With little progress in establishing a protection and indemnity (P&I) entity to insure cargo vessels, the Centre is considering deploying its own funds as preliminary investment. This approach would involve private insurers and shippers contributing at a secondary stage, according to multiple officials familiar with the development.
More than a year after Union Finance Minister Nirmala Sitharaman’s unexpected announcement calling for a P&I entity, the lack of regulatory clarity and the nascency of the Indian shipping sector have slowed progress on this key initiative.
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The Ministry of Ports, Shipping, and Waterways initially requested insurers and shipping companies in February to provide the first layer of insurance for shippers and shipbuilders, with reinsurance expected to be managed by larger global players in a second layer.
“We’ve held several rounds of discussions, but the quantum of funds the industry is willing to commit won’t be much. We’re exploring options, including the possibility of an initial ‘seed’ fund once legislative provisions are in place,” a senior official from the shipping ministry revealed. “This could be done directly or through the Maritime Development Fund, but we will need firm structure and clarity from the Department of Financial Services (DFS) before finalising anything.”
An inter-ministerial consultation process has been ongoing this year to create the marine insurance entity, with industry representatives participating. Officials say the finance ministry is likely to propose an amendment to the Insurance Act, allowing mutual insurance associations — a critical provision that has impeded the formation of a P&I club. For now, the government is
considering starting with a fixed premium framework.
Initially, the proposed P&I entity would cover only coastal and riverine vessels, which fall outside the international P&I framework and carry a lower risk profile, as previously reported.
The ministry is exploring international partnerships to pool funds for the insurance entity, potentially with government-backed funds or other P&I clubs, the official said, adding, but this would occur later, when the entity would be handling export-import cargo.
A senior finance ministry official noted that Indian-owned ships are currently insured in various countries, with premiums substantially higher for vessels navigating volatile regions like West Asia and Russia. “They (the shipping ministry and other stakeholders) want to explore options, possibly a mutual insurance model. India’s marine insurance sector is not very mature in providing coverage for shipping. We are trying to establish a mechanism to address this,” he explained.
“This will take time; talks are ongoing. It’s a significant decision, and we need to coordinate our efforts to make it successful. However, no timeline has been set,” said a top executive at a public sector insurance company involved in the consultative process.
Queries sent to the Ministry of Ports, Shipping, and Waterways, as well as the Ministry of Finance, remained unanswered until publication.
P&I insurance offers shipowners coverage against costs in the event of accidents that could impact cargo, human lives, and the environment. This coverage is typically provided through not-for-profit clubs of like-minded shipowners. The International Group, comprising 12 P&I clubs, offers marine liability coverage to approximately 90-95 percent of the world’s sea tonnage.
First Published: Oct 11 2024 | 12:06 AM IST
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Centre considers seed funding to establish a shipping insurance entity | Economy & Policy News[/gpt3]
With little progress in establishing a protection and indemnity (P&I) entity to insure cargo vessels, the Centre is considering deploying its own funds as preliminary investment. This approach would involve private insurers and shippers contributing at a secondary stage, according to multiple officials familiar with the development.
More than a year after Union Finance Minister Nirmala Sitharaman’s unexpected announcement calling for a P&I entity, the lack of regulatory clarity and the nascency of the Indian shipping sector have slowed progress on this key initiative.
Click here to connect with us on WhatsApp
The Ministry of Ports, Shipping, and Waterways initially requested insurers and shipping companies in February to provide the first layer of insurance for shippers and shipbuilders, with reinsurance expected to be managed by larger global players in a second layer.
“We’ve held several rounds of discussions, but the quantum of funds the industry is willing to commit won’t be much. We’re exploring options, including the possibility of an initial ‘seed’ fund once legislative provisions are in place,” a senior official from the shipping ministry revealed. “This could be done directly or through the Maritime Development Fund, but we will need firm structure and clarity from the Department of Financial Services (DFS) before finalising anything.”
An inter-ministerial consultation process has been ongoing this year to create the marine insurance entity, with industry representatives participating. Officials say the finance ministry is likely to propose an amendment to the Insurance Act, allowing mutual insurance associations — a critical provision that has impeded the formation of a P&I club. For now, the government is
considering starting with a fixed premium framework.
Initially, the proposed P&I entity would cover only coastal and riverine vessels, which fall outside the international P&I framework and carry a lower risk profile, as previously reported.
The ministry is exploring international partnerships to pool funds for the insurance entity, potentially with government-backed funds or other P&I clubs, the official said, adding, but this would occur later, when the entity would be handling export-import cargo.
A senior finance ministry official noted that Indian-owned ships are currently insured in various countries, with premiums substantially higher for vessels navigating volatile regions like West Asia and Russia. “They (the shipping ministry and other stakeholders) want to explore options, possibly a mutual insurance model. India’s marine insurance sector is not very mature in providing coverage for shipping. We are trying to establish a mechanism to address this,” he explained.
“This will take time; talks are ongoing. It’s a significant decision, and we need to coordinate our efforts to make it successful. However, no timeline has been set,” said a top executive at a public sector insurance company involved in the consultative process.
Queries sent to the Ministry of Ports, Shipping, and Waterways, as well as the Ministry of Finance, remained unanswered until publication.
P&I insurance offers shipowners coverage against costs in the event of accidents that could impact cargo, human lives, and the environment. This coverage is typically provided through not-for-profit clubs of like-minded shipowners. The International Group, comprising 12 P&I clubs, offers marine liability coverage to approximately 90-95 percent of the world’s sea tonnage.
First Published: Oct 11 2024 | 12:06 AM IST
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