The liability insurance of the shipowner--Universal Maritime of Athens--is provided by the London Steam-Ship Owners' Mutual in London, also known as A. Bilbrough & Co. Ltd.

Marcus Baker, managing director of marine and energy at Marsh Ltd., in London, said certain international conventions that have been signed by Spain and Portugal limit liability in the cases of oil spills affecting signatory countries. (Marsh is not the broker for any of the affected parties.)

As a result, liability will be limited to $25,248,631 under the terms of the Civil Liability Convention, he said. If claims exceed the limit, the Fund Protocol comes into play, he explained in an interview. He said that salvage costs should be recoverable from the P&I club.

"The Fund provides additional compensation when the total of all admissible pollution claims exceeds the shipowners' liability under CLC," he said.

The combined CLC and Fund limit is $180,489,350, so there will be about $180 million available for this particular claim, he said. "The fund will pay the difference between the CLC limit and the combined limit--i.e., $155,247,719."

If the costs of claims go above this amount, it is open to conjecture about who would pay for any additional pollution claims, he explained, noting that the European Union also is pledging money to aid in the cleanup.

"The Fund is financed by levies applied to individuals and corporations who receive persistent [crude] oil in states that are members of the [IOPC] Fund," he added. (The United States is not a signatory to the IOPC Fund.) The conventions have established a strict liability limitation for vessels, Mr. Baker said.

"The reason they did this was simply to make sure that if there was a spill, there was going to be a sum of money there straight away to pay for the cleanup of consequential losses," he said.

The International Group of P&I Clubs pools their financial resources to buy reinsurance in excess of individual and group retained amounts, he said. P&I clubs retain the first $5 million of every risk, he explained. "Claims in excess of this figure are then pooled between the clubs to a value of an additional $25 million to a value of $30 million. Above this figure, the International Group [of P&I Clubs] starts to buy reinsurance from the commercial market."

For this particular pollution claim, the losses may exceed the pool, which means that it will go into the first layers of reinsurance, which is led by Lloyd's, he said.