Standard Absorption Clause Welcomed by Industry

Insurance underwriters and average adjusters have welcomed the recent publication of BIMCO’s Standard General Average Absorption Clause. It is hoped that the initiative will help to promote a broad move away from declaring general average for small and uneconomic claims in all sectors of the industry. The Standard Absorption Clause is designed to be of benefit both to shipowners and insurers by avoiding the time and expense associated with pursuing small general average claims. The Clause is targeted for use in hull and machinery policies covering all types of vessels from container ships, bulk carriers, and tankers to cruise ships. BIMCO’s Deputy Secretary General, Søren Larsen, said that “it is not the first time that the marine insurance sector has looked to BIMCO for assistance in developing and promoting a standard clause for industry-wide use and we are delighted to have been able to continue the excellent working relationship on this occasion”. He continued “we have worked closely with insurance underwriters, average adjusters, shipowners and the International Group of P&I Clubs to ensure that the Standard Absorption Clause fairly represents the interests of all parties. This, we hope, will encourage the Clause’s widespread adoption”. Average adjusters are unequivocal in their support for the new Clause. Tim Madge, Chairman of the Association of Average Adjusters, said that the BIMCO Absorption Clause should “alleviate many of the problems that we encounter in practice due to a multitude of different wordings being included in policies”. He went on to say that his Association hoped that the Clause “is soon adopted as a standard clause world wide”. In the United States, Howard McCormack, President of the Average Adjusters Association of the United States has praised BIMCO’s initiative. He said that his Association had been following the development of the Absorption Clause with interest and that “BIMCO is to be congratulated on their hard work to come up with a clause that reflects the commercial resolution of a matter that has…caused some angst in the maritime industry, particularly among the container trades where there is intense competition”. McCormack added, “Due to the complexities of obtaining security for a general average declaration by the vessel owner, the owners and cargo interests have reached a reasonable commercial solution to this problem”. McCormack concluded, “The Absorption Clause is a practical method of dealing with what is a purely commercial issue. It should be understood that the clause does not involve any variation or change in the York-Antwerp Rules but is solely a commercial resolution to a practical problem”.