India sets sail to chart its own course in the maritime insurance sector, with plans underway to establish a national Protection and Indemnity (P&I) entity. The ambition is to provide shipowners in the country with access to open-ended high-risk insurance covers, a service often shied away by traditional insurers. The Ministry of Ports, Shipping and Waterways (MoPSW), the driving force behind the initiative, is currently in the early stages of shaping the structure and functioning of this P&I entity.
A New Wave of Maritime Insurance
The MoPSW’s initiative is primarily focused on evolving the operational model for the national P&I entity, which will encompass the establishment of funding mechanisms and potential collaborations with insurance service providers. An official from the Ministry has shed light on the possibility of MoPSW providing a seed fund or corpus, serving as the initial impetus for the realization of this P&I entity.
However, the task is not without its set of challenges. The official highlighted how the relatively small number of Indian-flagged ships, when compared to the vast global fleets, could pose a significant hurdle. This discrepancy affects the viability of a P&I pool system, given the higher cost per participant due to the smaller number of contributors.
Shifting Away from International Dependence
At present, Indian shipowners are largely dependent on the International Group of P&I Clubs for such high-risk insurance coverage. This group constitutes thirteen clubs that collectively cover approximately 90% of the global ocean-going tonnage. P&I insurance, a mutual maritime insurance, offers coverage for various risks including cargo damage, war risks, and environmental hazards like oil spills. Members contribute to a shared pool of funds, with payments fluctuating based on the club’s overall financial performance each year.
The closest India has come to having a native P&I entity was back in 2018. The New India Assurance Co had offered P&I cover to local vessels plying on domestic routes. However, the current push for a national P&I entity aims to go beyond just domestic coverage. It seeks to shield Indian shipping interests against international sanctions, such as those witnessed during complications in insuring vessels for transporting crude from Russia. In essence, the creation of a national P&I entity in India is not just about expanding insurance options for shipowners. It’s about steering the nation’s maritime industry towards self-reliance, reducing dependence on international entities, and safeguarding national interests in the global shipping landscape.
