Category: Marine insurance · Reviewed by Matt Bartlett, Director · Founder · Last reviewed 2026-06-05
Charterers liability insurance covers the third-party and contractual liabilities that a charterer of a vessel may incur under a charterparty, including damage to the chartered vessel’s hull caused by the charterer’s orders, cargo claims, pollution and bunker liability.
Category: Marine insurance Also known as: charterers’ liability cover, charterers P&I, CLI First codified: market practice from the 19th century; standard wordings developed by Lloyd’s syndicates and P&I clubs from the 1960s Related legislation: Marine Insurance Act 1906 [1]; Carriage of Goods by Sea Act 1992 [2]
A charterer of a vessel takes on a defined set of contractual obligations and risks under the charterparty. Whether voyage, time or bareboat (demise), the charterer may become liable for damage to the chartered vessel itself (where the damage results from the charterer’s orders or unsafe port nomination), for loss of or damage to cargo carried under sub-bills of lading issued by the charterer as carrier, for pollution from bunkers supplied by the charterer, and for indemnities under the charterparty itself (BIMCO and Asbatankvoy standard forms contain extensive indemnity provisions). Charterers liability insurance (‘CLI’) covers these exposures [3][4].
The product is conceptually distinct from owners’ P&I cover: an owner’s P&I responds for liabilities owed by the owner of the entered vessel, whereas a charterer is not the owner and so falls outside owners’ P&I cover. Some International Group P&I Clubs write fixed-premium charterers’ cover as a sideline; the larger market is written by specialist Lloyd’s syndicates and a small number of dedicated charterers’ mutuals, notably the Charterama club [4][5].
Cover responds to liabilities under voyage charters (typically a single voyage, with the charterer responsible for cargo and certain in-port operations), time charters (where the charterer directs the vessel’s movements for an agreed period and is responsible for safe port nomination and bunker procurement) and bareboat or demise charters (where the charterer takes operational and crewing responsibility and becomes effectively an owner for liability purposes) [3].
The charterer’s exposures derive from the charterparty contract, supported by general law of carriage by sea. The Marine Insurance Act 1906 recognises that a charterer has insurable interest in respect of liabilities incurred in connection with the marine adventure (s.5(2)). Charterparty wordings (BIMCO Gentime, Shelltime 4, Asbatankvoy, BIMCO Bargehire, BARECON) contain express indemnities, knock-for-knock provisions and safe port warranties that drive liability allocation [1][3].
Cargo claims liability depends on whether the charterer has issued bills of lading as carrier. Under English law, the Carriage of Goods by Sea Act 1992 transfers rights of suit under bills of lading to the holder; the carrier on the face of the bill (which may be the charterer) bears liability subject to convention defences under the Hague, Hague-Visby or Hamburg Rules as incorporated [2]. The Carriage of Goods by Sea Act 1971 gives effect to the Hague-Visby Rules in respect of contracts evidenced by a bill of lading where the carriage involves a UK port or where the bill of lading is issued in a UK port [3].
Bunker pollution from a vessel for which the charterer has procured fuel may engage the Bunkers Convention 2001 as implemented by the Merchant Shipping (Oil Pollution) Acts and supporting regulations. Although primary liability rests with the registered owner, contractual recourse from the owner to the charterer is permitted under the Convention’s recital provisions and is commonly enforced under standard charter indemnities [4].
A typical CLI placement provides cover up to an aggregate limit per vessel per event (commonly US$100m, US$250m or US$500m, with the higher limits driven by lender requirements for time-chartered tankers and gas carriers). The wording defines covered liabilities by reference to a schedule of risks (cargo loss and damage; damage to the chartered vessel; pollution; wreck removal; personal injury to crew and third parties; loss of life; fines and penalties; legal costs) and supplements them with charterers’ add-ons (sue and labour, defence costs, contractual liability assumed under specific named charterparty forms) [4][5].
Underwriters will typically require disclosure of the charterer’s fleet (vessels under voyage and time charter and identity of bareboat charters), the trading area, sub-charter and cargo profile, claims experience over the prior five years, and details of any high-risk operations (heavy lift, STS transfers, ice trading). Premium is typically a flat rate per voyage or time-charter day, with adjustments for high-risk cargoes or routes [5].
Cover usually responds on a primary basis up to the policy limit, although a marine umbrella excess layer can be added above the primary CLI placement for charterers with significant aggregate exposure. Buyers must take care over the interaction between CLI and any owners’ P&I cover that contains charterers’ extension under a ‘misdirected arrow’ endorsement, to avoid duplication of premium and gaps in cover [4][5].
Charterers’ damage to hull cover (CDH) is a specific sub-cover for liability for physical damage to the chartered vessel caused by the charterer’s orders, unsafe port nomination, contaminated bunkers or improper cargo. It is normally written within the CLI policy but can be carved out as a standalone product where the charterer’s primary exposure is to a small number of chartered vessels.
Charterers’ freight, demurrage and defence (CFDD) provides legal costs cover for disputes between the charterer and the owner, sub-charterers or cargo interests. It is the charterers’ equivalent of owners’ FD&D and is written either by P&I clubs that admit charterers as a separate class, by specialist Lloyd’s syndicates or by Charterama and similar dedicated charterers’ mutuals.
Bareboat (demise) charterers in practice obtain owners’ P&I rather than CLI, on the basis that they assume operational responsibility for the vessel for the charter period. Some clubs require evidence of co-entry with the registered owner or a release from the registered owner’s club before accepting a bareboat charterer for cover.
A UK-based commodity trader takes a 24-month time charter of a 50,000 dwt product tanker for the carriage of clean petroleum products in European and West African trades. The trader places fixed-premium charterers’ liability insurance with a Lloyd’s syndicate for a limit of US$500m any one accident or occurrence on a standard market wording. During the charter the vessel sustains contaminated cargo damage at a port nominated by the trader as a port of loading, resulting in cargo claims of US$3m and damage to the vessel’s coated tanks of US$1.2m. The CLI placement responds for both elements, less the policy deductible. Limits and figures in this example are illustrative.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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