AIS and Marine insurance cover

Automatic Identification System, or AIS, was initially developed as a collision avoidance tool for use together with radar and watchkeeping. Today, AIS has many uses, and one of its widely known functions is the supply of real-time information on a vessel’s location anywhere in the world.

As a result of this function, AIS has received closer attention in recent years and seems to have found a new role in providing information on vessels entering territorial waters of countries subject to international sanctions.

What is AIS used for?

In addition to its role in collision avoidance, AIS is a valuable tool for crew and for office teams in assisting search and rescue efforts and for investigating accidents. It is being increasingly used to track vessels operating in the vicinity of offshore platforms as well as of underwater cables and pipelines for asset protection purposes. It also provides valuable statistical information on the type and size of vessels using particular ports, canals and trade routes, with such information being available widely including to governments, port authorities and maritime economists.

Is it compulsory? 

The International Convention for the Safety of Life at Sea (SOLAS) requires that the following must be fitted with AIS:

- all ships of 300 GT and above engaged in international voyages,

- cargo ships of 500GT and above engaged domestic voyages, and

- all passenger ships regardless of size.

AIS must always be in operation when ships are underway or at anchor. However, where identification of the vessel, its type, speed or cargo may put the vessel at additional risk, it is acceptable for a Master to switch off

AIS if they have legitimate concerns that such information will put the vessel, its cargo and crew at imminent risk.

In such situations, a Master can choose to switch off AIS. The reasons to switch off AIS along with its duration should be recorded in the deck logbook and AIS must be switched back on as soon as the risk has passed. If AIS has malfunctioned due to a technical fault, this must also be recorded in ship’s logs and reported to relevant authorities as required, and immediate measures must be taken for its repair. Repair documentation should be kept as supporting evidence. Intentional disabling of AIS will likely be a breach of flag and port state regulations, where its use is compulsory under SOLAS and applicable regulations. This might have insurance implications. 

AIS in the spotlight

The US Treasury’s Office of Foreign Assets Control (OFAC) identified use – or perhaps more correctly “nonuse” – of AIS as one of several shipping practices for the purpose of evading UN, US and EU sanctions.

There is increasing pressure applied by OFAC as well as related stakeholders on financial institutions including insurers, and more recently P&I Clubs, to actively monitor vessel destinations, and to investigate AIS manipulation and instances of AIS transponders “going dark” as red flags for potentially illicit activity. The pressure on P&I Clubs is not accidental – while a ship might be able to commercially operate without certain other insurances, P&I cover is an essential ticket to trade.

What do P&I Clubs say?

Based on a survey of certain P&I Clubs in the International Group, a common theme was that Clubs are reluctant to take on the role of policing sanctions. However, Clubs agree that turning a blind eye to any suspicious activity is not an option, as this may expose the Clubs themselves to sanctions. This exposure requires Clubs to be proactive especially where any suspicious activity, such as AIS “going dark”, is brought to their attention.

Under increasing pressure, insurers are investing in systems, staff and time to monitor such possible red flags.

Owners who find themselves in the spotlight might be asked to demonstrate evidence of AIS functionality and to have alternative means of identifying the queried vessels’ locations. Shipowners might find themselves with such inquiries from P&I clubs’ legal or loss prevention departments going forward.

The consequences of a disabled AIS

Insurance coverage, especially that of liability insurance, goes hand in hand with law and regulatory implications. Shipowners undertake to comply with law and regulations, in turn liability insurers agree to insure them for liabilities arising from operations of their vessels, provided shipowners do not engage in unlawful trade, nor imprudent, unsafe or improper operations.

P&I Clubs are of the view that their policy wordings are sufficiently equipped to exclude from cover a breach of sanctions or unlawful trade. Introduction of a new rule for automatic termination of policies due to intentional disabling of AIS without a justifiable reason is reportedly being discussed, but has so far been dismissed for being impractical, not least due to its potential implications for innocent victims of marine casualties. As it stands, there are no immediate plans among the IG Clubs for a rule change to deal with AIS manipulations.

A breach of SOLAS and/or activity that may expose an insurer to sanctions might lead to loss of insurance cover. Good record keeping where AIS might have malfunctioned or might have been deliberately switched off for justifiable reasons is recommended.

For any questions regarding the contents of this Marine Client Advisor or for any other marine insurance enquiries please do get in touch. 

Howden Insurance Brokers is not a technical, commercial or legal adviser. Any commentary made in this document should not be construed as such, and we do not guarantee in any way the accuracy of the resources used or referenced in this document. In case of doubt, formal advice should be obtained that is directly relevant to your circumstances.