46 Cfr 249

SUBCHAPTER C—REGULATIONS AFFECTING SUBSIDIZED
VESSELS AND OPERATORS
insurance with the American market
to the maximum extent possible when
the rates, terms and conditions offered
by American underwriters are competitive with those offered by foreign underwriters.

PART 249—APPROVAL OF UNDERWRITERS FOR MARINE HULL INSURANCE
Sec.
249.1
249.2
249.3
249.4
249.5
249.6
249.7
249.8
249.9
249.10
249.11
249.12

Purpose.
Policy.
Amounts of insurance.
Eligibility.
Eligibility criteria.
Application procedures.
Approval.
Limitation on risk.
American market participation.
Non-discrimination policy.
Confidentiality.
Waivers.

§ 249.3 Amounts of insurance.
MARAD will inform the owner of
each vessel that is subsidized or covered by vessel obligation guarantees,
prior to initial placement and at least
annually thereafter, of the minimum
amount of insurance required to be
placed on the vessel.
§ 249.4 Eligibility.
In General. All required marine hull
insurance must be placed with:
(a) Underwriters licensed to do business in one or more of the United
States;
(b) Underwriters at Lloyds;
(c) Member companies of the Institute of London Underwriters; or
(d) Other underwriters specifically
approved in advance by the Maritime
Administration.

AUTHORITY: Sec. 204(b), 1109, Merchant Marine Act, 1936, as amended (46 App. U.S.C.
1114(b), 1279b); 49 CFR 1.66.
SOURCE: 53 FR 23119, June 20, 1988, unless
otherwise noted.

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§ 249.1 Purpose.
This part prescribes certain regulations governing the placement of marine hull insurance on vessels built or
operated with subsidy or covered by
vessel obligation guarantees issued
pursuant to Title XI of the Merchant
Marine Act, 1936, as amended (Act). (46
U.S.C. 1271–1279)

§ 249.5 Eligibility criteria.
(a) U.S. Underwriters. Underwriters licensed to do business in a state are eligible to participate without further
consideration, provided they have at
least a B security rating, as published
in the latest edition of A.M. Best’s Insurance Reports, and the amount of insurance does not exceed the limitation
on risk prescribed in § 249.8.
(b) Foreign Underwriters. (1) Underwriters at Lloyds are eligible to participate without further consideration.
(2) Underwriters which are members
of the Institute of London Underwriters (ILU) (i.e., member companies,
not parents or affiliates of the member
companies) are eligible to participate
without further consideration, provided that the ILU member company
actually underwriting the risk maintains a trust fund in the United States
for the benefit of its U.S. policyholders
in an amount at least equal to the minimum provided in § 249.7(d), and the

§ 249.2 Policy.
(a) It is the policy of the Maritime
Administration (MARAD) that companies subject to requirements for the
placement of marine hull insurance
shall be afforded the widest possible
opportunity to obtain the necessary
coverage, with minimal regulatory
constraints, with financially sound underwriters, and that such placement
should not create any unnecessary impediments to competitive maritime operations.
(b) It is also the policy of MARAD to
require owners of vessels with ODS or
Title XI obligation guarantees to allow
the American marine insurance market
the opportunity to compete for the marine hull insurance on their vessels before such insurance is placed. Consistent with sound business judgment,
owners will be expected to place their

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§ 249.7
(After review, MARAD may contact
the foreign national regulatory authorities, as appropriate);
(3) An affidavit in writing, executed
by an agent of the applicant who is a
domiciliary of the United States, and
supported by appropriate documentation, to demonstrate that there is
nothing in either law or practice to
preclude a U.S. insurer from obtaining
the same access to the applicant’s
home market as the applicant is seeking to the U.S. market, and
(4) The details of its reinsurance program, if it wishes to write any risks in
excess of five percent of its policyholders’ surplus. These details shall be
accompanied by a statement that
clearly demonstrates the special circumstances and good cause by which
MARAD should be persuaded to modify
its general policy on limitation of risk
described in § 249.8.

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amount insured does not exceed the
limitation on risk prescribed in § 249.8.
Parent companies or affiliates of the
ILU member companies are treated as
other foreign underwriters under subsection (c) of this section.
MARAD reserves the right to review
this eligibility at any time.
(c) Other Foreign Underwriters. Foreign underwriters, other than those
specified in paragraphs (b) (1) and (2) of
this section, may also be eligible to
participate in the writing of marine
hull insurance on MARAD program
vessels, if approved to do so in accordance with the procedures contained in
§§ 249.6 and 249.7.
(d) Documentation of eligibility. It
shall be the responsibility of the vessel
owner and its broker to ensure that the
requirements of this section are met,
and they should be able to provide
MARAD, upon request, with documentation to that effect.

