Marine & specialist risk

Marine P&I and pollution liability under the Insurance Act 2015

Category: Insurance Act 2015 · Reviewed by the Apex broking team · Last reviewed 2026-08-22

In short: Marine pollution liability is carried almost entirely by protection and indemnity (P&I) cover, and it is shaped by two international liability conventions given effect in UK law: the 1992 Civil Liability Convention for tanker oil cargo, and the 2001 Bunkers Convention for fuel oil. Both channel liability to the shipowner, both require compulsory insurance evidenced by a certificate, and both give claimants a direct route to the insurer. The Insurance Act 2015 sits over the insurance contract itself — fair presentation, and the reformed treatment of warranties — because marine contracts are within its scope.

First, a naming point: P&I is not PI

Protection and indemnity (P&I) is marine third-party liability cover, provided mutually by shipowners to each other through clubs. Professional indemnity (PI) is cover for professional advice and design. Both get abbreviated to something that looks like the other, and marine consultancies frequently need both: P&I if they own or operate tonnage, professional indemnity for surveys, naval architecture, marine engineering or advisory work. This page is about the first.

How P&I cover is structured

P&I clubs are mutuals. Members are shipowners, operators and charterers; they contribute by calls rather than by premium in the ordinary sense, and cover is defined by the club rules rather than by a conventional policy schedule. Pollution liability is one of the principal heads of club cover, alongside cargo, crew, collision liabilities and wreck removal.

The clubs that write most of the world’s deep-sea tonnage co-operate through the International Group. According to the International Group, it comprises twelve P&I clubs providing marine liability cover for approximately 87 per cent of the world’s ocean-going tonnage. Claims above an individual club’s retention — currently set at US$10 million — are shared between the member clubs under a Pooling Agreement, and the pool is itself supported by an extensive annually renewed reinsurance programme. That structure is what allows a mutual to stand behind pollution exposures of a size no single club balance sheet would carry.

One feature of club cover that catches newcomers is the “pay to be paid” principle: club rules have traditionally required the member to have discharged the liability before the club indemnifies. Where compulsory pollution insurance applies, the statutory direct-action right described below cuts across that, which is precisely why the conventions provide for it.

Oil cargo pollution: CLC 1992 in UK law

The International Convention on Civil Liability for Oil Pollution Damage, in its 1992 form, governs pollution damage caused by persistent oil carried in bulk as cargo by tankers. In the United Kingdom it is given effect by Chapter III of Part VI of the Merchant Shipping Act 1995. Section 153 imposes liability for oil pollution in the case of tankers, and section 163 imposes compulsory insurance against liability for pollution, evidenced by a certificate that a ship must carry.

The design of the regime is deliberate. Liability is strict and channelled to the registered owner, so a claimant does not need to prove fault or to work out which contractor in the chain was at fault. It is subject to limits calculated by reference to the ship’s tonnage. Compulsory insurance means there is a solvent respondent behind the owner, and the certificate makes that verifiable at a port state’s border. Above the owner’s layer sits a compensation fund tier, dealt with in Chapter IV of Part VI of the 1995 Act, at sections 172 to 182, which provides for contributions to and compensation from the international fund arrangements.

Bunker oil: the Bunkers Convention 2001

Cargo is not the only source of oil in the water. Every ship carries fuel, and a non-tanker casualty can produce a significant spill. The International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 fills that gap. In the United Kingdom it is implemented by the Merchant Shipping (Oil Pollution) (Bunkers Convention) Regulations 2006, SI 2006/1244, which insert provisions into Chapter III of Part VI of the Merchant Shipping Act 1995 and require compulsory insurance for ships above 1,000 gross tonnage.

Two differences from CLC are worth knowing. The Bunkers Convention defines “shipowner” broadly, reaching the registered owner, bareboat charterer, manager and operator, so liability is not channelled to a single party in the same way. And the Convention does not create its own free-standing limitation figures; limitation is left to the applicable general limitation regime for maritime claims.

Certificates, blue cards and direct action

The mechanics that make compulsory insurance work are the same in outline under both conventions. The insurer confirms cover to the flag state, the state issues the ship’s certificate, and the ship carries it. The conventions give a claimant a direct right of action against the insurer, subject to the defences the insurer would have had, which is what prevents an insolvent or absent owner from defeating a legitimate pollution claim.

