India Prepares to Launch its Own P&I Club
India's government is reportedly ramping up to launch its own local P&I club. Its first services would be for the domestic market, but it could expand later to cover international shipping interests, according to local media - and this could provide India a way around disruptive Western sanctions.
The new India Club will reportedly operate as a traditional insurance cooperative, pooling premiums from its shipowning members and drawing on support from the national government. Top Indian insurers like New India Assurance and GIC Re are expected to play a part in its creation. In the first phase, it is intended to reduce Indian shipowners' dependence on foreign insurers and potentially cut costs for coastwise trade.
Indian officials have previously called for a locally owned P&I club that would provide sanctions-resistant cover for international trade. The Indian downstream sector has a voracious appetite for Russian crude, and it has absorbed much of the leftover volume that Europe abandoned when Russia invaded Ukraine. The sales arrangement is beneficial for Indian refiners and the Indian economy, since the oil is sold at a discount price.
Western sanctions on Russia have occasionally interfered with this trade. Gatik Ship Management, a Mumbai-based tanker operator that sprung up in the first year of the war, flourished briefly in the Russian oil trade with support from Western service providers. Its fleet of 60 tankers drew on the services of some of the largest insurers and class societies. However, when news spread that Gatik might be out of compliance with Western sanctions, these overseas partners ended their agreements - leaving Gatik high and dry. (Gatik eventually sold off its fleet, citing "substantial losses due to shifts in insurances, flags, and classes.")
In recent months, a small number of India-bound tankers with Russian oil cargoes have had to divert to other destinations because of sanctions-related difficulties, including payment processing challenges and sanctions on specific vessels. The Indian government has been keenly aware of the disruption and has been discussing the creation of a sanctions-resistant, locally-held P&I club in response.
"I would think it is important to have a P&I entity of India's own ownership," said Finance Minister Nirmala Sitharaman in October 2023. "It would reduce India's vulnerability to international sanctions and pressures to provide strategic flexibility in shipping operations."