Merchant Shipping Act 2025 and Compulsory Shipowner Insurance in India: Wreck Removal, Bunker Pollution and Seafarer Liability Cover

The Merchant Shipping Act, 2025 replaced the Merchant Shipping Act, 1958 in 2025, and it did more than modernise language. It pulled India's fragmented liability-convention provisions into one statute and made third-party financial security a condition of trading, not a commercial choice the owner made vessel by vessel. Under the old Part XB regime, compulsory insurance in Indian law effectively reached only oil-tanker pollution under the Civil Liability Convention. Everything else, wreck liability, bunker spills from dry cargo ships, seafarer repatriation and death claims, sat in a patchwork that Directorate General of Shipping (DG Shipping) circulars tried to hold together.

The 2025 Act codifies four separate financial-security obligations and attaches state-issued certificates to each. A registered Indian ship, and a foreign ship calling at an Indian port, must now carry certificates evidencing insurance for Civil Liability Convention (CLC) oil pollution, bunker-oil pollution under the Bunker Convention 2001, wreck removal under the Nairobi Convention 2007, and seafarer liabilities under the Maritime Labour Convention (MLC) 2006. The Act also extended compulsory pollution cover down to smaller and coastal craft, including certain fishing vessels and ships under 15 net tonnes in coasting trade, which the 1958 framework never touched.

For a broker, the practical shift is that a shipowner client's insurable interest and its statutory compliance are now the same conversation. A missing or expired certificate is not just a coverage gap; it is grounds for detention and for refusal of port entry or clearance. The Protection and Indemnity (P&I) cover that Indian owners buy from International Group clubs has always answered most of these heads of liability. What changed is that the certificate evidencing that cover is now the document a port state control officer, and a claimant, will demand first.

Each compulsory head under the 2025 Act runs on its own convention, its own tonnage trigger and its own certificate. Treating them as one block is where owners and their brokers get caught.

CLC oil pollution applies to ships carrying more than 2,000 tonnes of persistent oil in bulk as cargo. The owner must maintain insurance to the CLC limit and carry a state-issued certificate; India issues these through DG Shipping. Bunker Convention 2001 reaches a far wider fleet: every ship above 1,000 gross tonnage (GT) must insure liability for pollution from its own fuel oil, which sweeps in bulk carriers, container ships and general cargo vessels that carry no oil cargo at all. The Nairobi Wreck Removal Convention 2007 requires ships of 300 GT and above to hold insurance covering the cost of locating, marking and removing a wreck, with its own certificate. MLC 2006 financial security covers seafarer repatriation and contractual death or long-term disability claims, evidenced by certificates posted on board, and generally applies to ships of 500 GT on international voyages.

The insurance behind all four heads normally sits inside the owner's P&I entry with an International Group club. The club issues a Blue Card to the flag administration confirming cover for each convention, and the administration then issues the state certificate. Brokers arranging shipowner P&I insurance in India should confirm the club has issued a distinct Blue Card for each applicable convention, because a club can decline to certify a particular head if the entry has warranties or unpaid calls outstanding.

The Act fixes the certificate obligation on the registered owner, and that single word decides a large share of the disputes that follow. A charterer, however commercially dominant, is not the registered owner and cannot discharge the owner's compulsory-insurance duty by buying its own cover. This is where a compliance map earns its keep, because the P&I structures on a chartered vessel are layered and it is easy to insure the wrong interest.

On a bareboat (demise) charter, the charterer takes over manning, operation and often registration on a bareboat basis, and in substance carries the operational liabilities. Even so, the state certificate stays tied to the registered ownership recorded under the Act, so the parties must agree in the charterparty who funds the P&I entry that supports the certificate and who is named. On a time or voyage charter, the owner retains the ship and the certificates, while the charterer's exposure is narrower: cargo liabilities, freight, and its own charterer's liability and damage-to-hull risks, which sit in a separate charterer's P&I entry, not in the owner's convention certificates.

The map a broker should hold for each client vessel has four columns, one per certificate, and three rows: registered owner, disponent owner or operator, and charterer. For each cell the broker records who holds the entry, which club, whether a Blue Card has issued, and the expiry date. Two failure modes recur. First, a charterer assumes the owner's Nairobi or Bunker certificate protects the charterer against a direct pollution claim; it does not, because those certificates evidence the owner's liability, and a claimant with a separate cause of action against the charterer can still sue it. Second, on sale or reflagging the certificates lapse with the change of registration, and the buyer trades for weeks uncertificated. Mapping the interest against the certificate, not against the commercial relationship, is what keeps the client compliant.

The 2025 Act gives wreck removal statutory teeth it never had domestically. It requires owners to report wrecks, places strict liability for a hazardous wreck on the shipowner, and lets the Central Government appoint a receiver of wrecks who can take possession, mark and remove the wreck, sell it, and enforce the obligations of the owner, operator or insurer. The insurer is named in the same breath as the owner, which matters, because it opens the door to the claimant proceeding against the P&I club directly.

