Why is it in the news?

• India plans to establish its protection and indemnity (P&I) entity, known as the India Club, to offer insurance for ships in Indian waters.

About P&I Entity/Club

• P&I Entity/Club is a mutual insurance association providing risk-pooling, information, and representation exclusively for members, including ship owners, operators, charterers, freight forwarders, and warehouses.
• Reports only to its members and covers third-party open-ended risks such as cargo damage, war, and environmental issues like oil spills, often avoided by traditional insurers.

Reasons for Establishing India Club

• A locally focused Indian entity aims to reduce susceptibility to global sanctions, ensuring coverage for ships operating in regions facing sanctions.
• The Russia-Ukraine war highlights the significance of having such coverage.

 Challenges for India Club

• The move may primarily benefit entities like the Shipping Corporation of India and some small shipping lines, as 90% of Indian-owned ships operate under foreign flags (e.g., Panama, Liberia, Kazakhstan).
• The India Club may face challenges if global traders do not accept its coverage, impacting its effectiveness in the international shipping market.

Conclusion

• The establishment of the India Club reflects India’s strategic move to enhance self-reliance in the maritime insurance sector.
• However, challenges related to the acceptance of coverage and the limited impact on a significant portion of the Indian-owned fleet operating under foreign flags need to be addressed for the India Club to achieve widespread success and recognition in the global shipping industry.