proprietary and confidential project cargo be the expert steven p. weiss cpcu, amim, nams-cms svp...

Proprietary and Confidential

Project CargoBe the Expert

Steven P. Weiss CPCU, AMIM, NAMS-CMS

SVP Project Cargo & Latin America Marine Manager

Mariners September 22, 2014

1


What is Project Cargo?

• Single Project

• Infrastructure Building

• Complements Construction

• Delay in Start-up/Advanced Loss of Profits

2


Examples of Targeted Classes

• Petrochemical, oil & gas refining and transport

• Power generation

• Mining

• Bridge expansion

• Underground rail or tunnel

• Pharmaceutical plants

• Terminal expansion

• Owner or contractor controlled

3


What is involved?

• Project Management– EPCM: Engineering, Procurement, Construction, Management

• Project Location– Green vs. Brown– Developed vs. Underdeveloped

• Type of Build– Modular– Stick Built

• Logistics and Delivery– Gantt charts– Replacement times– DSU worksheets

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Location Examples

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Types of Project Build

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Stick built

Modular built


Gantt Chart

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Policy Construction• Project Specific• Two Sections

– Section One – Physical Damage– Section 2 – Delay in Start up/Advanced Loss of Profits– Conditions are relatively standard

• Different Named Insured's can be in Sections 1 and 2

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What/Who is an Insured?Insured Clause

• Section I (Fill in Named Assured) Hereinafter referred to as the Named Insured with respects section 1 only And any subsidiary, affiliated, associated, allied or financially controlled company (but excluding any company exercising financial control over the Named Insured) as exists now or may be constituted and for which the Named Insured has the responsibility to insure, hereinafter referred to as the Insured. For account of whom it may concern. Insured to also include, at the option of the Named Insured, any other contractors, subcontractors, lenders, project consultants, architects, engineers, suppliers or other entities associated with the project herein described, as may be nominated by the Named Insured, all for their respective rights and interests, but in all cases, unless specifically agreed to in writing by the Insurers. Excluding ship owners, ship charterers, ship managers and/or freight forwarders. Loss, if any, payable to Named Insured or Order.

• Section II (Normally Project Owner only) Responds to loss covered under section plus a couple extensions.

9


Geographical Limits

At and from Ports and/or Places anywhere in the World to Project Site noted above, direct shipment or via ports and/or places in any order, including transits to or from and whilst at the premises of forwarders, packers, consolidators, haulers, warehousemen and other bailees, via any route, including risks in customs and temporary storage as required, transshipment by land, air or water whether customary or otherwise and including return shipments if and as applicable.

10


Voyage Clause

This insurance commences from the time of attachment of the Insured's interest in the subject matter insured but unless otherwise specifically agreed herein not prior to the time the goods are set in motion in the Insured's and/or sub-contractor's and/or suppliers premises, storage depots and/or warehouses for the imminent commencement of transit and continues in the normal course of transit during packing, repacking, storage within the ordinary course of transit, consolidation, deconsolidation, stuffing and unstuffing, and containerization and at transshipment points including and during delays beyond the control of the insured, subject always to the provisions of the Institute Clauses incorporated herein, until the goods are delivered to site at final destination including return shipments of damaged cargo to manufacturers or suppliers premises and return back to site.

Including all loading and unloading risks.

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Vessel Conveyance Limit

Section I The Insurers shall not be liable for more than (insert limit) in respect of goods on any one vessel, aircraft and connecting conveyance or in any one place at any one time.

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Types of Conveyances

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Heavy Lift/Haul Ships


Types of Conveyance

14

Aircraft


Types of Conveyance

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Barges


Types of Conveyance

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Heavy Haul Trailer


Estimated Project Sendings

At the inception of the policy, it is estimated that USD (insert estimated amount) will be shipped in respect to the project contemplated by this policy. Actual amounts will be determined at the end of the policy period and additional premium if required will then be assessed based on the audited amounts.

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Critical Items

For the purpose of this insurance a critical item is either named below or is defined as any item which, in the event of a loss under the marine policy, cannot be re-manufactured/repaired, re-shipped, installed, tested and commissioned and still leave a two-month window prior to the scheduled start-up date. The critical items are as follows: (Name items) Warranted all critical items as identified shipped under deck other than where such critical items are shipped in totally enclosed steel containers per purpose built container vessel.

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Typical Critical Items

• Heavy Lifts• Unusual Logistics• Specialized Equipment• Long Lead Time• High Values• Last Minute Arrivals• Bottlenecks• Contractor’s Equipment• Anything that could affect the project’s on-time completion

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Critical Item Examples

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Survey Warranty

In respect of named critical items (per section 14 above), as specified, it is warranted that the Leading Insurer will be advised at least 10 (ten) working days prior to the shipment/movement of such items to enable their Risk Management and/or their appointed representatives, where deemed necessary by the Leading Insurer to:

a) Approve vessel(s), tug(s), barge(s) and/or any other carrying conveyance(s) and all lifting equipment including cranes, tackle, etc., required for loading/transshipment/unloading operations.

b) Approve and/or attend all packing, loading, stowage, securing, transportation, discharge and unloading arrangements and operations throughout the entire transportation chain.

