Compulsory insurance
Article 12 of the Convention requires the owner of a
ship of 300 GT and above, and flying the flag of a State
Party, “to maintain insurance or other financial security,
such as a guarantee of a bank or similar institution”,
to cover liability under this Convention. The value is to
be determined by the applicable limitation regime but
in all cases not exceeding an amount calculated in
accordance with the limits determined by LLMC, 1976,
as amended. Each ship shall carry a certificate attesting
that insurance or another financial security is in force.
The certificate shall be in an approved format, a draft
of which is included in the annex to the Convention. In
addition, claims for costs arising out of the provisions
of the Convention can be brought directly against the
insurer or guarantor stated in the certificate.36
However, it is worth noting that States Parties will have
to extend the application of the Convention to their
territory, including the territorial sea, in accordance
with article 3(2), in order to be able to rely on the
insurance certificates for incidents occurring outside
the “Convention area”,37 and be able to bring direct
action claims against the insurer pursuant to article 12.