Protection and indemnity insurance (P&I Insurance) is a type of commercial marine insurance that is provided by a club. This club is a cooperative insurance association that provides insurance for ship owners, operators and charterers. It differs from marine insurance in that it does not have to answer to shareholders, only to its members.
What does P&I Insurance Cover?
Like conventional marine insurance, P&I Insurance is governed by the Marine Insurance Act of 1906. The purpose of P&I Insurance is to cover a broader range of indeterminate risks than those covered in conventional insurance. These include third party liabilities such as damage to cargo, ship’s liability in the event of a collision and environmental pollution insurance.
How does P&I Insurance Operate?
There are no premiums charged for P&I Insurance. Instead, it is financed by “calls,” which are the funds the members of the club contribute to the common pool. This pool is used to pay claims. If the pool does not have enough funds, members will be asked to contribute more calls, but if there are funds left over after a given year, members may be able to pay a reduced call for the next year. This system works because only marine companies with solid reputations are allowed to join a P&I club. If a member is found to be reckless, he or she can be asked to leave the club.
Protection and Indemnity Commercial Marine Insurance can provide a variety of benefits for marine businesses and can be paired with conventional marine insurance for maximum coverage and protection.