Understanding the structural differences
With the 20 February 2026 P&I renewals now concluded and processed, this is an appropriate moment to revisit a structural question that frequently arises in P&I and other insurance placements: When additional entities are involved in vessel operations, should they be added as co-assureds or joint assureds, and critically, what are the consequences of each status?
As insurance brokers advising owners, operators and managers across jurisdictions, we regularly see uncertainty around this distinction. The classification is not only administrative, and getting it wrong may only become visible at the time of claim.
This directly affects:
-Scope of cover
-Right of recovery
-Premium liability
-Allocation of operational risk
Why the Question Arises
Vessels are typically entered into a P&I program by (or on behalf of) the registered owner.
However, in practice, modern ownership and management structures frequently include:
-Beneficial owners with limited operational involvement
-Crewing agents employing the crew
-Technical managers
-Commercial managers
-Full ship managers assuming operational control
Due to the degree of operational involvement varies significantly, the insured status must reflect the actual allocation of responsibility and exposure.
Co-Assured
Co-assurance is often taken out for several reasons, including industry custom, the desire to avoid insurer recourse, the opportunity to obtain inexpensive or “free” liability coverage, or because certain contracts explicitly require it (for example, BIMCO’s BARECON 2017 and SHIPMAN 2024 forms).
P&I Club Rules frequently extend co-assurance to parties involved in a vessel’s ownership or operation. While co-assureds typically do not pay an additional premium, they are usually jointly liable for premiums, and in some cases, for even broader obligations. These structural choices directly affect the scope of coverage for co-assureds
Scope of Cover
A co-assured is covered only for liabilities arising out of operations or activities that are:
-Normally carried out by the member; or
-At the risk and responsibility of the member
Where a member outsources activities to a third party, that entity may become exposed to risks that would otherwise have attached to the member. In such cases, cover may respond, but only insofar as the liability would have been covered had it attached to the member.
A co-assured can never enjoy broader protection than the member’s insured cover.
Risks Arising from Club Rules
Co-assureds face varying levels of liability depending on the specific rules of the P&I Clubs they are covered under.
The main risks stem from differences between the International Group (IG) Clubs:
-While IG Clubs pool large claims, their rules on co-assured liability can vary.
-Some Clubs limit joint liability to Members and Joint Members only, meaning a co-assured (such as a Ship Manager) may not face recourse exposure.
-Other Clubs expressly impose joint and several liability on co-assureds for “premiums, calls, and other sums,” or even “all sums due.”
–>This can include recourse claims paid by the Club under a Letter of Undertaking, even if the co-assured was not legally liable to the original claimant.
-The outcome depends heavily on the specific Club Rules and applicable law.
As a result, co-insurance can expose a party to broader liabilities than it would otherwise face. For example, a Ship Manager’s contractual liability toward the Owner is often capped (such as under SHIPMAN). Without co-insurance, a Club pursuing subrogation would be bound by that contractual limitation. With co-insurance, however, Club Rules may create a separate and potentially unlimited basis of recovery.
In summary, co-assurance can significantly affect liability exposure depending on the specific Club Rules. Anyone considering co-assured status under a P&I entry should review the relevant Club Rules carefully and reassess exposure at each renewal, especially if the Owner changes Clubs, as liability risks can shift.
“Misdirected Arrow” Cover
A co-assured may also benefit from protection where a claimant pursues the most accessible or commercially viable defendant, even though liability properly rests with the member.
Recovery is possible only if:
-The claim would have succeeded against the member; and
-The member would have been entitled to indemnity under the policy
Once indemnity is provided to the co-assured, the Association bears no further liability to any other party in respect of that claim.
Key Limitations
-No independent right of recovery
-No cover for disputes between assured parties
-No liability for premium
Joint Assured
In comparison, a joint assured occupies a materially different position within the insurance structure.
Scope of Cover and Obligations
A joint assured is insured for the same risks and liabilities as the member and is subject to the same contractual obligations.
This includes:
-Joint liability for premium and other amounts due
-Exposure to calls payable to the Association
However, if the member fails to meet premium obligations, the joint assured may be required to do so.
Independent Right of Recovery
Unlike a co-assured, a joint assured has an independent right of recovery directly against the Association.
However:
-No cover exists for disputes between joint assureds, co-assureds or the member
-Cover cannot exceed the scope of risks insured by the member
Overview of the cover available to co assureds and joint assureds
| Cover Structure | Co-Assured | Joint Assured |
| Cover for claims arising out of operations or activities normally carried out by, or at the risk and responsibility of the member/insured | Yes | Yes |
| Misdirected arrow cover | Yes | Yes |
| Independent right of recovery | No | Yes |
| Cover for disputes amongst assureds/member | No | No |
| Liable to pay insurance premium | No | Yes |
Practical Illustration
If a co-assured issues bills of lading in its own name under which the member bears no liability, cover will not respond.
If a joint assured does the same, the independent right of recovery may allow indemnity, provided the liability falls within the risks insured by the member.
The distinction becomes critical where contractual arrangements diverge from operational responsibility.
Renewal Considerations
At renewal, adding entities should not be treated as a procedural formality. Moreover, it is critical to consider the specific Club Rules and co-assured risks, as liability exposure can shift if the Owner changes Clubs or contractual arrangements evolve.
The correct classification must reflect:
-Premium responsibility
-Actual operational control
-Contractual allocation of liability
-Financial exposure
In our experience, misalignment between structure and insured status often only becomes apparent once a claim arises, at which point recovery rights and premium obligations are tested. A careful review and update at placement and renewal stage remains essential to ensuring that the insurance structure mirrors the commercial reality of the vessel’s operation.
At FDR, we do not view renewal as an administrative exercise. It is a structural review of risk allocation across the ownership and management chain. Ensuring the correct assured status at inception is fundamental to avoiding unintended exposure at the time of claim.
We are grateful for our discussions with Noord Nederlandsche P&I Club (NNPC) and their contribution of the Co-assurance materials supporting this publication.
