SAMA issues the Marine Insurance Coverages Instructions

In yet another highly positive development for the Kingdom of Saudi Arabia, the Saudi Arabian Monetary Agency (SAMA) has recently issued the Marine Insurance Coverage Instructions (the Instructions) which were drafted in collaboration with the Transport General Authority for developing a regulatory framework for mandatory marine insurance coverage and for setting minimum limits for coverage and benefits.  The Instructions seek to ensure compliance with international agreements, treaties and other requirements contained in the Commercial Maritime Law.   Notably, they shall be complied with in conjunction with the Cooperative Insurance Companies Control Law (the Insurance Law), and its Implementing Regulations. 

Application

Regarding their application, Article 4 of the Instructions state that the Instructions shall apply to “compulsory marine insurance coverages and their policies issued in the Kingdom”.  Whilst it thus appears at face value that the Instructions do not extend and apply to international reinsurers (with no presence in the Kingdom), Article 14 of the Implementing Regulations states that all Insurance and Reinsurance service providers in the Kingdom shall obtain prior written approval from SAMA before dealing with Lloyd’s insurance brokers and/ or foreign companies to cover risks that cannot be covered through a licensed company in the Kingdom.  As above, the Instructions clearly indicate that they shall be complied with in conjunction with the Insurance Law, and its Implementing Regulations, meaning that by virtue of Article 14, they may extend (and in turn apply to) international reinsurers who reinsure locally based risks in the Kingdom. 

What is compulsory insurance?

In terms of the Instructions, compulsory insurance includes: 

1. The operator’s liability to the third party for death, bodily injury, and damage of properties, including transported goods;

2. The operator’s liability to the vessel crew for death and bodily injury;

3. The marine units’ liability to the third party for death, bodily injury, or any material and environmental damage that may arise from the marine unit;

4. The civil liability of vessels transporting oil from and to Saudi Arabia for any damage arising during transportation;

5. The operator’s liability to the crew of vessels holding the Saudi nationality and traveling to areas likely to be affected by risks of war, piracy or armed robbery;

6. The operator’s liability to the third party for risks arising from operating the vessel;

7. The operator’s liability for removing the wreck;

8. The operator’s liability for the risks arising from pollution; and

9. The vessel owner’s liability for oil pollution damage.

 What are the limitations of compulsory insurance?

 In the case of compulsory insurance, marine insurance shall cover liability to the third party for costs, losses and damages sustained by the insured as a direct result of operating the insured vessel or marine unit registered by the insured in its capacity as owner or charterer during the insurance policy term.

 With the exception of the limits for passenger claims, the operator’s liability limits arising from any apparent incident shall be calculated as follows: 

1. Claims related to death or bodily injury:

   1. million units of account for a vessel of a tonnage not exceeding 2,000 tons;

   2. for a vessel of a tonnage exceeding that, the following amounts shall be added to the number mentioned above:

1208 units of account for each ton from 2,001 to 30,000;

906 units of account for each ton from 30,001 to 70,000 tons; and

604 units of account for each ton over 70,000 tons.

1. Any other claims (material damage and pollution resulting from the vessel, except for oil transited as cargo):

   1. 1.51 million units of account for a vessel of a tonnage not exceeding 2,000 tons;

   2. For a vessel of a tonnage exceeding that, the following amounts shall be added to the number mentioned above:

604 units of account for each ton from 2,002 to 30,000 tons;

453 units of account for each ton from 30,001 to 70,000 tons; and

302 units of account for each ton over 70,000 tons. 

 Practical implications

 In terms of practical implications, as we interpret the Instructions, it seems that insurers (or the assured) are now obliged to offer or take cover at the minimum requirements as laid out in the Instructions, especially for compulsory insurance.

 Limitation implications

On a final note, another interesting point to generally note is the (now seemingly codified) limitation/ prescription section – see Article 29.  The limitation period is two years, and there are a variety of different grounds upon which the prescriptive period starts to run.  It is going to be interesting to see how that unfolds once tested in due course. 

If you have any questions on these developments, or anything related, please contact Khurram Ali. 

Authors

Khurram Ali, Partner