York Antwerp Rules

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General Average Absorption Clauses

General Average Absorption Clauses

38.01 The collection of general average security, the preparation of a general average statement and the collection of contributions can be a time-consuming and therefore costly exercise, particularly where a large number of cargo interests are involved. Even where the number of cargo interests is low, or even singular, the declaration and pursuit of general average can be uneconomic if the general average losses are limited in amount. To overcome these problems the marine insurance markets have devised general average absorption cover, usually as an extension of the hull and machinery insurance. This cover enables the shipowner to recover general average expenditure in full up to a pre-agreed figure without collecting security or contributions from the concerned in cargo. 38.02 There have been two general approaches to general average absorption. The first is for hull underwriters to agree to bear general average in full (expenditure and sacrifices) up to a certain figure and without the collection of security from the other interests. This obviously assists the shipowner by making it unnecessary to go through general average procedures where the amount of the general average may be relatively small. For shipowners operating in the liner trade it also has a benefit in terms of customer relations. 38.03 The alternative is for hull underwriters to agree to bear general average in full provided that it does not exceed a certain figure, where it would be uneconomic for security to be collected, a full general average statement prepared and the collections from the various parties to be made. In such cases, although the shipowner is the main beneficiary, hull underwriters do gain some benefit in terms of reduced adjustment charges. The difficulty with this approach is that, at the time when a decision has to be taken whether or not to collect security, consideration of the economics involved will be subjective. 38.04 Sometimes the approach is a combination of the above. It should be noted that there is a subtle difference between paying general average in full up to a certain figure and paying general in full provided that it does not exceed a certain figure. 38.05 A complicating issue relates to the sacrifice of interests other than the ship. While there does not seem to be any good reason why hull underwriters should undertake to pay for the sacrifice of cargo in full, depending upon the circumstances, it may be uneconomic from the hull underwriters’ standpoint if full general average procedures were undertaken. On balance it is considered that the benefits of simplicity should outweigh the rare occasions where a general average consists predominantly of cargo sacrifices. 38.06 No standard general average absorption clause existed until 2002 when BIMCO published the following clause.

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BIMCO Standard General Average Absorption Clause

IMPORTANT NOTICE: This Clause is specifically designed for incorporation into marine insurance policies and should not, under any circumstances, be incorporated into charter parties.

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