The ongoing West Asia war has renewed urgency within the government to set up an India-based protection and indemnity (P&I) entity—tentatively referred to as the “India Club”—to provide third-party maritime insurance for coastal shipping and inland waterways.
The move underscores a structural vulnerability in India’s shipping ecosystem: its near-total dependence on global P&I clubs for specialized marine insurance.
P&I insurance is critical for shipowners as it covers third-party liabilities, including environmental damage, cargo risks and crew-related claims. However, such coverage becomes significantly more expensive during periods of conflict or geopolitical instability—as seen now in rising war-risk premiums—eroding the competitiveness of Indian shipping firms.
A domestic P&I entity could cushion such shocks by offering more stable and potentially lower-cost insurance, particularly for vessels operating within India’s own maritime geography.
Mint explains the proposal and its implications.
What is a P&I entity and why they operate in the form of global clubs?
A P&I entity, or protection and indemnity club, is a mutual insurance association that pools risks among its members.
Unlike a marine insurance company, which reports to shareholders, a P&I club reports only to its members—shipowners, ship operators, charterers, freight forwarders and warehouse owners. Members are both insurers and insured parties.
These clubs provide coverage for third-party, open-ended risks such as:
- Damage to cargo during carriage
- War risks
- Environmental damage, including oil spills and pollution
Such risks are often too large or uncertain for traditional insurers to underwrite independently. The mutual structure allows members to collectively share liabilities that can run into billions of dollars.
How many global P&I clubs exist—and where do Indian shippers fit in?
The International Group of P&I Clubs (IG), largely based in London, comprises 12 principal member clubs. Together, they provide P&I liability cover for approximately 90% of the world’s ocean-going tonnage.
These include clubs based in the UK, US, Korea, Singapore, Japan, the Netherlands, China, Bermuda, Norway and Sweden.
The clubs cooperate through a pooling arrangement to share large claims. Members contribute to a common risk pool according to agreed rules, allowing the group to handle catastrophic claims through shared reinsurance structures.
Indian shipping companies rely almost entirely on these international clubs for P&I coverage.
Why is India pushing for its own P&I club now?
Industry executives and policymakers say the latest spike in insurance premiums—triggered by the West Asia war and heightened risks along key global shipping routes—has sharpened concerns about the absence of a domestic risk-pooling mechanism.
During conflicts, global insurers typically reprice risk abruptly, leading to steep increases in premiums or tighter coverage conditions. This is evident from rising war risk premium for vessels moving in and around the war zone. This disproportionately affects Indian shipping companies, particularly those operating on thin margins.
Additionally, pricing by global clubs reflects global risk perceptions—not India-specific operating conditions. Domestic operators with limited exposure to high-risk international routes still face elevated premiums during global disruptions.
How would an India-based P&I club function?
The proposed entity would operate as a mutual insurance pool. Shipowners would contribute to a collective fund used to settle claims.
The Union ministry of ports, shipping and waterways is spearheading efforts to form a coalition of domestic fleet owners to establish a locally owned P&I entity. The club could initially provide cover for coastal shipping and inland waterways before expanding to international voyages.
The government may provide seed capital. Insurance companies such as New India Assurance and GIC Re are being considered as potential partners. A traditional insurance and reinsurance company may also be involved to ensure proper underwriting and claims servicing.
Such a structure could enable:
- Tailored risk assessment
- Pricing aligned with domestic realities
- Reduced dependence on overseas insurers during geopolitical stress
It could also enhance India’s strategic autonomy in maritime logistics.
How is this different from the Bharat Maritime Insurance Pool (BMIP)?
The government has already approved the BMIP, backed by a sovereign guarantee of ₹12,980 crore.
BMIP is a temporary arrangement designed to provide insurance cover to Indian-linked vessels facing denial of insurance or very high premiums due to the West Asia conflict. It addresses reinsurance gaps in high-risk zones.
An India-backed P&I club, in contrast, would be a permanent, member-driven mutual structure providing certainty on insurance matters beyond crisis periods.
“Technically, India can set up a P&I Club. However with a small Marine Insurance premium (around 2% of the total General Insurance Premium), western P & I Club should be sufficient,” said C R Vijayan, former secretary general of the General Insurance Council.
What challenges does an India-based P&I entity may face?
Despite its potential benefits, setting up a domestic P&I club is complex.
It requires substantial capital, technical expertise in underwriting maritime risks, and global reinsurance linkages to handle large claims.
There are also questions around scale. India’s shipping fleet, while growing, remains relatively small compared to global leaders, which could limit the risk diversification needed for a sustainable insurance pool.
Moreover, global P&I clubs are part of well-established international groupings that provide shared reinsurance and claims support—advantages that a new Indian entity would need time to replicate.
Also, the move will only benefit players like Shipping Corporation of India and a few small shipping lines as 90% of Indian owned ships are operating on foreign flags of countries such as Panama, Liberia, Kazakhstan etc. who have relaxed regulations.
Global traders may also not accept cover provided by Indian club as they largely depend on covers offered by IG clubs that provided insurance globally with quick settlement of claims. Moreover, with coverage and accidental damage for a crude carrying tanker running into $8 billion or more, it will be difficult for any Indian entity to provide such cover at present.