Royal Caribbean Cruise Lines 2011 Annual Report Download - page 26

2011 ANNUAL REPORT 22
PART I
INSURANCE
We maintain insurance on the hull and machinery of
our ships, which includes additional coverage for
disbursements, earnings and increased value, which
are maintained in amounts related to the value of each
ship. The coverage for each of the hull policies is
maintained with syndicates of insurance underwriters
from the British, Scandinavian, French, United States
and other international insurance markets.
We maintain liability protection and indemnity insur-
ance for each of our ships through either the United
Kingdom Mutual Steam Ship Assurance Association
(Bermuda) Limited, the Steamship Mutual Underwriting
Association (Bermuda) Limited or the Assurance-
foreningen SKULD (Gjensidig). Our protection and
indemnity liability insurance is done on a mutual basis
and we are subject to additional premium calls in
amounts based on claim records of all members of
the mutual protection and indemnity association. We
are also subject to additional premium calls based on
investment shortfalls experienced by the insurer.
We maintain war risk insurance which covers damage
due to acts of war, including invasion, insurrection,
terrorism, rebellion, piracy and hijacking, on each ship,
through a Norwegian war risk insurance organization.
This coverage includes coverage for physical damage
to the ship which is not covered under the hull poli-
cies as a result of war exclusion clauses in such hull
policies. We also maintain protection and indemnity
war risk coverage for risks that would be excluded by
the rules of the indemnity insurance organizations,
subject to certain limitations. Consistent with most
marine war risk policies, under the terms of our war
risk insurance coverage, underwriters can give seven
days notice to us that the policy will be canceled and
reinstated at higher premium rates.
Insurance coverage for shoreside property, shipboard
inventory, and general liability risks are maintained
with insurance underwriters in the United States and
the United Kingdom.
We do not carry business interruption insurance for
our ships based on our evaluation of the risks involved
and protective measures already in place, as compared
to the cost of insurance. We carry business interrup-
tion insurance for certain of our shoreside operations.
All insurance coverage is subject to certain limitations,
exclusions and deductible levels. In addition, in cer-
tain circumstances, we either self-insure or co-insure a
portion of these risks. Premiums charged by insurance
carriers, including carriers in the maritime insurance
industry, increase or decrease from time to time and
tend to be cyclical in nature. These cycles are impacted
both by our own loss experience and by losses incurred
in direct and reinsurance markets. We historically have
been able to obtain insurance coverage in amounts
and at premiums we have deemed to be commercially
acceptable. No assurance can be given that afford-
able and secure insurance markets will be available to
us in the future, particularly for war risk insurance.
The Athens Convention relating to the Carriage of
Passengers and their Luggage by Sea (1974) and the
1976 Protocol to the Athens Convention are generally
applicable to passenger ships. The United States has
not ratified the Athens Convention; however, with lim-
ited exceptions, the 1976 Athens Convention Protocol
may be contractually enforced with respect to those
of our cruises that do not call at a United States port.
The International Maritime Organization Diplomatic
Conference agreed upon a new Protocol to the Athens
Convention on November 1, 2002. The 2002 Protocol,
which is not yet in force pending ratification by the
requisite number of countries, substantially increases
the level of compulsory insurance which must be
maintained by passenger ship operators. In an attempt
to expedite implementation, the European Union
adopted the European Union Regulation 392/2009
(“EU Passenger Liability Regulation”) on the liability
of carriers of passengers by sea, which will become
effective on December 31, 2012. This regulation incor-
porates the 2002 Protocol in many ways. We have
had discussions with the insurance marketplace and
feel that we have sufficient coverage to meet the level
of coverage required under the EU Passenger Liability
Regulation.
TRADEMARKS
We own a number of registered trademarks related to
the Royal Caribbean International, Celebrity Cruises,
Azamara Club Cruises, Pullmantur and CDF Croisières
de France cruise brands. The registered trademarks
include the name “Royal Caribbean International”
and its crown and anchor logo, the name “Celebrity
Cruises” and its “X” logo, the name “Azamara Club
Cruises” and its logo, the names “Pullmantur Cruises”
and “Pullmantur” and their logos, the name “CDF
Croisières de France” and its logo, and the names of
various cruise ships. We believe our trademarks are
widely recognized throughout the world and have
considerable value.
REGULATION
Our ships are regulated by various international,
national, state and local laws, regulations and treaties
in force in the jurisdictions in which they operate.
In addition, our ships are registered in the Bahamas,
Malta or in the case of Celebrity Xpedition, Ecuador.
Each ship is subject to regulations issued by its coun-
try of registry, including regulations issued pursuant
to international treaties governing the safety of our