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Insurance

Navigating limits and AWIWL

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AWIWL sits on recaps constantly and is one of the first things a charterer asks about a ship. It stands for Always Within Institute Warranty Limits, and what it points at is a hull underwriter’s list of water with dates against it. It is not a safety rule, no state enforces it, and it forbids nothing. It is a warning that a telephone call is owed, and the call is cheap while the omission is not.

The name is out of date and the trade kept it

The Institute Warranties were a short free-standing document of 1976, habitually attached to or endorsed on a hull policy rather than printed inside it. They were replaced by the International Navigating Conditions dated 1 November 2003, whose first clause is headed Navigating Limits, and the market contracted the two into International Navigating Limits. There has been no revision since. What is periodically updated is the guidance the underwriting market publishes alongside the areas, not the clause.

The body behind it is the Joint Hull Committee, made up of underwriting representatives from the Lloyd’s Market Association and the International Underwriting Association, working through a navigating limits sub-committee. Worth holding on to, because the Joint War Committee that publishes the war risk listed areas is the same two trade bodies in a different hat: the two instruments are siblings, one for hull perils and one for war.

Every broker still says IWL and it is not worth correcting anybody. Worth knowing, though, that the abbreviation belongs to the negotiation rather than to the contract: it gets expanded when the charterparty is drawn.

It stopped being a warranty, and that was the whole point

The 1976 document said “warranted no” and meant it. Under English marine insurance law as it then stood, breach of a warranty discharged the insurer from that moment onward, automatically, even if the breach had nothing to do with the loss and even if it had since been put right.

The 2003 drafting deliberately abandoned warranty language and rebuilt the result as a suspension. The market’s own comparison puts it in a line: underwriters are not liable during the period of breach, and cover resumes after it. That is the most important thing to know about the clause and it is the opposite of what most of the trade literature says. A breach does not void the hull cover. Losses before it are untouched, the policy is not avoided, and cover comes back on its own once she is back inside the limits.

Three clauses, and the useful one is the third

The conditions run to three short clauses and most summaries mention only two, which inverts how the thing is actually used.

Read Clause 2 carefully, because it is not a held covered clause and calling it one gets the commercial position wrong. Under a true held covered clause the assured has a right to be kept on risk. Here cover returns only if terms “required by them are agreed”: the underwriter holds a discretion, nobody is entitled to a quote, and by then he is being asked to price a risk that has already run and may already have produced a casualty. The timing, not the act, is the unforgiving part. Prior permission is routine; retrospective notice is a request.

The ten areas

The clause is organised into numbered areas. Where a period is stated the area is excluded only inside it, and outside it the water is unremarkable.

AreaWhat is excludedWhen
1. ArcticNorth of 70°N, and the Barents Sea. Calls at Kola Bay, Murmansk and anywhere in Norway are excepted, provided she does not go north of 72°30’N or east of 35°E. The exception covers both limbs, so a Norwegian call above 70°N is permitted All year
2. Northern SeasThe White Sea and the Chukchi SeaAll year
3. BalticThe Gulf of Bothnia north of a line from Umea to Vasa; the Gulf of Finland east of 28°45’E; the Gulfs and adjacent waters north of 59°24’N, excepting calls at Stockholm, Tallinn and Helsinki; the Gulf of Riga and adjacent waters east of 22°E and south of 59°NSeasonal, with a different period for each. The earliest opens on 10 December and the latest closes on 25 May
4. GreenlandGreenland territorial watersAll year
5. North America, eastNorth of 52°10’N between 50°W and 100°W; the Gulf of St Lawrence and the river and its tributaries east of Les Escoumins, with the Strait of Belle Isle, Cabot Strait and the Strait of Canso; the river west of Les Escoumins; the Seaway and the Great LakesThe Gulf and the river are winter exclusions running to 30 April. The Seaway and the Lakes carry no dates at all and are excluded all year
6. North America, westNorth of 54°30’N between 100°W and 170°W, and any port or place in the Queen Charlotte Islands or the Aleutian Islands. Ports and places, note, not the surrounding seaAll year
7. Southern OceanSouth of 50°S, except inside the triangle formed by rhumb lines between 50°S 50°W, 57°S 67°30’W and 50°S 160°WAll year
8. Kerguelen and CrozetTerritorial waters of the Kerguelen and Crozet IslandsAll year
9. East AsiaThe Sea of Okhotsk above stated parallels either side of a meridian, and East Asian waters north of 46°N west of the Kuriles and Kamchatka Seasonal winter exclusions
10. Bering SeaThe Bering Sea, except on through voyages meeting four cumulative conditions: south of 54°30’N, entering and leaving by named passes, carrying listed navigational equipment fully operational and manned, and corrected charts and publications All year

Three things about that table that catch people out

Most of it is seasonal, and the seasons wrap the year. The Gulf of Bothnia above the Umea to Vasa line is excluded from 10 December to 25 May, and on 26 May it is ordinary water. A system that compares those two dates in the obvious order treats 10 December as later than 25 May, finds no days between them, and switches the exclusion off for exactly the months it exists for.

