Background
LOH cover originated in the early twentieth century as a response to the increasing capital intensity of the merchant fleet. As ships grew larger and more specialised, the financial impact of off-hire periods grew correspondingly more severe, and shipowners (particularly those operating with high leverage) needed a way to protect their loan service obligations through periods of casualty-driven inactivity. The cover developed first in the Nordic markets and through specialist Lloyd’s syndicates, and is now a standard component of most commercial vessel insurance programmes, particularly for tankers, gas carriers, container ships and offshore units where daily earnings are high.
LOH is a relatively low-frequency, high-severity cover. Most insured years pass without a claim, but a significant casualty (a major engine failure, a serious grounding, a collision requiring extensive repairs) can produce an LOH claim of several million United States dollars. The cover’s specific terms (the daily indemnity, the deductible, the maximum indemnity period and the perils insured against) require careful negotiation and continuous review against the trading environment and the underlying H&M cover.
Fundamentals of LOH Cover
LOH responds to time-based losses arising from off-hire incidents caused by perils insured under the policy. The structure of the cover involves four principal parameters:
Daily indemnity (or daily amount): The insured daily amount payable for each day of off-hire after expiry of the deductible period. This is typically set by reference to the vessel’s notional time charter equivalent or net daily earnings, less variable operating costs that are saved during off-hire.
Deductible (or waiting period): The number of days at the start of any off-hire period during which no indemnity is payable. Typical deductibles are 14, 21 or 30 days.
Maximum indemnity period per casualty: The maximum number of days for which indemnity is payable in respect of a single casualty. Common values are 90 days, 120 days or 180 days.
Maximum indemnity period per policy year (annual aggregate): The total number of days for which indemnity is payable across all casualties during the policy year. This is typically two to three times the per-casualty maximum.
For example, a typical tanker LOH policy might provide cover at 50,000 United States dollars per day, with a 14-day deductible, 90-day maximum per casualty and 180-day annual aggregate. A casualty causing 60 days of off-hire would produce an LOH recovery of (60 - 14) days x 50,000 = 2.3 million United States dollars.
Wordings: ABS, Nordic Plan and Bespoke
LOH cover is written under several wordings:
ABS 1/10/83 (Additional Clauses for Loss of Hire): A London market wording designed to be appended to ITC-Hulls 1/11/95 or its predecessor. ABS provides cover for loss of hire arising from the perils insured under the underlying H&M policy, with definitions of off-hire period, daily indemnity and policy parameters.
ABS 1/10/16: A more recent revision of the ABS wording, addressing certain issues of construction and aligning with developments in market practice. Adoption has been gradual.
Nordic Marine Insurance Plan Chapter 16: The Nordic Plan integrates LOH into its broader marine insurance framework, with cover for loss of time arising from the perils insured under the Plan’s hull cover (which is itself an “all risks” wording). The Nordic Plan approach is notably more generous on certain peril coverage but applies stricter exclusions in other areas.
Bespoke wordings: Specialist segments (offshore, cruise, complex multi-vessel programmes) often use bespoke wordings drafted by leading underwriters and brokers to address the particular features of the operation.
Perils Insured Against
LOH cover is typically tied to the perils insured under the underlying H&M policy. ABS 1/10/83 covers loss of hire arising from the perils of ITC-Hulls 1/11/95, including:
Perils of the seas, fire and explosion, violent theft, jettison, piracy, contact with land conveyances, earthquake, accidents in loading or discharging cargo (the traditional marine perils)
The Inchmaree clause perils: bursting of boilers, breakage of shafts, latent defect, negligence of master, officers, crew or pilots, negligence of repairers (subject to the due diligence proviso)
Collision liability under the Running Down Clause (where the off-hire results from required repairs to the insured vessel, not damage to the other vessel)
Where the underlying H&M policy includes an extension (such as the Inchmaree clause), the LOH policy follows the extension. Where the underlying H&M policy excludes a peril (such as war risks), the LOH policy similarly excludes that peril, and a separate war LOH cover may be purchased.
