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Web Alert: Limitation amounts set to increase

10 September 2012

The LLMC set specified limits of liability for two types of claims against shipowners - claims for loss of life or personal injury, and property claims.

The limits under the LLMC were raised by a Protocol in 1996, and have now been further revised under the convention’s tacit amendment procedure by the IMO’s Legal Committee which met in April 2012.

Some states pressed for a substantial increase in limitation figures. The IG supported the approach of other states who maintained that limitation amounts should only increase by some 2.7% per annum compounded. The IG argued that limitation amounts should be set at a justifiable level that will be insurable at reasonable cost and to avoid setting a precedent for future arbitrary increases which would deter states from ratifying the convention.

The Legal Committee agreed and decided to implement a 51% increase to applicable limits under the LLMC. The new limits are expected to enter into force on 8 June 2015.

New limits:

Under the amendments to the 1996 Protocol, the limits expressed in Special Drawing Rights (SDRs) are raised as follows:
 
The limit of liability for claims for loss of life or personal injury on ships not exceeding 2,000 gross tonnage is 3.02 million SDR (up from 2 million SDR).
 
For larger ships, the following additional amounts are used in calculating the limitation amount:

  • For each ton from 2,001 to 30,000 tons, 1,208 SDR (up from 800 SDR) 
  • For each ton from 30,001 to 70,000 tons, 906 SDR (up from 600 SDR) 
  • For each ton in excess of 70,000, 604 SDR (up from 400 SDR)


The limit of liability for property claims for ships not exceeding 2,000 gross tonnage is  1.51 million SDR (up from 1 million SDR).

For larger ships, the following additional amounts are used in calculating the limitation amount:

  • For each ton from 2,001 to 30,000 tons, 604  SDR (up from 400 SDR) 
  • For each ton from 30,001 to 70,000 tons, 453 SDR (up from  300 SDR) 
  • For each ton in excess of 70,000 tons, 302 SDR (up from 200 SDR)

Limitation gives owners and insurers certainty; financial exposures for claims following a casualty are capped to a predictable level. This produces clarity of risk and insurance pricing.