Gard P&I Club Issues Public Comment on USCG Notice

WASHINGTON, Oct. 15 -- Gard AS P&I Club, Arendal, Norway, has issued a public comment on the Coast Guard notice entitled "Request for Information: Integration of Automated and Autonomous Commercial Vessels and Vessel Technologies into the Maritime Transportation System". The comment was posted on Oct. 14, 2020:

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For over 100 years, Gard has focused on providing the maritime industry with insurance products that offer financial protection and practical assistance. The company is the world's largest protections and indemnities (P&I) insurer with its head office in Arendal, Norway and has the highest security rating in the marine market.

Gard operates offices in 13 locations around the world, including in New York through Gard North America. Gard's creation and evolution are closely linked to the development of the modern shipping and insurance industries. Founded to underwrite only the P&I risks of sailing vessels, it soon widened its remit to accept steamships and tankers - and then expanded into the offshore energy and Hull and Machinery (H&M) markets. Gard is now adapting to the advent of "autonomous" and unmanned ships.

The Role of Marine Insurers and P&I Clubs

Gard helps members and clients manage their risks by accepting risks transferred to us, preventing losses, and responding to casualties. Our mission statement is "Together, we enable sustainable maritime development." At the core of this concept are the risks and exposure to liability shipowners face, and thus marine insurance is vital for commercial shipping. In the context of autonomous ships, the business case must be made and be right for the shipowner and that business case must drive development.

Marine insurance is based on the premise that a ship is properly classed, operates in accordance with flag state and IMO requirements and is seaworthy. There are 13 International Group (IG) P&I clubs, together insuring the third-party liabilities of around 90% or 95% of the world's tonnage. Gard represents 17.2% of the International Group. All clubs operate on a not-for-profit basis, giving shipowners large and sophisticated reinsurance arrangements at cost. Gard is the largest and strongest of the 13 international group clubs. Although Gard is a traditional P&I club, we are diverse because we offer a full portfolio of products covering energy, marine and P&I products. Gard has thus benefitted from the knowledge of marine property and P&I underwriters when looking at autonomous ships.

While Gard offers insurance cover for liabilities under P&I cover, we also offer cover for damages to the own ship, known as H&M cover. P&I insurance is primarily intended to cover a shipowner's or operator's liability towards third parties and it generally excludes damage to the insured's own property or direct loss of the Company. H&M insurance is basically insurance of the client's vessel as its primary asset. The two types of insurance interact in the area of collision liability and liability for contact damage to third party property. H&M insurance and P&I insurance are often complementary when it comes to collision liability and liability for damage to piers, loading cranes and other third-party property, generally known as damage to fixed and floating objects (FFO).

The clubs have a claim sharing agreement called the pooling agreement. Liability under club rules and in turn the pooling agreement is conditional upon compliance with class rules and flag state regulations, where applicable. Thus, P&I insurance is often referred to colloquially as a vessel's "ticket to trade." Over the last few years, Gard has reviewed cover provisions in the context of autonomous vessels. The existing definition of an eligible person and an eligible vessel under the club rules works with autonomous ships - so in principle they would be eligible for pooling under the pooling agreement. In our view, both Gard's rules and the pooling agreement are essentially "autonomous ship ready."

At Gard, we are now preparing ourselves by collaborating with our Members, clients, and the maritime industry to understand the benefits and risks, and to find insurance solutions for smart and autonomous ships. Consequently, Gard is actively monitoring industry developments with a focus on developments in class rules and flag state regulations to ensure they can accommodate autonomous ships. Gard appreciates that there is an untested theory that computers do a better job on a ship than humans, and thus on a practical level, we are evaluating whether there will be lower premiums if we remove humans from the loop. Our most important aspiration is to share more of our expertise, competence, and experience. Finding new ways of identifying risks while reducing and preventing them are the key priorities for us. We want to be proactive and focus on the trends and developments that not only affect safety, but also environmental issues, cargo issues, areas of trade, human and organizational element, seafarers' welfare, and technology making ships and seafaring safer.

