The Importance of P&I club in shipping
What is P&I club?
A Protection and Indemnity or P&I club is a non-governmental, non-profitable mutual or cooperative association of marine insurance providers to its members which consists of ship owners, operators, charterers and seafarers under the member companies.
Why is P&I insurance Important?
The three essential elements of shipping industry are the ship, the seafarers and the cargo. The one part which is directly connected to all the three mentioned is the “Risk” involved in transporting the cargo on a ship by seafarers.
Due to the “Risk” factor, a shipowner can face substantial monetary losses if his/her ship meets an accident and there is damage to the environment, cargo or to the vessel. Also, the risk to the lives of seafarers is kept above all and thus P & I insurance is a significant aspect of sailing.
During the sea service, the most valuable element onboard, i.e. human life can be at risk due to illness, injury by accident or even death by hazards.
A P&I club provides compensation in the form of insurance cover for reasons as mentioned above to the seafarers. This not only helps him in the difficult time but also to the seafarer’s family in case of death of their earning member.
Each P&I club sets a premium for an individual owner reflecting:
- The risks against which he requires cover
- His fleets gross tonnage
- His fleet exposure to risk
- Other factors including the likelihood of significant claims in the coming year
What P&I 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, Pier, 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
- Other fines
What are the functions of P & I Clubs?
- Ensure ship owners and operators against third-party liabilities not covered by hull and machinery policies obtained. The club will usually only accept risks on chartered-in-tonnage where the member also has owned vessels entered with the organization. Charterers club exists to offer similar cover for charterers
- Often ensure entire company fleets, but tend to prefer owners with similar types and standards of fleet
- May subject owners vessels to inspection before entry into the club and during membership
- Strive to keep ‘calls on their members’ at a minimum through loss prevention methods such as information bulletins aimed at owners insurance officers
- Disseminate information aimed at keeping members premiums down
- Produce lists of correspondents and reliable lawyers and surveyors
- Produce standard forms of letters of indemnity and protest
- May post bonds against members, ships when under arrest
- Issue handbooks containing club rules and lists of correspondents, which are very useful to master seeking advice and assistance win in any kind of trouble
Club control and management
-Controlled by the committee of directors representing the shipowner member. Large claims are examined by the directors at regular meetings before payment is made
-Managed by firms of insurance experts, maritime lawyers and Mariners
-Operate on a non-profit making basis
-Members ships entered may be subjected to random ship inspections concentrating on the management of the vessel. If failed, a more intensive condition survey by independent surveyors may be called by the club’s managers. An owner who fails to keep his vessel in the condition required by the club’s rules may be expelled from the club
-Issue each member vessel with the ‘certificate of entry’, which should be kept by the master
P&I Club Correspondents
Clubs retain correspondents at numerous sports worldwide. In some countries the correspondents maybe a firm of insurance specialists acting for more than one club, or a shipbroking or insurance company only occasionally handling P&I business. The correspondence is often a law firm with maritime law practitioners.