A critical interpretive point is whether the LOH policy responds to all off-hire arising from a covered peril, or only to off-hire arising from physical damage that the H&M policy actually pays. The standard wording requires that the underlying casualty be one that would be recoverable under the H&M policy if damage exceeded the deductible. Hence small repair incidents below the H&M deductible can still trigger LOH provided they meet the LOH waiting period.
Interplay with Hull and Machinery
The interplay between LOH and H&M is the defining feature of LOH cover. Several principles apply:
Same casualty, different damages: The H&M policy responds to the cost of physical repair; the LOH policy responds to the time-based loss of earnings during the repair period. These are distinct heads of damage from a single casualty.
Repair time vs. off-hire time: LOH cover responds to the time the vessel is actually off-hire, not the theoretically minimum repair time. However, where the assured prolongs the off-hire period through unreasonable delay, additional yard works that are not casualty-related, or non-casualty maintenance combined with casualty repairs, the LOH cover applies only to the time reasonably attributable to the casualty.
Single casualty vs. separate casualties: The single-casualty maximum indemnity applies to a single accident, occurrence or sequence of events arising from one cause. Where multiple separate incidents occur during a single off-hire period, careful analysis is required to determine whether one or multiple casualties have occurred for LOH purposes.
Coordination of repairs: Many LOH disputes involve the question of whether owner-elected works (modifications, scheduled maintenance, dry-dock items) properly extend the off-hire period or are concurrent with the casualty repairs. The standard analysis follows the “but-for” test: would the off-hire have occurred but for the casualty? If yes, the casualty is causative and the LOH applies; if the time would have been spent on owner-elected works regardless, the time is not casualty-related.
Sue and labour overlap: Costs incurred to expedite repairs and shorten the off-hire period may be recoverable under the H&M sue and labour clause (because they minimise H&M loss) or under LOH provisions (because they minimise LOH loss), depending on the structure. Many programmes contain a coordination provision allocating such costs proportionately.
Common Exclusions
LOH policies typically exclude a range of perils and circumstances:
Routine maintenance: Time spent on scheduled maintenance, surveys, classification renewals, dry-dock items not arising from a casualty.
Deficient crew or owner negligence: Off-hire arising from crew incompetence, owner failure to maintain the vessel or breach of warranties.
Delays in repair preparation: Time before repairs begin (waiting for parts, awaiting yard slots, voyage to repair port) is sometimes excluded or partially excluded depending on the wording.
Strikes and labour disputes: Most LOH wordings exclude time lost to strikes (covered separately under strikes LOH if at all).
War, capture and seizure: Excluded from standard LOH, with separate war LOH available.
Quarantine and regulatory delays: Time lost to quarantine, port detention, port state control deficiencies (a particular issue post-COVID).
Owners’ delay: Time lost while the owner negotiates with underwriters, considers alternatives, or is otherwise responsible for delay.
Inherent defects in design: Some wordings exclude losses arising from design defects rather than latent defects in materials or workmanship, although the line is contested.
Real-Time Monitoring and Claims
LOH claims are characterised by detailed timekeeping and continuous coordination between owner, broker, surveyor and underwriter. The claim file typically includes:
Statement of facts: Day-by-day record of the vessel’s status, drawing on bridge logs, engine room logs, port records and the statement of facts prepared at the casualty port.
Repair specification and progress reports: Documentation of the scope of repairs, the agreed yard contract, and progress reports during the repair period.
Daily earnings calculation: Evidence of the vessel’s earning capacity, typically with reference to time charter rates for similar vessels (the Baltic Exchange indices for tankers, bulk carriers, gas carriers; the Container Ship Time Charter Assessment Index for boxships).
Saved expenses: Calculation of variable operating costs saved during off-hire (bunkers, port expenses, lubricants, certain crew costs depending on the bareboat or time charter structure).
Causation analysis: Detailed analysis of which days of off-hire are attributable to the casualty and which to other causes.
Many programmes now use real-time vessel monitoring data (AIS tracking, engine performance data, ship-to-shore reports) to produce more granular and reliable timekeeping than was possible in the past. This has reduced disputes on factual questions but elevated questions of causation and allocation.
