Insurances for Charterers
The difference between P&I insurance and Hull and machinery
Protection and Indemnity is a type of Insurance that protects Owners and Charterers from Liability from their shipping operations. It differs from Hull and Cargo Insurance because these types of insurance cover a physical asset such as the hull and machinery of a vessel the cargo being shipped on a vessel such as coal, steel, logs, barley and other cargoes.
The insurance under HnM and cargo policies provides cover for physical damage to the property insured; this also extends to situations where there may be damage to that asset and a sacrifice has to be made under General Average (GA) by the property owner.
Companies who own and operate ships have a third type of risk or exposure; the risk to third parties of loss or damage to their property caused by the shipping operations that they undertake. Vessels operate in dangerous conditions, the vessels themselves can suffer loss and accident, crew can make mistakes or the sea conditions can result in unexpected accidents including grounding, sinking, pollution, explosion, fire, damage to hull, unsafe berth, unsafe port.
An owner is liable to third parties for damage to their property ie cargo, under crewing contracts for damage or death to employees, under passenger contracts for loss or damage to passengers effects or to death or injury caused by the owner. Also covered are port contracts, berth use agreements, pilotage, towage and other contracts that the owner routinely faces.
Protection covers the support and guidance P&I Insurers provide as part of the policy; indemnity covers the amounts that the Assured has to pay to third parties as part of the shipping operations. Most policies are pay to be paid i.e. the Assured must discharge the claim before seeking indemnity for their loss under the policy.
A charterers also faces third party risks that require a protection and indemnity policy. The risks that a charterer faces is governed by the shipping contracts that they engage in such as the charterparty whether its NYPE, ASBATIME, BALTIME or GENCON and also the bill of lading whether they choose to issue that as the carrier or not.
The charterer therefore has a limited cone of third party risk to only the shipowner, sub-charterer or cargo interest that they contract with but the risks that they face are as real as that assumed by a shipowner.
Where to buy Protection and Indemnity insurance
A shipowner has protection and indemnity cover from a Club who specialises in offering Protection and Indemnity cover to Owners, they are often Mutual organisation who pool risk amongst like-minded owners.
Charterers do not require mutual organisations but do require expertise to protect themselves against loss and damage that they face under shipping contracts. Charterers require a specialisation all to themselves, its contractual but their insurer must understand the contractual framework of sales contracts, charterparties and commercial exposure.
Find the right insurance that can protect you against the risks you’ll face in the industry. For charterers, the MECO Group offers high-quality insurance products to protect you from liability risks. We have insured more than 400 charterers and 16,000 vessels from large shipping companies and cargo interests.