Lloyd’s
Open Form
Report 2014
This report provides detailed analysis of LOF Data for the period 1 January,
2004 to 31 December, 2013.
Detailed, definitive, downloadable

Contents
1

Introduction
1.1 Lloyd’s Standard Form of Salvage Agreement
1.2 This Report
1.3 International Convention on Salvage, 1989

03

2

LOF Process

05

3

General Analysis and Vessel Type06
3.1 Number of LOF Cases
3.2 What type of vessels are salved under LOF
3.3 Year by Year Trend of vessels involved in LOF services
3.4 Value of salvage operations under LOF
3.5 Total amounts awarded under LOF
3.6 The Award as a percentage of the salved value
3.7 Difference between appeal award and Arbitrator’s award

4

Bulk Carrier Vessels
4.1 Types of Bulk Carrier Vessels
4.2 Mean Award value per year
4.3 Time of Process
4.4 Data Table

10

5

Container Vessels
5.1 Mean Award value per year
5.2 Time of Process
5.3 Data Table

12

6

General Cargo Vessels
6.1 Types of General Cargo Vessels
6.2 Mean Award value per year
6.3 Time of Process
6.4 Data Table

14

7‘Other’ Vessels
7.1 Types of ‘Other’ Vessels
7.2 Mean Award value per year
7.3 Time of Process
7.4 Data Table

16

8

Casualty Type
8.1 Cause of casualty
8.2 Number of LOFs and Awards according to casualty
8.3 Award amounts by year according to cause of casualty

18

9

LOF 2011; Notice 4

20

Disclaimer
Lloyd’s provides the materials contained in these pages for general information purposes only. Lloyd’s accepts no
responsibility and shall not be liable for any loss which may arise from reliance upon the information provided. If you
have any queries regarding the information presented, please contact Kevin Clarke, Manager Salvage Arbitration
Branch, Agency Department, at kevin.clarke@lloyds.com.
Report produced by Freddie Scarratt
Images from the Lloyd’s Archive2

1 Introduction
1.1 Lloyd’s Standard Form of Salvage Agreement
Lloyd’s Standard Form of Salvage Agreement or Lloyd’s Open Form (LOF as it is more commonly referred to), istoday a world standard. It consistently aims to reflect best practise in light of changing circumstances. The LOF istherefore one of the finest examples of the use of the Lloyd’s name, featuring importantly in the maritime world, but
without necessarily having any insurance connotation directly relating to the Lloyd’s market. Indeed, it exists to serve
the whole maritime community.
Lloyd’s, through the Salvage Arbitration Branch (SAB) of Lloyd’s Agency Department, provides a reputable andsecure framework in which the security and arbitration process, referred to in the LOF, can operate. Importantly
however, it assumes no direct involvement in the arbitration process itself.

1.2 This Report
The data contained in this report takes as its source the LOF cases reported to the Salvage Arbitration Branch overthe period of 1 January 2004 to 31 December 2013 and the status of those cases at 22 July, 2014.
It should be noted that 83.7% of cases were settled amicably between the parties without need for recourse toarbitration. Therefore, the “Award” data shown within this report reflects only those cases that did proceed toarbitration and in which an Award was issued. The total salvage award since 2004 stands at USD 1,992,600,000 (till31 December, 2013).
The monetary details of the cases that settled are private and confidential to the parties, and therefore are notincluded in the statistics shown within this report.

1.3 International convention on Salvage, 1989
Article 13.1

Criteria for fixing the reward;
The reward shall be fixed with a view to encouraging salvage operations, taking into account the following criteria
without regard to the order in which they are presented below;a)

The salved value of the vessel and other property;b)

The skill and efforts of the salvors in preventing or minimizing damage to the environment;c)

The measure of success obtained by the salvor;d)

The nature and degree of the danger;e)

The skill and efforts of the salvors in salving the vessel, other property and life;f)

The time used and expenses and losses incurred by the salvors;g)

The risk of liability and other risks run by the salvors or their equipment;h)

The promptness of the services rendered;i)

The availability and use of vessels or their equipment intended for salvage operations;3j)The state of readiness and efficiency of the salvor’s equipment and the value thereof.