Market Practitioners
The LOH market is concentrated among specialist underwriters who combine LOH with H&M and write the two covers as a package. Leading practitioners include:
London market: Beazley, Hiscox, MS Amlin, Catlin (now AXA XL), and various other Lloyd’s syndicates write significant LOH lines, often led by specialists who handle hull and LOH together.
Norwegian market: Norwegian Hull Club, Gard, Skuld and Hydor write LOH under the Nordic Plan with their hull lines. Norwegian Hull Club is particularly prominent in offshore LOH.
Continental market: Allianz Global Corporate & Specialty, AXA XL, Munich Re Specialty and Swiss Re Corporate Solutions write LOH alongside hull lines.
Specialist providers: A small group of specialist LOH writers, including some MGAs and reinsurance-backed facilities, focus solely on LOH and complementary covers (delay in start-up insurance for newbuildings, advanced loss of profits for shipyard projects).
Recent Developments: Offshore and Renewable Energy
The offshore wind sector has emerged as a major growth area for LOH-style covers. Construction support vessels, walk-to-work units, cable lay vessels and operations and maintenance vessels in offshore wind projects carry significant daily charter rates (often in excess of 200,000 United States dollars per day for large units), and project economics depend on continuous operation of the support fleet.
The development of “delay in start-up” (DSU) insurance for offshore wind farm construction and “Marine Loss of Production Income” cover for operating wind farms has created a specialist niche that draws on traditional LOH principles but extends to broader project-level financial losses. Norwegian Hull Club, AXA XL and Munich Re Specialty are leading providers in this space.
The cruise sector has also driven LOH developments. Cruise ship daily earnings (driven by passenger revenue, casino and onboard spend) significantly exceed traditional cargo vessel earnings, and the consequences of casualty-driven cancellations affect not only the affected ship but the cruise line’s broader brand and customer base. Specialist cruise LOH covers, often combined with passenger trip cancellation and brand protection covers, are written predominantly through London and Bermuda markets.
The decarbonisation transition has introduced new LOH considerations. Vessels using ammonia, hydrogen or methanol fuels face higher casualty risk profiles during the early adoption phase, and the cost of repairs (including specialist parts, crew training and bunkering disruption) extends typical off-hire periods. LOH wordings are being adapted to address these new risks.
Causation Analysis in LOH Claims
Causation is the single most contested issue in LOH claims and warrants detailed examination. The standard tests applied are:
The “but-for” test: Would the off-hire have occurred but for the casualty? If the off-hire would have occurred anyway (for example, scheduled drydocking that was already required), the casualty is not the cause of the off-hire and LOH does not respond.
Concurrent causes: Where the off-hire has multiple causes (a casualty repair plus an owner-elected upgrade), the time properly attributable to each must be identified. Where the activities are sequential, allocation is straightforward. Where they are concurrent (the upgrade is performed while the vessel is in dock for casualty repairs), the question is whether the casualty work or the upgrade work was the “critical path” extending the off-hire period.
Acceleration and deceleration: Owners may elect to accelerate casualty repairs by paying for overtime, expedited parts or weekend work. The acceleration costs may be recoverable under sue and labour, and the corresponding shorter off-hire period reduces LOH exposure. Conversely, an owner who decelerates repairs (because of cash constraints or strategic reasons) cannot recover the prolonged off-hire.
Intervening causes: Where an unrelated event (a strike at the repair yard, a hurricane delaying drydock entry, a regulatory inspection) extends the off-hire period, the question is whether the intervening event is causally connected to the casualty (and therefore covered) or independent (and therefore excluded).
Repair location selection: Where the assured selects a more distant repair yard for commercial or contractual reasons, the additional voyage time to and from the yard may not be entirely covered. The standard analysis considers whether a “reasonable” assured would have selected the same yard for casualty repairs.
These causation issues frequently absorb significant claim handler and adjuster time, and disputed claims may be referred to arbitration or litigation. The Lloyd’s market practice is to handle most LOH disputes through informal negotiation given the complexity and cost of formal proceedings.
