Carnival Cruises 2008 Annual Report Download - page 26

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that is a member of the International Association of Classification Societies ("IACS"). All
of our ships are currently certified as in class by an IACS member. These certifications
have either been issued or endorsed within the last twelve months.
War Risk Insurance
We maintain war risk insurance coverage for liability and physical damage, subject to
coverage limits, deductibles and exclusions for claims such as those arising from chemical,
nuclear and biological attacks, on all of our ships covering our legal liability to crew,
guests and other third parties as well as loss or damage to our vessels arising from war or
war-like actions, including terrorist incidents. This coverage is provided by international
marine insurance carriers and Mutual War Risk Clubs. In addition, excess war risk insurance
is provided by our three P&I clubs for all our ships. Under the terms of our war risk
insurance coverage, which is typical for war risk policies in the marine industry,
underwriters can give seven days notice to the insured that the liability and physical
damage policies can be cancelled. However, the policy can be reinstated at different
premium rates. This gives underwriters the ability to increase our premiums following
events that they determine have increased their risk.
Other Insurance
As required by the FMC, we maintain performance bonds or insurance in the aggregate
amount of $105 million for ships operated by our brands which embark guests in U.S. ports to
cover guest ticket liabilities in the event of a cancelled or interrupted cruise. We also
maintain other performance bonds or guarantees as required by various U.S. and foreign
authorities that regulate certain of our operations in their jurisdictions; the most
significant of which are required by Abta, which total $123 million of sterling-denominated
bonds to cover our brands' UK passenger deposit liabilities.
We maintain standard property and casualty insurance policies to cover certain
shoreside assets and liabilities to third parties, including our tour business and certain
port facility assets, as well as appropriate workers' compensation and certain health
insurance policies.
The Athens Convention
Current conventions generally in force applying to passenger ships are the Athens
Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, the 1976
Protocol to the Athens Convention and the Convention on Limitation of Liability for Maritime
Claims 1976. The U.S. has not ratified any Athens Convention Protocol. However, a vessel's
flag state or the port state that has ratified it may enforce the 1976 Athens Convention
Protocol with regard to vessels registered under its flag or visiting a port located in its
jurisdiction.
The IMO Diplomatic Conference agreed to a new protocol to the Athens Convention on
November 1, 2002. The new protocol, which has not yet been ratified by the U.S. or any of
our flag states, requires substantial levels of compulsory insurance which must be
maintained by passenger ship operators and provides a direct action provision, which will
allow claimants to proceed directly against insurers. This new protocol requires passenger
ship operators to maintain insurance or some other form of financial security, such as a
guarantee from a bank, to cover the limits of liability under the Athens Convention with
regards to the death or personal injury of passengers. It is not certain when or if this
new protocol will come into force. We cannot be certain that affordable and viable direct
and reinsurance markets will be available to provide the level of coverage required under
the new protocol. If the new protocol is ratified, we expect insurance costs will increase.
F. Trademarks and Other Intellectual Property
We own and have registered, or licensed, numerous trademarks and have also registered
various domain names, which we believe are widely recognized throughout the world and have
considerable value, which enables us to distinguish our cruise product from that of our
competitors. These trademarks include the names of our cruise lines, each of which we
believe is a widely-recognized brand name in the cruise vacation industry, as well as
"World's Leading Cruise Lines." We have a license to use the P&O name, the P&O flag and
other relevant trademarks and domain names in relation to cruises and related activities.
Finally, we also have a license to use the "Love Boat" name and related marks. See Note 2,
"Goodwill and Trademarks" to our Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations – Critical
Accounting Estimates – Asset Impairment" in Exhibit 13 to this Form 10-K.