This echoes the guidance given by former Admiralty Judge, Sir John Nichol, in the Industry (1835), who wrote thatthe salvors’ remuneration should;“Encourage enterprise, reward exertion and be liberal in all that is due to the general interest of commerce, and to
the general benefit of underwriters, even though the reward may fall upon an individual owner with some severity.”At the same time, when taking the above into account, it is important that the Award must not be altogether out of
proportion to the services actually rendered.

1.4 In Summary
It is hoped that the following statistics will allay many of the misconceived impressions that LOF Awards are often
high and out of proportion, to the benefit the salvage services serve on the property owners and underwriters.
I hope you find this publication both enlightening and helpful.
Kevin Clarke
Salvage Arbitration Branch, Lloyd’s Agency Department

4

2 The LOF Process

Vessel in Casualty

Salvage services
requried

Assistance not
Required

LOF Agreed
Non LOF services

LOF notifified to
Lloyd's within 14
days

Salvage security
collected

LOF Arbitrator
Appointed

Amicable settlement

Salvage security
released

Amicable settlement

Salvage security
released

Arbitrator's Award

Award Accepted

Appeal Arbitrator
appointed

Award monies paid

Appeal withdrawn

Salvage security
releasedAward monies paid

Salvage security
releasedAward Appealed

Appeal Award
publishedAward monies paid

Salvage security
released5

3 Vessel Type
3.1 Number of LOF cases
The total number of LOF cases reported to Lloyd’s over the 2004-2013 period was 754. However, the pie chart
below highlights the decrease of 16% in LOF cases in the last 5 years, compared to the first 5 years over this period.
The line graph highlights the overall trend for salvage operations. This is perhaps a reflection of the present global
trend of decreasing salvage operations.

120

Nuber of Vessels

100
80

319

2004-2008

60

437

2009-201440
20
02004 2005 2006 2007 2008 2009 2010 2011 2012 2013

3.2 What types of vessels are salved under LOF?
Bulk vessels continue to make up the majority of LOF cases at 46%, a rise of 3% from the period 2001-2011, with a
total salved value possibly in excess of USD5bn. Container vessels have continued the trend of being the smallest
percentage of vessels salvaged under LOF, at 10%.

18%
Bulk Carrier

46%

Container
General Cargo

26%

Other
10%

Number of LOF Cases

350
300

61

250
200
150

20
274

18

100
28
46

50

171
114

0
Bulk

Container
LOFs

GeneralOtherAwards6

3.3 Year by Year trend of vessels involved in LOF services
Bulk vessels have consistently made up the largest share of LOF cases over the 10 year period.
With the exception of 2011, an overall decline in total cases can be observed across all vessel types.

120
Number of Cases

100
80
60
40
20
0
2004 2005

2006

Bulk Carrier

2007

2008

Container

2009

2010

General Cargo

2011

2012

2013

Other

3.4 Value of Salvage operations under LOF
The graph below highlights the length of time arbitration takes via the lag time of peaks in the graphs above andbelow. This is because, as seen above, the highest amount of LOF cases (106 cases) was in 2005; however the
total value came in at USD 181.6 million. In contrast, in 2007 with only 71 cases, the total value came in at
USD392.7 million. This is because the average length from agreeing an LOF to award is 510 days. Therefore, thegraph below shows a lag time of 1 ½ years with the graph above. However, the fact that 2009 has the highest valueof USD 571 million, and 2007 has 20 less cases than 2005 highlights how individual cases are significantly different.
Volume of cases therefore is not significantly correlated to amount of salvage value.
The overall total value for the 10 year period was USD 1,992.6 Million.

Millions

Ship category is the value of the ship salvaged. Cargo is the value of the cargo on board that is salvaged, while otheris the value of such items as petrol etc.

