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The Protection and indemnity insurance, commonly known as P&I, is a form of marine insurance provided by a P&I Club. A P&I Club is a mutual (i.e. co-operative) insurance association that provides cover for its members, who will typically be ship-owners, ship-operators or demise chatterers.
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The both P&I Clubs and conventional marine insurers are governed by the provisions of the Marine Insurance Act 1906.
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Although marine insurance dates from the Middle Ages, British ship-owners did not feel the need to purchase liability insurance until the 19th century when injured crew members began to seek compensation from their employers, and the Fatal Accidents Act 1846 facilitated claims by passengers or their survivors.
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The Ship-owners were also becoming increasingly aware of the inadequacy of the available insurance cover in respect of damage caused by their ships in collisions with other ships. The usual cover for claims by other ships and their cargo for collision damage excluded altogether one fourth of such damage and, more seriously, was limited in amount. (The indemnity maximum recovery under hull policies, including both damage to the insured ship and liability for the damage it had caused, was the insured value of the ship).
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Marine insurers provide cover for known quantifiable risks, mainly Hull & Machinery insurance for ship-owners, and Cargo Insurance for cargo owners. By contrast, P&I Clubs provide insurance cover for broader indeterminate risks, such as third party liabilities that marine insurers are loath to cover. Third party risks include a carrier’s liability to a cargo-owner for damage to cargo, a ship’s liability after a collision, environmental pollution and war risk insurance; (although some marine insurers are also prepared to cover war risks).
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The shipper/cargo-owner will take out conventional cover, and the carrier will have P&I cover. If the cargo is lost or damaged, the cargo-owner should first lodge a cargo claim against the carrier. In such a case, the cargo owner will claim against his own insurer. If the cargo-owner fails to claim first against the carrier, but claims against his own insurer, the latter (having reimbursed their client) will, through subrogation, be able to pursue the claim in their own right against the carrier.
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The Marine insurers charge a premium, which guarantees to the assured full cover during the validity of the policy, but P&I insurance is financed not by premiums but by “calls”. Club members contribute to the club’s common pool, out of which claims are paid. The P&I Clubs has cover today more than 90% of the World's oceangoing tonnage is insured by the mutual P&I Clubs that are members of the International Group of P&I Clubs. The following P&I Clubs are for Correspondents.
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United Kingdom Mutual Steamship Insurance Association Bermuda Limited.
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The Britannia Steamship Insurance Association Limited.
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London Steamship Owners Mutual Insurance Association Ltd.
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Assurance foreningen SKULD.
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International Transport Intermediaries Club Ltd. (ITIC).
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Through Transport Mutual Services (UK) Ltd.(TT Club).
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Ingoss trakh Insurance Co. (Russia).
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Norwegian Hull Club (Oslo).
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The South of England P&I (Bermuda) Association.
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Mitsui Sumitomo Insurance Co. Ltd., (Japan).
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ARDAF S.A. Insurance & Co. (Romania).
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