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IT IS A SHIPOWNERS INSURANCE COVER FOR LEGAL LIABILITIES TO THE THIRD PARTIES. THE LEGAL LIABILITIES ARE DECIEDED IN ACCORDANCE WITH THE LAWS OF THE COUNTRY WHERE AN ACCIDENT TAKES PLACE.

      THE P&I INSURANCE COVER FOR CONTRACTUAL LIABILITY IS AGREED AT THE TIME THE OWNER REQUESTS INSURANCE COVER FROM THE CLUB AND IS USUALLY IN ACCORDANCE WITH THE OWNER’S RESPONSIBILITY UNDER CREW CONTRACTS OR SPECIAL TERMS RELATING TO THE TRADING PATTERN OF THE VESSEL.

MEANING OF PROTECTION:

IT SIMPLY MEANS THAT THE INSURANCE ALSO COVERS ASSISTANCE WHEN A SHIP IS INVOLVED IN AN ACCIDENT AND THE SHIPOWNER AND HIS MASTER NEED HELP. OFTEN THE CLUB’S INTERVENTION AND ASSISTANCE WILL HELP TO HEAD OFF PROBLEMS AND SERVE TO PROTECT THE SHIPOWNER FROM INFLATED CLAIMS.

MEANING OF INDEMNITY:

THE SHIPOWNER MUST DEMONSTRATE HIS LOSS BEFORE THE CLUB WILL PAY OUT (OR INDEMNIFY HIM) UNDER THE TERMS OF THE INSURANCE POLICY. THE CLUB NEVER ASSUMES THE OWNER’S LIABILITY, THEREFORE TECHNICALLY THE OWNER IS ALWAYS RESPONSIBLE FOR PAYMENT. THIS MEANS THAT THE INSURER SHOULD PAY THE THIRD PARTY FIRST AND THEN TAKE THE CLAIMS FROM THE CLUB. THIS IS CALLED” PAY TO BE PAID” PRINCIPLE.

      THIS IS DONE SO THAT THE ASSURED SHOULD NOT MAKE PROFIT FROM THE PAYMENT RECIEVER FROM THE CLUB AND THEN FAILING TO PAY THE THIRD PARTY.

                                     THE CLUB CAN WAIVE THIS PRE-PAYMENT CLAUSE IF IT FEELS THAT THE MEMBER WILL BE DRAGGED TO COURT TO PAY OUT TO THE THIRD PARTY. THE CLUB CAN ARRANGE AN OUT-OF -COURT SETTLEMENT WITH THIRD PARTY. ALSO IF THE VESSEL IS ARRESTED THEN AN UNDERTAKING LETTER IS ISSUED TO RELEASE THE VESSEL STATING THAT THE CLUB WILL ASSUME RESPONSIBILITY OF THE MARITIME CLAIM.

P&I ALSO DEALS WITH:

1. DEATH AND PERSONNEL INJURY ONBOARD THE VESSEL.
2. REPATRIATION OF SICK OR INJURED CREW AND HOSPITAL EXPENSES.
3. LOSS OF CREW MEMBER’S PERSONNEL EFFECT IN CASE OF SHIP WRECK OR FIRE ON BOARD. BUT ONLY THOSE ITEMS WHICH ARE DEEMED TO BE REASONABLE FOR ANY CREW MEMBER TO HAVE WITH HIM ONBOARD.

LOSS OR DAMAGE TO THE CARGO:

IN CASE THE LOSS OR DAMAGE OF THE CARGO, THE CARGO OWNER WILL GET THE AMOUNT OF THE CARGO LOST FROM HIS INSURER WHO WILL IN RETURN GET THAT MONEY FROM THE SHIP OWNER WHICH IN TURN WILL GET THAT MONEY FROM P&I CLUB.

