Marine Insurance Essentials: H&M, P&I, War Risks and How to Protect Your Vessel

My name is Davide Ramponi, I’m 20 years old and currently training as a shipping agent in Hamburg. On my blog, I take you with me on my journey into the fascinating world of shipping. I share my insights, practical knowledge, and what I learn as I work toward becoming an expert in the field of Sale and Purchase – the trade with ships.

In previous posts, we’ve talked a lot about ship management—covering technical operations, crewing, commercial strategy, and compliance. But there’s one topic that underpins all of these areas and ensures that shipowners can sleep at night: insurance.

Whether it’s a collision, engine damage, cargo loss, or political unrest—things can go wrong at sea. And when they do, having the right insurance in place can mean the difference between a manageable setback and a financial disaster.

In this article, I’ll walk you through the key types of insurance every ship manager should understand, explain how premiums are calculated, share typical claims, and offer tips to optimise insurance costs without compromising protection. Let’s set sail into the world of marine insurance.

Why Insurance Is a Cornerstone of Ship Management

Shipping is a high-risk business. Vessels operate in harsh environments, across international borders, often carrying valuable cargo through politically unstable regions.

That’s why marine insurance is essential—not just for legal compliance, but for operational continuity and risk management. It allows shipowners, managers, and charterers to transfer financial risks to insurers and focus on running the ship.

There are three main categories of insurance that every manager should know:

1. Hull & Machinery (H&M)

2. Protection & Indemnity (P&I)

3. War Risks Insurance

Let’s explore what each one covers—and how they work together.

1. Hull & Machinery (H&M) Insurance

Hull & Machinery insurance covers physical damage to the ship itself and its machinery.

🔧 What does it cover?

• Collision with another vessel

• Grounding and underwater damage

• Fire or explosion

• Machinery breakdown (e.g. engine failure, steering gear issues)

• Heavy weather damage

• Salvage and towage costs

📌 Example:

A feeder vessel encountered rough weather while crossing the North Sea and sustained damage to the propeller shaft and rudder. H&M insurance covered the dry-docking, repairs, and temporary downtime costs—saving the owner over $400,000.

💡 Tip: H&M policies are typically based on the Institute Time Clauses – Hulls and can be tailored to vessel type, age, and trading region.

2. Protection & Indemnity (P&I) Insurance

While H&M covers damage to your own vessel, P&I insurance covers liabilities to others. This includes crew injuries, environmental damage, cargo loss, and third-party claims.

🛡️ Typical P&I cover includes:

• Injury or death of crew and passengers

• Oil pollution and clean-up costs

• Damage to port infrastructure

• Cargo damage or misdelivery

• Fines and legal costs

• Wreck removal

📌 Example:

A crew member slipped and suffered a serious injury during mooring operations. The ship’s P&I club handled medical costs, repatriation, and compensation to the family. They also provided legal assistance in dealing with the flag state investigation.

🔍 Who provides P&I cover?

Most P&I insurance is provided by mutual clubs, such as the International Group of P&I Clubs. These operate on a non-profit basis and offer access to extensive claims handling expertise.

3. War Risks Insurance

War Risks insurance protects ships against losses resulting from war-like situations, including piracy, terrorism, civil unrest, and confiscation.

💣 Covered events include:

• Acts of war (declared or not)

• Terrorist attacks

• Piracy (in certain regions)

• Seizure or detention by foreign authorities

• Mines, torpedoes, and similar perils

📌*Example:

A vessel passing through the Red Sea was boarded by armed militants. The ship was held for several days before being released. The war risk insurer compensated for the vessel’s delay and loss of hire, as well as minor structural damage during the standoff.

💡 Important: War Risks insurance is often required when trading in listed high-risk zones, and coverage can be added to H&M or bought separately.

Typical Damages and Claims—And How Insurance Responds

Understanding what can go wrong helps highlight the importance of proper coverage. Here are some real-world scenarios:

🔧 Mechanical Breakdown

• Covered by: Hull & Machinery

• Claim example: Main engine failure due to lubrication system malfunction

⚓ Collision in Port

• Covered by: H&M (own vessel) + P&I (damage to other ship or terminal)

• Claim example: Bow damage during docking; repair and liability claims both covered

💼 Cargo Damage

• Covered by: P&I

• Claim example: Container refrigeration failure results in spoiled goods

🌍 Political Detention

• Covered by: War Risks

• Claim example: Vessel detained in a sanctioned country; loss-of-hire paid out

🧍‍♂️ Crew Injury

• Covered by: P&I

• Claim example: Medical evacuation, surgery, and compensation handled by insurer

How Are Marine Insurance Premiums Calculated?

Just like in any form of insurance, premiums depend on risk level. Insurers look at a range of factors before setting the annual cost:

1. Vessel Age and Type

• Older vessels generally have higher premiums

• Complex ships (e.g. LNG tankers) may attract special conditions

2. Trading Area

• High-risk zones (e.g., Gulf of Guinea, Strait of Hormuz) = higher War Risks premiums

• Coastal vs deep-sea operations also matter

3. Claims History

• A vessel or fleet with frequent past claims will pay more

• A clean record can attract loyalty discounts

4. Maintenance and Condition

• Well-maintained ships with strong technical management = lower risk

• Insurers may inspect ships or require survey reports

5. Crew Competence and Safety Culture

• Crewing records and ISM Code compliance impact both P&I and H&M ratings

• Onboard safety practices reduce liability exposure

Tips to Optimise Insurance Costs Without Losing Protection

Insurance is essential, but that doesn’t mean you can’t be smart about it. Here’s how shipowners and managers can reduce premiums while maintaining solid coverage:

✅ 1. Bundle Policies

Negotiate package deals for H&M, War Risk, and Loss of Hire with the same insurer. Bundling can reduce admin costs and provide volume discounts.

✅ 2. Maintain Strong Technical and Safety Standards

Invest in preventive maintenance, safety training, and crew wellbeing. Not only does this reduce claim likelihood—it also builds trust with underwriters.

✅ 3. Use a Broker

A maritime insurance broker knows which underwriters offer the best terms for your specific fleet type and trading pattern. They also help with claim negotiations.

✅ 4.*Review Coverage Annually

Don’t auto-renew without evaluating whether coverage matches your actual trading patterns, vessel changes, or new legal obligations.

✅ 5. Document Everything

Maintain clear maintenance logs, crew certifications, and inspection reports. Insurers value transparency and solid records when assessing risk.

Conclusion: Marine Insurance Is Not Just a Requirement—It’s a Strategy

In today’s complex and high-risk shipping environment, marine insurance is not just a checkbox. It’s a key part of ship management that protects your assets, supports your crew, and ensures your business can continue even when things go wrong.

⚓ Hull & Machinery insurance covers physical damage to your vessel.

🛡️ P&I insurance protects you against third-party liability and legal claims.

💣 War Risks insurance provides peace of mind when operating in dangerous regions.

📈 Insurance premiums depend on vessel type, history, and operations—but can be optimised with smart strategies.

Have you ever been involved in an insurance claim—or faced challenges finding the right cover for your fleet?

Share your experiences and insights in the comments—I look forward to the exchange!

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