$600
$500
$400
$300

OTHER

$200

CARGO

$100

SHIP

$0
2004

2005

2006

2007

2008

2009

2010

2011

2012

2013
7

3.5 Total amounts awarded
The total amount awarded under LOF by vessel year-on-year does, of course, vary. When assessing the level of thesalvors’ award, the Arbitrator must take into account not only the salved value of the vessel and her cargo (if any),
but apply the “criteria for fixing the reward” that is set out in Article 13.1 of the International Convention on Salvage
1989 (see page 3 of this report). The weight given to each of these criteria will differ from case to case so it would
not be correct to expect that the total amount awarded in LOF cases would correspond to the total number of LOF
services, in any given year. It should be noted that those awards not in US dollars were exchanged into dollars by
the exchange rate on 30/07/14 (£1 = USD 1.6909, €1 = USD 1.3396).
It can be seen from the graph below that firstly, there was a spike in 2005 of USD 82.9 million above the average.
This will be due to the consistently higher amount of LOF cases prior to 2005. Secondly, the decline towards 2012
mirrors the global trend in salvage cases seen in graphs 3.1. However, it must be stated that those recent cases
which have gone to arbitration may have not been resolved yet, leading to distorted lower figures.

Amounts Awards

Millions

In terms of the types of vessels, once again bulk is consistently larger than most. However, the 2005 spike inContainer vessels can be placed manly at the door of one or two vessels. Again, this highlights the individual natureof each case.

$140
$120
$100
$80
$60
$40
$20
$0
2004

2005

2006

Bulk Carrier

2007

2008

Container

2009

2010

General Cargo

2011

2012

Other

3.6 The Award as a percentage of the salved valueAwards as a percentage of the total salved value over the 9 year period* were fairly consistent across vessel typeapart from ‘General Cargo’. Over this 9 year period, General Cargo is 13% larger than its nearest vessel type. This is
an increase of 10% since the 2013 LOF Report in terms of increase.

Bulk Carrier

Container

General Cargo

Other

Minimum Value

0.72%

0.02%

3.68%

1.51%

1st Quartile

6.06%

5.87%

20.42%

5.36%

Medium Quartile

13.54%

10.89%

30.99%

11.32%

3rd Quartile

25.36%

15.37%

42.67%

32.62%

Highest Value

97.43%

56.16%

96.88%

85.60%

8

The table above is a more detailed statistical analysis than the graph below. This is needed to stress the point thateach individual case is significantly different. Though the averages are shown below, this cannot be used as a guideto the monetary amount of the Arbitrator’s Award. This is highlighted by the quartile range shown in the table above.

0%

20%

40%

60%

80%

100%

21.22

Bulk Carrier

15.33

Container

35.05

General Cargo

22.50

Other

Award

Benefit*no significant data for 2013 (1 August 2014)

3.7 Average Difference per year between Appeal Award and Award
When the Arbitrator’s Award is appealed, the final award can be both higher and lower than the original award. Thisgraph highlights this with the average difference between the awards, for each year that an LOF was issued. There
are no published appeal awards, as of 1 August 2014, for LOF cases starting in 2008, 2011 and 2013.
There were 34 Appeal Awards in total, with 10 original awards being upheld by the Appeal Arbitrator.

$2,000,000$1,500,000$1,000,000$500,000$0-$500,000-$1,000,000-$1,500,000-$2,000,000
2004

2005

2006

2007

2008

Appeal Award Difference

2009

2010

2011

2012

2013

9

4 Bulk Carrier Vessels
An analysis of Bulk Carrier Vessels salved under LOF.

4.1 Types of Bulk Carrier Vessels
The large majority of bulk vessels were Dry Bulk Carriers, as seen below, making up 63% of all Bulk LOF cases.

