens Road (East), P.O. Box 40, Hong Kong, (Tlx. HX 85252).
22. M/s. Axis Shipbroking Ltd., London
23. M/s. Fleton Valuation and Shipping, Badgers, 2 Benford Road, Hoddesdon, Herts EN11 8LW, London.

M.Hull/Cir-2/2001                                                            Date : 20th June, 2001

Re : Marine Hull Insurance - New Rating Guidelines for Fixing

Initial Rates on Ocean-going Vessels- Effective Date : 1-4-2001

This is further to our circular no.M.Hull/Cir-1/2001 dated 27th March 2001 enclosing the captioned Guidelines at Annexure 'A'.

We invite your attention towards the following Matrices :

(i) 'BULK CARRIERS' : MATRIX FOR OTL RATES APPLICALE TO VESSELS WITH H&M SUM INSURED UPTO Rs.100 CRORES

(ANNEXURE B5)

OTL rates in respect of Bulk Carriers not over 5 years of age and falling within different Tonnage (DWT) groups have inadvertently not been incorporated in the said Matrix (please refer Annexure B5).

Hence, we are enclosing a copy of the revised Annexure B5 showing the said rates. The existing annexure may kindly be replaced with it.

(ii)'TUGS/SUPPLY VESSELS/ANCHOR HANDLING TUG-CUM-SUPPLY VESSELS' : MATRICES FOR TL RATES APPLICABLE TO VESSELS WITH DIFFERENT H&M SUMS INSURED (ANNEXURE D1 TO D4)

Kindly note that the rate for vessels 'over 1000 but not over 2000' BHP relating to the age group 'over 20 years', shown as 0.630% in Annexure D1, should be corrected as 0.830%. Since the subsequent Matrices (ANNEXURES D2, D3 & D4) are correlated, the corresponding rates in these Matrices would also undergo change.

We are, therefore, enclosing revised Annexures D1, D2, D3 & D4 with the request that the existing ones be replaced suitably.

Insurers are requested to advise their operating offices suitably in the above regard.

SECRETARY