Assignment of Earnings and Insurances
The standard ship-finance security assignment: notices and acknowledgements, loss payable clauses, and how a lender intercepts hire and insurance proceeds.
An assignment of earnings and insurances is the security document by which a shipowner borrower assigns to its lender the ship’s freight, hire and other earnings, and the proceeds of its hull, war risks and protection and indemnity cover, as security for the loan the ship’s mortgage also secures.
The assignment is what makes the mortgage bankable. A mortgage attaches to the ship; the assignment attaches to the cash the ship generates and to the money that replaces the ship if it is lost. Notice of assignment is given to charterers, underwriters and clubs, and a loss payable clause directs casualty proceeds above an agreed figure to the lender. On default the lender can direct that hire be paid to it rather than to the owner, which is the mechanism by which a lender takes over the income stream of a ship on a bareboat charter party without taking possession of the ship.
The full article will cover the assignment’s construction as a security interest, the notice and acknowledgement mechanics, the loss payable and notice of cancellation provisions, priority against maritime liens, and the interaction with the quiet enjoyment letter given to the charterer.