As autonomous shipping develops, Gard believes marine insurers must find appropriate commercial solutions to address the impact that new technology may have on the altered distribution of risk. It is far from certain that the present distribution of risk can be maintained in relation to autonomous ships. Under the current insurance market system and pursuant to international conventions, shipowners are subject to a combination of norms that include either strict liability regimes or a right to liability exemptions and limitations. Thus, a clearly defined regulatory framework should be a prerequisite for an insurance market capable of accommodating autonomous vessels that remains cost-effective and transparent. The distribution of risk between P&I and H&M insurances in case of collision will presumably also give rise to considerations.

Seaworthiness under insurance law in relation to autonomous ships will presumably give rise to uncertainty in many other jurisdictions, especially common law jurisdictions. Given that the insurance terms on a large part of the global insurance market is subject to law of a common law jurisdiction, this is a great challenge in relation to insurance of autonomous ships.

Homogeneous technical standards and international regulation will be important to ensure a functioning insurance market for the new risk presented by autonomous ships. If international regulation of shipping makes autonomous ships possible, the insurance market, and Gard specifically, will adjust to the new market conditions.

COMMENTS

The Coast Guard seeks public comments more broadly on automated and autonomous commercial vessels and vessel technologies that may not be covered in the following questions.

(1) What existing statutes or Coast Guard-issued regulations, policies, or standards may present a challenge or barrier to the development, demonstration, deployment, or evaluation of automated and autonomous commercial vessels and vessel technologies? Please provide specific examples of these statutes, regulations, policies, or standards. How would these statutes, regulations, policies, or standards need to be changed to remove barriers or challenges?

Background Discussion

To best facilitate a regulatory response to this RFI, the Coast Guard should proceed with a well-thought out deliberative process that facilitates innovation and safe commercial developments without unduly restricting progress. As with other sectors, ship technology is evolving at a rate that seems to be outpacing the current regulations, or at least is driving a closer examination of how this technology fits in the existing regime. Introduction of new unmanned systems presents many challenges and opportunities and this RFI is a positive step in assessing this evolutionary (not revolutionary) technology that prudently expands the aperture beyond vessels to incorporate the marine transportation system. The technology advances and the need for more sustainable solutions at sea require safe, flexible, and adaptable approaches - safety is paramount.

Ship technology has evolved with the advent of autopilot, unmanned engine rooms, and dynamic positioning. To be future-proof, any regulations, policies, or standards must be risk and goal-based and technology-neutral, and should enable new concepts, procedures, testing, and pilots. In this context, regulations should set goals, not technologies, and accordingly should be guided by industry. To this end, Gard concurs with the United States' submission to the MSC 102/5/17 (Summary of results of the second step of the Regulatory Scoping Exercise (RSE) for STCW Convention and Code) which states the "extent to which automation will apply to all shipboard operational systems and functions is unclear and will likely evolve with advancements in technology."

Careful consideration should thus be given to the regulatory approach related to the development, demonstration, deployment, or evaluation of automated and autonomous commercial vessels and vessel technologies./1

Depending on how the Coast Guard chooses to address these issues, Gard suggests that any approach should attempt to avoid becoming a hindrance to technological developments and the commercial use of autonomous technologies in shipping./2

To this end, the Coast Guard should consider that national regulation of autonomous ships should be in the form of goal-based framework regulation accomplished through the use of industry-specific technical standards and codes of conduct for autonomous ships, some of which are already available as guideposts,/3 rather than through prescriptive regulation.

View full comment at: https://downloads.regulations.gov/USCG-2019-0698-0028/attachment_1.pdf

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Footnotes:

1 The forthcoming results of the National Academy of Sciences ad hoc study committee on developing, testing, and deploying unmanned technologies for Coast Guard maritime domain awareness will be informative in this regard; https://www8.nationalacademies.org/pa/projectview.aspx?key=51681.

2 For a comprehensive summary of these issues, see MARITIME SAFETY COMMITTEE, 99th session Agenda item 5, MSC 99/INF.3, 18 January 2018, REGULATORY SCOPING EXERCISE FOR THE USE OF MARITIME AUTONOMOUS, SURFACE SHIPS (MASS) Final Report: Analysis of Regulatory Barriers to the use of Autonomous Ships, Submitted by Denmark.

3 See NAVSAC Best Practices and UK Code of Conduct for MASS

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The notice can be viewed at: https://beta.regulations.gov/document/USCG-2019-0698-0001

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