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Thursday, June 21, 2012

Arms to Syria - Insurance cancellation and its impact

First came the news of transportation of attack helicopters to beleaguered Syria from Russia.  Then there was the news of Standard Club cancelling insurance to the ship, as the vessel MV Alaed was carrying arms. At a time when one  wondered whether there would at all be impact on insurance cancellation, when ship was carrying cargo of such nature and of military significance, comes the news that the vessel has turned back after its cargo became known and Insurers cancelled coverage.

I had earlier posted of MV Alaed  which was reported to have picked up its cargo of Mi-25 helicopter gunships from the Russian port of Kaliningrad, and headed  for Syria with attack helicopters and munitions for the al-Assad regime.   MV Alaed is a 2010 chinese built 9000MT DWT General cargo ship flying Belize flag.  The insurers based on report of the nature of cargo had cancelled the cover.  The withdrawal of coverage  was reported to have been applicable  to the whole Femco fleet of eight vessels entered with the company, according to officials at Standard Club in London.  Do read my earlier post :

Now there are reports in the British press that the ship was off the coast of Scotland at the time, apparently en route to Syria,  but had changed course.  The British Foreign Secretary William Hague is quoted as stating House of Commons that "I'm pleased that the ship that was reported to be carrying arms to Syria has now turned back, apparently toward Russia,"  He is further quoted as saying . "We discourage anyone else from supplying arms to Syria."

Syria has been a long standing client of Moscow and the incident is another one in the acrimonious dispute in the supply race between Russia and West.  There have been some confirmed reports of use of attack helicopters against forces opposed to Syrian President Bashar Assad. Secretary of State Hillary Rodham Clinton charged last week that Russian shipments of attack helicopters were en route to Syria and could dramatically escalate the conflict there.  Russia had contended that  the helicopters she referred to were not new aircraft but refurbished ones that Syria already owned and were being sent back after repairs.   Russian officials were furious about Clinton's comments and accused Washington of sending arms to the region that can be used against protestors.

Syria is in turmoil and perhaps a joint effort, a U.N.-brokered peace plan could offer some salvation ending the bloodshed in Syria.  Speculation has been rife of Security Council moving observers and making patrols as a part of the six-point peace plan hammered out by special U.N. envoy Kofi Annan.   The Rulers claim that they are battling terrorists and foreign conspiracy – thousands of lives have since been lost after the government has mounted a ruthless crackdown on dissent.   President Barack Obama and Russian President Vladimir Putin, meeting on the sidelines of a Group of 20 summit in Mexico, issued a joint appeal calling for the "immediate cessation of the violence" in Syria and endorsing "political transition to a democratic pluralist political system."

From an Insurance perspective – ships are covered on annual basis, under conditions - - The Institute Time Clauses Hulls (1.10.83, 1.11.95  or  IHC 2003)   The clauses offer  indemnity  under specified perils as listed out in cl 6 – which covers : perils of sea; fire, explosion; jettison; piracy; contact with aircraft or objects falling therefrom, land conveyance, dock or harbour equipment or installation; earthquake.  Besides coverage under due diligence clause is extended for accidents in loading, discharging or shifting cargo or fuel; bursting of boilers, breakage of shafts or any latent defect and more as specified therein in the clause.

The availability of coverage is subject to the provisions specified in ‘Navigation’ – which provides coverage when vessel sail or navigates but excludes towage or salvage services under a contract previously arranged.   The policy makers bearing in mind that the vessel could be at midsea, have incorporated a condition that should the vessel at the expiration of the insurance be at sea or in distress or at a port of reguge or of call, she shall, provided previous notice be given to the Underwriters, be held covered at a pro rata monthly premium to her port of destination. 

There is also another condition ‘Breach of Warranty’ which states - Held covered in case of any breach of warranty as to cargo, trade, locality towage, salvage services or date of sailing, provided notice be given to the Underwriters immediately after receipt of advices and any amended terms of cover and any additional premium required by them be agreed.

In the circumstances, the move to terminate Insurance is a strong decision made weighing various aspects, especially the transportation of arms and ammunition to a Nation already in turmoil

With regards – S. Sampathkumar.

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