7 8
Dry Bulk Carrier

1

Tanker

105

LPG
LNG

210

Other

4.2 Mean Award value by year
The amounts awarded in those cases that proceeded to arbitration are set out in the graph below, which also shows
the amounts awarded as a percentage of the value of the property salved (see red line).
To date there have been no Awards published for bulk vessel cases originating in 2011 and 2013.

$10,000,000

100$9,000,000

90$8,000,000

80$7,000,000

70$6,000,000

60$5,000,000

50$4,000,000

40$3,000,000

30$2,000,000

20$1,000,000

10

$0

0
2004

2005

2006

2007

Award Value

2008

2009

2010

2011

2012

2013

Awards as % of Salved Values

104.3 Time of Process
Each case that proceeds to arbitration has its own unique characteristics, therefore the length any one case going
through what is a quasi-judicial process will vary hugely. The graph below shows the average time a case took fromthe date of the LOF (date of casualty) to the publication of the final Award.
The time is broken down into two segments;
1.
2.

The number of days from the date of the signing of LOF, to the appointment of an Arbitrator (shown inblue).
From the appointment of an Arbitrator, to the publication of the Arbitrator’s Award.

700
600
500
574

400
300

343

319
416

244
309

305

200
100

120

2006

144

2007

2008

217

289
86

2005

213

258

120

0
2004

209

179

2009

Date of LOF to Arbitrator

173
124
2010

2011

2012

119
2013

Arbitrator to Award

4.4 Data Table
Fact table highlighting the range of values within the Bulk Carrier Data set for 2004 to 2013.

Award % of Salvaged
Value

Appeal Award
Value

Salvage Value

Award Value

Minimum$

800,000.00$

58,426.00

0.72%

$

490,744.12

1st Quartile$

5,451,813.15$

827,577.50

6.06%

$

1,313,447.46

Medium$ 14,886,068.00$ 1,475,443.50

13.54%$

2,373,381.00

3rd Quartile$ 32,271,230.90$ 3,090,386.50

25.36%$

5,759,936.50

Maximum$ 166,185,830.00$ 36,627,846.58

97.43%$

43,250,000.00

11

5 Container Vessels
Container vessels account for 10% of all reported LOF cases between 2004 and 2013.

5.1 Mean Award value per Year
The amounts awarded in those cases that proceeded to arbitration are set out in the graph below, which also shows
the amounts awarded as a percentage of the value of the property salved (see red line). To date there have been no
Awards published for Container cases originating from 2011.

$25,000,000.00

100
90$20,000,000.00

80
70$15,000,000.00

60
50$10,000,000.00

40
30$5,000,000.00

20
10

$0.00

0
2004

2005

2006

2007

Award Value

2008

2009

2010

2011

2012

2013

Awards as % of Salved Values

5.2 Time of Process
The design of the modern container ship, with its high sea-board and no on-board discharge equipment, can lead tolong and protracted salvage services. In addition to this, the after services administration, which invariably involves
many parties, means that container vessel cases tend to be protracted.
This is reflected within the graph below, which shows an average case lasting 560 days, or 18 months.

12

900
800
700
476

600
270

471

335

379

500

259

400
264

300
200

380

374
144

100

356

315

285

248

271

0
133

76

0
64

0
2004

2005

2006

2007

2008

2009

Date of LOF to Arbitrator

2010

2011

2012

2013

Arbitrator to Award

5.3 Data Table
A table highlighting the range of values, via the quartile range, in the Container Data set.

Award % ofSalvaged Value

Appeal Award
Value

Difference
between Award
and Appeal award

15,617.80

0.019576303$ 3,244,113.00$-1,469,378.58$

346,060.25

5.868035182$ 5,096,838.86$-901,050.94$ 15,222,138.99$

793,311.50

10.88864359$ 6,949,564.71$-332,723.29

3rd Quartile$ 65,340,059.75$ 5,398,601.75

15.37419604$ 8,802,290.57$

235,604.36

Maximum$ 171,437,166.49$ 51,567,957.63

56.16399878$ 10,655,016.42$

803,932.00

Salvage Value

Award Value

Minimum$

73,409.57$

1st Quartile$

4,147,584.50

Medium13

6 General Cargo Vessels
General Cargo vessels account for 26% (191 vessels) of all reported LOF cases between 2004 and 2013, making it
the second largest category of vessels to use LOF.

