What is the role of P&I insurance in shipping and what liabilities does it typically cover?

• A. Protection and Indemnity covers third-party liabilities arising from ship ownership and operation, including personal injury, cargo damage, collision, salvage, and wreck removal; not hull or machinery.
• B. P&I covers hull damage.
• C. P&I covers cargo owner's losses.
• D. P&I covers only environmental fines.

Answer: (A)

P&I insurance provides protection for third-party liabilities arising from owning and operating a vessel. It covers losses and legal liabilities to others that can arise from the ship’s activities, such as injuries to crew and other people, damage to third-party property or cargo, liabilities from collisions with other vessels or objects, and the costs associated with salvage and wreck removal. It does not insure the ship’s own hull or machinery—those risks are covered by hull and machinery insurance. It also isn’t limited to environmental fines; pollution-related liabilities can be part of P&I coverage as third-party claims, but the scope is broader than fines alone. This broad third-party liability cover is why this option is the best description of P&I.