Daily Indemnity Calculation Methodology
The daily indemnity in an LOH policy may be set on several bases:
Time charter equivalent (TCE): The vessel’s notional earning capacity expressed as a daily charter rate. For tankers, this is calculated using market rate indices (the Baltic Exchange tanker indices, the Worldscale system) and trade patterns. For dry bulk carriers, the Baltic Dry Index components (Capesize, Panamax, Supramax, Handysize) provide reference points.
Net daily earnings: The vessel’s actual daily earnings net of variable operating costs. This requires identification of the costs that are saved during off-hire (bunkers, port expenses, lubricants, certain crew costs) and those that continue (technical management fees, insurance, annual surveys, fixed crew costs).
Charter hire (for time-chartered vessels): Where the vessel is on a time charter at a fixed rate, the daily indemnity may be set at the charter hire rate, reflecting the actual loss to the owner during off-hire periods.
Agreed daily amount: A negotiated figure that may not strictly correspond to current earning capacity but reflects historical performance, average earnings or other negotiated reference points.
The choice of basis affects both the premium and the claim size. Higher daily indemnity figures attract higher premiums, and the assured should ensure that the daily amount reflects realistic earning capacity rather than a peak figure that may overstate the loss.
Maximum Indemnity Periods and Aggregation
The maximum indemnity period structure is critical to LOH cover economics:
Per casualty maximum: Typical figures are 90, 120 or 180 days. For older or specialised vessels with longer typical repair periods, higher per-casualty maxima may be selected (270 days for major engine room rebuilds, for example). The per-casualty maximum sets the upper bound on a single-event recovery and is the principal driver of premium for vessels with long repair lead times.
Annual aggregate maximum: The total days of indemnity available across all casualties in a policy year. Common figures are 180 to 360 days. The annual aggregate prevents accumulation of multiple small claims from exhausting cover but rarely binds in practice.
Aggregation provisions: Where multiple casualties occur in close succession, the question is whether they constitute a single casualty (subject to a single per-casualty maximum) or separate casualties (each with its own maximum). Standard wordings define a casualty as “a single accident, occurrence or sequence of events arising from one cause”, with the aggregation rules drawn from the Lloyd’s “single event” definitions.
Interruption between casualties: Where the vessel returns to service between casualties, the second casualty has its own per-casualty maximum. Where the vessel does not return to service (additional damage discovered during repair, complication during sea trials), the issue is whether the additional days of off-hire fall within the original casualty period or constitute a new casualty.
Sue and Labour in LOH
LOH wordings include sue and labour provisions analogous to those in H&M. The assured is required to take reasonable measures to minimise the loss, and the cost of those measures is recoverable in addition to the indemnity. Examples of recoverable sue and labour expenses include:
Premium payments to expedite delivery of critical spare parts;
Overtime and weekend working at the repair yard;
Use of helicopter or air freight for critical parts;
Charter of substitute tonnage to cover commercial commitments while the vessel is off-hire (recoverable up to the LOH indemnity that would otherwise have been paid);
Engineering consultancy to expedite or optimise repair plans.
The sue and labour cover is typically subject to the underlying daily indemnity ceiling, although some wordings provide additional cover above the daily indemnity for sue and labour costs.
Coordination with Charter Party Off-Hire
The LOH policy responds to off-hire as defined in the policy, which typically follows the time charter off-hire concept under standard charter forms (NYPE 1946, NYPE 2015, BIMCO BalticCon, BPTime3) but is not legally identical. The relationship works as follows:
Time-chartered vessel: When a vessel is off-hire under the time charter, the owner ceases to receive hire from the charterer. The LOH policy responds to this loss of revenue, subject to the deductible and other terms.
Voyage-chartered or spot vessel: When a vessel is unable to perform a voyage charter, the analysis is more complex: the lost earnings include freight that would have been earned, less voyage expenses saved.
Bareboat chartered vessel: Where the vessel is on bareboat charter, the bareboat hire continues even during periods that would be off-hire under a time charter (because the bareboat charter places operational risk on the bareboat charterer). LOH cover for bareboat-chartered vessels typically responds to the bareboat charterer’s loss rather than the registered owner’s loss.
