The Lamma Island ferry tragedy raised concerns about the importance of Compulsory Third Party Risks Insurance of vessels both among the public and throughout the insurance industry.

In accordance with Hong Kong regulations, if a vessel carries less than 12 passengers, the third party liability insurance cover amount should be HK$1 million. For any commercial vessel that carries more than 12 passengers, the insurance cover amount should be at least HK$5 million. With regard to the ferry tragedy, the total insurance cover amount for the vessels involved - “Lamma IV” and “Sea Smooth” - should have been at least HK$10 million. But even this amount provides insufficient cover considering the number of casualties and injuries. In view of this, it is common for many ship-owners to join the International Group of P&I Clubs in an attempt to share the compensation risk.

P&I Clubs is a mutual insurance association that provides protection to its ship-owner members. The main business of P&I Clubs is to offer P&I Insurance (Protection and Indemnity insurance), which covers broader risks like third party liabilities, including the carrier’s liability to a cargo-owner for damage to cargo, a ship owner’s liability after a collision, environmental pollution and war risk insurance, etc. At the same time, members can also obtain professional services such as guarantees and expert advice from the Club. As P&I Clubs provide unlimited coverage for members’ vessels, there is a strict requirement for membership enrolment. Only ship owners with a sound reputation can become members and a premium is charged according to their past record.

These days, there is a total of 13 principal member clubs under International Group of P&I Clubs worldwide. Click here for more details.

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