OTHER LIABILITIES:

1. STOWAWAYS.
2. OIL POLLUTION.
3. WRECK REMOVAL IN CASE THE SHIP SINKS AND IS BLOCKING NAVIGATION OF OTHER SHIPS.

HOW P&I WORKS

1. P&I IS A COLLECTION OF SHIP OWNERS WHO CLUB TOGETHER TO INSURE SIMILAR RISKS ON MUTUAL BASIS.
2. PREMIUM IS ALSO MUTUAL AND IS ESTIMATED FOR A GIVEN POILCY YEAR AND DECIEDED AT MINIMUM 3 YEARS LATER.
3. PREMIUM IS ALSO CALLED “CALLS”.
4. CALLS CAN BE FULL ESTIMATED TOTAL CALL OR DIVIDED INTO ADVANCE AND SUPPLEMENTARY CALLS.
5. ESTIMATED TOTAL CALL IS BENEFIAL TO BE CHARGED AT FIRST POLICY YEAR SO THAT MEMBER CAN FULLY BUDGET HIS CALL. BEFORE THE POLICY YEAR IS FINALLY CLOSED, THE CLUB CAN DECIEDE TO COVER THE CLAIMS AND TO CHARGE AN ADDITIONAL SUPPLEMENTARY CALL.

UNDERWRITING (EVALUATING THE RISK)

WHEN A SHIPOWNER REQUIRES P&I INSURNACE FOR THE SHIP, THE CLUB UNDERWRITERS WILL ASK FOLLOWING INFORMATION TO MAKE A RISK PROFILE OF THE VESSEL.

1. GROSS TONNAGE.
2. YEAR OF BUILD.
3. NO. OF CREW MEMBERS
4. TYPE OF VESSEL.
5. TYPE OF CARGO CARRIED.
6. AREA OF TRADING.
7. LINER TRADE OR TRAMP.
8. CLASSIFICATION SOCIETY.
9. MANAGEMENT EXPERTISE.
10. COMPLIANCE WITH NATIONAL AND INTERNATIONAL REQUIREMENT.
11. HOW MANY SHIPS IN THE COMPANY.
12. PREVIOUS P&I HISTORY.

ONCE THE RISK IS ESTIMATED, THE PREMIUM IS GENERATED. THE CLUB OFTEN WILL AUDIT THE COMPANY OF THE SHIP AND WILL SURVEY ONE OR MORE SHIPS IN THE NEW FLEET TO ENSURE THE QUALITY AND TECHNICAL STANDARS OF THE SHIPS.

LOSS RECORDS

1. P&I CLUB WILL KEEP RECORD FOR EACH INDIVIDUAL SHIP ENTERED WITH THE CLUB BASED ON THE LAST FIVE INSURANCE YEARS.
2. THIS RECORD IS OF ALL PAYMENTS MADE BY THE MEMBER IN THE FORM OF PREMIUM, ALL MONEY COLLECTED BY THE MEMBER AS COMPENSATION PAID TO HIM BY THE CLUB AND OTHER COSTS.
3. THE CLUB WILL PREPARE A LOSS RECORD FOR THAT SHIP AND OVERALL LOSS RECORD FOR THAT PARTICULAR FLEET.
4. HENCE A LOSS RATIO IS ESTABLISHED FOR THE FLEET.

LOSS RATIO= COMPENSATION PAID BY THE CLUB ON MEMBERS BEHALF/PREMIUM PAID

• HIGHER THE LOSS RATIO, HIGHER WILL BE THE PREMIUM.

MAIN RISKS COVERED UNDER P&I

1. CARGO LOSS/DAMAGE/DELAY ETC.
2. LOSS OF LIFE OF CREW OR PASSENGERS.
3. OIL POLLUTION
4. COLLISION AND CONTACT LIABILITY
5. WRECK REMOVAL AND OBSTRUCTION
6. GENERAL AVERAGE
7. FINES
8. QUARANTINE AND DISINFECTION REQUIREMENT.
9. LIABILITIES FOR STOWAWAYS, REFUGEES, SALVAGE AND TOWAGE ,ETC.