Most of the world’s merchant fleet is covered against marine liability risks by ‘protection and indemnity’ insurance, commonly arranged by entry in one of the mutual insurance associations, or ‘P&I Clubs’, which provide this form of cover. Between them, the 13 member associations of the International Group of P&I Clubs cover about 90% of the world’s ocean-going merchant fleet (and an even higher percentage of internationally trading tankers). This cover is available up to very high financial limits, made possible by the International Group’s pooling and other reinsurance arrangements.
Some ships are covered by other liability insurers, sometimes on a mutual basis by smaller Clubs outside the International Group, and sometimes by other insurers on a fixed premium basis. Risks reinsured outside the IG Pool are normally subject to a lower limit of cover, which may be considered sufficient for vessels presenting a relatively modest level of risk due to their type or size.
Shipowners’ liabilities for oil pollution are commonly governed by laws which make insurance compulsory and allow claims to be brought directly against the insurer. This means that the insurer may incur liability in either of two different ways: one to indemnify the assured, on the terms of the policy, and the other directly to those who have suffered the loss or damage, on the terms of the legislation.
A similar duality applies to passenger claims and, increasingly, to claims for wreck removal.
These topics are examined in more detail in Chapter 20 of Shipping and the Environment, ‘P&I Clubs and other Liability Insurers’.