A typical voyage will require many insurances. The ship's hull and machinery will need to be insured, as will the cargo being transported and the crew on board.

The vessel's hull and machinery are often insured in Lloyd's of London, or one or more of the large commercial insurance companies and is the responsibility of the shipowner. This is also the case with cargo insurance which is the responsibility of the charterer. Owners must belong to a P&I Club, which will cover the ship for its liability for cargo and will usually provide insurance for crew, death and bodily injury. Charterers will have potential liabilities to third parties including the owner, and these are often also covered via membership of a P&I Club. Other insurance includes War Risks Insurance, relevant when entering areas of high risk.

The Protection and Indemnity (P&I) Clubs

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 Act 1906.

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.

The International Group of P&I Clubs is comprised of:

American Steamship Owners Mutual Protection and Indemnity Association



The Swedish Club

The Britannia Steam Ship Insurance Association

The Japan Shipowners’ Mutual

The London Steam Shipowners

The North of England

The Shipowners’ Mutual

The Standard Club

Steamship Mutual

The West of England Shipowners Mutual

United Kingdom Mutual

A mutual provides risk pooling, information and representation for its members. Some Clubs also offer fixed premium P&I cover which is designed to protect smaller and medium-sized vessels.

The full range of risks covered by the P&I Clubs include crew, stevedore and third party death and injury and other crew liabilities, collision liabilities, damage to docks, pollution, removal of wreck (all of which are ‘protection’ risks), loss of or damage to cargo, ship's proportion of General Average, customs penalties and many types of fine (indemnity risks).

Freight, Demurrage and Defence Clubs are also run by some of the major P&I Clubs. These insure the legal and other costs of dealing with disputes that are otherwise uninsured. Typical claims are for freight, demurrage, collections of debt and the like. New building contracts or Sale & Purchase disputes are amongst the most expensive claims handled by Defence Clubs, who also give legal and commercial advice to their members. 

General Average

There is a General Average act when, and only when, an extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety or the purpose of preserving from peril the property involved in a common maritime adventure. A sacrifice is the loss of or damage to physical property, for instance jettison of cargo. An expenditure is a disbursement of money, for instance salvage costs or expenses entering and while at a port of refuge.

Contracts of carriage, Charterparties and Bills of Lading, almost invariably specify that general averages shall be adjusted according to the York-Antwerp Rules (the most recent version of which is the 2016 Rules). Ship, cargo and freight contribute to the general average and expenditures in proportion to their values at the end of the voyage. The shipowner has a lien on the cargo at destination and therefore requires cargo interests to sign an average bond and their insurers an average guarantee before release of the cargo to consignees. 

Professional Indemnity Insurance

Marine Professional Indemnity insurance is designed to protect firms and individuals within the maritime industry against claims arising from their legal liability and errors & omissions in the exercise of the their professional duties. Cover extensions include third party liability and liability for fines and duty.

ITIC is the leading provider of professional indemnity insurance to the shipping industry. Globally, ITIC provides professional indemnity insurance for professionals working across maritime commercial sectors including; Ship Brokers, Ship Managers, Expert Witnesses, Pool Managers. https://www.itic-insure.com/our-cover/marine/