CLAIMS HANDLING

　　1. New registered claims

　　A. All policy years

　　In the 2008 policy year, the reported claims for all policy years totaled 1,834 (including newly registered claims for the 2008 policy year) with an aggregate claim amount of US$ 53.37 million. Whilst this represents an increase of 6.8% in the number of claims and a decrease of 87.6% in claim amount as compared to the 1,718 claims and US$ 429.54 million from the previous policy year.
　　

　　B.The 2008 Policy Year
　　

　　There were 1,590 reported claims in the 2008 policy year with an aggregate claim amount of US$ 42.88 million, which represents an increase of 8.7% in the number of claims and a decrease of 89.8% in claim amount as compared to the preceding policy year’s 1,463 claims and US$ 421.98.million respectively. With absence of large-scale oil pollution cases such as the M.V. Hebei Spirit in South Korea in 2007, the claim amount showed a significant decrease in the 2008 policy year.
　　

　　C. Category of Newly Registered Claims in the 2008 Policy Year
　　

　　As in 2007, the most regularly occurring claims in 2008 involved cargo liability and crew illness.
The types of incidents which gave rise to the largest claims by value involved cargo liability, FFO and collision liability. Cargo liability ranked the highest in terms of claim amount in the 2008 policy year, rising from third place in the previous policy year. In addition, pollution liability slipped to ninth place from first place in the previous policy year.

Table 1

Table 2

Table 3
US$ ,000s

　　D. Major Claims during the 2008 Policy Year (claim amount over US$ 400,000 )

　　Fourteen major claims occurred in the 2008 policy year with a total claim amount of
US$ 28.54 million. Compared to the 2007 policy year when there were 20 claims and a total claim amount of US$ 408.28 million, the number of claims in the 2008 policy year decreased by 30% and the aggregate claim amount decreased by 93%. The situation has changed for the better.

　　E. Arrest of ship and guarantee

　　During the 2008 policy year, the Association arranged for securities in various forms for 32 entered ships, for a total amount of US$ 43.14 million. Compared to those provided last year, the number of guarantees decreased by 39.6%, while the amount of guarantees increased by 46.4%. Ninety-one percent of the guarantees provided utilized CPI’s Letter of Undertaking.

Table 4:

Arrest / Guarantee Cases

US$ ,000s

　　2.Claims Settlement

　　A.　　Settled Claims

　　In the 2008 policy year, 1,886 claims from previous years were settled and closed. The claimed amount of which was US$ 50.62 million, whereas total net payment by the Association was US$ 13.14 million. Compared to the 1,950 claims of the previous policy year, the number of closed cases decreased by 3.3%. (Table 5).

Table 5
US$ ,000s

　　B.　　Report on Settlement of Major Claims (please also refer to our previous reports)
　　

　　2003 policy year

　　(1) M.V. “Jing Po He” of Cosco Container Lines Co. Ltd. arrived in Seattle, the USA on 7th Sept. 2003. During loading, the break of the crane wire-line caused a container with drill dropping onto the dock, resulting in damage to the cargo in it. On 24th Aug. 2004 the shipper filed a claim for US$ 2.895 million of cargo damage and indirect loss. The surveyor appointed by the Association was of the opinion that the stevedore company SSA should be held 100% liable for the damage. The Association appointed a lawyer to defend the member. The lawyer listed the SSA as third party in the suit. Finally, SSA agreed to take over the case. The cargo receiver also started legal proceedings in Australia. The Association appointed a lawyer there as well. In August 2008, the Association received written confirmation that both claimants (the shipper in the USA and the cargo receiver in Australia) dropped their cases against Members.

　　2004 policy year
　　

　　(2) M.V. “An Qing Jiang” of Cosco Shipping Co. Ltd. arrived in Lagos, Nigeria to discharge on 19th Nov. 2004. A stevedore injured his hand during discharging. The Association appointed a local correspondent to handle the claim. The case was settled with Members paying US$5,000 to the stevedore. Later, a local law firm representing the same stevedore raised a claim of US$1 million against the Association. The Association firmly rejected this unscrupulous claim. Failing to achieve his purpose, the injured stevedore employed another lawyer to sue Members. The Association appointed a lawyer to prepare defense. Eventually the case was dismissed by the local court.

