Neptune Atlas logo Neptune Atlas

Insurance

Navigating limits and AWIWL

·

AWIWL appears on recaps (the written summary of an agreed deal) all the time. It is one of the first things a charterer asks about a ship. It stands for Always Within Institute Warranty Limits. It points to a hull insurer’s list of sea areas, each with dates. It is not a safety rule, no state enforces it, and it forbids nothing. It tells you to call the insurer before the ship enters one of the areas. The call costs little. Not making it can cost a lot.

The name is out of date, but the trade still uses it

The Institute Warranties were a short, separate document from 1976. It was usually attached to a hull policy, not printed inside it. On 1 November 2003 it was replaced by the International Navigating Conditions. The first clause of that document is headed Navigating Limits, and the market joined the two names into International Navigating Limits. The clause has not been revised since. What the underwriting market updates from time to time is the guidance it publishes next to the areas, not the clause itself.

The body behind it is the Joint Hull Committee. Its members represent underwriters (insurers) from the Lloyd’s Market Association and the International Underwriting Association, and it works through a navigating limits sub-committee. The Joint War Committee, which publishes the war risk listed areas, is made up of the same two trade bodies. One covers hull risks and the other covers war.

Every broker still says IWL. The abbreviation is used in the negotiation, not in the contract. It is written out in full when the charterparty (the charter contract) is drawn up.

It stopped being a warranty, deliberately

The 1976 document used the words “warranted no”. Under English marine insurance law at that time, breaking a warranty released the insurer from that moment on, automatically. This was true even if the breach had nothing to do with the loss, or had been put right.

The 2003 wording deliberately dropped the warranty language and made the result a suspension of cover. The market’s own comparison says it in one line: underwriters are not liable during the period of breach, and cover starts again after it. This is the most important thing to know about the clause, and it is the opposite of what most trade writing says. A breach does not cancel the hull cover. Losses before the breach are not affected, the policy is not cancelled, and cover comes back by itself once the ship is back inside the limits.

Three clauses, and the useful one is the third

The conditions have three short clauses. Most summaries mention only two, which is misleading.

Read Clause 2 carefully. It is not a held covered clause, and calling it one gets the commercial position wrong. Under a true held covered clause, the insured party has a right to stay covered. Here, cover returns only if terms “required by them are agreed”. The underwriter decides, and nobody has a right to a quote. The underwriter is now pricing a risk that has already happened, and may already have caused an accident. Asking in advance is routine. Telling the insurer afterwards is only a request.

The ten areas

The clause is divided into numbered areas. Where a period is stated, the area is excluded only during that period. Outside that period, the area is not excluded.

AreaWhat is excludedWhen
1. ArcticNorth of 70°N, and the Barents Sea. Calls at Kola Bay, Murmansk and anywhere in Norway are allowed, as long as the ship does not go north of 72°30’N or east of 35°E. This exception covers both parts, so a call in Norway above 70°N is allowed 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 nearby waters north of 59°24’N, except calls at Stockholm, Tallinn and Helsinki; the Gulf of Riga and nearby waters east of 22°E and south of 59°NSeasonal, with a different period for each. The earliest starts on 10 December and the latest ends 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 branches 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 that end on 30 April. The Seaway and the Lakes have 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. Note that this means ports and places, not the sea around themAll 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 lines of latitude on each side of a meridian, and East Asian waters north of 46°N west of the Kuriles and KamchatkaSeasonal winter exclusions
10. Bering SeaThe Bering Sea, except for through voyages that meet all four of these conditions: south of 54°30’N, entering and leaving by named passes, carrying listed navigation equipment that is fully working and manned, and carrying up-to-date charts and publications All year

Three points in that table that people often miss

Most of it is seasonal, and the seasons cross the new year. The Gulf of Bothnia above the Umea to Vasa line is excluded from 10 December to 25 May. On 26 May it is no longer excluded. A system that compares the two dates without allowing for the new year finds no days between them. It then turns the exclusion off for exactly the months it is meant to cover.

