4.7. Fines from courts, authorities, ports, customs…
In the process of operating a ship, agents, crew members or employees of the ship owner may violate regulations on labor safety, customs, environment, etc. due to their mistakes or carelessness. In such cases, port authorities, courts, customs, may impose fines based on the level of their violations. The Association will compensate for these fines if, according to the law, the ship owner is the one who must bear the fines arising from the mistakes of the agent, crew members or employees of the ship owner. However, not all fines of the ship owner are the responsibility of the Association.
Normally, the Association only compensates ship owners in cases where
after:
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- Ship violates labor safety regulations
- Ships deliver excess or insufficient cargo or do not comply with the regulations on cargo handling.
cargo report or documents of the insured vessel.
- Violation of immigration laws or procedures
- Violation of customs regulations
- Pollution by oil or toxic substances.
4.8. Other responsibilities
In addition to the shipowner's responsibilities covered by the Association's insurance above, the Association is also responsible for compensating Members for the following losses and expenses:
- The expenses incurred by Members when they act under the direction of the Association's administrators.
- Expenses incurred due to changes in route to provide medical treatment to those on board or to bring illegal passengers, refugees or victims rescued at sea ashore.
- Wages and unemployment compensation in case of shipwreck.
Through this chapter, we can understand more clearly about P&I Insurance Association and P&I shipowners' civil liability insurance. So to know how this type of insurance works for shipping companies in the Vietnamese market, we will go into Chapter II.
CHAPTER II
CURRENT STATUS OF P&I INSURANCE ACTIVITIES OF VIETNAMESE SHIPPING ENTERPRISES
I. The need for P&I insurance
1. For Shipping Companies
P&I shipowners' civil liability insurance is a very new type of insurance in Vietnam. In the beginning, only Bao Viet Insurance Company underwrote this type of insurance and then reinsured it for the WOE Association. Later, due to the recognition of the necessity and development of P&I insurance, the number of primary insurance companies and international associations participating in insurance in Vietnam also increased. Up to now, there have been 11 primary insurance companies and 4 international associations participating in this market.
The rapid growth in the number of primary insurance companies in the Vietnamese market demonstrates the increasing demand for P&I insurance by shipping lines and further demonstrates the important role of P&I insurance for our country's shipping companies.
The important role of P&I insurance for shipping companies is further demonstrated through the benefits it brings to the Company itself.
First of all, P&I insurance brings spiritual value to sailors and crew members, helping them work more effectively, more enthusiastically and bring more profits to the shipping company.
Furthermore, as mentioned above, when only participating in hull insurance, the shipping companies still have to bear ¼ of the liability for collision, the liability for crew members, passengers, and other third parties, is a significant part of the responsibility. And if a loss occurs, the compensation amount will cause financial difficulties for the companies and may even lead to bankruptcy.
When participating in P&I insurance, shipping companies can receive help from shipping lines in limiting risks when going to sea, reducing unnecessary losses. Especially with our country's fleet, there are still many limitations in maintenance work, limiting risks due to economic conditions and underdeveloped science and technology.
2. For Insurance Companies
The rapid increase in the number of Insurance Companies not only proves that the demand for participation of Shipping Companies is increasing but also proves that this is a potential market that Insurance Companies want to exploit because of the benefits it brings to Insurance Companies.
The first thing that makes civil liability insurance meaningful to insurance companies is to diversify the insurance products at the company, while also attracting more potential customers or taking advantage of existing customers to increase revenue.
Second, this is a very new market segment with a lot of potential for exploitation, especially in Vietnam, a maritime transport market that is still in the process of development and still has many weaknesses and needs many measures to overcome losses, and P&I insurance is the source for insurance companies to aim for.
The third reason is the international element of P&I insurance. Domestic insurance companies, when exploiting this type of insurance, can enhance their relationships with international associations and international insurance companies, thereby learning from experience to improve their operations, while creating many opportunities to receive assistance from abroad such as linking professional training for company staff, organizing international seminars to attract domestic and foreign customers, etc.
II. Actual implementation of P&I insurance services in the Vietnamese market
1. Legal basis of P&I insurance activities in Vietnam
In P&I insurance activities in Vietnam, the insurer and the insured are Vietnamese citizens, so first of all, P&I insurance contracts between ship owners and insurance companies must be subject to the regulation of Vietnamese law sources.
Some sources of law in Vietnam that serve as the basis for P&I shipowner civil liability insurance:
- Law on Insurance Business No. 24/2000/QH10
- Vietnam Maritime Code
- Decree:
+ Decree 45/2007/ND-CP dated March 27, 2007 detailing the implementation of a number of articles of the Law on Insurance Business.
+ Decree 46/2007/ND-CP dated March 27, 2007 regulating the financial regime for insurance enterprises and insurance brokerage enterprises.
+ Decree 118/2003/ND-CP dated October 13, 2003 regulating administrative sanctions in the field of insurance business.
