Protection and Indemnity (P&I) is a type of insurance that shipowners purchase to cover the potentially huge costs of any harm they accidentally cause to people, property and the environment.
As liabilities for injuries, cargo loss, collisions and pollution can far exceed the value of a ship, shipowners have found since the 19th century that the most cost-effective way of buying P&I cover is through not-for-profit clubs of like-minded shipowners.
Pooling claims
Through these P&I clubs, shipowners pool their insurance premiums to pay claims on a mutual basis. The early clubs soon realised they could operate a similar pooling arrangement between them, reducing costs further. The Standard Club, formed in 1884, joined the first pooling agreement with five other British clubs in 1899. As the clubs grew in size, number and nationality, this eventually became the International Group of P&I Clubs.
Today the 12 members of the International Group provide P&I cover to around 90% of the world’s ocean-going tonnage. The Group’s Pooling Agreement provides a mechanism for sharing all claims of$10m up to around $8bn, much of which is supported by reinsurance.
Liabilities and services
P&I clubs have evolved to cover a wide range of liabilities, including loss of life and personal injury to crew, passengers and others on board, cargo loss and damage, pollution by oil and other hazardous substances, wreck removal, collision and damage to property. They continue to look at new covers to meet industry needs.
They also provide a wide range of services to their members including claims handling, advice on legal issues and loss prevention, and they regularly play a leading role in coordinating the response to, and management of, maritime casualties.
Frequently Asked Questions
Is P&I insurance mandatory for all shipowners?
Yes. All shipowners who use their vessel for business or transportation, or for transporting passengers, workers, or cargo across international seas, must carry P&I insurance. To enter ports around the world, the master must provide a 'certificate of entry' given by the shipowners' respective P&I club, demonstrating their insurance to the port authorities.
How much does P&I insurance cost?
The cost of P&I insurance can change depending on several factors. Such factors could include the size and type of vessel, the nature of the cargo, the trading areas, the shipowner's or operator's claims history, and the necessary coverage level.
How are claims paid in a P&I club?
When a claim is made, the claims handling team will determine whether the P&I policy covers it. If the claim is covered, the claims team will negotiate a settlement with the claimant and pay the claim. The P&I club will also consider any deductible that may apply.
Can I add additional coverage to my P&I insurance?
Standard Club offers many additional covers that complement basic P&I insurance, these additional policies provide extra protection against specific risks or emergencies.
