Govt open to legislative changes for domestic P&I entity as Bharat Maritime Insurance Pool gains traction

Speaking at a workshop in Mumbai on June 5 to review the implementation of BMIP, Debasish Prusty, Additional Secretary, Department of Financial Services, Ministry of Finance, said the pool had issued 85 policies within less than a month of its launch on May 12, covering cargo war risk and hull war risk. According to Prusty, BMIP has already delivered significant savings to the shipping industry, with premiums for hull war risk declining by around 27 per cent and cargo war risk premiums falling by nearly 48 per cent compared to pre-conflict levels. However, while war risk policies have seen strong uptake, Protection and Indemnity (P&I) cover has attracted limited participation so far. Prusty urged industry stakeholders to identify barriers preventing wider adoption of P&I policies through the pool and suggested exploring a regulatory framework that could support the development of a domestic P&I ecosystem.

P&I insurance covers third-party liabilities arising from ship operations, including oil pollution, wreck removal, cargo claims, crew liabilities and damage to port infrastructure. Globally, such risks are primarily insured through the International Group of Protection and Indemnity Clubs (IG Clubs), a London-based association of 12 mutual insurers that provide liability cover for approximately 90 per cent of the world’s ocean-going fleet by tonnage.

Prusty proposed that India initially focus on building domestic P&I capacity for coastal and harbour risks before expanding coverage to ocean-going vessels. He also suggested leveraging the Maritime Development Fund (MDF) to support the capitalisation of a domestic P&I entity. “Can we have an IRDAI-licensed fixed premium P&I insurance product for Indian coastal and harbour risks? Can we think of leveraging the Maritime Development Fund for capitalising a domestic P&I Club?” he asked.

The BMIP currently operates with a total corpus of about $1.5 billion, comprising a $1.4 billion sovereign backstop guarantee from the Union Government and ₹950 crore contributed by 21 participating underwriters as the first layer of risk coverage.

Prusty said the government would fully support any legislative changes required to accommodate a mutual insurance structure compatible with international standards. “I am mindful of the legislative requirements, which we will fully support if there is a need to factor mutuality and redefine the insurance business under the Insurance Act. We can go ahead with that and make it compatible with international standards and regulations,” he said.

The BMIP was created to strengthen India’s maritime insurance resilience amid growing geopolitical uncertainties, sanctions regimes and disruptions affecting global trade routes. Prusty noted that nearly 95 per cent of Indian shipping tonnage currently relies on P&I cover provided by IG Clubs, exposing shipowners to rising insurance costs during periods of geopolitical tension.

He highlighted that sanctions-related risks have led to premium increases of up to 200 per cent for some Indian vessels, underlining the need for greater domestic insurance capacity.

While emphasising that international compliance standards must be maintained, Prusty said India should work towards creating a credible domestic P&I network that complements existing global arrangements and reduces excessive dependence on foreign insurers.

Given the challenges involved in establishing a full-fledged mutual P&I Club, he suggested that India could initially introduce domestic insurance products incorporating P&I coverage and gradually build expertise, underwriting capacity and risk-sharing networks before moving towards a larger domestic P&I framework.      “Once we develop the product, bring in more players, subscribe it, get the risks covered, then we can build our own network,” he added.