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[TradeWinds] Wordings that specify only International Group cover to be raised with ship financiers and others  
administrator 17-08-16 10:44  

Wordings that specify only International Group cover to be raised with ship financiers and others

Jim Mulrenan

London

A campaign to get the Korea Shipowners’ Mutual Protection & Indemnity Association (KPIC) made as acceptable security in ship finance and chartering contracts has been backed by the country’s owners.

The Korea Shipowners’ Association (KSA) is recommending that member companies press for KPIC to be named as an acceptable club alongside the International Group mutuals in contract wordings.

TradeWinds reported in June that KPIC was seeking to change wordings that specify that only cover from International Group clubs is allowed in loan and other ship-finance agreements, time and voyage charterparties, contracts of affreightment and commodity-sales contracts.

The KSA, which represents nearly all of South Korea’s major shipping groups, says the exclusion of KPIC from wordings is leading to an annual outflow of $150m to foreign insurers.

The KSA, chaired by Youn-Jae Lee of Heung-A Shipping, says Korea’s state-owned banks are already aware of the need to support KPIC’s development and this backing should be widened.

Market share of KPIC is put at 17% by the KSA, which says the club covers a fleet of about 1,100 vessels paying an annual premium of $31m.

The KSA says KPIC has grown at a similar rate to the International Group clubs but the contract-wordings issue is holding back further development.

It reminds Korean companies that KPIC was founded in 2000 with investment from the country’s shipowners and government support, and is part of an effort to create a virtuous circle that will strengthen national maritime competitiveness.

Initiative welcomed

The KSA initiative has been welcomed by KPIC’s top manager, Bay Moon, who views shipowner support as part of wider moves to strengthen Korea’s maritime industry.

A year on from the failure of Hanjin Shipping, the Korean government and the KSA are in active discussions about rebuilding the nation’s shipping industry.

An alliance — the Korea Shipping Partnership — between the 14 Korean container carriers was signed on Tuesday this week, while, earlier in August, the Federation of Korean Seafarers’ Union and the Korean Merchant Seafarers’ Union agreed to merge.

Moon says mergers and integration have become a key feature of Korea’s shipping industry, with the development of KPIC seen as part of the moves to rebuild the maritime sector.

KPIC is at an advanced stage in drafting a development plan to chart the future strategy of the club, which covers a fleet of 22 million gross tons.

The KSA is raising unfair contract-wording discrimination against the KPIC in consultative groups that it is involved with and is hopeful that changes can be agreed.

“It was confirmed in the several meetings so far hosted by the KSA that there are no ship financiers, nor major consignees, who doubt the club’s stability and professionalism,” Moon said.

The club chief says Korea’s Ministry of Oceans and Fisheries is also keeping a close eye on developments and is looking for a prompt resolution of the wording issue.

“It is time to amend the standard contracts to add KPIC to the ‘International Group clubs-only’ clauses,” Moon said.

He notes that KPIC has been in business for 17 years and has an “A-” or excellent financial strength rating from AM Best.


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