Neptune Atlas

Insurance

P&I clubs and marine insurance

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Ask whether a ship is insured and you have asked a question with at least five answers. The hull is insured under one policy, third party liabilities under a completely different one, war risks under a third because both of the others exclude them, the cargo under a policy the shipowner is not a party to at all, and the legal costs of arguing about any of it under a fourth. The covers are drawn not to overlap, and the gaps between them are deliberate.

The layers

CoverBought byWhat it answers for
Hull and machineryOwner Physical loss of or damage to the ship herself, and conventionally a share of collision liability. A commercial market cover, priced by underwriters
Protection and indemnityOwner, or charterer under separate charterers' cover Third party liabilities: crew, passengers, cargo claims, pollution, wreck removal, damage to fixed and floating objects, the balance of collision liability, fines, stowaways
War risksOwner Written separately because hull and P&I both exclude war. Priced by area and rewritten as the map changes
CargoThe cargo owner The goods. Nothing to do with the ship's insurers, and the reason cargo claims arrive from subrogated underwriters rather than from shippers
Loss of hireOwner Earnings lost while the ship is out of service after an insured casualty. Optional and often not bought
Freight, demurrage and defenceOwner or charterer Legal costs of pursuing or defending commercial disputes, including demurrage claims. Cover for the lawyers, not for the liability

Notice what falls between them. A charterer who has not bought charterers' liability cover has bought nothing. The owner's P&I answers for the owner's liabilities, and a charterer sued for an unsafe port or a cargo claim is on their own.

What makes a P&I club different

A club is a mutual. The members are shipowners, and they are collectively the insurer. There are no shareholders and no premium in the ordinary sense. Members pay calls, and the mechanics of that are the part outsiders find strange:

Cover is defined by the club's Rules rather than a negotiated policy wording, and the board has discretion a commercial underwriter does not. That cuts both ways.

One structural feature catches third parties out. Most clubs operate a pay to be paid rule: the member must discharge the liability first and then claim reimbursement. A claimant with a judgment against an insolvent owner cannot simply proceed against the club, because the member never paid. Personal injury claims are commonly treated more generously and some statutory regimes give a direct right of action, but the default is as stated.

The International Group, the Pool and the tower

Twelve principal clubs make up the International Group, and between them they provide liability cover for around ninety per cent of the world's ocean-going tonnage. They compete for members and share their large claims through the annually renewed Pooling Agreement, which defines what may be pooled, what is excluded, and how a pooled loss is shared.

The structure for the 2026/27 policy year runs like this. Each club retains the first 10 million US dollars of a claim. Above that the claim enters the Pool, which is structured in layers up to 100 million US dollars. Above 100 million the Group's collective excess of loss reinsurance contract attaches, running to 2.35 billion US dollars, and above that a further 1 billion of collective overspill protection sits. The clubs also reinsure part of the Pool through their own captive vehicle rather than buying all of it in the market.

That tower is why a mutual owned by shipowners can answer a casualty far larger than any one club could carry, and it is why the Group can issue the financial security certificates trade now depends on: blue cards evidencing insurance under the civil liability regimes for oil and bunker pollution, and under the wreck removal convention. A ship without them cannot trade to the states that require them, which makes club entry a trading document as much as an insurance one.

Limitation of liability

Underneath all of it sits a right with no equivalent on land: a shipowner may cap liability for most maritime claims by reference to the ship's tonnage. The Convention on Limitation of Liability for Maritime Claims was adopted in 1976 and entered into force in 1986; its 1996 Protocol substantially raised the figures and entered into force in 2004, and amendments raising them again took effect in 2015. Separate tonnage-based scales apply to personal injury and to property claims.

The limit is hard to break, being lost only where the loss resulted from the person's own act or omission committed with intent to cause it, or recklessly and with knowledge that such loss would probably result. States are not uniformly party to the same version, so the number a claimant faces depends on where limitation is sought, and oil pollution from tankers sits under its own separate liability and fund regime.

The English law backdrop, and what changed

Marine insurance was codified in the Marine Insurance Act 1906, which is still the foundation and still where insurable interest, warranty and utmost good faith are defined. The Insurance Act 2015 changed the parts that most often destroyed cover. The duty of disclosure became a duty of fair presentation of the risk, avoidance of the whole contract ceased to be the automatic remedy in favour of proportionate ones, and a breach of warranty no longer discharges the insurer where the assured can show the breach could not have increased the risk of the loss that actually happened. Older commentary written against the 1906 position on warranties describes a regime that no longer applies.

On the cargo side the standard wordings are the Institute Cargo Clauses (A), (B) and (C), published by the Lloyd's Market Association and the International Underwriting Association, whose current editions took effect on 1 January 2009 and replaced the 1982 versions. Clause A covers all risks subject to the stated exclusions; B and C are named perils, narrowing as you go.

Three practical points for a chartering desk

References

General averageA loss deliberately inflicted on one interest to save them all is shared by all of them, which is why a cargo owner who did nothing wrong gets a demand for money. Safe port and safe berthWhether the safe port promise is a guarantee or only a duty of care is one line in the charter and two different answers depending on the governing law. Hague-Visby, Hamburg and Rotterdam RulesOne regime governs most of world trade, one is in force but nowhere that matters, one is not in force at all, and the ancestor is still the law in the United States. War risk areasAn underwriters’ list of water, not a report of what happened last week. What being inside one does to the premium, the crew, the route and the rate. Port state control and detentionsA detained ship cannot perform. What an inspection actually records, and how to read a hull's record without over-reading one bad day.

Neptune Atlas

Neptune Atlas carries the register side of this: flag, class, year built, particulars and the port state control inspection and detention history that an underwriter and a charterer both read before committing. It is not an insurance system. It holds no policies, no certificates of entry and no club correspondence. Every paid plan starts with 7 free days. A card is needed to start them, and cancelling before they end costs nothing.

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