The intention of P&I cover is to protect the ship owner's interests against claims from third parties and to indemnify in case ship owner is liable to compensate third party losses.
The Protection & Indemnity (P&I) Clubs (around a group of 13 clubs now in the world) provide liability cover (protection and indemnity) for approximately 90% of the world’s ocean-going tonnage.
Each Group club is an independent, non-profit making mutual insurance association, providing cover for its ship-owner and charterer members against third party liabilities relating to the use and operation of ships. Each club is controlled by its members through a board of directors or committee elected from the membership.
There are normally two categories/classes of cover available from most P&I insurers, namely:
Category I - Protection & Indemnity (P&I):
This is general liability insurance, which would cover ship owners' liability for main exposures they may face in today's shipping, including, but not limited to:
- Passenger (and other persons carried on board) liability
- Stowaways and refugees
- Collision and contact with fixed or floating objects
- Wreck removal
- General Average not recoverable under Hull Policy
Category II - Freight, Demurrage & Defense (FD&D):
This insurance is covering ship owners' reasonable costs for necessary legal assistance in relation to disputes, which are directly connected with the operation of the insured vessel.
It goes without saying that you do not need to be liable to be held liable, so FD&D cover is becoming more and more popular within the shipping community these days.
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