Singapore is aiming to have a protection and indemnity club, or P&I Club, in the medium term and is also working to have its own clause, a senior industry executive said at the recent Singapore Maritime Week.
“Our next initiative will take a little bit longer, may be a couple of years, but we are moving towards having a Singapore Clause,” said Gina Lee-Wan, chairman of the legal and insurance committee under the Singapore Shipping Association.
A clause comprises the terms of the insurance cover or the wordings on which the cover is underwritten on.
The first Singapore-based national mutual war risks insurance, the SWRM, was launched in 2015 by P&I underwriter, The Standard Club Asia.
SWRM’s terms are an offshoot of The Standard Club Asia, with the club’s tailored war risks wording being used as a standard but other international forms such as Nordic, German, French and American can also be accommodated.
The initial process to put in place a team which will draft the Singapore Clause has started and the idea will be to look at gaps between various international forms or plans and “build an overarching product that is missing at the moment.”
“With SWRM, Singapore already has the vehicle. We now need to add on what is tailored for us. We will look at the existing plans, what has worked and not worked and try to fill the gaps,” Lee-Wan, who is also the co-head of the maritime and aviation practice at law firm Allen & Gledhill, said.
While drafting the Singapore Clause, the team will look at the risks the maritime industry is facing and build it into its SWRM cover.
Singapore started by providing a national war risk insurance cover but wants to enhance its maritime product offering and eventually has an aim to have a Singapore P&I Club, though it will take time to achieve this goal, she said.
The Standard Club Asia is a Singapore-incorporated P&I Club and part of The Standard Club group, that is registered in Bermuda. The Standard Club is a member of the International Group of P&I Clubs.
The plan is significant because Singapore, which is already the world’s largest bunkering port, aims to be a global maritime hub for all shipping related activities including insurance, commercial management, dry docking and onshore storage.
Currently, the SWRM facility is available only to owners which have a connection to Singapore and it is another reason for companies to establish operations in the city state, she said.
Singapore has the world’s fifth largest registry of ships and there is strong demand for insurance related offerings in the country.
However, the Singapore flag is not mandatory for a ship to get the SWRM cover. Links such as a registered office in the country is sufficient to qualify.
Singapore War Risk Insurance Expands
The existing war risk mutual cover has exceeded expectations. In mid-April, it had over 475 ships insured, comprising 12 million gross tons, entered by 27 shipowners.
From last month, Tier I of the SWRM insurance cover is now being provided out of Singapore, unlike the past when it was the Tier II, Lee-Wan said.
SWRM is now building reserves and is translating into greater income for the Singapore insurance market, she said.
SWRM is fully reinsured and the capital supporting the mutual has increasingly come from the reinsurers based in Singapore.
Accumulation of reserves is crucial for SWRM to be able to provide more competitive rates of premium, sources said.
War insurance has traditionally been the preserve of international markets and SWRM makes shipowners linked to Singapore to be less reliant on war risk offerings globally.
When the Strait of Malacca was declared an excluded area by the Joint War Committee of the London insurance market in 2005, Singapore had no such vehicle with which to influence premiums or enable it to waive the exclusion.
“With SWRM, Singapore shipowners have an autonomous facility designed to protect against maritime security threats,” Lee-Wan said.
It gives Singapore greater control over its needs of war risk insurance and help the shipowners manage their costs.
SWRM offers hull war risk cover up to the insured value of the ship, with excess war risk P&I cover of up to $550 million, along with optional additional insurance such as loss of hire.
It is a general practice among shipowners to have a basic war risk insurance cover to be prepared for all eventualities. Banks that have provided credit to shipowners and charterers who hire the ships also insist on such covers.
Additional premiums have to be paid if the ships venture into high risk areas, as designated by the insurers.
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