21


Typical Exclusions

In addition to exclusions noted elsewhere, the policy does not cover: a) Electrical and mechanical derangement unless the

insured property is otherwise damaged from an external cause.

b) Rusting, oxidation, discoloration in respect of unpacked or unprotected insured property and of all uncontainerized items shipped on deck.

c) Barge shipments, unless written prior approval of underwriters is given and at terms/conditions/premium to be agreed

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Typical Exclusion (cont.)

d) Loss, damage or expense caused by or resulting from final position, installation and/or testing.

e) Bending, twisting and/or distortion of steelwork unless caused by a peril covered under Institute Cargo Clauses (C) CL.254 dated 1/1/82.

f) Damage to coatings and linings of pipe.g) Equipment procured from within the same country as

the project site location, unless otherwise endorsed hereunder.

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General Average This insurance covers general average and salvage

charges adjusted or determined according to the contract of affreightment and/or the governing law and practice (or if there is no contract of affreightment according to York-Antwerp Rules) incurred to avoid or in connection with the avoidance of loss from any cause except those specifically excluded herefrom.

For the purpose of claims for general average contributions and salvage charges recoverable hereunder the Insured property shall be deemed to be insured for its full contributory value.

General average deposits shall be payable on production of general average deposit receipts.

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50/50 Clause

Upon arrival at the final destination, goods are to be inspected by the Insured for possible damage incurred during transit. In the case of packed goods, which are to be left in their packing until a later date, the packing is to be visually inspected for signs of possible damage. If any sign of damage is visible, the goods are to be unpacked immediately and inspected. Any damage discovered is to be reported to the marine policy. Any damage to the goods which becomes manifest only upon their unpacking will be ascribed to the marine policy or the construction/erection policy according to whether it clearly was caused before or after arrival of the goods at the location. Where it is not possible to establish whether the damage was caused before or after arrival of the goods at the location, it is agreed that settlement will be made 50/50 by the marine and the construction/erection policies.

25


Cutting Clause

In the event of a pipe being damaged but being reasonably usable for the purpose for which it was originally intended if the damaged part is cut off, the Insurers’ liability shall be for the proportion of the insured value which the length of the part cut off bears to the length of the complete pipe but they shall have the benefit of any salvage in respect thereof. In addition the Insurers shall be liable for the costs of cutting the pipe, cutting and refitting flanges, re-cutting bevels or otherwise rendering the pipe usable for its original purpose.

26


Storage/Delay en Route

Should there be an accumulation of interests beyond the limits expressed in this policy by reason of any interruption of transit and/or occurrence beyond the control of the Insured, or by reason of any casualty at a transshipping point and/or on any connecting conveyance, this policy shall attach for the full amount at risk, but in no event for more than twice the policy limit as expressed in this Clause, provided notice be given to the Insurers as soon as practicable upon becoming known to the Insured.

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Institute Classification Clause01/01/2001 (amended)

A. Qualifying Vessels

B. Age Limitation

C. Craft Clause

D. National Flag Society

E. Prompt Notice

F. Law and Practice

Can also consider the US Class wording.

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Trade Sanctions Inasmuch as this Clause does not conflict with the law of the jurisdiction in which the Insurers are operating, which at all times shall remain paramount, whenever coverage provided by this policy would be in violation of any United States economic or trade sanctions such as, but not limited to, those sanctions administered and enforced by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”), such coverage shall be null and void. Similarly, any coverage relating to or referred to in any certificates or other evidences of insurance or any claim that would be in violation of United States economic or trade sanctions as described above shall be null and void. The Insured agrees to assist the Insurers in all respects or pursue rights of recovery against other responsible third parties. The above agreement is not to interfere with rights of subrogation against packers and/or their Insurers.

Also could use the international sanctions wording.

29


Forms Comparison

ICC “C” clauses are most restrictive:

• Fire or explosion

• Vessel or craft being stranded, sunk or capsized

• Overturning or derailment of land conveyance

• Collision or contact of vessel, craft or conveyance with

any external object other then water

• Discharge of cargo at a port of distress

• General average sacrifice

• Jettison

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Forms Comparison (cont.)

ICC “B” clauses extend “C” with:

• Earthquake, volcanic eruption or lightning

• Washing overboard

• Entry of sea, lake or river water into the vessel,

craft, hold, conveyance, container, lift van or place

of storage

• Total loss of any package lost overboard or

dropped whilst loading on to, or unloading from,

vessel or craft

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Forms Comparison (cont.)

