RULES GOVERNING THE MANDATORY MARINE INSURANCE TO COVER LEGAL LIABILITIES ARISING OUT OF ANY MARITIME RELATED ACCIDENTS

Pursuant to Presidential Decree No. 474 and Executive Order No. 125
as amended, and Republic Act No. 9295 and its Implementing Rules and
Regulations (Sections 1 & 2, Rule IX) the following rules are hereby
adopted:

I. OBJECTIVES

1. To ensure that domestic shipowners/operators and those
shipowners/operators referred to in Section VIII herein will be able to
meet their financial responsibility for any legal liability arising out
of any maritime related accidents.

2. To ensure that adequate marine insurance coverage against legal
liabilities and expenses are secured to answer for claims for damage or
compensation to risks not covered under existing regulations.

II. COVERAGE

This Circular shall apply to all persons, corporations,
partnerships, cooperatives and entities operating any type of ships, 20
GT and above, including wooden hulled ships 35 GT and above, for hire or
compensation in the domestic trade, and tankers which require coverage
as stipulated in MC 184.

The following ships shall not be covered:

1. Government owned ships not engaged in commerce
2. Non-motorized wooden hulled ships
3. Yachts and pleasure crafts

III. DEFINITION OF TERMS

1. Protection and Indemnity (P&I) – refers to a form
of marine insurance to cover a shipowner’s and/or operator’s liability
to others and generally excludes damage to the insured’s own property.

2. P&I Mutual Club – refers to a group of shipowners
and bareboat charterers grouped together by becoming members of a
Protection and Indemnity Mutual Association to cover any liabilities
arising out of the management or navigation of their vessels.

3. P&I Associations’ Premiums (also referred to as “Calls”) – refers to the amount required as contribution to the mutual fund computed on a rate per GT of the entered ship.

4. Advance Call – refers to the amount required at the
commencement of the policy year of the P&I Club to be collected from
its members. Often, the advance call is only an installment premium,
and at the same time the Club publishes its estimate of the additional
call which it anticipates will be necessary to balance the accounts for
that year with the actual amount being determined some six months after
the end of the policy year.

5. Supplementary Call – refers to additional call, where
the claims in any one year exceed the advance call. An owner will be offered cover on a mutual basis, the concept of mutuality being
fundamental to the operation of P&I Clubs. This means that in any
one year, the premium collected from the Members should be identical to
total expenses and claims arising out of incidents during the same
period. In this way, the Club makes neither a profit nor loss. To
achieve this result it is possible that members may be required to pay a
supplementary premium during the course of a policy year in the event
that claims exceed the premium initially collected.

6. Renewal Date – refers to Noon of February 20^th each
year, as the major proportion of all P&I Club entries are renewable
at the same time – Noon, on 20^th February, and any new entry
(vessels) attaching mid-year has an initial period of insurance up to
the next 20th February and thereafter is entered for 12 months.

7. Adequate Insurance – is an insurance cover which complies with the minimum requirements of this Circular.

8. Full Insurance – is an insurance which covers all the risk set out in Section V.

9. Philippine Domestic Insurance Company Market – refers
to local insurance companies registered in the Philippines, which have
been founded with local Philippine capital and comply with local
Philippine regulations. The Philippine Domestic Insurance Market
excludes local branches, affiliates, offices or agencies of or any other
type of connection with an overseas parent company.

10. Maritime related accidents – are ship related
incidents such as, but not limited to collision, grounding, sinking,
capsizing & any other extraordinary incidents involving ships.

11. Members of the International Group of P&I Clubs – internationally recognized P&I Clubs as listed in the appendices hereunder.

12. The National Mutual Protection and Indemnity Association of the Philippines Inc. –
the local Philippine P&I Mutual Club specifically incorporated by
means of an association of Philippine shipowners plying domestic trade
with the purpose of providing the adequate insurance to those shipowners
who are unable to secure full cover with Members of the International
Group of P&I Clubs and from the identified fixed premium
underwriters in Appendix 4*.

I V. GENERAL PROVISIONS

1. Only ships with P&I coverage (as defined herein) shall be allowed to operate in the domestic trade.

2. The P&I coverage may be secured from a P&I Association (as defined herein).

3. The adequate marine insurance cover shall be secured from the
National Mutual Protection and Indemnity Association of the Philippines
Inc. and full cover as set out in Section III Paragraph 8 shall be
secured from Protection and Indemnity associations which are Members of
the International Group of P&I Clubs or the National Mutual
Protection and Indemnity Association of the Philippines Inc. in Appendix
Number 1 or from the identified fixed premium underwriters or the
Philippine Domestic Insurance Company Market in Appendix 4.

4. The tankers which require cover as stipulated in MC 184 shall
secure P&I cover from the list of accredited insurers in Appendix
5*.

5. Current Members entered with the International Group of P&I
Clubs in Appendix 1 and those covered by the identified fixed premium
underwriters in Appendix 4 – shall have the right to maintain their
existing cove r, but shall not have the right to reduce
their existing cover to the adequate insurance as defined herein.
Should their existing cover be less than the mandatory minimum adequate
insurance, they shall be obliged to change their cover to the adequate
insurance as defined herein.

6. Shipowners who are not able to secure the adequate or the full
marine insurance shall be obliged to post a cash bond equivalent to the
liabilities stated herein to be deemed compliant with this circular.

7. The ships covered by International Group of P&I Clubs are
deemed in compliance with this Circular provided the liabilities arising
from wreck removal and oil pollution are included.