+ Decree 18/2005/ND-CP regulates the establishment, organization and operation of mutual insurance organizations.
- Circular:
+ Circular 174/1998/TT – BTC dated December 24, 1998 guiding the application of value added tax and corporate income tax to insurance business activities.
+ Circular 155/2007/TT – BTC dated December 20, 2007 guiding the implementation of Decree 45/2007/ND – CP.
+ Circular 156/2007/TT – BTC dated December 20, 2007 guiding the implementation of Decree 46/2007/ND – CP.
Among the above legal sources, it can be said that the provisions in the Vietnam Maritime Code have the most influence on shipowner civil liability insurance because there are direct provisions on shipowner civil liability such as:
- For transported goods: Chapter V, section 2, article 75; article 77; article 78; article 79; article 80
- For passengers: Chapter VI, article 126; article 130; article 122
- For shipwrecks and sunken properties: Chapter XII, Article 198; Article 200
- For collision accidents: Chapter XIII, Article 208, Article 209
- For general average contribution: Chapter XIV, Article 213, Article 214
- On the limitation of civil liability: Chapter XV
In addition, it is impossible not to mention the rules and agreements of the Vietnam Insurance Association, especially the cooperation agreement No. 1 in marine insurance signed and issued by the President of the Vietnam Insurance Association and effective on March 24, 2005 with the following basic contents ( Source : Vinare, Cooperation agreement No. 1 in marine insurance )
- In case the ship is currently insured by one insurance company and switches to another insurance company, the ship owner must pay the insurance premium to the previous insurance company to avoid bad debts. At the same time, the new company insuring the ship needs to consult the previous insurance company for more information about the risk status, loss, and insurance premium payment of the ship to assess the risk and determine the insurance premium better so that the new premium is not lower than the old premium if the insurance conditions are similar.
- The age of a ship is calculated from the date of registration, not from the date of conversion or the inspection of the ship's age. The previous insurance company is responsible for providing timely and truthful information to the new insurance company.
- The “new for old” clause does not apply to ship engines when the ship’s engine has been in operation for more than 15 years because in reality the engine has fully depreciated and accounts for a large value in the entire ship.
- For ships over 20 years old, insurance companies need to do a good job of insurance assessment and have measures to regularly monitor the condition of the ship.
- In P&I shipowners' liability insurance, the premium of the Shipowners' Civil Liability Insurance Association applied to the fleet is used as the minimum floor premium, including advance fees, additional fees and reinsurance fees. Insurance companies do not insure P&I for shipowners below the above floor premium.
P&I shipowners' civil liability insurance covers ships operating in the international maritime sector. Furthermore, insurance must be carried out with international P&I Clubs, so in addition to national law sources, the legal basis for this insurance activity also includes international law sources such as: regulations of the P&I Clubs that shipowners participate in insurance: Brussels Convention 1924; Protocol amending the Brussels Convention - Visby Rules 1968; Hamburg Rules 1978, York - Antwerp Rules 2004, etc.
2. Method of participating in P&I insurance of Vietnamese fleet
Before 1993, Vietnamese ship owners participated in P&I insurance through Bao Viet. After Decree 100/ND-CP in 1993 of the Government, a number of other newly established insurance companies also exploited this insurance business. Up to now, there have been 11 insurance companies participating in P&I ship owners' civil liability insurance. Insurance companies usually insure the hull and also insure the civil liability of the ship owners and then participate in P&I insurance on behalf of the ship owners.
Normally, insurance companies can be considered as primary insurers, after accepting insurance responsibility for ship owners, they proceed to transfer reinsurance to the P&I Club. The status of Vietnamese insurance companies
When assigning reinsurance to the Associations, they are insurance traders, not members of international P&I Associations. Most Vietnamese shipowners participate in P&I insurance with only P&I risk groups. Particularly for the risk of collision liability between ships, shipowners will be compensated by the insurance company for 4/4 of the collision liability and the Association will only insure the liability exceeding the hull insurance amount. Insurance companies will base on their financial capacity to decide on the portion of liability to retain and the remainder will be reinsured at some P&I Associations such as the West of England Association (WOE), LSSO, Gard and Steamship according to the rules of these Associations.
3. Scope of insurance liability ( Source: Prof. Dr. Hoang Van Chau, Insurance in Business Course )
3.1 Liability to Third Parties
a. The ship owner shall be liable for damage caused by the insured ship or boat.
do:
- Damage to wharves, dams, embankments, culverts, rafts, bottom platforms, and above-ground structures
fixed or mobile shore or underwater
- Injury or damage to the life or property of another third party (not a crew member on the insured vessel)
- Loss or damage to goods and property transported on insured ships or boats (excluding damage or loss due to theft or natural shortage)
b. Actual costs arising from accidents of insured vessels and boats for which the vessel and boat owner must bear civil liability according to the law as well as court decisions include:
- Oil pollution cleanup costs, local government fines and claims for consequences caused by oil pollution;