ICC “A” clauses are the broadest:

• This insurance covers all risks of loss or damage to the

subject matter insured

• Exceptions are provided by clauses 4, 5, 6 and 7

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Section II: Delay in Start-up (DSU)

Who funds projects and what interest do they have?• Banks: Corporate and Investment Bankers

– Protection of principle and interest– Contractually protected through a lenders agreement

• Shareholders– Protection of share value and ROI– Will pull support for company/diminish share value– Less impact on insurance requirements

• Internal– Divisional expectations/management bonuses

• Government– Adherence to process and budget– Can be a significant source of funding

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Why would I need DSU?

What’s on the line?• Fixed costs• Variable costs that cannot be easily put on hold• Profits

– Revenue projections– Ramp-up period– Testing and commissioning

• Loss of revenue under a contract• Interest costs• Contractual payment requirements

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Types of DSU coverage

• Gross Earnings

• Continuing Costs

• Financing Costs

• Loss of Revenue from contracts

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DSU LimitSection II The Insurers shall not be liable for more than (insert limit) per day for each day’s delay as recoverable under Section II, and in no event to exceed (insert number) or (number days) days in total. The preceding number of days will heretofore be known as the Maximum Period of Indemnity.

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How is DSU triggered?

• Loss under Section I of policy

• Can you buy standalone?

– Claims Control

• What if you have bought items with the requirement

that you want them delivered?

– Contingent

– Claims Cooperation

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DSU Critical Information

• Anticipated date of commencement of operations

• DSU Worksheet

• Measure of Indemnity

• Non insurance-related delays

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DSU Worksheet

• Spreadsheet outlining what the intention is to cover

• Continuing and variable costs identified

• Loss of production identified

• DSU driver identified

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Measure of Indemnity

In the event the subject matter insured herein shall be lost or damaged and such loss or damage would be recoverable under section 1 of this policy or but for the deductible applicable to section 1 of this policy would be recoverable under section 1 of this policy then under section 2, Marine Delay in Start-up of this policy, the insured shall be indemnified to the extent of (per #9 of the signed Declarations) per day for each day’s delay after the scheduled start up date or amended schedule start up date resultant upon such loss or damage subject at all times to the insured self retention of the first (per #10 of the signed Declarations) of such each and every delay.

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How do I choose my market?

What markets can write Cargo/DSU?

• Leading Underwriters– Must have related underwriting experience– Must have structured solution to risk management issues,

and team of vetted surveyors worldwide– Must have structured solution to handling claims, quick to

respond and empowered

• Market Capacity / Shared Participation

• North America vs. London vs. Europe

• Presenting to Markets – interactive presentations

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Underwriting

How do markets underwrite project risk?

• Physical Damage rate is generally as per market, or

slightly higher

• DSU premium based on “Rate on Line” methodology

• Potential downside is HUGE

• Must count on loss prevention, and claims handling

42


Risk Management

Surveyors are key to the success of a project, acting as Underwriters’ eyes and ears from the planning stage through execution:

• When should the Surveyor be involved?

• What is the role of the Surveyor?

• Factors in Company/Surveyor selection

– In-house

– External

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Risk Management

Pre-Bind: to assist the Underwriter in the analysis of the risk from a logistics and complexity standpoint• Agree Critical Items• Agree estimated costs for surveys• Review logistics package

Post-Bind• Kickoff meeting• Set up survey parameters• Assign Surveyors• Accomplish the actual surveys

44


Risk Engineering

Review of Engineering and Design• Critical items• Discuss bottlenecks• Structural/packing for voyage

Vessel and Route Selection• Breakbulk vs. Containerized• Heavy Lifts: self-loading or not• Weather: WNA, hurricanes, winter access• Inland: rail, truck, unusual circumstances• Barge

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What is a Project Submission?

• Risk details

• Wording

• Financial details of project

• Location

• Expected load and discharge ports

• Timelines

• DSU information: spreadsheet, measure, etc.

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Project Cargo/DSU Claims

• Notify

• Mitigate

• Repair/Replace

• Expediting

• Network

• Affinity with client

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Keys to Project Success

Project Knowledge• Underwriting• Claims• Risk Engineering

Specialized Risk Analysis

Coordinated Involvement (project lifecycle)• Client• Broker• Underwriter

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Recent Items of Interest

Largest claim: Hurricane Ike• Voyage Clause/Duration of Risk

Vessel Classification Clause

Returned Shipment Clause

Non-standard wording

Inland Transit

49


Claims

•Transfield Kemerton•Motiva•Chilca 3•Sithe Goreway•MPX Paraneiba I

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Questions?

51

proprietary and confidential project cargo be the expert steven p. weiss cpcu, amim, nams-cms svp...

Documents

construction project

named insured

project consultants

project cargobe

project managementepcm

insured clause section

location examples5 proprietary

cost of stick building