　　2007 Policy Year

　　(3) The M.V. “Da Tian” of Cosco Shipping Co. Ltd arrived in Karachi, Pakistan to discharge electromechanical equipment on 28th June 2007. Cargo damage occurred upon discharge. The cargo insurer started legal proceedings in the Shanghai Maritime Court in June 2008 for a claim of US$3.696 million. The damaged machinery had already been sold. Therefore it is impossible to carry out a survey to assess damage. The Association had no choice but to investigate the matter through the ship’s agent. It turned out that the packing of some parts of the cargo was found damaged during discharge, but the cargo inside was not inspected. Although the cargo receiver did not raise a claim then, the shipowner’s liability for the cargo damage could not be ruled out.. Taking into consideration of the potential risk in law suit, the Association decided to settle the case with nominal damages of RMB 500,000.
　　

　　(4) The M.V. “Pacific Paradise” of Hong Kong Mingwah Shipping Co., Ltd. arrived in Fangcheng, China on 20th June 2007 to discharge Soya beans. The cargo was found contaminated with foreign substances. The consignee made a claim for 2000mts of cargo and requested to be guaranteed for US$ 660,000. The shipowner dispatched personnel to handle the case on spot. Finally an agreement was reached to release the vessel against guarantee of US$495,000. The surveyor appointed by the Association was of the opinion that the damage was due to a preexisting condition of cargo. There was a shortage upon loading. The shipper used the remaining cargo of low quality in his warehouse to makeup a quantity of cargo. Therefore, the shipowner should not be held liable. The case was rejected subsequently due to time bar.

　　(5) The M.V. “Fu Jin” of Pacific King Shipping Holding Pte. Ltd. collided with the Quay No. 22 while berthing in Bandar Abbas, Iran on 19th August 2007 due to the fault of the pilot. The crane on Quay No.22 sustained severe damage. The Port Authority detained the vessel and put forward a claim for US$ 41.5million. The claim was later reduced to US$ 15.5 million. However, the amount was still much higher than the damage assessment by a local expert (US$ 4.5 million for the crane and US$ 700,000 for the dock). The representatives from shipowner and the Association went to Iran in April 2008 to deal with the case.. With assistance from the Chinese government, the delegation was able to reach an agreement with the Port Authority to settle the case for a lump sum payment of US$ 8 million. The vessel was released after Members made payment.

3. SPECIAL NOTES FOR CLAIMS INCURRED IN POLICY YEAR 2008

　　Ａ．Collisions with quays

　　In the 2008 policy year, several entered ships were involved in collision accidents with port quays. The Port Authority often put forward huge claims and demanded bank guarantees. These accidents resulted in prolonged detentions (of the vessels involved) and brought huge financial losses and adverse effects to the related Members.
　　In order to avoid such accidents, the Association would like to draw the attention of Members to such accidents by introducing some typical cases,.
　　

　　(1) The entered ship MV “Tai He Hai” collided with the jetty when berthing at the Haikou Macun Power Station quay, on 1st March 2008. The power station alleged that a cement box bellow the sea surface was severely damaged to such an extent that it must be replaced at the cost of RMB 40 million. The Association has appointed an expert to access the damage and provide a plan for repair.?

　　(2) The entered ship MV “Bai Hua Yuan” was berthing at Ganda Port, Dalian on 10th May when the after gallows in starboard side scraped two oil pipe lines due to a Southwest wind of 5-6 scale. The surveyor appointed by the Association estimated that the repair cost for the pipe lines alone would be about RMB 550,000. The oil pipe lines were so severely damaged that they had to be sent back to the manufacturer in Yangzhou for repair. The cost for transportation and the indirect loss raised the claim amount. The Association was eventually able to settle the case via a lump sum payment of RMB 295,000.??

　　(3) The entered ship MV “Tai Hai” was berthed at a quay in Qingdao port due to lay-up. On 23rd Jan 2009, the vessel collided with the quay in severe weather. The vessel sank afterwards due to water ingress. The total loss of vessel brought about cost for compulsory wreck removal as well as clean-up costs for oil pollution.?

　　(4) The entered ship MV “Xin Su Zhou” collided with the quay and two dock cranes at Piraeus, Greece, on 12th Dec. 2008 due to mooring cables broken in severe weather. The Port Authority put forward a claim of Euro 1.38 million.

　　(5) The entered ship M.V. “Bao Qing Men” was berthing at Dock No.7 in port Odessa, Ukraine, when on 2nd Sept. 2008 the bulb bow of the vessel came into contact with the dock. The vessel was then arrested by the Port Authority in exchange for a bank guarantee of US$ 1.48 million. After the vessel had been detained for 3 months, the case was settled through diplomatic efforts for US$ 597,000.
From the above mentioned cases, we draw the conclusion that the collisions were mostly caused by the following two reasons:

　　１．The speed of vessel was too high when berthing so as to hindered the maneuver when the danger of collision aroused.

