If you want coverage against all third-party risks, protection and indemnity (P&I) insurance is a suitable option. This covers cargo damage, wreck removal, reimbursement for clean-up and pollution, personal harm to your workers and passengers, and more.
The principal activity is this extremely specialized insurance, and it can help you as a shipowner or charterer by helping you understand what Protection and Indemnity (P&I) insurance is all about.
What is Protection and Indemnity Insurance
Protection and Indemnity, or P&I, insurance is a type of cooperative marine insurance that provides cover for shipowners and cargo owners, offering protection for hull and machinery risks. Generally, this includes hazards related to political unrest, conflict, environmental harm, and damage to third-party goods, among other marine liability risks linked with vessel ownership and operation.
There isn’t a standard P&I form. However, underwriters customize P&I forms for each insured based on risk type, preferred level, and coverage type. Furthermore, P&I insurance is primarily an indemnity contract, meaning that the insurer is under no obligation to make payments until the covered party pays the claim.
What Does Protection and Indemnity Insurance Cover
P&I insurance is primarily designed to shield policyholders from claims of personal injury, disease, and death made by passengers, personnel, and other parties. Moreover, P&I insurance covers the following:
- Claims for liability following a collision
- Destroying the wreck
- Repatriation and stowaways
- Loss or damage to cargo
- Damage to items that are fixed or floating
- Civil liabilities following an oil spill or pollution
- Accountability under authorized wage agreements
P&I insurance offered by P&I clubs does not cover risks under workers’ compensation or collision clauses. It provides members with risk sharing, information, representation, and mitigation options.
What Does Protection and Indemnity Insurance Not Cover
Protection and Indemnity (P&I) Insurance is a specific type of coverage for shipowners and operators However, it does not cover all risks or liabilities. Here are some common exclusions usually seen in P&I insurance policies:
Other insurance
If club managers believe that the shipowner should have obtained other insurance that covers collision liabilities, then a P&I insurance claim may be denied. These other insurances include hull insurance or war risk insurance. Furthermore, liabilities for damages to fixed and floating objects (“FFO”) in certain situations will be rejected.
Mutuality
If the shipowner does not take enough precautions to restrict its responsibility to safeguard the club, a claim may be dismissed in whole or in part. Shipowners must make sure that the language in passenger tickets and bills of lading minimizes their responsibility.
Moral hazard
P&I insurance often does not cover liabilities resulting from the fraudulent non-delivery of cargo, particularly when the cargo is delivered without an original bill of lading.
Willful misconduct
Losses that the insured turned a blind eye to or planned to occur but knew were likely to occur.
Public policy
Criminal responsibilities were not automatically protected. Only deliberate wrongdoing was subject to criminal culpability, and criminal responsibilities were often covered by the need for fortuity. Many nations now have laws that hold people criminally accountable for careless behavior that harms the environment, even in situations where it does not qualify as willful misconduct.
P&I Insurance plans differ, with limitations based on insurer-insurer terms and mutual insurance association collective agreements. Shipowners and operators should study their contracts to understand the coverage and limitations.
What is the Intentional Group of P&I Clubs
The International Group of P&I Clubs consists of 13 P&I companies that offer mutual P&I coverage to shipowners and operators. Standard & Poor’s has given the clubs an ‘A’ rating. Moreover, being one of the top P&I clubs in the International Group, it offers mutual P&I coverage up to larger amounts than are often offered in the commercial sector.
How P&I Clubs Works
For the great majority of ship owners, joining a mutual P&I Club wherein ship owners combine their resources to gain enhanced protection limits for losses to third parties is the most economical course of action.
In the 1800s, P&I clubs were established to address the increasing third-party obligations faced by shipowners due to evolving UK and international laws. Moreover, insurance had only covered collision-related damage. Furthermore, P&I now provides insurance to its members against a broad range of hazards, such as:
- Injury, disease, and crew member death
- Passengers’ and other third parties’ injuries, illnesses, and deaths on board
- The price of repatriating stowaways
- Broken or missing cargo
- Collisions
- Disposal of wrecks
- Property harm
- Pollution
Why are Protection and Indemnity Insurance Important
Protection and indemnity insurance serves as a ticket to trade; without it, ships cannot trade profitably. Additionally, it is also critical to remain protected from any events that may occur when moving merchandise. It also protects shipowners who may face considerable financial loss as a consequence of an accident or damage to the environment, cargo, or the vessel itself.
While on board a vessel, seafarers might become ill, injured, or even die. During these trying times, P&I insurance compensates seamen and their families by providing insurance coverage. Furthermore, the North has approximately ninety claims experts, twenty-four lawyers, and twelve seamen on its worldwide P&I team.
Is Protection and Indemnity Insurance Mandatory for All Ship-owners
Yes, protection and indemnity insurance are mandatory for all shipowners who utilize their vessels for commercial or recreational purposes. Additionally, it can be used for moving people, equipment, or cargo over international borders. A certificate of entry is issued by the ship owners and is to be presented by the master to port authorities to prove insurance coverage while entering ports worldwide.
How to Buy Protection and Indemnity Insurance
To obtain P&I insurance, you must get in touch with a member of our dedicated P&I underwriting team. Additionally, you will evaluate your requirements for marine insurance together, and they will issue you an estimate for coverage.
Protection and Indemnity (P&I) Insurance is an important component in controlling the risks connected with vessel ownership and operation, as it provides complete coverage for a variety of marine liabilities. This includes cargo loss, environmental damage, and personal injury claims, and is backed by P&I clubs.