6.1 Types of General Cargo
11

The vast majority of General Cargo casualties(92%) are defined as ‘General Cargo’ vessels.
6% are made up of Refrigerated vessels.

2

General Cargo
Refrigerated
Other

172

6.2 Mean Award value per year
The amounts awarded in those cases that proceeded to arbitration are set out in the graph below, which also shows
the amounts awarded as a percentage of the value of the property salved (see red line).
To date there have been no Awards published in general cargo vessel cases originating from 2009, 2011 and 2013.

$3,000,000

100
90$2,500,000

80
70$2,000,000

60$1,500,000

50
40$1,000,000

30
20$500,000

10
$0

0
2004

2005

2006

2007

Mean Award Value

2008

2009

2010

2011

2012

2013

Awards as % of Salved Values

146.3 Time of Process
Each case that proceeds to arbitration has its own unique characteristics, therefore the length any one case going
through, what is a quasi-judicial process, will vary hugely. The graph below shows the average time a case tookfrom the date of the LOF (date of casualty) to the publication of the final Award.
The time is broken down into two segments;
1.
2.

The number of days from the date of the signing of LOF, to the appointment of an Arbitrator (shown inblue).
From appointment of an Arbitrator to the publication of the Arbitrator’s Award.

The data is vastly skewed due to one case originating in 2004 which took 64 months for the Award to be published.

1400
1200
1000

863

800
600
318

309

400

184

296

213

223

189

164

219

191

261

2005

2006

2007

2008

2009

2010

197
479

200

268

169

163

0
2004

Date of LOF to Arbitrator

2011

2012

2013

Arbitrator to Award

6.4 Data Table
A table highlighting the range of values, via the quartile range, in the General Cargo Data set.

SalvageValueAward Value

Award % ofSalvaged
Value

AppealAward Value

Difference between
Award and Appeal'saward

Minimum$

165,378.37$

15,520.00

3.68$ 593,637.00$-796,000.00

1st Quartile$

673,836.07$

433,549.84

20.42$ 927,237.50$-550,932.29

Medium$ 2,730,882.00$

739,302.00

30.99$1,260,838.00$-240,191.73

3rdQuartile$ 5,328,173.50$

1,476,254.99

42.67$1,346,695.71$-64,602.75

Maximum$ 11,238,605.00$

3,894,768.00

96.88$1,432,553.42$

274,602.11

15

7 ‘Other’ vessels
7.1 Types of Vessels
The many diverse types of vessels that make up this category are clearly shown below. Since the 2013 LOF Report,
Yachts has become the new highest casualty type (26%), taking over from Ro/Ros (21.5%). The overall amount of
LOF cases have declined with Ro/Ro cases’ almost halving from 47 to 28 since the last report.

Ro/Ro
14

8

Yacht

28

Fishing Vessel

19

Barge
Vehicle Carrier
9

Tug/Supply Vessel
34

16

Ferry
Dredger

12Other

7.2 Mean Award value per year
The amounts awarded in those cases that proceeded to arbitration are set out in the graph below, which also shows
the amounts awarded as a percentage of the value of the property salved (see red line).
There are no publications of awards from LOF cases originating in 2010, 2012 and 2013.

$4,000,000

100$3,500,000

90
80$3,000,000

70$2,500,000

60$2,000,00050$1,500,000

40
30$1,000,000

20$500,000

10

$-

0
2004

2005

2006

2007

Mean Award Value

2008

2009

2010

2011

2012

2013

Awards as % of Salved Values

167.3 Time of Process
It is characteristic of this category that the vast majority of the cases are settled amicably between the parties without
the need to refer the matter to arbitration. As can be seen from the graph below, no cases in this category in 2010,2012* or 2013* proceeded to arbitration; all were settled.
*some cases maybe be still going through arbitration.