For an operator, the administrative consequence is that pollution certification is tied to continuity of club entry. A gap in cover is not simply an uninsured exposure — it is a trading problem, because a ship without a valid certificate should not be entering the waters of a contracting state.

Where the Insurance Act 2015 comes in

Marine insurance contracts are within the scope of the Insurance Act 2015; the Act reformed English insurance contract law generally and amended the Marine Insurance Act 1906 in the process. It applies to contracts entered into, and variations agreed, on or after 12 August 2016. Three parts of it are directly relevant to a pollution-exposed marine account.

Fair presentation. A non-consumer insured must make a fair presentation of the risk, disclosing every material circumstance it knows or ought to know, or giving sufficient information to put a prudent insurer on notice that it needs to ask questions, and doing so in a reasonably clear and accessible manner. For a shipowner that reaches trading patterns, management arrangements, casualty and detention history and the state of the fleet. See fair presentation and our deep dive on the duty.

Section 9: basis of contract clauses. A representation made in connection with a proposed non-consumer contract can no longer be converted into a warranty by a term of the contract, whether by a “basis of the contract” declaration or otherwise. See Insurance Act 2015 section 9.

Section 10: breach of warranty. The old rule that breach of warranty automatically discharged the insurer’s liability is abolished. Instead, the insurer has no liability for loss occurring, or attributable to something happening, after a warranty has been breached but before the breach has been remedied. Cover revives on remedy. In a marine context, where warranties about class, trading limits, laid-up conditions and management systems are common, that change is significant. See Insurance Act 2015 section 10.

Section 11 also matters: an insurer cannot rely on non-compliance with a term designed to reduce the risk of a particular kind of loss, or of loss at a particular time or place, if the insured shows the non-compliance could not have increased the risk of the loss that actually occurred. That is covered at section 11.

Pollution and the professional indemnity boundary

Marine consultants, surveyors and naval architects are not covered by a club for advisory liability; they need professional indemnity. Professional indemnity policies commonly carry a pollution exclusion, and its width decides whether advice that contributed to a pollution incident is insured at all. Our note on the pollution exclusion in PI sets out how those clauses are usually drafted and where the carve-backs sit.

How Apex approaches marine pollution exposure

Marine pollution liability is a specialist placement and much of it belongs with a club rather than with the commercial market. Our role for marine businesses is usually the surrounding programme — the yard, the terminal, the marine trades operation, the consultancy — and making sure the boundary between club cover, commercial liability cover and professional indemnity is drawn deliberately rather than discovered after an incident. Related pages: marine trades insurance, marine liability insurance and marine pollution insurance.

Frequently asked questions

Who is liable for oil pollution from a tanker under UK law?

Liability is channelled to the registered owner of the ship on a strict basis under the 1992 Civil Liability Convention, given effect in the United Kingdom by Chapter III of Part VI of the Merchant Shipping Act 1995. Section 153 imposes the liability and section 163 requires compulsory insurance evidenced by a certificate. A compensation fund tier sits above the owner's layer under Chapter IV of the same Part.

What does the Bunkers Convention cover that CLC does not?

The Bunkers Convention 2001 deals with pollution from a ship's own fuel oil rather than from persistent oil carried as cargo, so it reaches non-tanker casualties. In the United Kingdom it is implemented by the Merchant Shipping (Oil Pollution) (Bunkers Convention) Regulations 2006, SI 2006/1244, and it requires compulsory insurance for ships over 1,000 gross tonnage. Its definition of shipowner is wider than the CLC's, reaching the registered owner, bareboat charterer, manager and operator.

What is the International Group of P&I Clubs?

It is the association through which the principal P&I clubs co-operate. The International Group states that it comprises twelve clubs providing marine liability cover for approximately 87 per cent of the world's ocean-going tonnage. Claims above an individual club's retention, currently US$10 million, are shared between the clubs under a Pooling Agreement supported by an annually renewed reinsurance programme.

Does the Insurance Act 2015 apply to marine insurance?

Yes. The Act reformed English insurance contract law generally and amended the Marine Insurance Act 1906. It applies to contracts entered into, and variations agreed, on or after 12 August 2016. The duty of fair presentation, the abolition of basis of contract clauses in section 9 and the suspensory treatment of warranty breach in section 10 all apply to marine covers.