　　２．The severe weather caused the vessel to collide with the quay.

　　The Association would like to draw Members’ attention to the following recommendations:

　　１．The master should control the speed of the vessel during berthing operation, regardless of whether there is pilot on board. The master should take notice to lower the speed especially when the port features a small turning circle or when stormy weather and waves are present.

　　２．The master should closely observe and record changes in the weather and sea condition. He should strengthen the mooring arrangements of the vessel in a timely fashion, or depart the port to take shelter from the wind if necessary.

　　B. Piracy in Somalia

　　Somali piracy was a hot topic in 2008. The pirate-infested Gulf of Aden area is one of the world’s most important shipping lanes. It links the Indian Ocean with Mediterranean and the Atlantic Ocean through Red Sea and the Suez Cannel. Although no entered ships have been hijacked by Somali pirates, the piracy issue inevitably affected Members. The Association issued a Loss Prevention Circular No.7 2008 on 11th June 2008 to raise Members’ attention to piracy. All entered ships passing through the Gulf of Aden area should be on alert for pirate threats.
　　

　　The Somali pirate problem flared up recently. On 21st August 2008, three vessels were hijacked in the Gulf of Aden, a new record in recent years. On 25th September, the Ukrainian M.V. FAINA was hijacked off the East coast of Kenya. The vessel was transporting thirty-three Soviet-made T-72 tanks, weapons (including rocket-propelled grenades and anti-aircraft guns) and ammunition on board when it was seized. This was the first time that the Somali pirates attacked a ship carrying military materials.

　　On 10th October, a Panama flagged chemical carrier was captured by Somali pirates. The crew consisted of 17 Georgians and 3 Spaniards.

　　On 21st October, the pirates seized a Panama flagged bulk carrier with 70,000 mts of iron ore.

　　Only four days later, on the 25th, a Marshall flagged bulk carrier with 60,000 mts of fertilizer bound for the Far East was captured by the pirates.

　　On 13th November, fishing vessel “Tian Yu 8” owned by a company in Tianjin, China was seized by the pirates off the coast of Kenya. There was 25 crew members onboard, 16 of them were from mainland China.
On 18th November, the Saudi Arabian VLCC “Sirius Star” with 2 million barrels of crude oil onboard was hijacked by the pirates. The vessel was over 330 meters long and with a total cargo capacity of 318,000 mts deadweight.

　　In order to ensure the safety of Chinese merchant vessels in the escalating pirate attacks, a Chinese naval fleet set sail from Sanya on 26th December 2008 to carry out escort mission off the Somali Coast.
Limited by time and space in the vast region of the Gulf of Aden, it is impossible for the escort mission to relieve all piracy threats. Therefore, the Association would like to remind all Members to pay serious attention to the Somali Piracy problem so that the safety of vessel and crew could be protected.?

　　C. Safety of laid-up vessels
　　

　　In the latter half of 2008, the shipping market was seriously affected by the financial crises. To reduce operational costs, some shipping companies laid up part of their fleet. This resulted in a sudden rise of number of vessels in anchorages.
　　

　　To ensure the safety of vessel, the Association issued Loss Prevention Circular No.13 2008 concerning the safety management of vessel during mooring. It requires Members to keep sufficient watch on mooring vessels. Some provincial Marine Safety Agencies in China also issued similar circulars for mooring vessels, concerning the minimum safety standards for the manning of mooring vessels. For example, one of the circulars stated: “The mooring vessel must strictly adhere to the requirements in the Vessel Minimum Safety Manning Regulations of P.R.China, and other international convention and national laws. The vessel must be with sufficient qualified crews who have mastered the relative safety regulations and can operate the vessel safely and skillfully.
　　

　　The number of crew onboard an anchoring vessel should never fall lower than 1/2 of that required by the Vessel Minimum Safety Manning Certificate., or 1/3 when the vessel is mooring. For a seagoing vessel of over 500 gt (or over 750kw), river trade vessel over 600gt (or over 441kw), the Master and the Chief Officer should not be absent from the ship at the same time. The same applies to the Chief Engineer and the First Engineer.”
　　

　　When mooring at a berth, the entered ship M.V. “Tai Hai” was left with 4 crews onboard in accordance with the regulations of Marine Safety Agency. On 23rd Jan.2009, severe weather caused the vessel to collide with the dock. The vessel grounded due to water ingress and resulted in a major marine casualty. Insufficient manning made it difficult to maneuver the vessel and take shelter from the wind, causing the accident. Therefore, the Association requires all Members to strictly follow the manning requirements.