Wreck removal insurance in India is not a standalone product an owner shops for; it is a head of cover inside the P&I entry, and its certificate is the Nairobi certificate. The exposure it answers is open-ended in a way brokers should flag to clients. Wreck removal is not paid on the value of the ship. It is paid on the cost of the operation, which is driven by location, depth, the cargo and bunkers still aboard, and the environmental sensitivity of the site. A grounding in a shallow, busy channel near a port can generate removal costs that dwarf the hull value many times over. That gap between hull value and removal cost is the reason P&I cover, which responds to liability rather than to asset value, is the correct home for this risk.

Brokers should also check that the receiver's statutory power to enforce against the insurer is reconciled with the club's pay to be paid rule, under which the club traditionally pays only after the member has paid. The Nairobi direct-action right can override that rule for the certificated liability, and the Blue Card wording should reflect it.

Pollution is the head where the Act's compulsory-insurance logic is most developed, and where the two regimes, CLC and Bunker, must not be confused. CLC answers pollution from persistent oil carried as cargo on tankers above the 2,000-tonne trigger and channels all liability to the registered owner on a strict-liability basis, backed by compulsory insurance and a direct right of action against the insurer. Bunker Convention insurance in India answers pollution from the ship's own fuel oil on ships above 1,000 GT, again on a strict-liability, compulsory-insurance, direct-action basis, but with the liable parties defined more widely to include the registered owner, bareboat charterer, manager and operator.

The practical consequence of direct action is that the P&I club can be sued in India by a pollution claimant without the owner being joined, and cannot hide behind the pay to be paid rule for the certificated CLC or Bunker liability. Brokers should confirm the club's Blue Card is issued to DG Shipping for each vessel that needs it, and that the certificate on board matches the current name, flag and IMO number, because port state control will detain on a mismatch alone.

Limits differ between the two regimes. CLC liability is capped under the Convention's tonnage-based limit and is topped up, for member states, by the International Oil Pollution Compensation (IOPC) Funds. The Bunker Convention carries no separate fund; its ceiling is the LLMC limit for the tonnage, and a large bunker spill can exceed it, leaving the balance on the owner. For a broker advising an owner whose fleet mixes tankers and dry cargo ships, the takeaway is that a single fleet P&I entry produces two different certificate obligations and two different limit structures, and the compliance file must record both per vessel rather than as a fleet average.

The Act's seafarer-welfare provisions are the head most likely to be underestimated, because they read as labour law rather than as insurance. The 2025 Act secures monthly wage payment with interest for delay, paid leave, repatriation rights and compensation for loss of the vessel, and it sits alongside the Maritime Labour Convention, 2006 financial-security requirements that India already applies. Under the 2014 MLC amendments, an owner must hold financial security for two distinct exposures: the cost of repatriating an abandoned seafarer with up to four months of outstanding wages, and contractual compensation for a seafarer's death or long-term disability.

These are certificated liabilities, with MLC certificates posted on board and inspectable by port state control. The cover normally sits inside P&I, but abandonment security in particular is a defined, first-response obligation: if an owner abandons a crew, the security provider must fund repatriation and back-wages directly, without waiting for the owner. Brokers should confirm the P&I entry includes MLC extension cover and that the certificate names a responsive provider, because a lapsed or mismatched MLC certificate is a frequent detention trigger at Indian and foreign ports alike.

The interaction with domestic law needs care. A crew death or injury claim can arrive through the MLC contractual route, through the P&I crew cover, and through employer liability principles at the same time. Where Indian-domiciled seafarers are involved, the P&I and foreign workers' compensation questions we set out for Indian seafarers determine which policy actually pays and in what order. For a broker, the discipline is to read the MLC certificate, the P&I crew wording and any local employment cover together, so the owner is not paying twice for one exposure or, worse, finding a gap between them after a casualty.

The through-line of the 2025 Act is that compulsory insurance is now evidenced by certificates, and certificates are what get inspected, disputed and enforced. A shipowner client is compliant when, for every vessel, the right certificates exist, match the ship's current particulars, sit behind a live P&I entry with a Blue Card per convention, and are mapped to the correct insured interest. That is a document-control problem as much as an underwriting one.

The file a broker should maintain per vessel is compact: the CLC certificate where the ship carries persistent oil cargo above 2,000 tonnes, the Bunker certificate above 1,000 GT, the Nairobi wreck certificate above 300 GT, and the MLC certificates on international voyages, each cross-referenced to the club, the Blue Card, the limit basis and the expiry. Renewal, sale, reflagging and change of manager are the four events that break the chain, and each needs a checklist so the vessel never trades uncertificated. Reading the P&I wording precisely against each convention head, and against the LLMC limit that caps most of them, is what separates a certificate that will answer a claim from one that merely satisfies an inspector.

That reading is where structured access to insurer wordings changes the work. Sarvada gives commercial insurance brokers searchable, structured access to insurer policy wordings and the P&I and marine liability terms around them, so the convention-by-convention cover behind each certificate, its limits, its direct-action position and its exclusions, can be checked against the Merchant Shipping Act 2025's obligations rather than assumed. Request Access to make a shipowner's compliance file rest on the wording that actually answers the claim, not on the certificate that only proves cover was once in place.