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ACQ 2016-1

Introduction of P&I

P&I is a shipowner’s insurance cover for legal liabilities to third parties. “Third Parties” are any person, apart from the shipowner himself, who may have a legal or contractual claim against the ship. P&I insurance is usually arranged by entering the ship in a mutual insurance association, otherwise referred to as a club. The members of such clubs are shipowners, bareboat charterers and/or ship management companies.

Please kindly find below the detailed information about its coverage

  1. Running Down Clause (RDC) and Fixed or Floating Objects (FFO): The P&I cover may include liability for collision, such as when the Member’s ship is in collision with another ship, or when the entered ship strikes an FFO, i.e. a quay, dock or buoy. As a standard P&I cover, 1/4th RDC and 4/4th FFO are included. However, shipowner’s may adjust the amount of RDC in the P&I cover (i.e. no RDC or 4/4th RDC).
  2. Loss of crew members’ personal effects: P&I insurance covers the owner’s liability for loss of crew belongings in case of shipwreck or fire on board. The cover only applies to items which are deemed to be reasonable for any crew member to have with him/her on board.
  3. Loss or Damage to Cargo: usually the cargo insurers (or underwriters) will pay the person or company who owns the cargo ( the receiver) for the costs of loss or damage to that cargo when the cargo has an accident. The cargo underwriters will then seek to recover their losses from the shipowner or charterer. The P&I club will usually take over the handling of such claims on behalf of the assured.
  4. Other P&I covered risks: including liability of stowaways, liability related to drug smuggling, liability for oil pollution and other types of pollution and legal liability for wreck removal if the ship sinks and is blocking free navigation for other vessel.