India is looking to have its own protection and indemnity (P&I) entity. This will allow shipowners the option to purchase open-ended high-risk covers (insurance) that traditional players are generally reluctant to provide.

Senior officials of the Ministry of Ports, Shipping and Waterways (MoPSW) told businessline that discussions around setting up a P&I entity have begun; and “over the next few months” there will be clarity on the structure and operational activities. Factors like funding and bringing on-board insurance service providers are also being looked into.

“We are looking at having a P&I entity to which Indian shipowners can have access. But we need to work on the factors like having a seed fund or some corpus, which perhaps, the Ministry may have to provide in the initial days. However, work is on and over the next few months, there will be some structure to these discussions. But, yes, the P&I entity is important for Indian ships,” another official added.

The fact also remains that the number of Indian-flagged fleets are relatively low in number compared with global ones; which is also seen as a deterrent in having such a P&I pool system. A larger number of players would also mean lower payout per ship-owner or participant.

India currently has no such entity and Indian shipowners have to approach International Group of P&I Clubs for such a cover.

The International Group of P&I Clubs (based in Leadenhall Street, London) comprise thirteen-odd clubs, which provide P&I liability cover for approximately 90 per cent of the world’s ocean-going tonnage.

What is P&I

Typically, protection and indemnity insurance is a form of mutual maritime insurance provided by entities which are technically called a P&I club. While a marine insurance company provides cover for “hull and machinery” to a shipowners, or cover cargoes; the P&I club provides cover for open-ended risks – like damage caused to cargo during carriage, war risk, risks of environmental damage such as oil spills and pollution, among others.

Generally, a P&I club operates as a mutual insurance association that provides risk-pooling, information and representation for its members and the club is operated by shipowners and charterers, freight forwarders and warehouse operators.

Instead of an insurance premium, a P&I club member pays a ‘call’. This a sum of money is put into the club’s pool. If, at the end of the year, there are still funds available in the pool, each member will pay a reduced call charge the following year. But if the club has made a major payout, members pay a further call to replenish the pool.

Previous attempts

Last year, during the Global Maritime Summit, Union Finance Minister, Nirmala Sitharaman called for having an India-based P&I entity. She had pointed out that such a move will allow Indian vessels greater operational agility and higher resilience.

Market sources say such a move allows Indian ship protection against international sanctions. There have been instances where it became difficult to get vessels and tankers as well as insure them for shipping crude from Russia.

The closest India came to have a P&I entity was in 2018, when the State-run New India Assurance Co ventured into the marine insurance segment and offered protection and indemnity cover to local vessels that plied on domestic routes (within India).

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