The Insurance Regulatory and Development Authority of India (IRDAI) is in talks with Indian National Shipowners Association (INSA) to develop a protection and indemnity insurance club (P&I club) in India, a move that will support the development of a marine insurance market in India, said insurance sector players at a Maritime India Summit.
Marine premium formed about 2 per cent of the gross domestic premium in FY20. India has been looking to put in place a P&I club for a few years now.
A P&I club is a mutual insurance association that enables risk pooling among members and provides information and representation for its members. A P& I club provides cover for open-ended risks (such as war risk, environmental damage such as oil spills and pollution) that traditional insurers are reluctant to insure. P&I clubs are structures where shipowners, operators and seafarers pool in money that can be used to help shipowners or seafarers in challenging times. These days even freight forwarders and warehouse operators are able to join P&I clubs in overseas jurisdictions.
Digital push
Meanwhile, the General Insurance Council is set to automate the re-insurance payment system, a first such initiative globally, making India the first country to digitise reinsurance, said Kuhu Mohapatra, DGM-Marine Underwriter, New India Assurance Company. Most of the re-insurance work and processes are paper-based globally, she pointed out, adding that Singapore is making an effort in the same direction.
While India accounts for a low share of marine insurance globally, its software prowess could be used to give India the necessary leg-up in the area, pointed out IRDAI.
Subhash Chandra Khuntia, Chairman, IRDAI, said that primary insurance (for marine sector) can grow if there is presence of reinsurance and called for starting a protection and indemnity club in India. He also sought support from shipowners for information sharing regarding Indian and foreign vessels and insurance pooling initiatives such as salvage association and P&I clubs. Salvage is the process of recovering cargo after a ship wreck.
Growth of this area depends on the availability of ecosystem, pointed out Arti Mathur, GM, Oriental Insurance Company. Marine insurance business in India is in the range of 1.5-2 per cent, which further shrunk during the pandemic, Mathur added.
Gujarat International Finance Tec-City IFSC (International Financial Services Centre) can be a platform for such activities, pointed out experts.
As India looks to develop a robust marine insurance sector, challenges that need to be addressed include lack of P&I clubs (for covering risks like loss of lives) and lack of claims assessment expertise, said Mohapatra.