Why Modi government wants to establish a marine insurance group
What's the story
The Indian government is in the process of setting up its first Protection and Indemnity (P&I) entity, named India Club. The move comes as a response to the need for third-party insurance for Indian ships operating in coastal and inland waterways. Shipping Secretary T.K. Ramachandran said that domestic companies will be roped in to provide this cover, which is presently dependent on global firms for securing ships and cargoes.
Strategic move
Aim to reduce vulnerability to international sanctions
The establishment of India Club is also aimed at reducing India's vulnerability to international sanctions and pressures, which often deny insurance coverage to shipping lines between countries facing such restrictions. Presently, third-party risks in the shipping sector are insured with the International Group of P&I Clubs, a London-based group that provides liability cover for over 90% of global shipping lines.
Funding strategy
India Club will have to kickstart underwriting process
To kickstart the underwriting process, fleet owners and possibly even the government may contribute some seed money into the new P&I entity. The Ministry of Ports, Shipping and Waterways (MoPSW) is also looking to form a coalition of domestic fleet owners operating in the coastal and inland waterways routes. Public sector insurance companies and reinsurers will be allowed to join this coalition to give India Club the heft necessary for providing protection cover.
Insurance innovation
What is a P&I club?
A P&I entity/club is a mutual insurance association that provides risk pooling information as well as representation for its members. Unlike marine insurance companies, which report to their shareholders, a P&I club reports only to its members. These include the ship owners/operators, charterers, freight folders and warehouse owners. They act as both insurer providers and receivers for their members and provide coverage for third-party open-ended risks such as damage during carriage, war risks, and environmental damage like oil spills/pollution.