TRICOLOR wreck removal Insurance issues:


The removal and disposal of the TRICOLOR wreck and cargo will be conducted in accordance with a contract between the owner of TRICOLOR, Capital Bank Plc, UK, represented by Wilh. Wilhelmsen of Norway, and the consortium “Combinatie Berging Tricolor” consisting of SMIT Salvage B.V., Scaldis Salvage & Marine Contractors N.V., URS Salvage & Marine Contractors N.V. and Multraship Salvage B.V.

The cost of removal and disposal to be incurred under the contract is covered by the owner’s protection and indemnity (P&I) insurance with the Gard P&I Club of Norway (“Gard P&I ”). Gard P&I is an association of shipowners (in P&I terms: Members) who insure, on a mutual basis, certain liabilities, losses, costs and expenses incurred in direct connection with the operation of ships entered in the association. Liabilities, losses, costs and expenses arising as a result of the removal of the wreck of an entered ship are covered under a standard P&I policy.

Gard P&I is managed by Gard AS ("Gard"), a wholly owned subsidiary of Gard P&I. More information about Gard is found under its company profile.

Certain P&I associations, among them Gard, have entered into a collective claims sharing arrangement (“the Pool”) and have in addition collectively purchased commercial market reinsurance protection for liabilities, losses, costs and expenses that exceed the Pool. At present, the Pool range is USD 25 million excess of USD 5 million; i.e. Gard will have to retain the first USD 5 million, the excess being subject to distribution amongst all P&I associations participating in the Pool according to pre-defined parameters. Some P&I associations purchase reinsurance protection for part of the above-mentioned USD 5 million retention. Gard has elected not to do so, relying on its financial strength. Liabilities, losses, costs and expenses that exceed the Pool is covered in part by market reinsurance (75 %) and in part (25 %) retained as a self-insured risk by the Pool and hence distributed back to the participating P&I associations.

It is certain that the cost of removing TRICOLOR will exceed the upper limit of the Pool. However, the actual end cost will depend on various circumstances related to contractor performance and is subject to confidentiality as between the contractual parties. Hence, it cannot be revealed. The end cost for Gard will also depend on how much can be recovered from the owners of KARIBA, the vessel that struck TRICOLOR and caused it to sink, and the P&I insurer of KARIBA. It is therefore conceivable that two P&I associations may bring claims against the Pool at the end of the day.

There are other types of marine insurance involved in this event as well, e.g. the hull insurance of both vessels, as well as the loss of hire insurance for the KARIBA. However, as to the wreck removal itself, only the P&I insurance will come into play.