Clubs cover a wide range of risks including personal injury to crew, passengers and others on board, cargo loss and damage, oil pollution, wreck removal and dock damage. They also provide a wide range of services to their members on claims, legal issues and loss prevention, and often play a leading role in the management of casualties.
The main P&I clubs belong to the International Group (IG) which enables claims sharing and joint reinsurance arrangements, allowing the clubs to cope with the occasional big incident. There are 13 clubs in the IG and together they account for about 90 per cent of the world's ocean-going tonnage.
Each group club is an independent, non-profit making mutual insurance association, controlled by its members through a board of directors or committee elected from the membership. Usually there is a management company which runs the club.
The clubs fulfil a role unique to the shipping industry. In times of trouble, the first phone call is usually to the P&I club. Just in case that all sounds rather cosy, it is important to say that the clubs compete with one another both on price and service. Many owners do switch between clubs at the annual renewals to obtain cheaper cover, while others tend to give a greater weight to other factors such as service and the extent that they have a say in the way their club is run.
Within shipping, the P&I club system is more or less universally seen as a highly effective and valuable asset, something based on long experience and still meeting the industry's needs.
So there should be no problem, you might think, and I can finish the column here.
Of course there is a problem and once again, as with other important shipping issues, the problem is the European Union, or more specifically the bureaucrats working within competition directorate of the European Commission (EC).
Having claimed the scalp of the conference system they appear once again to have the P&I clubs in their sights. Brussels has periodically investigated P&I in the past, but the latest probe has rung alarm bells within the industry.
Albert Engelsman, managing director of Netherlands-based Wagenborg Shipping and chairman of the North P&I club has denounced the investigation as potentially 'irresponsible'.
He said recently: 'It is unclear to the shipowner members of P&I clubs, who are also the consumers, why an investigation is being carried out into a tried-and-tested system that delivers cost benefits to consumers and also to third parties. The pooling agreement between the 13 members of the International Group enables shipowners to trade and comply with the increasingly complex and regulated world of international maritime conventions - it would therefore be irresponsible for the European Commission (EC) to jeopardise what is an invaluable global system.'
He added that it was all too easy for regulators and industry commentators to focus on the 'light competitive restraint' of the International Group agreement and to ignore the fact that most maritime liability conventions are underpinned by the insurance provided by IG clubs.
He added: 'Too often the clubs are given insufficient credit for the invaluable role they play enabling global trade - quite simply, the majority of the world's shipowners and operators depend and rely upon the unparalleled liability insurance provided by the clubs. In my view, we must do everything we can to ensure that this wonderfully unique system continues to serve the best interests of the shipping industry and society.'
There will be few within shipping who will disagree with Mr Engelsman. Meanwhile, the International Chamber of Shipping (ICS) and International Shipping Federation (ISF) are to meet EC officials at the latter's request in order to get a better understanding of the 'main issues and realities of the P&I clubs'.
The EC has told the two closely linked industry bodies that it is investigating whether the IG's claims sharing and joint reinsurance arrangements infringe EU antitrust rules. In a briefing paper, ICS and ISF say that they have no direct involvement in the arrangements under consideration, but strongly support the P&I system for 'the benefits it provides to shipowners through the provision of cost effective insurance to meet their liabilities, as well as consumers and society generally'. They stress that it is necessary to have the security of an established system of liability insurance which will pay claims promptly and efficiently.
ICS and ISF carefully go through all the benefits of the current P&I system in their paper and will no doubt put their viewpoint across persuasively to the commission. Let's hope Brussels is listening.
Yet again, though, the Asian shipping community is having to watch while European officials threaten to tinker unilaterally with systems that are global, not European, in nature. The Singapore Shipping Association is a member of ICS and so its interests are being defended robustly, but this is an issue that needs watching carefully.
