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Source-This post is based on the article “India Club: what it means for our shipping firms” published in “Live mint” on 10th January 2024.
Why in the News?
India plans to create its own protection and indemnity (P&I) entity, the India Club, to provide insurance for ships in Indian waters thereby reducing reliance on global firms.
What is a P&I entity or club?
1) It is a mutual insurance association offering risk-pooling, information, and representation exclusively for its members, including ship owners, operators, charterers, freight forwarders, and warehouses.
2) Unlike traditional insurers, P&I clubs reports only to their members, cover third-party open-ended risks such as cargo damage, war, and environmental issues like oil spills which are often avoided by conventional insurers.
How many such clubs operate globally?
1) The London-based International Group of P&I Clubs consists of 13 clubs, covering around 90% of global ocean-going ships.
2) Member clubs– The UK, US, Korea, Singapore, Japan, the Netherlands, China, Bermuda, Norway, and Sweden.
3) Club members contribute to the club’s common risk-pool according to the pooling
agreement rules.
Why is India looking to set up its own P&I entity?
A locally focused Indian entity could diminish the nation’s susceptibility to global sanctions, as it ensures coverage for ships operating in regions facing sanctions. The events surrounding the Russia-Ukraine war underscore the importance of having such coverage.
What difficulties might confront such an entity?
1) The move will only benefit players like the Shipping Corporation of India and some small shipping lines as 90% of Indian-owned ships are operating under foreign flags of countries like Panama, Liberia and Kazakhstan.
2) The India Club might encounter challenges if global traders do not accept its cover.
UPSC Syllabus- Indian Economy (Infrastructure)
