Insurance costs and P&I

Marine Insurance and Protection&Indemnity Insurance (P&I) expenses are probably the most unpredictable costs, and there is very little information on the prices, so it is not simple to define the expenditures. Some analysts argue that the total insurance costs may vary from 9 to up to 30% of the OPEX, but typically insurance accounts for 14% of operating costs. Here we will consider the main factors which impact on this cost category. 

1. Hull and Machinery (H&M) Insurance

This insurance covers the physical aspects of the vessel, and the main contributing driver for this cost head is the value of the ship. As long as the ship ages, the insurance costs are increasing, due to the increased number of the H&M-related problems. Safer ships have a benefit to negotiate better insurance price, therefore preventive Rapair&Maintenance policy will play an important role in cost savings. The owners' prior records and reputation will be also taken into consideration, as well as a number of ships in the fleet to be insured. 

The typical H&M claims include:

- Total loss of the vessel

- Damages to the vessel, engines or equipment

- Explosions and fires

- Striking 

- Collisions

- Groundings 

2. Protection and Indemnity (P&I) Insurance 

P&I Insurance is provided by the P&I Club to cover the liability of the shipowner to the third party, such as injury or death of crew members, passengers or visitors, damage to cargo, collision damage or pollution. This cost head also depends on the number of factors. First, it depends on the measures taken by the shipowner or ship manager in terms of the ships' safety and security. As the industry experiencing a pressure from the regulators to apply stricter safety rules, the ships, in general, becoming the safer place. Trading area is a contributing factor, and if the vessels are operating in high-risk or war zones, we can expect increased insurance costs, due to the requirement to have additional coverage. The risk of terrorism and piracy make the prices increase. 

Other types of insurances as War Insurance or Loss of Hire Insurance are also should be considered and the expenses to be taken into the estimation of the total insurance costs. 

 

 

 

 

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