Advertisement
When should a housing society in Mumbai start considering re...
From GST on JDAs to SEBI’s REIT reclassification and the S...
Stay ahead in the world of real estate with our daily podcas...
Stay ahead in the world of real estate with our daily podcas...
The central government is working on a dedicated insurance support mechanism for shipping companies as risks rise due to the ongoing West Asia conflict. The proposal includes setting up a domestic protection and indemnity (P&I) structure and a war-risk insurance fund of around INR 1,000 crore. Global insurers have reduced exposure to high-risk routes like the Strait of Hormuz, leading to higher premiums and limited coverage. The move aims to ensure smoother trade operations, reduce reliance on foreign insurers, and support Indian shipping firms and exporters facing cost pressures.
The government is working on a structured insurance support system for shipping companies as geopolitical tensions in West Asia continue to affect maritime trade and increase operational costs. Advertisement
A key proposal under discussion is the creation of a domestic protection and indemnity (P&I) club. This entity would provide liability insurance to Indian shipowners and help reduce dependence on foreign insurers, who currently dominate this segment. The need for such a mechanism has become more urgent as global insurers have started limiting coverage for vessels operating in conflict-prone regions.
Shipping routes passing through the Strait of Hormuz have seen increased risk levels, prompting insurers and reinsurers to either raise premiums sharply or withdraw coverage in certain cases. This has made it difficult for shipping companies to secure affordable insurance, directly impacting freight rates and overall logistics planning.
To address this, the government is also considering setting up a war-risk insurance fund of around INR 1,000 crore. This fund is expected to support insurers in underwriting high-risk voyages and ensure that vessels continue to operate without major disruptions. It may act as a financial backstop in situations where private insurers are unwilling to take exposure.
Industry stakeholders, including shipping companies and exporters, have highlighted the sharp increase in war-risk premiums and the uncertainty around cargo movement. These concerns have been taken up with the government, following which consultations have been initiated to explore regulatory and financial solutions.
The idea of establishing an Indian P&I structure has been examined in the past as well, but it did not move forward due to issues related to scale, capital requirements, and operational structure. The current situation has brought renewed focus on the proposal, and a detailed study is being carried out to assess its feasibility.
The ongoing conflict in West Asia has also led to operational disruptions, including delays and vessels waiting near key trade routes. Since a large share of India's crude oil and energy imports pass through these corridors, maintaining smooth shipping operations is critical for supply stability.
As an interim step, the government has also looked at easing the burden on exporters by addressing high war surcharges and insurance-related challenges. Efforts are being made to ensure cargo movement remains steady and port operations are not affected due to external risks.
Overall, the proposed insurance facility is aimed at providing stability to the shipping sector, ensuring availability of risk coverage, and supporting trade continuity during uncertain global conditions.
5th Jun, 2025
25th May, 2023
11th May, 2023
27th Apr, 2023
Advertisement
Facebook
Whatsapp