　　Attachment: “Major Claims Incurred in the 2008 Policy Year
　　

　　<1> The MV “Tai He Hai” of Cosco Bulk Carriers Co., Ltd. collided with the jetty when berthing at the Haikou Macun Power Station quay, on 1st March 2008. Underwater diving inspection showed that a cement box was damaged. The power station alleged that the cement box was so severely damaged that it would need to be replaced. Replacement would cost RMB 40 million. The Association has appointed an expert to access the damage and provide plan for repair.
　　

　　<2> The M.V. “Fu Zhou Hai” of Cosco Bulk Carriers Co., Ltd. arrived in Saudi Arabia to discharge on 5th April 2008. Bilge water entered into hold No.4 causing? damage to all the cargo inside. The consignee refused to discharge the damaged cargo and demanded security. The vessel was released after the Association provided a LOU in the amount of US$1.6 million. The case is handled by the Association now.
　　

　　<3> The M.V. “Han Lord” of Shanghai Zhengdong Shipping Co. Ltd. collided with fishing vessel “Zhe Yu Dai 11524” off the Changjang River Estuary on 11th April, 2008. The fishing vessel sank. Only 4 of the 14 crews on board were saved. The Association negotiated with family Members of all the missing crews. Only one of them lodged suit, all others accepted compensation of RMB 560,000 per crew.?
　　

　　<4> The M.V. “Xian Hu” of Shenzhen Shekou Shipping & Transportation Co., Ltd. collided with ship “Jiang Jiao Ji 9958” on 10th May 2008 in Changjiang River off Taizhou, China. The latter vessel sank and two crew members died. The vessel was released after the Shipowner provided cash guarantee of RMB 500,000 and the Association issued a LOU of RMB 5 million to the Marine Safety Agency respectively. The family Members of the two dead crews filed claims for RMB 5.982 million. The Association finally settled the claims for RMB 840,000.?
　　

　　<5> The M.V. “Yong Wang” of Zhejiang Yongyue Ocean Shipping Group Co., Ltd carried 506 containers from Singapore bound for Kolkata, India on 6th April, 2008. The vessel encountered heavy weather en route, 22 containers were washed overboard, and 74 separate containers were damaged. The hull of the vessel sustained damage as well. Two claimants arrested the vessel in Singapore. The Association issued LOUs in the amount of SG$495,000 and US$4 million respectively to release the vessel. The Association appointed lawyer in Singapore to prepare defense for the cases.
　　

　　<6>The M.V. “Hebei Mountain” of Hebei Ocean Shipping Co., Ltd.carried two kinds of fuel oil from South America to Singapore and Malaysia on 16th May 2008. During the discharge at Singapore, malfunction of the hydraulic valve resulted in two kinds of oil blended together. According to the surveyor's report, nearly 80,000 mts of the oil were affected. The consignee raised a claim of USD1,400,000 and during the negotiation, the claimant requested the Association to put forward guarantee in the amount of USD800,000. The negotiation is still in process.
　　

　　<7> The M.V. “Zhong Xing” of International Marine United Shipmanagement Pte. Ltd. grounded on 23rd May 2008 while en route to Pankal Pinang, Indonesia. The shipowner appointed the Salvor POSH SEMCO to carry out salvage of the vessel and signed a LOF contract with a SCOPIC 2007 clause. The Association subsequently appointed a surveyor to go on board with shipowner’s representative and provide assistance to the master. The vessel was successfully refloated after part of the cargo was transferred to barges. The vessel continued her voyage to destination after some repair was done. The Shipowner declared General Average and obtained security for GA. The Association has provided LOU in the amount of US$ 1.5 million to the Salvor.
　　

　　<8> The M.V. “Ding Heng 8” of Shanghai Dingheng Shipping Co., Ltd. arrived in Changzhou, China to discharge methanol on 15th July, 2008. The cargo was contaminated because the cargo hold was not sufficiently cleaned before loading. The complete shipment had to be degraded. The Association provided a LOU of RMB 2.8 million to the consignee. The consignee has lodged suit in Shanghai Maritime Court. The Association has appointed lawyers to actively prepare a defense.
　　

　　<9> The M.V. “An Long Jiang” of Cosco Shipping Co., Ltd. arrived in Lagos Apapa, Nigeria to discharge hot rolled coils on 29th July 2008. Cargo damage was found upon discharge. The surveyor appointed by the Association drew the conclusion that the cargo damage was attributed to insufficient packing of the cargo. The cargo insurer put forward a claim of US$ 543,000. To avoid arrest of the vessel, the Association provided a LOU of US$ 650,000. The Association is now under negotiation with the cargo interests.
　　

