Due to changes in the available reinsurance the terms of the cover were changed for 2003/04. The reinsurance changes were notified to the International Group only shortly before the renewal and the International Group has been seeking to clarify two issues. Please bear in mind that the following understanding of the reinsurance terms is applicable to the relevant terms of the P&I War Risks Clause of the Association.

The clause reads as follows:-

It is our understanding that the phrase 'any chemical, bio-chemical ........ weapon' was intended by Underwriters to exclude neurological or viral agents such as sarin, mustard gas, anthrax, smallpox etc. It is not intended to refer to explosives, or methods of their detonation or attachment. Nor does it refer to the use of a vessel or its cargo as a means of inflicting harm, unless such cargo is itself a chemical or biochemical weapon within the scope of the clause. We understand the phrase 'electromagnetic weapon' to refer to highly sophisticated devices designed to disable computer software, and not to methods of detonation or attachment of explosives.

The exclusion of 'the use or operation, as a means for inflicting harm, of any computer virus' is relevant in the context of this policy only if it is used as an act of war or terrorism."

The International Group have submitted a revised wording for the clause which incorporates these principles and it is hoped that the wording of the clause for the next year will be clearer.

"This policy to pay claims excess of amounts recoverable under vessels or crew war risks P&I policies subject to a minimum excess of the proper value of the entered ship or USD100,000,000 whichever is the less (applicable to owners' entries and not to charterers' entries), and further subject to a minimum excess of USD50,000 any one event."

Once again the brokers and reinsuring underwriters are concerned that the intent of this clause should be clearly understood and, following discussions with the International Group, the brokers have issued the following clarification with the approval of reinsuring underwriters:-

"It is therefore our understanding that in respect of Owners' entries this policy will respond excess of underlying insurances with a limit of at least the proper value of a vessel.

In the event that a vessel is not so insured, this policy will respond as if an underlying policy with a limit up to the proper value were in place, except that for a vessel with a proper value of more than USD100m, the deemed underlying excess shall be USD100m.

Further we understand that this policy will be in excess of all other policies placed by owners for vessels' or crew war risks P&I. We do not believe that corporate general liability umbrellas placed on behalf of organisations of which shipping forms a part are underlying policies hereon (even if they might include some war and terrorism cover).

We believe reinsurers understand that Club boards may exercise their discretion as to what constitutes the proper value of an entered vessel, but the payment of claims under this policy remains subject to the criteria above and the Claims Co-operation Clause."

Members should note that they are deemed to have underlying cover with conditions equivalent to the Association's cover given under the P&I War Risks Clause equal to at least the hull value of the ship. Furthermore this cover is excess of any cover which the Member has actually taken out which covers the risk, unless the cover is a corporate general liability umbrella cover. A corporate general liability umbrella cover is difficult to define and it is important that any Member who considers that he has such a cover should inform the Managers so that the position can be clarified.

Members are recommended to seek similar clarifications to those set out above from the underwriters of their underlying War Risks cover.