Responds to situations where charterer is not paid following default or insolvency. After a waiting period (180 days but sometimes as low as 90) this insurance pays an agreed daily amount, less Replacement Charter Hire.
Availability of financial data on charterer (or rating) is crucial to price and availability, also the number of other operators who are in the market to insure the same risk.
Scope:
Charterer fails to pay hire in accordance with contract.
Applies to:
Any operator who finds that the value of a contract with one counterparty represents a significant part of their balance sheet. Individual vessels on particularly good charter terms or on long charters, specialised vessels unlikely to fetch a charter rate required to amortise the cost of adaption of the asset to the charter, should the charterer fail. Chance and cost of completing cover rises sharply once the operator becomes aware of potential issues. The insurance should be bought from a high level risk management and balance sheet assessment viewpoint.
How it works:
Responds to situations where charterer is not paid following default or insolvency. After a waiting period (180 days but sometimes as low as 90) this insurance pays an agreed daily amount, less Replacement Charter Hire.
Availability of financial data on charterer (or rating) is crucial to price and availability, also the number of other operators who are in the market to insure the same risk.
Markets:
Lloyd’s, Norway.
Price Range:
1.75 - 2.5% - if counterparty is insurable.
Self Retention:
10 % quota share retention, plus a waiting period ranging from 180 to 90 days.
Time to market:
Minimum 60 days.