　　<10> The M.V. “Bao Qing Men” of HTM Shipping Co.,Ltd. was berthing at Dock No.7 in port Odessa, Ukraine, on 2nd Sept. 2008 when the bulbous bow of the vessel came into contact with the dock. The vessel was then arrested by the Port Authority in exchange for a bank guarantee of US$ 1.48 million. The case was later settled for US$597,000 through diplomatic efforts after the vessel had been detained for 3 months.
　　

　　<11> The M.V. “Pacific Bangguang” of Pacific King Shipping Pte. Ltd. carrying Indian yellow corn left for Abu Dhabi, UAE on 20th Aug. 2008. The discharge operation started on 5th Sept. Foreign materials such as stones and bag fragments present in the cargo damaged the discharge conveyor. The discharge was suspended. The surveyor appointed by the consignee found out the cargo contained high level of flatoxin. Based on the elevated level of flatoxin, the consignee made a claim and requested security. The Association provided a LOU of US$ 3.93 million and arranged a surveyor to investigate into the cause and extent of the damage. Furthermore, the Association appointed a British grain expert to determine the cause of high flatoxin level. To secure rights of recovery against the time charterer, the Association has appointed lawyer to demand security from the charterer.
　　

　　<12> The M.V. “Cos Prosperity ”of Cosco Singapore Pte., Ltd. encountered heavy weather on 17th Sept. 2008, while en route from South Korea to the USA. Six containers with engines inside were washed overboard. The cargo receiver and insurer has put forward a claim of US$ 1.5 million and threatened to start legal proceedings in the USA.
　　

　　<13>The M.V. “Ruaha” of Chinese-Tanzania Joint Shipping Co. discharged 13,000 mts of steel products in Jabel Ali, Dubai on 18th Oct. 2008. The two consignees raised claim for US$440,000 and US$70,000 respectively. However, the quantities cargo recorded in the two bills of lading involved were quite small. Suspecting fraudulent claims, the Association has appointed a correspondent to investigate into the claims.
　　

　　<14> The M.V. “Hebei Century” of Hebei Ocean Shipping Co., Ltd. arrived in Pohang, South Korea to discharge iron ore in 21st Nov. 2008. The cargo was found to be damaged by sea water. Due to the sudden drop in iron ore prices, the consignee refused to take delivery of the cargo. Later, it turned out that the damage only affected cargo in holds No.2 and 3. The consignee had to resume discharging. The quantity of affected cargo was 7,000 mts in total. The consignee claimed for US$ 500,000 for damages. The Association is currently in negotiation with the consignee.

Financial Statement

　　1. Claims in all policy years and assessment of liability
　　

　　For all policy years since the establishment of the Association on 1st January 1984 to 20th February 2009, there are currently 2,148 open cases with a total claim amount of US$ 725.38 million. The Association’s estimated liability in these claims is US$ 230.27 million（including co-insurance apportionment, net liability US$31.8 million）, with an estimated loss ratio of 31.74%. In comparison with the prior policy year, there has been seen a decrease of 36 cases (representing 1.64%), an increase of US$60.7 million in terms of claim amount (representing 9.13%). The estimated liability increased by US$8.24 million (representing 3.71%). The estimated loss ratio decreased by 4.9%. This represents a minor deterioration in the claims.

　　2. Assets
　　

　　According to the Audit Report of the 2008 policy year, the total assets of the Association were US$ 447.04 million. This represents an increase of 13.1% compared to the previous policy year, and a net increase of US$ 51.75 million. This increase is mainly attributed to an increase of US$ 28 million in investment income. In addition, the increased value of the Chinese RMB against the US dollar also contributed an increase of US$ 16 million in the assets of the Association.

　　3. Free Reserves per GT
　　

　　At a total tonnage of 17.88 million GT in the 2008 policy year, the free reserve per GT is US$ 22.83. This represents an increase of 6%, or a net increase of US$ 1.29 per GT, compared to US$ 21.54 per GT in the previous policy year. Had the calculation been based on the total tonnage of 16.51 million GT in the previous policy year, the free reserves per GT would have been US$ 24.73 per GT, indicating a net increase of 14.8%.

　　Note: The increase rate was 2008/2007 figure
　　According to data in the above table, when compared with all Clubs in the International Group of P&I Clubs, the Association ranked first for the past eight consecutive years.