Lay-up cover: helping owners in a distressed market The Field In this article, Kate Li of Skuld Offshore looks at the insurance aspects of vessels and units entering into lay-up, while Egil Legland of the American Bureau of Shipping (ABS) provides an overview in relation to the technical aspects. ABS has in addition kindly allowed us to re-publish excerpts from their Lay-up Guide. Impact of the downturn 2016 was a devastating year for most owners in the offshore service sector and many analysts predict that this will continue at least through 2017. Although market ups and downs are not unknown in this sector, this downturn is by some way the deepest since the 1990s, with the oil price having fallen as low as USD 27 a barrel in January 2016. The impact of this on owners in the offshore service sector has been enormous. Strong competition in an already overly crowded market has driven the charter hire down drastically. The OSV day rate has dropped by at least 40% from early 2014 and utilization rates have plunged across the industry. More and more owners are now resorting to the option of stacking their out of work vessels to reduce operational costs. This can then lead to a slightly reduced (but not removed) exposure from a P&I risk perspective as, depending on the type of lay-up chosen (discussed in more detail below), the machinery may no longer be running, there may be fewer or no crew on board and the vessel is not operating in the offshore field. Continuing risk Although the risk may be generally reduced, it would be unwise to think that there is no risk at all, as many things can and do still go wrong while the vessel is in lay-up. Obviously, it is crucially important, particularly during tough market conditions, to properly protect owners from the risks they may face so that they are not unnecessarily exposed. Over the last six months, we have seen almost the full spectrum of P&I claims from vessels and units which are both hot- and cold-stacked. Colli