The intersection between off-hire and performance claims under the charter party and the LOH cover is a frequent source of complex claims, particularly where the underlying casualty involves elements of crew negligence, owner-supplied stores or technical management decisions.
Strikes Loss of Hire
A separate strikes LOH cover responds to off-hire arising from strikes affecting the vessel, the loading or discharge of cargo, or the repair of the vessel after casualty. Standard wordings include extensions for crew strikes, port worker strikes and yard worker strikes. The cover is typically purchased as an extension to the main LOH or as a separate policy with specialist underwriters.
War Loss of Hire
War LOH responds to off-hire arising from war perils (capture, seizure, mines, blockade, detention) that are excluded from standard LOH. The cover is structured similarly to standard LOH but the perils mirror those of war risks insurance. Recent claims have included extended detentions of vessels in Iranian, Yemeni and Russian waters.
Newbuilding Delay in Start-Up
For newbuildings under construction, “Delay in Start-Up” or “Advanced Loss of Profits” insurance responds to the financial loss arising from late delivery caused by an insured peril at the shipyard (fire, sinking during outfitting, major equipment failure during commissioning). The cover responds for the period from the contractual delivery date to the actual delivery date and is structured similarly to LOH but with project-specific parameters.
Recent Developments and Market Trends
Several trends are shaping the LOH market:
Rate hardening since 2019: Following years of soft pricing, LOH rates have moved up materially since 2019, in line with the broader hull market.
Capacity constraints: Several London market participants have reduced LOH capacity, particularly for older tonnage and challenging trades.
Coverage tightening: Wordings have been tightened on issues including concurrent delays, scope of cover during repairs and Inchmaree clause incidents.
Data-driven underwriting: Underwriters are increasingly using vessel performance data, voyage analytics and operator track records to refine pricing, supplementing traditional age-flag-tonnage models.
Offshore wind growth: As discussed above, offshore renewable construction is the most rapidly growing segment for LOH and DSU covers.
Climate event clustering: Hurricane and typhoon clusters, abnormal weather patterns and increased frequency of extreme weather events are producing concentration risks for LOH portfolios, leading to revised aggregate management at the underwriter level.
LOH Wordings: Detailed Provisions
Several specific provisions of the standard LOH wordings warrant detailed examination:
Time of attachment: Cover typically attaches when the vessel becomes “wholly prevented from earning hire or freight” by an insured peril. Partial inefficiency, reduced speed or operational limitation that does not result in complete inability to earn does not trigger cover.
Definition of “off-hire”: The LOH off-hire definition is specific to the policy and is not necessarily identical to the time charter off-hire concept. Some policies cover off-hire as defined in the underlying time charter; others define off-hire by reference to the vessel’s inability to perform her ordinary employment.
Termination of off-hire: Cover terminates when the vessel is restored to a condition in which she can resume earning. Disputes arise where the vessel returns to service but at reduced capacity (operating with one engine instead of two, with reduced cargo capacity, with restricted trading warranties), with the question of whether full off-hire continues until full capacity is restored.
Pro-rata daily indemnity: Where the vessel is off-hire for fractions of a day at the start or end of the period, the indemnity is typically calculated on a pro-rata basis.
Currency provisions: Most LOH policies are denominated in United States dollars, but some are written in euros, pounds sterling or other currencies. The currency provisions and exchange rate mechanisms can be material for claims involving non-US-dollar earnings.
Specific Casualty Scenarios
LOH cover responds to specific casualty scenarios in characteristic ways:
Major collision: A serious collision typically results in 60 to 180 days of off-hire while repairs are completed. The LOH claim is straightforward, with the daily indemnity applying for the full repair period (less the deductible).
Engine room fire: A serious engine room fire typically results in 90 to 270 days of off-hire, with complex repair specifications and potentially the need for engine replacement. LOH claims for engine room fires often involve disputes over the repair scope and the time properly attributable to the casualty.
