Covering the Basics of FD&D and P&I Insurance


Many individuals are aware of insurance on an individual level, especially in terms of the investment policies and protection benefits for themselves, their properties and their families. Insurance, however, can also apply to marine vessels and ship owners, dating as far back as the twelfth and thirteen centuries. Ship owners at that time were obliged to repay loans for seafaring ventures. They pledged a vessel as security for the loan has become the norm. Since then, the practice has spread across Europe.

Today, ship owners can apply for various marine insurance policies. A couple of them include Freight Demurrage and Defence (FD&D) insurance and Protection & Indemnity (P&I) Insurance.

FD&D Insurance

This insurance gives members with cover for legal costs related to a wide range of disputes and claims handling assistance. Such disputes are beyond the scope of P&I insurance and Hull and Machinery (H&M) insurance and arise from the owning, selling, buying, building or operation of an entered vessel. An FD&D insurance, would cover the expenses of defending or pursuing disputes and claims that could arise in respect of the following:

  • Marine Insurance Contracts
  • Crew Contracts
  • Bunker and Necessaries Contracts
  • Ship Broking, Insurance Broking and Management Service Contracts
  • Salvage, Towage, Stevedoring and Vessel Agency Contracts
  • Vessel Repair Contracts
  • Vessel Purchase and Sale Contracts
  • Vessel Building Contracts
  • Contracts of Affreightment
  • Bills of Lading
  • Contracts of Carriage
  • Charterparties

Additionally, FD&D insurance covers the cost of getting legal assistance and advice, including the expense of hiring experts (as needed) to defend or pursue such disputes. This type of insurance, however, does not cover the principal sum in dispute. An example is a claim being denied by a hull insurer or unpaid hire under a charterparty.

P&I Insurance

cargo ship

This type of insurance, on the other hand, provides cover to charterers, operators and ship owners for third-party liabilities encountered in the business operation of entered vessels. The primary risks covered are costs and liabilities for the following:

  • Vessel’s Proportion of General Average
  • Unrecoverable General Average Contributions
  • Vessel Diversion Expenses
  • Damage to Property on Board the Insured Vessel
  • Crew Substitution and Repatriation
  • Mutiny and Misconduct by Crew
  • Fines and Penalties
  • Pollution
  • Wreck Removal
  • Damage to Fixed and Floating Objects, such as Buoys and Docks
  • Cargo Loss, Damage or Shortage
  • Illness, Loss of Life and Injury of Passengers, Crew and Other Individuals

A P&I cover complements a vessel’s H&M insurance and related covers.

Insurance Terms

When you’re getting either of the two insurance, you’ll come across terms that you need to know. The first one is the insured or assured. This individual has an insurable interest and one with the intention to protect that interest from risk. This assured contracts with an insurer, using a sum of money called the premium. The latter’s promise is to indemnify the assured in case there would be total or partial loss, especially due to insured perils or risks. A broker will act on the behalf of the two parties.

This overview serves as a quick refresher for both ship owners and civilians alike when it comes to FD&D and P&I insurance.

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