Commentary

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Section 2: Termination of the insurance

  • Clause 15-5. War between the major powers

    The Clause was edited in 2016. It is intended to have the same effect as the Automatic Termination of Cover used for war risk insurance in the English market and regularly included in all war risks reinsurance contracts.

    The provision means that if war or war-like conditions arise between two or more of the superpowers, the insurance terminates immediately. The expression "war-like conditions" is used to indicate that a formal declaration of war is not necessary for the provision to apply; it is sufficient that a state of war exists in reality.

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    Clause 15-5. War between the major powers

    In the event of war or war-like conditions breaking out between any of the following States: The United Kingdom, the United States of America, France, the Russian Federation, the People's Republic of China, the insurance against war perils shall automatically terminate.

  • Clause 15-6. Use of nuclear arms for war purposes

    The Clause is intended to have the same effect as the nuclear arms clause used in the English market.

    It follows from the first sentence that the insurance terminates immediately if nuclear arms are used for war purposes. The ship need not be involved in the use of the nuclear arms for the provision to apply; nor need it be in an area which is excluded or subject to an additional premium under the insurance.

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    Clause 15-6. Use of nuclear arms for war purposes

    In the event of any use of nuclear arms for war purposes, the insurance shall automatically terminate.

  • Clause 15-7. Bareboat chartering

    The Clause was edited in 2016 by inserting “automatically” instead of “immediately” in order to bring the wording in line with Cl. 15-6.

    Firstly, the insurance will automatically terminate - and not just be suspended - if the ship is chartered out under a bareboat charterparty. Secondly, the provision applies to all forms of bareboat chartering, not just bareboat chartering to foreign charterers. If the insurer has in advance agreed to co-insure a group of companies, of which one or more are bareboat charterers, the insurance will only terminate if the vessel without the insurer’s consent is bareboat chartered to a bareboat charterer outside the originally assured group of companies, cf. the Commentary to Cl. 18-65.

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    Clause 15-7. Bareboat chartering

    If the ship is bareboat chartered, the insurance shall automatically terminate.

  • Clause 15-8. Cancellation

    The provision concords with the approach in the English war risk insurance conditions. The provision was amended in 2016 by the addition of the words in brackets in the first sentence of sub-clause 1. Sub-clause 2 is completely rewritten. 

    Sub-clause 1, first sentence, gives both the person effecting the insurance and the insurer the right to cancel the insurance in the event of changed circumstances. The cancellation is subject to seven days' notice. The words in brackets are verbatim the same as used in English conditions and clarify when the cancellation takes effect, i.e. on the expiry of 7 days from midnight of the day on which notice of cancellation is issued by or to the insurer.

    The provision is primarily of significance for the insurer, as it ensures him the possibility of being released quickly from the insurance contract, when the risk has changed after the insurance contract was entered into. Consequently, the provision must be seen as a supplement to, on the one hand, Cl. 15-5, Cl. 15-6 and Cl. 15-7, which entail automatic termination of the insurance under certain circumstances and, on the other hand, Cl. 15-9, which gives the insurer wide-ranging powers to amend the trading areas and thereby reduce the risk he will run.

    The right to cancel under sub-clause 1 may also be of importance to the assured. If, for example, a war situation has apparently subsided, but the assured finds that the insurer, compared with other insurers, has a very conservative view of the significance this should have for trading areas, premium, etc., the assured may be released from the insurance contract quickly.

    The second sentence was added in the 2002 revision. It previously followed from Cl. 7-2 that cancellation of an insurance contract would not affect the rights of the mortgagee, unless the insurer had given him at least fourteen days' specific notice of the situation. In relation to war risk insurance, however, such a solution is untenable, because it might entail an insurer being bound in relation to the mortgagee for longer than the period for which he in fact has reinsurance cover. Adding the second sentence underscores the fact that in relation to war risk insurance, cancellation - by either the person effecting the insurance or the insurer - will also affect the rights of the mortgagee. Consequently, the insurance cover terminates with seven days' notice, even if the mortgagee himself has not received notice. In the last part of the second sentence, it is nonetheless stated as a standard procedure that the insurer shall immediately notify the mortgagee of the cancellation, regardless of whether it was initiated by the person effecting the insurance or by the insurer.

    Sub-clause 2 supplements sub-clause 1. This provision only imposes on the insurer a best effort obligation to provide the assured with an offer for continued insurance on new conditions, if relevant, and with a new premium, provided always that it is practically and commercially possible to continue the war risks insurance. It is conceivable under extreme circumstances that no commercial war risks insurance can be made available. Hence, the war risks insurer must be relieved of any obligation to offer continuation of the war risks insurance. This applies regardless of whether it was the insurer or the assured who cancelled the insurance under sub-clause 1.

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    Clause 15-8. Cancellation

    In the event of a change of risk, the person effecting the insurance as well as the insurer is entitled to cancel the insurance by giving seven days' notice  (such cancellation becoming effective on the expiry of 7 days from midnight of the day on which notice of cancellation is issued by or to t...