§ 249.7 Approval
(a) Approval of the applicant will be
based upon an assessment of the applicant’s financial condition and solvency, its rating by an accepted international rating service, suitability of
the regulatory regime under which the
applicant must operate in its home
country, and on the principle of reciprocal non-discrimination. MARAD will
not approve access to the U.S. hull insurance market, if U.S. insurers are denied similar access to the hull insurance market in the applicant’s home
country.
(b) MARAD will publish in the FEDERAL REGISTER each Notice of Application received from foreign underwriters
described in § 249.5(c), affording interested persons an opportunity to bring
to MARAD’s attention any discriminatory laws or practices relating to the
placement of marine hull insurance
which might exist in the applicant’s
country of domicile.
(c) In granting approval, MARAD will
consider all materials available to it,
and may impose reasonable terms and
conditions upon any such approvals
granted.
(d) Upon approval, applicant will be
required to establish and maintain for
the benefit of its U.S. policyholders a
U.S. trust fund in the amount of at
least $1.5 million, such amount to be

§ 249.6 Application procedures.
(a) MARAD may grant specific approval for underwriters described in
§ 249.5(c) to participate in the writing of
marine hull insurance on MARAD program vessels, only in advance of any
actual placement.
(b) Only those foreign underwriters
who have obtained a high rating (A or
comparable) from an accepted international rating service may apply, and
if approved, such approval will be contingent upon continued maintenance of
such rating. MARAD will make available to interested parties the names of
any accepted international rating service.
(c) To seek approval, an applicant
shall submit to MARAD:
(1) Certified financial data for the
five previous years in sufficient detail
to enable MARAD to assess the financial strength and solvency of the applicant. Normally, this would be the same
data which the underwriter must submit to the regulatory agency in its
country of domicile. However, MARAD
may request additional data if the applicant’s submissions are considered inadequate;
(2) A comprehensive description and
English language version of the insurance regulatory regime that is in place
in the insurer’s country of domicile.

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§ 249.8

46 CFR Ch. II (10–1–09 Edition)
the risk may not exceed its surplus,
and the reinsurers must have a high (A
or comparable) rating from an accepted
international rating service.
(b) The vessel owner shall also provide MARAD with a mortgagee’s interest policy in an amount equal to the
difference between the net retention
and the amount of the line taken by
such underwriter.

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reviewed periodically (but not more
frequently than annually), and adjusted as appropriate. This requirement may be satisfied by means of an
appropriate irrevocable letter of credit.
(e) All policies, at the time of
issuance, shall contain the latest
American Institute of Marine Underwriters’ forms, or equivalent, as approved by MARAD.
(f) All policies issued by foreign underwriters shall include New York Suable Clause or Service of Suit (USA)
Clause.
(g)(1) To maintain approval, foreign
underwriters, other than those specified in § 249.5(b), shall, in addition to retaining the high rating from an accepted international rating service, file annual financial statements in the same
level of detail as required for original
approval. Such statements shall be due
within 120 days after the close of the
underwriter’s annual accounting period.
(2) In addition, a new affidavit concerning the lack of discriminatory laws
or practices related to hull insurance
in the underwriter’s home market, as
described in § 249.6(c)(3), shall be filed
annually at the same time as the financial statements.
(h) Since there is no annual reapproval required, foreign underwriters
which are approved shall agree to submit additional information, as requested by MARAD, if it has reason to
believe there has been a change in the
underwriter’s financial status or business practices which could affect the
quality of its security. Failure to provide such information on a timely basis
could result in immediate withdrawal
of the authorization to write hull insurance on MARAD program vessels.

§ 249.9

American market participation.

(a) Owners of vessels receiving ODS
or Title XI vessel obligation guarantees, or their brokers, shall offer to the
American marine insurance market the
opportunity to compete for the placement of marine hull insurance on each
vessel. Consistent with sound business
judgment, owners will be expected to
place their insurance with the American market to the maximum extent
possible when the rates, terms and conditions offered by American underwriters are competitive with those offered by foreign underwriters. MARAD
will make available a list of approved
American underwriters and their capacities.
(b) In the event that less than 50 percent of the placement is made with the
American marine insurance market,
the owners, or their brokers, shall file
an affidavit confirming that the risk
has been offered to a substantial portion of the American market. The affidavit shall list the American underwriters to which the risk was offered,
and such underwriters shall account
for at least 50 percent of the approved
American market capacity, or 75 percent in the event that more than 75
percent of the risk was placed in foreign markets.
(c) Failure to comply with (a) or (b),
above, may result in MARAD requiring
that the risk be reoffered and that the
existing placement be modified, as
deemed appropriate.

