Fri, Oct

Additional War Risk Insurance (AWRI)


Additional War Risk Insurance (AWRI).When tankers-are fixed to carry oil cargoes from or to a place where war or hostilities are taking place, hull insurers quickly impose additional war risk premiums on ships travelling to the areas of hostilities. 

This happened during the Iran-Iraq war in the 1984s and also when Iraq invaded Kuwait on 2 August 1990. In the shipping business, it should be made clear in the charterparty as to which party will bear the cost of the AWRI premium. If there is no clause in the charterparty and the charterer orders the ship to a war danger area, the owner may very well attempt to demand reimbursement of premiums from the charterer. In many cases during the Iran-Iraq war, disputes on this issue went before English courts and they had to resolve the dispute based on the wording in the charterparty. The courts generally decided that the scope of war risk cover obtained from the insurers was at the discretion of the "prudent" (that is, careful and sensible) shipowner, and the payment for the war risks cover would be made by the charterer as provided by the charterparty.

For example, in the time charterparty on the New York Produce Exchange form for The Athos, 1981, a Rider clause stated that charterers were to reimburse owners for extra War Risk insurance following receipt of invoices and supporting vouchers. The courts laid down the test for the premiums that would be regarded as reasonably incurred by a prudent shipowner. These included premiums for risk of loss of freight and disbursements, premiums to maintain the insured value of the vessel despite any fall in market value and premiums for detention or diversion expenses.

An example of another printed clause covering the payment of AWRI is found in an oil company (Chevron) standard form charterparty:

"Any increase of hull and machinery war risk premiums and crew war bonus over and above those in effect on the date of this Charterparty, will be for Charterer's account."

The clause also provides that if there is any increase in premiums because of closure of a port, or blocking or trapping of the vessel in a port or waterway, insurance is for the owner's account. (See also War clauses.)