Modi government to launch first marine insurer, countering Western pressure
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 initiative aims to provide third-party insurance for Indian ships operating in coastal areas and inland waterways. Shipping Secretary T.K. Ramachandran revealed this plan during an interview, highlighting the need for domestic companies to provide insurance cover for these vessels.
Strategic move
Reducing dependence on international P&I clubs
The establishment of the India Club is also a strategic move to reduce India's dependence on international P&I clubs for insurance coverage. These global entities often deny coverage to shipping lines operating between countries under sanctions. Currently, third-party risks in the shipping sector are insured by 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 funding
The Indian government is also looking at the possibility of funding the new P&I entity. Fleet owners and public sector insurance companies could contribute some initial capital to help India Club start underwriting insurance. The Ministry of Ports, Shipping, and Waterways (MoPSW) is also looking to form a coalition of domestic fleet owners on coastal and inland waterway routes for this purpose.
Implementation plan
Proposal to be sent to Union Cabinet for approval
A tender has already been issued, inviting consultants who can help set up the India Club. Based on the recommendations of these consultants and its own consultative exercise, MoPSW may finalize a proposal for this entity. The proposal would then be sent to the Union Cabinet for approval. Ramachandran said they are "moving forward on the plan to have a distinct Indian P&I entity."
Insurance coverage
What is a P&I club?
A P&I entity or club is a mutual insurance association that provides risk pooling information and representation for its members. Unlike a marine insurance company, which reports to its shareholders, a P&I club reports only to its members. These include ship owners and operators, charterers, freight folders, and warehouse owners.They provide coverage for a carrier's third-party open-ended risks such as damage caused to cargo during carriage or environmental damage like oil spills.