The Department of Financial Services(DFS) last week has written to the IFSCA to go ahead with earlier plans to develop P&I Club and Captives in its jurisdiction after eruption the West Asian geopolitical crisis completely disrupting shipping and supply of oil and liquefied petroleum gas (LPG) to India.
New Delhi:In a change of mind,in view of the escalating West Asian conflict triggered by US-Israel war with Iran, after saying no to such proposals earlier, the government has now hurriedly asked the International Financial Services Authority (IFSCA)to revive its old plans to facilitate a Protection and Indemnity Club( P&I Club) for shipping industry as well as Captives in the GIFT IFSC, India’s sole international financial services centre,
Both P&I Club and Captives are currently not allowed in the country.
The Department of Financial Services(DFS), in the last week, had written to the IFSCA to go ahead with its earlier plans to develop P&I Club and Captives in its jurisdiction, GIFT-IFSC, after break out of the West Asian geopolitical crisis completely disrupting the Indian shipping industry and supply of oil,liquefied petroleum gas (LPG) and fertilisers to the country.
Global re/insurers had issued notice of cancellation(NoC) for marine hull and cargo war risk coverage leading to a surge in the re/insurance premiums.
In fact,the IFSCA, way back in Dec, 2022, had asked the government’s nod for setting of both P& I and Captives but was denied approvals without giving any reasons and was intimated about the denials as recently as Feb, 2026.
IFSCA had taken up the issue with the DFS and had discussed the need to “issue a notification under the insurance act for enabling mutual insurance to create a P&I Club.
“ Now that the government has approved our plans for developing a P&I Club in the GIFT- IFSC, IFSCA will start working to frame necessary regulations,” said the DFS sources.
Globally, P&I club is a mutual insurance association covering third-party liabilities like oil spills, cargo damage, and crew injuries. Currently, all third-party risks in shipping are re/insured with the London based International Group of P&I Clubs, a not-for-profit association of 12 P&I Clubs providing marine liability cover for 90 per cent of the world’s ocean-going tonnage,placing a $3.1-billion limit on individual claims.Any claims beyond $5 billion are handled jointly by these clubs.
Each Club is owned by its shipowner and charterer members and is an independent, not-for-profit mutual insurance association, providing cover for its shipowner and charterer members against third party liabilities arising out of the use and operation of ships. Moreover,these competing Clubs share up to $100 million and place reinsurance deals with 70 global re-insurers.eeding $5 billion.
There are also Non-IG (International Group) P&I clubs which are independent marine liability insurers that operate outside the pooling agreement of the top 12-13 global clubs. These include specialized, mutual, or commercial insurers such as Hydor AS, Turk P&I, British Marine (QBE), and China P&I Club, providing essential coverage for smaller vessels, specialized fleets, or specific regions.
Captive insurance is a form of self-insurance where a large company creates its own licensed insurance subsidiary to cover its own risks, rather than paying premiums to third-party insurers. It acts as an in-house risk management tool, offering tailored coverage, potential tax benefits, reduced premiums, and greater control over claims and risk financing.
The proposed Captives in the GIFT –IFSC will come handy for all the PSU Oil and Gas majors to insure their assets at a much cheaper cost, analysts said.
According to industry sources, IFSCA will ensure a robust regulatory framework, which will be a time taking process,a before allowing Captives to operate.in its jurisdiction.
Getting ready, for the first time, Mumbai based Hindustan Petroleum during last year had floated a proposal to select a consultant for setting up of a Captive in the country, which will now facilitate IFSCA to allow the first Captive dealing with Oil & Gas.
The IFSCA is a unified regulator for the development and regulation of financial products, financial services and financial institutions in the International Financial Services Centre (IFSC) in India and currently acts as a regulator of Gujarat based GIFT IFSC, which has global players across the financial sector services including banking, capital markets and re/insurance having their operations in the centre.
Shipping insurance premiums, specifically war-risk coverage for vessels in the Red Sea and Persian Gulf, have surged significantly due to the West Asian crisis, with rates rising from around 0.25 per cent of a ship’s value to over 1 per cent —and sometimes as high as 3 per cent —a 50 or more increase in costs.
Special Secretary in the Shipping Ministry Rajesh Kumar Sinha, last week had said that war risk insurance premiums for ships have increased amid evolving security concerns in sensitive maritime regions.
Sinha had said discussions on setting up a domestic P&I club have been revived as shipping lines raise concerns over war-risk premiums because of the West Asia crisis.
“ We’ve made considerable progress on discussions about a P&I club. A few days ago we raised it again with the Department of Financial Services. A study on this is partly complete and we should have the report very soon. Based on that, we’ll move forward — this will be an important step for us in the near future, Setting P&I Club will be gradual and time taking affair and ” he said.
Marine insurance accounts for merely 2 per cent of the total Indian non-life insurance segment, a low figure by global standard. With over 1,500 vessels in its national fleet. India contributes just 0.8 per cent to global shipping tonnage and had paid Rs 5,500 crore of premium in FY 25N out of which around Rs 150 crore ceded to foreign P&I clubs.
Earlier,Finance Minister Nirmala Sitharaman flagged off the need for establishing a full-fledged, India-owned and based P&I entity despite industry scepticism over the plan given India’s miniscule tonnage.
A local P&I entity, according to Sitharaman, “would reduce India’s vulnerability to international sanctions and pressures to provide greater strategic flexibility in shipping operations”. Besides, it “would also provide a foothold into the specialised segments of P&I business which is currently dominated by very few players internationally where presently India doesn’t have a presence,”
The centre last week had also announced the Resilience & Logistic Intervention for Export promotion (RELIEF) scheme, with a funding of Rs 497 crore, to support Indian exporters impacted by the ongoing conflict in West Asia.
The scheme focuses on mitigating the sharp rise in logistics costs and insurance premiums for shipments heading to the Gulf and West Asia.