V . SPECIFIC PROVISIONS

1. The adequate marine insurance shall cover the following:

a. Liabilities arising from wreck removal
b. Liabilities arising from pollution

2. Non-coverage of any of the above mentioned liabilities shall be
construed as non- compliance of this Circular and shall subject the
concerned persons, corporations, partnerships, corporations and entities
to appropriate penalties as provided herein.

3. The following shall be added to the adequate marine insurance in the second phase of the program:

c .Loss of life, illness and personal injury (passenger/third parties/Seamen)
d. Liabilities arising from collisions
e. Liabilities arising from damage to fixed and floating objects/facilities
f. Liabilities to cargo (loss, shortage and damage)

4. The non-motorized ships, however, shall be covered only from
liabilities arising from wreck removal except those that are utilized to
carry petroleum products/petroleum by products or other cargoes, which
may cause pollution.

5. The concerned persons, corporations, partnerships, cooperatives
and entities shall submit to the MARINA copy of the mandatory insurance
cover within five (5) days from date of renewal.

6. Shipowners who will comply with this circular by 20 February
2009, shall be given a one-time discount equivalent to five percent (5%)
of the tonnage fee due for the year computed using the rates for first
quarter payments.

7. The MARINA shall publish through, an advisory a list of P&I
compliant companies/vessels as of 20 February 2009, and another list
after the (90)-day grace period.

VI. LIMITS OF LIABILITY

Coverage	Gross Tonnage	Minimum Limit of Liability
1. Liabilities arising from Wreck Removal	20/35 (WHS) and above	* US$1.5M per loss
2. Liabilities arising from Oil Pollution	20/35 (WHS) or and above other substances	* US$1.5M per loss

In the event of a simultaneous removal of wreck and a pollution
incident, the National Mutual Protection and Indemnity Association of
the Philippines Inc. will cover a combined single limit of any one event
of US$3,000,000.

VII. SANCTIONS AND PENALTIES

Violation	Sanction/Penalty
1. Operating without adequate marine insurance	First Company Offense – suspension until compliance +P1,000 per GT per vessel involved in the accident
	2nd Company Offense – suspension until compliance +P1,300 per GT per vessel involved in the accident
	3rd and succeeding Company Offense – suspension until compliance +P1,500 per GT per vessel involved in the accident
2. Submission of fraudulent documents	First Company Offense – suspension until compliance +P1,500 per GT per vessel involved in the accident, without prejudice to filing of criminal charges in a proper Court
	2nd Company Offense – suspension until compliance +P1,750 per GT per vessel involved in the accident, without prejudice to filing of criminal charges in a proper Court
	3rd and succeeding Company Offense – suspension until compliance +P2,000 per GT per vessel involved in the accident, without prejudice to filing of criminal charges in a proper Court.

VIII. PORT STATE

All Port State Control shall ensure that foreign-flagged ships and
Philippine-flagged ships operating in overseas trade, before entering in
Philippine territorial waters, are covered by adequate marine insurance
as required under this Circular. A list of accredited insurers for
Philippine-flagged ships operating in overseas trade is shown in
Appendices 2 & 4, for foreign-flagged non-tanker ships in Appendices
3 & 4 and for foreign-flagged tanker ships carrying persistent oil
in Appendix 5.

IX. TRANSITORY PROVISION

Phase 1

Liabilities arising from wreck removal
Liabilities arising from oil pollution

Al l ships engaged in domestic trade covered under this Circular
are hereby given until noon 20^th February 2009 to secure the required
P&I cover in Phase 1 of the provisions of this Circular. An
extension of 90 days to comply with this Circular shall be given, upon
filing of an Oath of Undertaking stating that compliance is currently
being undertaken by the shipowner with either the National Mutual
Protection and Indemnity Association of the Philippines Inc. or, in the
event of full cover, with the Protection and Indemnity associations
which are Members of the International Group of P&I Clubs, a list of
which can be found in Appendix 1 hereunder, or from the identified
fixed premium underwriters or the Philippine Domestic Insurance Company
Market in Appendix 4.

Phase 2

Loss of life, illness and personal injury (Seaman/third parties)
Liabilities arising from collisions
Liabilities arising from damage to fix and floating objects/facilities

All ships engaged in domestic trade covered under this Circular
shall be given until a date to be advise to comply with Phase 2 of the
provision of this Circular. The adequate marine insurance limits shall
be advised at that time.

Phase 3

Loss of life, illness and personal injury (passenger)
Liabilities to cargo (loss, shortage and damage)

All ships engaged in domestic trade covered under this Circular
shall be given until a date to be advised to comply with Phase 3 of the
provisions of this Circular. The adequate marine insurance limits
shall be advised at that time.

X. REPEALING CLAUSE

Any provisions of existing MARINA Circulars, Rules and Regulations,
Orders or Decisions which are inconsistent with this Circular are
hereby repealed or modified accordingly.

XI. SEPARABILITY CLAUSE

Should any provisions or part of this Circular be declared by
competent Authority to be invalid or unconstitutional, the remaining
provisions or parts hereof shall remain in full force and effect and
shall continue to be valid and effective.

XII. EFFECTIVITY

This Circular shall take effect immediately after publication in a newspaper of national circulation in the Philippines.

Adopted: 04 Feb. 2009

BY THE AUTHORITY OF THE MARINA BOARD:

(SGD.) MARIA ELENA H. BAUTISTA
Administrator