New cover from Norwegian Hull Club supports clients facing ‘total loss’ sustainability challenges

Norwegian Hull Club  has said that a common challenge for ship owners was performing waste-management and ship recycling in an environmentally and socially conscious way, while also keeping costs under control.

Norwegian Hull Club has developed SRI (Sustainable Recycling Interest) cover “to better enable ship owners to make the environmentally considerate choice when it comes to recycling a total loss, without having to worry about the financial cost of doing so”.

The cover – which is subsidiary to ordinary P&I cover – is triggered by a total loss and covers the assured’s added costs for recycling a wreck at an EU-verified yard. Transportation and recycling costs are included, as is a reduction in the proceeds of sale. Cover limit is up to $5m and is available to both existing and prospective clients.

Typical issues SRI provides cover against include:

  • Recycling / disposal of a Total Loss independently of legal requirements to do so, in accordance with the EU requirements on ship recycling for EU-flagged vessels;
  • Gaps in P&I cover for sustainable recycling of a Total Loss in certain jurisdictions.

Norwegian Hull Club noted that around 1,000 of the world’s commercial vessels reached the end of their service lives every year and became waste. Recycling these ships and their components was the most environmentally considerate way of handling such obsolete vessels. However, the Club said that “only a small proportion are sustainably recycled with workers’ safety and the environment in focus”.

The EU Ship Recycling Regulation (EU SRR) has sought to establish a system that ensures that all end-of-life EU-flagged vessels are sustainably recycled at one of its pre-approved yards.

EU SRR goes further than the requirements of the 2009 Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships, demanding higher standards for both worker safety and environmental considerations.

The European Commission requires that all recycling facilities on the EU pre-approved yards list have been audited and certified by independent third parties. The commission has the authority to add or remove facilities from the list.

Although many of Norwegian Hull Club’s clients took an active stand when it came to working towards the sustainable shipping industry of tomorrow, if one of their vessels ended up as either a total loss or constructive total loss when it was far from an EU SRR-approved recycling yard, a responsible ship owner might face having to cover the additional uninsured costs of transportation to an EU-verified yard for recycling at their own risk and cost – despite having reputable P&I insurance. SRI would cover the assured’s added costs for recycling the vessel at an EU-verified yard.