THE ATHENS PROTOCOL & THE IMPLICATIONS FOR FINANCIERS OF PASSENGER SHIPS

1. THE ATHENS PROTOCOL & THE IMPLICATIONS FOR FINANCIERS OF PASSENGER SHIPS Graham Barnes BankServe Insurance Services Ltd

2. Herald of Free Enterprise EstoniaNorwegian Dream Express Samina

3. SHIPOWNERS’ LIMITATIONS OF LIABILITY for PASSENGERS

5. The 2002 Protocol to the Athens Convention will supersede the current provisions of the 1974 Convention 12 months from the date it is ratified by just 10 states The EU is totally committed to the 2002 Protocol

6. ATHENS PROTOCOL 2002 • Liability without negligencefor the first SDR 250,000 per passenger of claims for death and personal injury if the incident relates to a "shipping incident" (An incident that could not have occurred in a land-based hotel) • Guaranteed by a Compulsory Insurancefor SDR 250,000 per passenger for death and personal injury claims, accepting direct action with no policy defences except wilful misconduct. Such insurance can be of any type or be combined with an acceptable guarantee.

8. ATHENS PROTOCOL continued • Maximum liability. IMO recommends a maximum liability limit of SDR 400,000 per passenger. • Unlimited liability in respect of death and personal injury claims for States that choose so in respect of actions in their courts.

10. THE P&I CLUBS HAVE SAID THEY CANNOT PROVIDE THE INSURANCE THAT THE ATHENS PROTOCOL 2002 REQUIRES!

11. Key elements of the P&I Club Mutual System • Members’ Funds payable by Club Calls • Establishment of the Pool accepting all member Clubs’ liabilities • Pool reinsurance programme • Strict indemnity principal limiting claims to Shipowners’ Limitation of Liability Conventions • No conceivable risk of Overspill Claims

12. EXTENT OF P&I COVER • Liabilities to Passengers and/or Cargo • Liabilities to Crew • Pollution liabilities • Collision liabilities • Damage to Port installations • Removal of wreck

13. The Clubs’ Difficulties • Increased risk to the upper R/I layers, causing higher premiums for Pool R/I programme. • Risk of Overspill Claims will become a reality. • Guarantee requirement removes the clubs’ strict indemnity to shipowner principle. • Cause internal divisions between club members, eg between tanker owners and passenger vessel operators. • Maximum liability limits getting close to total capacity of world insurance markets.

17. Current I.G. Pool Insurance Program

18. AN R/I PROGRAM TO SATISFYALL PARTIES

19. A CHEAPER ALTERNATIVE

20. PROVIDING THE GUARANTEES

21. CURRENT FINANCING LEVELS ON PASSENGER SHIPS • US$22 billion approx. in financing cruise ships, both outstanding and committed financing new buildings. • US$ 3 billion approx. in financing ferries, outstanding and committed.

23. TYPES OF FINANCING • Single Ship Financing - secured by Ship Mortgages and assignments of insurances • Corporate Financing - No Ship Mortgages • Lease Financing

24. REASSESSMENT OF THE LENDING RISKS • Availability of the required insurance enabling operators to trade. • Additional insurance costs which cannot be passed on to passengers in the ticket price. • Major fatal incidents causing bankruptcy of the operator due to insufficient insurance cover. • Lessors potentially liable for unpaid liabilities! • Consolidation of the cruise lines has made second hand values of cruise ship more uncertain.

25. MAXIMUM POSSIBLE LOSSES from a catastrophe exceeding insured limits

26. INSURABLE SOLUTIONS