to cover the costs associated with the threat of oil pollution in US waters.

First Line, which -- along with Shoreline Mutual -- guarantees Coast Guard certificates of financial responsibility which shipowners are required to have when they sail in US waters in case of an oil spill, was recently ordered to pay for the removal of a ship stranded off Hawaii.

The US Coast Guard ordered First Line to pay $300,000 to remove the Syabus Singapura , stranded off Honolulu, which posed a pollution threat to US waters.

In the owners' absence -- believed to be in bankruptcy proceedings and at large -- the Coast Guard held First Line responsible.

It is believed to be the first time that a COFR guarantor has been required to meet indirect pollution related costs, Lloyd's List said last week.

And Stockton Reinsurance Ltd. vice president Richard Black said the order reflected the uncertainty surrounding 1990's Oil Pollution Act, under which the system of COFRs was set up.

Mr. Black, whose firm underwrites First Line, said the guarantor is also facing a claim from the owners of the New York Oil Terminal who are seeking to recover $14 million in oil cleanup costs after lines were severed during a loading.

The terminal is attempting to recover the money from the ship owner and First Line.

These two types of costs were not considered when COFR programmes were set up, Mr. Black said.

"Guarantees are not just for discharge of oil but for the threat of discharge,'' he said. "No guarantor can say with certainty where potential claims will come from.'' But these two events will not affect premiums, he added.

Ship owners are currently amid renewals and premiums are declining, he said.

What's a COFR? Certificates of Financial Responsiblity (COFRs) are issued by the US Coast Guard under the terms of the 1990 Oil Pollution Act.

The certificates show that shipowners sailing in US waters will pay the costs of a clean-up in the event of an oil spill.

Two Bermuda companies, First Line and Shoreline, were formed to provide guarantees to shipowners to cover the clean-up costs after the owners' own insurers (commonly called Protection and Indemnity Clubs) balked at the potentially massive costs of covering claims.

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