BT Explainer: Why Bharat Maritime Insurance Pool needs a global outlook to work

After disruptions in the Strait of Hormuz drove up war-risk premiums and triggered insurance cancellations, the government has moved to set up the Bharat Maritime Insurance Pool (BMIP) -- a domestic maritime insurance pool -- to secure coverage for its trade. 

While the Union Cabinet approved the creation of the pool on April 18 to ensure affordable insurance for vessels carrying cargo from any international origin to Indian ports, experts say it needs to focus on a funding model, a strong legal framework and reinsurance backing to join the leagues of global players.

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A few years back, the Indian government and the New India Assurance launched a Protection and Indemnity (P&I) mutual insurance for ship owners. However, it did not succeed with Indian vessels and ship owners skipping it. 

There is a high dependence of Indian vessels on the International Group of Protection and Indemnity (IGP&I) Club for P&I insurance covering third-party liabilities like oil pollution liability, wreck removal, cargo damage, crew injury and repatriation, collision liabilities, and so on. These are led by London-based insurers active in the sector for over 150 years.

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With a renewed push for a domestic insurance pool to protect Indian cargo and vessels, experts flag some key elements for it to succeed amongst the global giants.

What is BMIP?

The government last week created BMIP with a sovereign guarantee of Rs 12,980 crores to facilitate continuous maritime insurance coverages.

The pool ensures that Indian trade continues to have access to affordable insurance for vessels carrying cargo from any international origin to Indian ports and vice versa, even when transiting volatile maritime corridors.

The US-Iran conflict brought focus on domestic marine insurance as war risk premiums are up by 300%, and many are even cancelling insurance for vessels passing through Iranian waters.

No clarity on BMIP?  

Marine insurance experts say BMIP is the need of the hour, but only if done right.

Ishwar Achanta, former member of the National Shipping Board (NSB), says P&I is not just another insurance company. "BMIP, to start with, won’t be a true P&I club without a mutual risk pool of ship owners or backed by massive reinsurance layers and supported by global legal and claims networks. The BMIP may not be, yet, trusted by ports, courts, and counterparties worldwide, which is crucial for us to be recognised, worldwide," says Achanta.

Echoing similar views, P. Sham Jacob, Marine insurance and Claims Expert, says BMIP has an unclear scope, funding model, or ship owner pooling from India and or overseas, and without clear guidelines, IRDAI concurrence, or a solid legal framework from the Government of India, it screams premature delivery.

"Involve Indian P&I experts, court domestic owners, and build real traction. Foreign-registered vessels won't touch it, and we don't even have 1,000 ocean-going Indian-flagged ships to sustain it. Contrast this with London-based or overseas P&I clubs—some with 150 years of history and a rock-solid track record of settling claims worldwide,” he explains.  

What needs to be done?

India has over 1,500 vessels in its national fleet. India contributes just 0.8% to global shipping tonnage yet pays nearly $15 million annually in premiums to foreign P&I clubs.

Marine insurance expert flagged that BMIP must also have a reinsurance dependency. A new P&I club demands regulatory approvals, global ports, overseas maritime authorities acceptance, and deep pockets -- hundreds of millions of US dollars -- to weather 8-10 years of claims settlements, bank guarantees, and reinsurance backing.

Jacob says, established P&I clubs settle claims efficiently: notify loss promptly, submit documents, get surveyed, reviewed, quantified, offered settlement, and paid—often in 30-60 days with full paperwork.
“Mutual clubs streamline this further with expert handlers. India could compete, but without expert buy-in and owner attraction, it's dead on arrival,” he added.