700
600
500
400

329

322

427
234

300

220

178

243
200
100

297

285

243

195

276
160

158

103

0
2004

2005

2006

2007

2008

2009

Date of LOF to Arbitrator

2010

2011

10

4

2012

2013

Arbitrator to Award

7.4 Data Table
A table highlighting the range of values, via the quartile range, in the ‘Other’ data set.

Minimum

Salvage Value

Award Value

Award %
of
Salvaged
Value

$

$

57,257.21$

1.51$ 362,276.71$ -159,182.19

201,468.00

AppealAward Value

Difference between
Award and Appeal'saward

1st Quartile$ 1,474,142.70$ 250,211.93

$

5.13

$ 2,529,539.38$ 1,901,472.10

Medium$ 3,780,801.97$ 521,458.90

$

10.60

$ 4,696,802.06$ 3,962,126.38

3rd Quartile$ 13,110,302.37$ 1,435,075.00

$

33.58

$ 6,864,064.73$ 6,022,780.67

Maximum$ 62,905,781.25$ 7,501,271.91

$

85.60

$ 9,031,327.40$ 8,083,434.95

It must be noted that unlike the previous three categories, the ‘Other’ database does not have a large data range
causing some of the stats in the graph to not be significant. This is due to the nature of the cases to settle amicably.

178 Casualty Type
8.1 Cause of casualty
Over the 2004-2013 period, by far the largest cause of casualty, to vessels receiving services under LOF was
grounding at 45.6% of all cases. This is only a -0.4% difference to the period 2000-2011. Again, engine breakdown
was the second largest cause of casualty. However, this has dropped by 8% since the last LOF Report.

345
124

140
120
100
80

20
0

59

48

42

60
40

58

61

19
Water Ingress/Flooded

Mechanical Fail

Fire/Explosion

Engine Breakdown

Other

Unknown

Collision

Grounding

8.2 Number of LOFs and Awards according to casualty
As we can see below, the Award to LOF ratio stays constant according to cause of casualty.

400
350
300
250

Awards

200

LOF

150
100
50
0

18

8.3 Total Amounts awarded
It has already been explained that the amount awarded to a salvor for services rendered under a LOF contract will
depend on a number of factors. The arbitrator must have in mind, when assessing the level of the Award, the“criteria for fixing the reward” set out in Article 13.1 of the International Convention on Salvage 1989.
The weight applied to each of these factors will, of course, differ from case to case so it is therefore not correct toexpect that the total amount awarded in LOF cases will correspond to the total number of LOF services in any given
year, or indeed the type of vessel or casualties.

Millions

If we could confidently correlate the number vessels and type of casualty with the amount awarded, then we would
expect to see groundings accounting for a far greater proportion of the amounts awarded. We can see from thegraph below that this is indeed the case for 2007, 2008 and 2010. However, the other years covered by this study do
not support this.

$40
$35
$30
$25
$20
$15
$10
$5
$2004

2005

2006

2007

2008

2009

2010

2011

2012

GroundingEngine Breakdown

Fire/Explosion

Collision

Water Ingress/Flooding

Mechanical Fail

Unkown

Other

2013

19

9 LOF 2011; Notice 4
9.1 Days’ Notice
The graph below shows the mean days it takes from agreeing a LOF to notifying the Council of Lloyds. In 2011, the
new LOF 2011 was introduced. It contained a new clause, Important Notice 4, which states;“The contractors shall, within 14 days of their engagement to render services under LOF, notify the Council of Lloyds oftheir engagement”

This therefore explains the sudden drop in 2012, and the continuation of the trend in 2013.

45
40
35

Days

30
25
20
15
10
5
0
2004

2005

2006

2007

2008

Yearly Mean of notification

2009

2010

2011

2012

2013

LOF 2011; Notice 4 (14 day rule)20