COFR option costs vary widely
Oslo-based P&I Club Skuld says the various schemes aimed at providing shipowners with the means to comply with the Certificates of Financial Responsibility (COFR) requirement in the US show marked differences in costs.
Geoff Garfield | 20 October 1994
Skuld has told its members that the financial soundness of each scheme is difficult to assess from Information available, and claims-handling capacity, with the exception of one scheme, is currently unknown.
Skuld has summarized the various options:
- Self-lnsurance or other self-guarantee: All must be approved by the US National Pollution Funds Center and require funds being available in the US.
- US Surety Bonds: Available through the major commercial banks in the US, which usually need a counter-guarantee from the shipowner or his local bank. Bonding costs vary from 0.5 per cent to 2 per cent of the amount guaranteed (statutory limits). For large tankers, it can be costly.
- OPACLUB: A bond scheme open to all vessels and initiated by Insurance brokers Willis Corroon Group, London and Sedgwick Marine & Cargo. A guarantee is issued for each vessel's stipulated maximum liability. Tanker premiums: USD 1 per grt , minimum USD 50,000 and maximum USD 2m per fleet. Owner must issue letter of credit 10 times the premium, minimum USD 2.Sm for dirty tankers, USD 1.25m for clean. Participation of around 60m grt required.
- OPASURE: Same organizers as OPACLUB, only one bond issued for all participating vessels and one joint guarantee of around USD 100m anticipated.
- First Line: Fixed premium insurance, not subject to mutual conditions. Launched by Johnson & Higgins, New York and Nicholson Leslie BankAssure, London. Risks will be reinsured.
- Shoreline Mutual, Bermuda: Mutual liability cover for US pollution up to a policy limit for one accident or occurrence, believed to be USD 300m, Underwriting in Bermuda, Tanker premiums around USO 0,70 per dwt, subject to supplementary call.
- OPAQUE/OPAL: Concept involves new mutual OPAQUE for shipowners trading to US covering liability up to OPA 90 and CERCLA limits (USD 1,200 plus USD 300 per grt) . Financing raised partially by diverting that prportion of premium owners currently pay to their P&I Club for US oil pollution cover. USD 200m excess facility will be utilized. Funding facility OPAL financed by a levy on imports of oil to US. Support of major oil companies required and being sought, Tindall Riley, London involved.