What is P&I Insurance?
Protection and Indemnity (P&I) is a type of insurance held by shipowners. Every ship plying its trade anywhere in the world needs to have valid P&I coverage.
P&I plays a critical role in protecting crews, the marine environment, coastal communities and third-party claimants in the event of a shipping casualty or incident. The very high limits of cover offered by the major P&I Clubs in the International Group of P&I Clubs (see below) ensure that even the biggest claims – which can exceed the total assets of a shipowner – are paid, protecting communities and crews.
Why do Shipping Companies need P&I?
While shipping companies always plan to mitigate the risks of accidents at sea, factors beyond their control can sometimes lead to incidents that affect the crew, cargo or marine life.
Determining legal liability after an accident or incident can be complex, with a shipowner potentially facing significant liabilities. P&I Clubs help settle these liability issues and provide immediate support, while the extensive cover ensures a shipowner can continue to trade and that communities, crews and the environment receive the support they need.
How do P&I Clubs work?
The most cost-effective approach for the vast majority of shipowners is to become a Member of a mutual P&I Club, where shipowners pool together to secure increased protection limits for third-party losses.
P&I Clubs were set up during the 1800s in response to increased third-party liabilities imposed on shipowners by rapidly developing legislative changes in the UK and elsewhere. Before then, insurance had traditionally been limited to damage caused by collision. Today, P&I insures their Members against a wide variety of risks including:
- Injury, illness and death of crew
- Injury, illness and death of passengers and other third parties on board
- Stowaways and the costs of repatriating them
- Damaged or lost cargo
- Wreck removal
- Damage to property
What is the International Group of P&I Clubs?
West is one of 13 P&I Clubs that make up the International Group (IG), which collectively insures more than 90% of the world’s ocean-going tonnage. The IG’s pooling arrangement and collective purchase of reinsurance allows Clubs to share claims from US$10 million up to $3.08 billion for non-oil pollution and $1 billion for oil pollution for any one incident.
What is Fixed P&I insurance?
The risks associated with maritime trade are not exclusive to larger ships, nor are the potential liabilities or legal requirements. Nevertheless, mutual insurance may not always be appropriate for these kinds of vessels, which are usually less than 10,000 GT, as any claims they make are unlikely to require very high levels of mutual cover.
Fixed premium P&I cover is an effective and cost-efficient option for these kinds of vessels, which typically include tugboats, barges, workboats and other smaller vessels. Fixed premium providers such as West Fixed will offer the same cover for liabilities as mutual insurance and access to the same loss-prevention resources, but with lower limits and on a fixed-price basis.