Grounding and refloating: Following a grounding, the off-hire period includes the salvage operation, the voyage to a repair port, the drydock period and sea trials. The LOH claim must address potentially extended periods at multiple locations.
Crankshaft or main engine bearing failure: The most common Inchmaree-clause LOH claims involve main engine machinery damage. Repair times depend on parts availability and yard slot availability, often producing claims of 30 to 90 days.
Heavy weather damage: Heavy weather damage to deck equipment, hatch covers or cargo handling gear typically results in shorter off-hire periods (2 to 6 weeks), although serious structural damage can extend repairs significantly.
Cargo-related damage: Damage to cargo holds from cargo operations (typically Inchmaree-clause covered) may produce extended off-hire if the holds require structural repair before further loading.
Joint Loss Adjustment
For complex casualties involving both H&M and LOH claims (the typical pattern), the loss adjustment process is conducted jointly:
Single adjuster: A single average adjuster typically handles both the H&M and LOH adjustments, ensuring consistency in the underlying causation, time and cost analysis.
Coordinated documentation: The casualty narrative, surveyor reports, repair specifications, yard quotations and invoice documentation are shared between the H&M and LOH claims.
Allocation of overheads: Where costs (sue and labour, surveyor fees, consultancy fees) benefit both H&M and LOH covers, the costs are allocated between the two on an equitable basis, typically reflecting the relative size of each claim.
Settlement coordination: The H&M and LOH settlements are typically coordinated so that the assured receives a single integrated settlement rather than separate parallel processes.
Newbuildings and LOH
For newbuildings, LOH-style cover typically takes the form of “Delay in Start-Up” (DSU) insurance:
Trigger event: DSU responds to delay in delivery of the vessel beyond the contractual delivery date caused by an insured peril at the shipyard (fire, sinking during outfitting, equipment failure during commissioning).
Indemnity period: The indemnity period runs from the contractual delivery date to the actual delivery date.
Daily indemnity: Calculated by reference to the vessel’s projected earnings during the delay period, often based on prevailing market charter rates or a contracted forward charter.
Maximum indemnity period: Typically 12 to 24 months for DSU on major newbuildings.
Standard wordings: DSU is typically written under bespoke wordings drafted for each project, with the Munich Re DSU wording, the Norwegian Hull Club CAR (Construction All Risks) DSU wording and various Lloyd’s specialist wordings providing reference points.
DSU is increasingly important for offshore wind farm construction and complex shipyard projects where delivery delays can have material commercial consequences.
LOH for Specialist Tonnage
LOH cover for specialist tonnage requires bespoke wordings and pricing approaches:
LNG carriers: Daily charter rates for LNG carriers can exceed 200,000 United States dollars per day during peak seasons. LOH cover for LNG carriers requires specific provisions for boil-off gas management during off-hire (a distinct technical issue from cargo damage), bespoke daily indemnity calculation and large maximum indemnity periods reflecting the lengthy repair times for specialised equipment.
FPSO and FSO units: Floating production storage and offloading units operating under long-term charter contracts (often 20 years) face LOH-style exposures very different from trading tankers. The “Marine Loss of Production Income” cover developed for FPSOs combines elements of LOH with insurance for the production itself, with daily indemnity calculations referencing oil and gas prices, production volumes and contract terms.
Cruise ships: Cruise ship LOH (often called “loss of revenue” or “advance loss of profits”) accounts for passenger booking cancellations, brand damage and lost revenue from disrupted itineraries. The cover is significantly more complex than cargo vessel LOH and is typically written by specialist cruise underwriters.
Offshore wind installation vessels: Heavy lift vessels and walk-to-work units operating in offshore wind installation projects can carry daily charter rates exceeding 250,000 United States dollars per day. LOH cover is essential for project economics, with bespoke wordings addressing the specific operational profile and weather-dependent installation work.
Yachts: Mega yachts and superyachts carry specialist LOH covers reflecting their unique operational profiles, with provisions addressing seasonal use, cruising patterns and luxury market considerations.