The exceptions are the reason the clause is usable. Murmansk is not excluded, because the Arctic entry excepts calls there. Cape Horn is not excluded, because the Southern Ocean entry carves out a triangle, and that triangle is far larger than the phrase suggests: its baseline runs along the fiftieth parallel from 50°W right across to 160°W. Stockholm, Tallinn and Helsinki are excepted from the northern Baltic exclusion. Strip the exceptions out and the clause appears to prohibit ordinary trades, which is how a tool ends up warning on every voyage that rounds the Horn and teaching its user to click past warnings.

One of them depends on the ship. The Gulf of Finland east of 28°45’E is a seasonal exclusion for a vessel equal to or less than 90,000 deadweight and a permanent one for anything greater. The same water on the same day is inside the limits for a Panamax and outside them for a Capesize, and a limit that does not know the ship cannot answer.

It is not printed in the charter. Somebody typed it in

This surprises people who go looking for it. Neither NYPE nor BALTIME prints any reference to the Institute limits. NYPE 1946 carries its own hard-coded 1946 geography, excluding among other things the Magdalena River, Hudson Bay and the St Lawrence from the end of October to the middle of May, and the later editions leave the trading limits blank to be filled. Where AWIWL appears in one of those charters, somebody typed it. The forms that do print it are the general time charter form and the standard tanker time charter.

That tanker form is also the clearest statement anywhere of who pays. Its printed text lets the charterer order the ship to ice-bound waters or outside the limits, provided the owner consents, such consent not to be unreasonably withheld, and provided the charterer pays any insurance premium the underwriters require as a consequence. Negotiated clauses in real fixtures follow the same skeleton: charterer’s option, subject to owners’ and underwriters’ approval not to be unreasonably withheld, charterer pays the additional premium. Sharper versions cap it, so the premium may not exceed what the London market quotes, which stops an owner marking it up.

What the premium buys, and what it does not

Get the two relationships the right way round. The owner is the assured, so the owner pays the underwriter; the charterer reimburses the owner under the charterparty. Different contracts, and confusing them produces an argument at the wrong moment.

Then the point that costs real money: the premium buys cover, not time. A ship that takes ice damage in an excluded area goes into repair, and the standard market wording on breaking the limits says nothing about who bears those days. The premium answers the cover question and leaves the delay to the off-hire clause, which under an ordinary time charter puts the days on the owner. A trading limits clause that settles the premium and is silent on the time has settled the smaller half.

What it is not

The market says the quiet part itself. The guidance sheets published area by area carry a footer noting that anything in them is non-binding and offered by way of guidance only, and that underwriters are free to offer whatever conditions they think appropriate. No IMO instrument references any of this. No certificate, no survey, no fine. It is a hull and machinery insurance provision about navigation and nothing else.

On the recap

In practice the term arrives inside a trading limits line that looks something like this.

TRADING : WORLDWIDE ALWAYS WITHIN IWL, ALWAYS AFLOAT,
          ALWAYS ACCESSIBLE, EXCLUDING SANCTIONED COUNTRIES,
          ICE FREE PORTS ONLY, CHRTRS OPTION TO BREAK IWL
          SUBJ OWNERS AND UNDERWRITERS PRIOR APPROVAL NOT
          TO BE UNREASONABLY WITHHELD, CHRTRS PAYING EXTRA
          INSURANCE PREMIUM AS PER UNDERWRITERS INVOICE

The last two lines are the whole mechanism. The charterer is not being forbidden anything; they are being sold an option, priced by somebody who is not in the room. Note that the approval is prior, which is Clause 3 doing its work, and that “as per underwriters’ invoice” decides whether the figure is agreed before fixing or arrives afterwards. A charterer who already knows they want the northern Baltic in February should ask what it costs before fixing rather than after.

The rest of the line is a family of neighbouring terms. Sanctions clauses cut the world down further; always afloat and always accessible describe the berths she may be ordered to and are not the same promise; ice free ports is a separate undertaking about much of the same winter water. Most of them can be bought out with a premium somebody agrees to pay. The sanctions clause is the exception, because that one is a prohibition rather than a price.

References

War risk areasAn underwriters’ list of water, not a report of what happened last week. What being inside one does to the premium, the crew, the route and the rate. Voyage charter vs time charterThe risk split behind the two main charter forms, what each side pays for, and which terms only exist on one side of it. Charterparty formsNobody drafts a charterparty from nothing. They name a printed form, amend it, and then argue about which half of the document wins.

Neptune Atlas

Neptune Atlas carries the ten areas as dated boxes with the clause text copied rather than paraphrased, and tells you which of them a computed route passes through on the voyage date. It does not decide whether a voyage is in breach. Several exclusions turn on where the ship calls, and that is a question the underwriter answers. Every paid plan starts with 7 free days. A card is needed to start them, and cancelling before they end costs nothing.

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