Protection and Indemnity insurance, or as it is more commonly known - ‘P&I insurance’, is the policy ship owners purchase to protect themselves against liability claims from crew and other third parties such as passengers. Liability claims include those such as collision, property damage, pollution, environmental damage and removal of wrecks.
The history of P&I Insurance
P&I insurance has a very long history and dates back to the 1800's when ‘Protection Clubs’ were formed in order to cater for the liabilities imposed on shipowners by the British Merchant Shipping Act of 1854 that Hull and Machinery did not wish to cover. The first pooling agreement between the 5 original P&I Clubs was created in 1884, and the Shipowners Club is proud to be one of them. These clubs were mutual insurance associations created by shipowners to provide coverage for a broader range of liabilities than traditional marine insurance. P&I clubs operated on the principle of mutuality, where members (shipowners) pooled their resources to cover claims. Each member contributed to the club’s funds and, in return, received coverage for their third-party liabilities. This mutual structure ensured that members shared in both the risks and rewards of the insurance pool. If you are interested in learning about the specific history of the Shipowners’ Club, please visit our history page.
P&I Insurance today
The cover provided by Mutual P&I Clubs is continually evolving. From its origins as protection against collision liability, it now caters for a wide variety of people-related marine exposures and provides the financial security needed to ensure ships can trade in an environmentally sensitive world, where pollution and wreck removal are top of the agenda.
Throughout time, one thing has remained constant: Insurance is provided on a mutual basis and not for profit.
Key Features of P&I Insurance
P&I insurance primarily covers liabilities to third parties. This includes injuries to crew members and other third parties such as passengers, as well as damage to other ships or structures.
One of the significant aspects of P&I insurance is its coverage for pollution. This includes oil spills and other forms of marine pollution that can cause significant environmental damage. P&I insurance provides coverage for the cleanup costs and any fines or penalties imposed due to pollution incidents.
If a ship sinks or becomes stranded, the owner might be liable for removing the wreck. P&I insurance covers the costs associated with a compulsory order to remove a wreck, which can be substantial.
P&I insurance also covers claims related to cargo, including damage to or loss of cargo while in transit. This is essential for protecting the interests of both shipowners and cargo owners.
Coverage extends to personal injury or loss of life of crew members, passengers, and others who might be injured in connection with the ship’s operations.
Fines and penalties levied against the shipowner for various infractions, such as pollution or immigration violations, are also covered by P&I insurance.
At the Shipowners’ Club, we have specialist and dedicated teams who are there to help our Members and their brokers should they ever need it. You can learn more about our people here.