An Introduction to P&I Insurance and Loss Prevention (Third Edition)

This publication introduces readers to P&I Club representation, detailing requirements for hull and machinery (H&M) and protection and indemnity (P&I) insurance. P&I underwriting is also examined through subjects such as obtaining income from premiums. The book is supported by extracts from the ISM Code, outlining the safety requirements shipping companies should endeavour to meet. Detail is given on risks excluded from P&I insurance, such as loss of hire and war. It is a key reference book for North’s long established educational courses on the topic of marine insurance.

Ships’ Masters, officers and those working within the shipping industry will be aware that unforeseen incidents can and do occur. Fortunately, most of these incidents are minor and do not result in significant repercussions or a claim against the ship. However, sometimes incidents can be more serious and it is for the liabilities arising from these incidents that marine insurance, including protection and indemnity (P&I) insurance, is provided.

This publication examines the development of marine insurance leading to the formation of P&I Clubs. It gives an overview of P&I Clubs, including how they work with correspondents to provide a worldwide service. It also looks at the role of the International Group of P&I Clubs (also referred to as the International Group or ‘IG’). It is important to understand the insurance requirements of a ship operator and how P&I Clubs provide an important component of that insurance.

Insurance exists to avoid or minimise financial uncertainty. In the case of a shipowner, insurance is usually confined to the financial consequences of damage to its own ship, death or injury to people, or damage to other people’s property. These are all risks that the insured person or company could not reasonably foresee or avoid. There are two principal types of marine insurance:

• Hull and machinery insurance (H&M)
• protection and indemnity insurance (P&I).

The shipowner may also have additional requirements for which other insurance cover is available, including freight, demurrage and defence (FD&D) insurance, war risks insurance and strike insurance. All of these will be detailed throughout the course of the publication.

Chapter 1 Introduction to P&I Clubs
1.1 Ship Operators’ Insurance Requirements
1.2 History of Marine Insurance
1.3 Mutual P&I Clubs Today
1.4 International Group of P&I Clubs
1.5 Insurance Not Provided by International Group P&I Clubs
1.6 Advantages of Mutual P&I clubs
1.7 P&I Correspondents
1.8 Summary

Chapter 2 P&I Underwriting
2.1 Premium Income
2.2 Types of Premium
2.3 Policy Year
2.4 Loss Ratio
2.5 Abatement
2.6 Reinsurance
2.7 Reserves
2.8 Entering Ships in a P&I Club
2.9 Summary

Chapter 3 P&I and Loss Prevention
3.1 Need for Loss Prevention
3.2 Reactive Approach to Loss Prevention
3.3 Proactive Approach to Loss Prevention
3.4 P&I Clubs and Loss Prevention
3.5 Summary

Chapter 4 P&I Principles and Rules
4.1 Underlying Principles of P&I
4.2 General Rules Governing P&I Insurance
4.3 Major categories of risk covered by P&I
4.4 Summary

Chapter 5 P&I Insurance for People
5.1 International Health and Safety Legislation
5.2 Domestic Health and Safety Legislation
5.3 Personal Injury and Illness
5.4 P&I Cover for Ship’s Crew
5.5 P&I Cover for Supernumeraries
5.6 P&I Cover for Passengers
5.7 P&I Cover for Third Parties
5.8 Loss Prevention for Crew, Passengers and Third Parties
5.9 Stowaways
5.10 Persons in Distress
5.11 P&I Cover for Stowaways and Persons in Distress
5.12 Loss Prevention for Stowaways and Persons in Distress
5.13 Diversion and Deviation
5.14 P&I Cover for Diversion and Deviation
5.15 Loss Prevention for Diversion and Deviation
5.16 Summary

Chapter 6 P&I Insurance for Cargo
6.1 International Trade
6.2 International Conventions Relating to the Carriage of Goods at Sea
6.3 Charterparties and Chartering
6.4 Charterparty Forms
6.5 Relationship Between the Charterparty and Bill of Lading
6.6 Time Charterparties
6.7 Voyage Charterparties
6.8 Charterparty Problems
6.9 P&I Cover for Cargo
6.10 Loss Prevention for Cargo
6.11 Summary

Chapter 7 P&I Insurance for Ships
7.1 Collisions
7.2 Insurance Cover for Collisions
7.3 Loss Prevention for Collisions
7.4 General Average and Salvage
7.5 Insurance Cover for General Average and Salvage
7.6 Damage to Third Party Property
7.7 P&I Cover for Damage to Third Party Property
7.8 Loss Prevention for Damage to Third Party Property
7.9 Wreck Removal
7.10 P&I Cover for Wreck Removal
7.11 Towage
7.12 P&I Cover for Towage
7.13 Pollution
7.14 P&I Cover for Pollution
7.15 Loss Prevention for Pollution
7.16 Summary

Chapter 8 Other P&I Risks, Exclusions and Discretionary Cover
8.1 Other Risks and Liabilities Covered by P&I
8.2 Exclusions and Risks not Covered by P&I
8.3 Discretionary Nature of P&I insurance
8.4 Summary

Chapter 9 P&I Claims Handling
9.1 Advising of the Incident
9.2 Visitors to the Vessel
9.3 Responding to the Incident
9.4 Appointing Experts
9.5 Establishing Contact
9.6 Risk of Arrest
9.7 Evaluating Evidence
9.8 Submission of Claim Documents
9.9 Settlement Negotiations
9.10 Possible Indemnity Claims
9.11 Choice of Jurisdiction and Law
9.12 Arbitration
9.13 Mediation
9.14 Early Intervention
9.15 Interaction of P&I and H&M Insurers
9.16 Claims Handling Following Personal Injury Incidents
9.17 Claims Handling Following Collisions
9.18 Summary

Chapter 10 Other Types of Marine Insurance
10.1 Hull and Machinery insurance
10.2 Increased Value Insurance
10.3 Freight, Demurrage and Defence Insurance
10.4 War Risks Insurance
10.5 Summary

NorthStandard is one of the leading providers of global marine insurance products and services across the maritime industries. Established through the merger of North P&I Club and the Standard Club in February 2023, NorthStandard brings together over 300 years of marine insurance heritage.

From headquarters in the UK and with offices throughout Europe, Asia and the Americas, NorthStandard offers a unique blend of worldwide presence and class-leading expertise across multiple specialist areas, including P&I, FD&D, War Risks, Strike & Delay, Hull and Machinery and ancillary insurance. Its Sunderland Marine and Coastal & Inland divisions also provide cover for owners’ fixed premium P&I, fishing vessels, inland waterway and coastal trading vessels and aquaculture. NorthStandard’s comprehensive local market and sector knowledge is underpinned by continuous investments in market-leading digital technologies.

NorthStandard is a leading member of the International Group of P&I Clubs (IG) and is fully committed to upholding the shared objectives of its 12 independent member clubs, which provide liability cover for approximately 90% of the world’s ocean-going tonnage.