Protection and indemnity insurance
, more commonly known as "P&I"
insurance, is a form of mutual maritime insurance provided by a P&I Club
. Whereas a marine insurance company
provides "hull and machinery" cover for shipowners, and cargo cover for cargo owners, a P&I Club provides cover for open-ended risks that traditional insurers are reluctant to insure
. Typical P&I cover includes: a carrier's third-party risks for damage caused to cargo during carriage
; war risks; and risks of environmental damage such as oil spills and pollution. In the UK, both traditional underwriters and P&I clubs are subject to the Marine Insurance
A P&I 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. Originally, P&I Club members were typically shipowners, ship operators or demise charterers, but more recently freight forwarders and warehouse operators have been able to join.
Whereas the assured
pays a premium to an underwriter for cover which lasts for a particular time (say, a year, or a voyage), a P&I Club member instead pays a "call". This is a sum of money that is put into the Club's pool
, a kind of "kitty". If, at the end of the year, there are still funds in the pool, each member will pay a reduced call the following year; but if the Club has made a major payout (say, after an oil spillage) club members will immediately have to pay a further call to replenish the pool.
There is an International Group of P&I Clubs based at Peek House, London. These Clubs cooperate to provide funds in the event of huge claims using a complex system
to determine liability.