LOH and Charterer Strategy
LOH cover affects charterer strategy in several ways:
Charterer’s exposure to off-hire: Time charterers benefit when the vessel is on hire (paying hire to owners) and effectively cease paying when off-hire. Charterers therefore have a financial interest in shorter off-hire periods even though they do not bear the underlying repair cost.
Substitute tonnage: When a chartered vessel is off-hire for an extended period, the charterer may need to source substitute tonnage to cover commercial commitments. The cost of substitute tonnage is the charterer’s exposure, not directly the owner’s, but commercial relationships often produce coordinated responses.
Charterers’ loss of profits: Some charterers maintain their own loss of profits insurance covering the financial consequences of vessel non-availability, separate from the owner’s LOH.
Force majeure interaction: Off-hire periods caused by force majeure events (where the underlying contract incorporates force majeure provisions) interact with LOH cover in complex ways, depending on whether the force majeure event is also an LOH-covered peril.
LOH Disputes: Common Issues
Common disputes in LOH claims include:
Causation disputes: Whether the underlying casualty falls within the cover, whether multiple causes interact and whether the claimed off-hire period is properly attributable to the casualty.
Daily indemnity disputes: Whether the daily amount agreed in the policy properly reflects the vessel’s earning capacity at the time of the casualty, particularly where market conditions have changed materially since policy inception.
Concurrent delays: Where casualty repairs and owner-elected works are conducted in parallel, the proper allocation of off-hire days between the two.
Acceleration costs: Whether expenditure to expedite repairs (overtime, weekend work, expedited parts) is recoverable as sue and labour or LOH-related cost.
Waiting time: Whether time spent waiting for parts, yard slots or surveyors counts toward the LOH indemnity period or is excluded as deductible time.
Termination of off-hire: Whether the vessel has been “restored” to a condition allowing resumption of earnings, particularly where commercial restrictions remain.
Aggregation: Whether multiple incidents constitute a single casualty or separate casualties for indemnity period purposes.
These disputes are typically handled through informal negotiation between brokers, average adjusters and underwriters, with formal arbitration or litigation reserved for the most significant or intractable cases.
LOH and Financing Considerations
LOH cover plays an important role in vessel financing structures:
Mortgage requirements: Vessel mortgagees (banks and ship finance providers) often require LOH cover as a condition of financing, particularly for vessels with high debt service obligations relative to operating cash flow.
Loss payee provisions: LOH policies often name the mortgagee as loss payee for indemnities above specified thresholds, ensuring that recoveries can be applied to debt service.
Coverage adequacy: Banks review the daily indemnity and maximum indemnity periods to ensure they are adequate to maintain debt service through realistic casualty scenarios.
Lender’s loss insurance: Some lenders maintain their own loss insurance covering the financial gap between LOH cover and full debt service, particularly for highly leveraged structures.
The interaction between LOH cover and vessel financing is a routine feature of ship finance practice, with bespoke covers often developed for specific transactions.
Related Wiki Articles
- Hull and Machinery Insurance
- P&I Clubs and the International Group
- War Risks Insurance
- Cargo Insurance and Institute Cargo Clauses
- General Average and York-Antwerp Rules
- Time Charter Party
- Voyage Charter Party
- Off-hire and Performance Claims
- Statement of Facts
- Force Majeure in Shipping
See also
Calculators
References
- UK Marine Insurance Act 1906
- Institute Time Clauses Hulls 1/11/95 (ITC-Hulls)
- ABS 1/10/83 Loss of Hire Clauses
- ABS 1/10/16 Loss of Hire Clauses
- Nordic Marine Insurance Plan 2013 (Version 2024) Chapter 16
- Institute War and Strikes Clauses (Hulls Time) 1/11/95
- NYPE 1946 (New York Produce Exchange) time charter form
- NYPE 2015 time charter form
- BIMCO BalticCon time charter form
- BPTime3 tanker time charter form
- Baltic Exchange Time Charter Assessment Indices
- Container Ship Time Charter Assessment Index
- Lloyd’s Market Association Joint Hull Committee LOH Sub-Committee Circulars
- International Underwriting Association Loss of Hire Working Group publications