The exceptions are what make the clause usable. Murmansk is not excluded, because the Arctic entry allows calls there. Cape Horn is not excluded, because the Southern Ocean entry cuts out a triangle. That triangle is much larger than it sounds: its base runs along the fiftieth parallel from 50°W all the way to 160°W. Stockholm, Tallinn and Helsinki are allowed in the northern Baltic exclusion. If you remove the exceptions, the clause seems to ban ordinary trades. A tool that does this warns on every voyage around Cape Horn.

One area depends on the ship. The Gulf of Finland east of 28°45’E is a seasonal exclusion for a vessel of 90,000 deadweight or less. For anything larger, it is excluded all year. So the same water on the same day is inside the limits for a Panamax and outside them for a Capesize. A limit check that does not know the ship cannot give the answer.

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

Neither NYPE nor BALTIME (two standard time charter forms) prints any reference to the Institute limits. NYPE 1946 has its own fixed 1946 list of places. Among other things, it excludes the Magdalena River, Hudson Bay and the St Lawrence from the end of October to the middle of May. The later editions leave the trading limits blank, to be filled in. So where AWIWL appears in one of those charters, somebody typed it in. The forms that do print it are the general time charter form and the standard tanker time charter.

That tanker form also states most clearly who pays. Its printed text lets the charterer order the ship into ice-bound waters or outside the limits. There are two conditions. The owner must agree, and may not refuse without good reason. And the charterer must pay any insurance premium the underwriters require as a result. Clauses negotiated in real fixtures follow the same outline: the charterer may choose to go, subject to approval by the owners and underwriters, not to be refused without good reason, and the charterer pays the additional premium. Stricter versions set a cap, so the premium may not exceed what the London market quotes. This stops an owner adding a mark-up.

What the premium buys, and what it does not

The owner is the insured party, so the owner pays the underwriter. The charterer then repays the owner under the charterparty. These are different contracts and should not be mixed up.

The next point costs real money: the premium buys cover, not time. Suppose a ship is damaged by ice in an excluded area and goes in for repair. The standard market wording on breaking the limits does not say who bears those days. The premium settles the cover question. The delay is left to the off-hire clause, the clause that says when the charterer stops paying hire. Under an ordinary time charter, that clause puts the lost days on the owner. A trading limits clause that settles the premium but says nothing about time has settled the smaller part of the problem.

What it is not

The guidance sheets published for each area carry a footer. It says that everything in them is non-binding and offered by way of guidance only, and that underwriters are free to offer whatever conditions they think suitable. No IMO document refers to any of this. There is no certificate, no survey and no fine: it is a hull and machinery insurance condition about navigation and nothing else.

On the recap

In practice, the term arrives inside a trading limits line 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 contain the whole arrangement. Nothing is forbidden. The charterer is buying an option, and the price is set by someone who is not part of the negotiation. Note that the approval is prior: this is Clause 3 at work. The words “as per underwriters’ invoice” decide whether the figure is agreed before fixing or arrives afterwards. If a charterer already knows they want the northern Baltic in February, they should ask the cost before fixing, not after.

Sanctions clauses cut the trading area down further. Always afloat and always accessible describe the berths the ship may be sent to, and they are two different promises. Ice free ports is a separate promise that covers much of the same winter water. Most of these can be set aside by paying a premium. The sanctions clause cannot, because it is a ban, not a price.

References

War risk areasAn insurers’ list of sea areas, not a report of last week’s attacks. What being inside one does to the premium, the crew, the route and the rate. Voyage charter vs time charterHow the two main charter types split the risk, what each side pays for, and which terms exist in only one of them. Charterparty formsNobody writes a charterparty from a blank page. People name a printed form, change it, and then disagree about which part of the document applies.

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 depend 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.

Try 7 days free Ship chartering software for brokers What each plan includes