§ 249.8 Limitation on risk.
(a) Underwriters may take a line on
any single risk in excess of five percent
of its Policyholders’ Surplus only with
the prior approval of MARAD. MARAD
will grant such approval to certain underwriters
only
in
special
circumstances, and for good cause shown.
The standard to be applied in such
cases shall be that the underwriter’s
net retention on any single risk may
not exceed five percent of its Policyholders’ Surplus, the gross amount of

§ 249.10

Non-discrimination policy.

To administer effectively the policy
regarding non-discrimination against
U.S. insurers in other countries, as described in §§ 249.6(b)(3) and 249.7(a),
MARAD seeks the assistance of the
American marine insurance industry to

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§ 251.1

provide information at the time of publication of Notice of Application described in § 249.7(b) concerning the existence of any discriminatory laws or
practices in the marine hull insurance
market abroad. Upon receipt of such
information, MARAD will take whatever action it deems appropriate.

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§ 249.11

quest for production of information
under the FOIA by third parties.
§ 249.12 Waivers.
The provision of this part may be
waived in writing, for special circumstances and good cause shown, provided the procedures adopted are consistent with the Act and with the intent of these regulations.

Confidentiality.

(a) If the data submitted under this
rule contain information that the submitter considers to be commercial or
financial information and privileged or
confidential, or otherwise exempt from
disclosure under the Freedom of Information Act (FOIA) (5 U.S.C. 552), the
submitter shall assert a claim of exemption at the time the data are submitted. The claim shall be made in a
letter contained in a sealed enveloped
marked ‘‘Confidential Information,’’
addressed to the Secretary, Maritime
Administration. The submitter shall
stamp or mark ‘‘confidential’’ on the
top of each page containing information claimed to be confidential.
(b) In claiming an exemption under
FOIA, the submitter must state the
basis for such action, including supporting information showing: (1) That
the information claimed to be confidential is a trade secret or commercial or financial information in accordance with statutory and decisional authority; and (2) that measures have
been taken by the submitter of the information to ensure that the information has not been disclosed or otherwise made available to the public, or, if
the information has been disclosed or
otherwise becomes available to the
public, why such disclosure or availability does not compromise the confidential nature of the information.
(c) In the event of a subsequent request for any portion of the data under
the FOIA, those submissions not so
claimed by the submitter will be disclosed, and those so claimed will be
subject to the initial determination by
the Secretary, Maritime Administration.
(d) If the Secretary makes a determination unfavorable to the submitter,
the submitter will be advised that
MARAD will not honor the request for
confidentiality at the time of any re-

PART 251—APPLICATION FOR SUBSIDIES AND OTHER DIRECT FINANCIAL AID
Sec.
251.1 Applications for construction-differential subsidy under Title V, Merchant Marine Act, 1936, as amended.
251.11 Applications under Title VI, Merchant Marine Act, 1936, as amended.
251.21 Applications under sections 803, 804,
805 (a) and (d), and 605(b), Merchant Marine Act, 1936.
251.31 Charges for processing applications
for authorization to transfer ownership
of ships built with construction-differential subsidy.
AUTHORITY: Sec. 204, 49 Stat. 1987, as
amended; 46 U.S.C. 1114.

§ 251.1 Applications for constructiondifferential subsidy under Title V,
Merchant Marine Act, 1936, as
amended.
(a) Applications under section 501 of
the Act for subsidy to aid in the construction of new vessels or the reconstruction of existing vessels, to be operated in the foreign commerce of the
United States, shall be filed on form
FMB–8 in accordance with the instructions annexed thereto. 1
(b) Applications for aid in the construction of new vessels to be operated
in domestic trade shall be filed on
Form VA–9 in accordance with the instructions annexed thereto. 1
APPENDIX NO. 1—POLICY
1. To the maximum practical extent as determined by the Maritime Subsidy Board applicants for construction-differential subsidy
(CDS) under Title V of the Merchant Marine
Act of 1936, as amended, shall duplicate designs of ships previously approved by the
Board for Subsidized Ship Construction.
1 Copies of forms referred to may be obtained on request from the Secretary, Maritime Subsidy Board, Washington, D.C.

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