Compulsory insurance of shipowners

Industry Database

In the past there has been no legal requirement for shipowners to have third party liability insurance - if a shipowner did not take out insurance, the third party would only recover damages if there were sufficient assets.

However, law firm Andrew Jackson says that EU Directive 2009/20/EC requiring the compulsory insurance of shipowners should have been implemented by member states by 1 January 2012, but the UK has not met this deadline. A draft Statutory Instrument was published on 16 March 2012 and the Department for Transport consultation period ended on 16 May 2012.

The aims of the Directive are to ensure better protection for victims and to help "eliminate substandard ships and make it possible to re-establish competition between operators".

The Directive applies to ships of 300 gross tonnage or more but excludes "warships, auxiliary warships or other State owned or operated ships used for a non commercial public service". In effect all commercially operated vessels over 300GT will now be subject to a requirement of compulsory insurance. This will include some larger fishing vessels, workboats and tugs.

Under the terms of the draft Statutory Instrument, a UK ship may not enter or leave a port in the UK or elsewhere unless it has insurance. In addition, a ship which is not a UK ship, may not enter or leave a UK port without insurance.

Levels of cover
The Convention sets out the levels of insurance cover required for loss of life or personal injury and property claims. Amendments were adopted on 19 April 2012 and the current levels will be increased from 19 April 2015.

A shipowner may still rely on "proved self insurance" or financial security but the ship will not be able to enter or leave port without confirmation from the Secretary of State that the arrangements are adequate.

The Directive sets out what must be included in the certificate of insurance. The information is as follows:

  • Name of ship, its International Maritime Organisation number and port of registry
  • Shipowner's name and principal place of business
  • Type and duration of the insurance
  • Name and principal place of business of the provider of the insurance and, where appropriate, the place of business where the insurance is established

Regulation 7 of the Statutory Instrument provides for criminal penalties for failure to comply. Shipowners are liable to a fine of up to £5000 in the Magistrates' Court and an unlimited fine in the Crown Court. A Master faces a penalty of up to £5000 in the Magistrates' Court.

These matters will be policed via Port State Control Inspectors who have powers to detain vessels whether UK flagged or foreign flagged. In the case of non UK flagged vessels certain formalities must be complied with but these are not unusual or onerous.


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