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.
|International Group of P&I Clubs
· Comprises 13 clubs based in London, covering around 90% of global ocean-going ships.
· Includes the UK, US, Korea, Singapore, Japan, the Netherlands, China, Bermuda, Norway, and Sweden.
· Club members contribute to the common risk-pool based on pooling agreement rules.
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.
- 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.