WHY IN NEWS?

  • Recently, there was a news of India planning to establish its own protection and indemnity (P&I) entity named India Club.

WHAT IS INDIA CLUB ?

  • It is a P&I ( Protection and Indemnity) entity or a P&I club.
  • P&I club is a mutual insurance association which provides risk-pooling information and representation for its members.
  • A P&I club reports only to its members which includes ship owners, operators, charterers, freight folders and warehouses unlike a marine insurance company, which reports to its shareholders.
  • The India Club will function like a cooperative, by pooling fees from members to provide third-party insurance.
  • The club acts as both insurer providers and insurance receivers for its members.
  • They also provide coverage for a carrier’s third-party open-ended risks such as damage to cargo, war, and damage such as oil spills.
  • On the other hand, traditional insurers are reluctant to provide such cover for third-party open ended risks.

BENEFITS OF INDIA CLUB:

  • This initiative will benefit domestic fleet owners and will reduce dependence on foreign entities for insurance coverage.
  • P&I clubs have evolved to cover a wide range of liabilities which includes loss of life and personal injury to crew, passengers and others on board, cargo loss and damage, pollution by oil and collision and damage to property.
  • They constantly look to enhance by adding new covers to meet industry needs.
  • The clubs also provide a wide range of services to their members including advice on legal issues, claims handling and loss prevention.
  • They regularly play a leading role in coordinating the response to, and management of, maritime casualties.
  • Public sector insurance companies like New India Assurance and GIC Re are being considered as partners for the initiative.

FUNCTIONING OF INDIA CLUB:

  • The ministry of ports, shipping and waterways proposed to form a coalition of domestic fleet owners operating on coastal and inland waterways routes.
  • The locally-owned P&I entity named INDIA CLUB will only cater to vessels operating within the country on coastal routes and inland waterways system.
  • Moreover, a traditional insurance and reinsurance company may be involved in the Indian P&I entity to underwrite claims and offer services to fleet owners.
  • Such an entity would fall under the regulation purview of the regulator IRDAI.

PROTECTION AND INDEMNITY (P&I) CLUB INSURANCE COVERS:

  • Personal injury, Illness and death claims from the crew, passenger, etc.
  • Stowaways and its repatriation arrangement.
  • Cargo claims for damage or loss of the same.
  • Unrecoverable GA contributions.
  • Liability due to a collision.
  • Damage to fixed and floating objects ( Jetty, marine animals, Rig, Fishery Facility, etc.)
  • Liability under approved towage contracts
  • Removal of wreck
  • Salvage operations
  • Civil liabilities imposed due to pollution or oil spill

PROBABLE CHALLENGES FOR INDIA CLUB:

  • The move will only benefit players like the Shipping Corporation of India and some small shipping lines as around 90% of Indian-owned ships are operating under foreign flags of countries like Panama, Liberia and Kazakhstan.
  • Ship owners opt for foreign flags, so as to avoid regulations like stricter safety standards.
  • Also, the India Club may face the problem of its cover not being accepted by global traders.
  • Moreover, coverage for a crude-carrying tanker can run into $8 billion or more and providing such a huge cover could be difficult.

NEED FOR INDIA CLUB:

  • An India-focused local entity may reduce the country’s vulnerability to international sanctions and pressures, as coverage is denied to ships operating between countries facing sanctions.
  • The Russia-Ukraine war, and its fallout, have reinforced the need for such a coverage.
  • The coverage, initially, will mostly be for domestic movement of ships.

OTHER SUCH GLOBAL PROTECTION AND INDEMNITY (P&I) CLUBS:

  • The famous International Group of P&I Clubs, based in London, comprises 13 clubs, which provide cover for approximately 90% of the world’s ocean-going ships.
  • These include clubs from the UK, US, Korea, Singapore, Japan, the Netherlands, China, Bermuda, Norway and Sweden.
  • These clubs cooperate to provide funds in the event of huge claims using a complex system to determine liability.
  • Club members contribute to the club’s common risk-pool according to the pooling agreement rules.
  • Several Indian shippers operating on global routes also take P&I cover from these clubs, which allows them to operate in global maritime zones.