Maritime Autonomous Surface Ships (MASS) are attracting attention within the global maritime industry. From a regulatory point of view, initial work is underway within the Maritime Safety Committee (MSC), and the Legal Committee (LEG) of the IMO is carrying out a gap analysis in relation to liability and compensation for MASS operations under existing IMO instruments. Several flag states have opened up for test areas for MASS, and shipowners and technology providers are busy entering into cooperation agreements to test the capabilities of autonomous systems.
Commissioned by the Danish Maritime Authority, and together with Rambøll Management Consulting, we published our “Analysis of regulatory barriers to the use of autonomous ships” in December last year. The analysis was submitted by Denmark to MSC 99 as an information paper (INF.3).
Zooming in on civil liability and insurance
Based on the analysis performed for the Danish Maritime Authority, we joined forces with the Nordic Association of Marine Insurers (Cefor) in July 2018 with the shared aim of focusing on civil liability and insurance matters in relation to MASS.
Through extensive stakeholder involvement from across the maritime industry, our goal has been to pave the way for an international, industry wide, common identification of civil liability and insurance issues surrounding MASS. This project is in its final phase and the concluding report will be published before the end of the year.
In a global context, the increased automation and the introduction of MASS is expected to reduce the level of risks and casualties within shipping, while at the same introducing risks that have not previously been quantified or insured. Historically, legal and insurance systems have been able to absorb such risks without the need for fundamental changes to basic principles. The stakeholders in our project widely expect that the same will apply to MASS but do foresee an intermediate period, during the gradual implementation of automation and MASS (at different levels), where the industry in general will weigh newly introduced risks over expected benefits. Both shipowners and insurers are expected to be cautious and look towards system suppliers and classification societies for comfort and assurance when quantifying the unknown risks associated with MASS.
Across stakeholders, the current lack of a clear international regulatory framework for MASS remains the main concern. In the regulatory context, adoption of a new “MASS code” is generally preferred over amendments to the existing framework. Acknowledging the inherent lengthy nature of the international regulatory process within the IMO and the speed at which new technology is deployed, stakeholders expect flag states, by partial delegation to classification societies, to bridge the regulatory gap on a national level until the international regulatory framework is in place.
Insurance and insurability
Stakeholders generally believe that insurance coverage for the operation of MASS will be available, as the insurance market will adapt to the demand from shipowners and technological developments.
Until an international regulatory framework is in place, stakeholders expect insurers to rely on flag state requirements and verification from classification societies as a prerequisite for insuring MASS.
Given the novelty of the technology and the operational structure, it is assumed that insurers may require additional independent third-party assurance and due diligence investigations prior to underwriting MASS risks. Particular insurance terms and conditions for MASS might be required, at least until more details on the claims history and the risk profile connected with insuring MASS are available.
Minor adjustments and clarifications will have to be made to insurance terms and conditions and concepts (namely in relation to the understanding of “seaworthiness”, “master”, “engineer” and “crew”), but this is not considered a significant barrier.
Stakeholders have highlighted that the scope of insurance coverage in relation to error in design and built in defects is a concern in relation to MASS. The reasoning is based on the novelty of the technology and the reluctance from insurers to on board risks that are essentially related to research and development. It is considered likely that insurers will require carve-outs for the coverage of errors in design in particular terms and conditions for MASS.
Similarly, to the extent that MASS will operate on different autonomy levels with inherent variations of associated risks, it is expected that insurers will introduce change of risk/alternate risk clauses in MASS insurance policies. The scope of notification requirements and triggers for change of risk remains to be defined as part of the insurance regime.
Operational data generated by MASS is expected to play a key role in clarifying circumstances and determining fault in the event of marine casualties. Presumably, insurers will, as part of the insurance terms and conditions, require access to operational data in connection with claims handling and, depending on the level of autonomy, such data may entirely replace statements from crew and master. It is further expected that marine insurers will be increasingly data driven in connection with underwriting and renewal, and that insurance products and premiums will depend on the data available.
When insuring MASS, and awaiting proof of technology and design, insurers are expected to increase focus on shipowners’ system suppliers in order to value and protect potential recourse claims. This is expected to apply to both the assessment of the legal position towards system suppliers, their insurance coverage and financial ability to absorb claims.
Some stakeholders have pointed to the fact that insurers’ increased focus on and the requirements to the financial position of system suppliers may pose a barrier for new technology as smaller technology providers will have difficulties in market access.
In the context of remote operators and assuming remote operation is carried out by independent third parties, the possibility of co-insurance with shipowners is uncertain, as it will impair potential recourse claims.
Cyber risk and insurance
Risks associated with data exchange and dependency are not unique to MASS. As any other industry, also the shipping industry is already exposed towards cyber risks. That said, the introduction of MASS is expected to increase the industry exposure significantly, and is by stakeholders widely considered as a (if not the) primary novelty brought about by the introduction of MASS.
In an operational context, it is expected that inadequate cyber risk management could result in MASS being considered unseaworthy which may impact contractual obligations and insurance coverage.
In general stakeholders find that the existing primary insurance products (P&I and Hull & Machinery) can provide adequate coverage for ship-related cyber risks. Particularly in relation to business interruption and reputational damages, stakeholders see a need for more comprehensive insurance coverage. Such coverage may well be obtained from the general insurance market given that the risks are not marine-specific.
In relation to Hull & Machinery, the use of the Institute Cyber Attack Exclusion Clause (CL.380) and the potential widening of the same to “non-malicious cyber events” is a concern for some stakeholders. Other stakeholders are satisfied as long as a buy back option remains. Furthermore, clarification is needed in relation to the coverage for non-physical damage (e.g. damage to software) under Hull & Machinery insurances.
The complete report with detailed conclusions is available on Cefor’s website (www.cefor.no).