EU Shadow Fleet Sanctions and P&I Insurance: Is International Group Cover Legally Required?

The adequacy of maritime liability insurance has become an increasingly important issue in the European Union’s sanctions against vessels associated with the transport of Russian oil. Under Article 3s of Council Regulation (EU) No 833/2014, the Council may list vessels that transport Russian crude oil or petroleum products while practising “irregular and high-risk shipping practices” within the meaning of IMO Assembly Resolution A.1192(33).

One of the practices identified in that Resolution is:

“not maintaining adequate liability insurance or other financial security”.

The requirement is therefore clear: a vessel must maintain adequate liability insurance or another form of financial security. What is less clear is whether adequate insurance must necessarily be provided by a Protection and Indemnity Club belonging to the International Group of P&I Clubs. The wording and structure of the relevant IMO instruments suggest that it does not.

The International Group as a Market Standard

Protection and Indemnity insurance, commonly referred to as P&I insurance, covers third-party liabilities arising from the operation of a vessel. Depending on the policy and the applicable legal regime, this may include liability for oil pollution, personal injury, cargo damage, wreck removal and other maritime risks.

A substantial part of the international shipping industry obtains this cover from the P&I Clubs belonging to the International Group of P&I Clubs.

The International Group currently consists of 12 P&I Clubs and states that its members provide liability cover for approximately 87 per cent of the world’s ocean-going tonnage. Its pooling and reinsurance arrangements enable the participating Clubs to share exposure to exceptionally large maritime claims.

International Group cover is therefore undoubtedly an important industry standard. It provides port authorities, charterers, cargo interests and other market participants with a high degree of confidence regarding the financial capacity, claims-handling infrastructure and international reach of the insurer.

A market standard, however, is not necessarily a mandatory legal standard.

Neither the term “P&I insurance” nor the concept of adequate maritime liability insurance is legally restricted to insurance issued by an International Group Club.

P&I describes a category of liability cover. It does not identify a particular association of insurers.

What the IMO Conventions Actually Require

The principal IMO liability conventions generally require a vessel to maintain “insurance or other financial security” sufficient to cover the shipowner’s statutory liability.

They do not require that the insurance provider belong to the International Group of P&I Clubs.

The International Convention on Civil Liability for Bunker Oil Pollution Damage provides a particularly relevant example. It requires ships exceeding 1,000 gross tonnage to maintain insurance or other financial security covering the registered owner’s liability for bunker oil pollution damage.

The IMO expressly explains that the necessary security may consist not only of insurance but also, for example, of a guarantee provided by a bank or similar financial institution.

The legal requirement is therefore functional rather than institutional.

The relevant question is whether sufficient and enforceable financial security exists. The identity or organisational affiliation of the provider may be relevant to that assessment, but it is not itself the statutory test.

The same general approach can be found across the international maritime liability regime. The 1992 Civil Liability Convention, the Bunkers Convention, the Nairobi Wreck Removal Convention and the Athens Convention all use systems of compulsory insurance or other financial security supported by formal certificates.

None creates an exclusive right for International Group Clubs to provide the required security.

State Certification Is Central to the IMO System

The international regime does not leave the existence of adequate insurance to informal assurances by the shipowner or insurer. It establishes a formal certification system.

Under the Bunkers Convention, the competent authority of a State Party must determine whether the applicable insurance or financial-security requirements have been satisfied. If the authority is satisfied, it issues or certifies a statutory insurance certificate, which must be carried on board the vessel.

The IMO’s Claims Manual for the Bunkers Convention explains that the required insurance or financial security is evidenced by a certificate issued by a State Party. It further states that this certificate should be considered sufficient security for claims under the Convention and that the registered owner should not ordinarily be required to provide additional security for those claims.

This system reflects a deliberate allocation of responsibility. The insurer or financial-security provider issues the underlying confirmation, often referred to as a Blue Card. The competent State authority then assesses that documentation and determines whether the statutory requirements have been fulfilled.

The resulting convention certificate is therefore not merely a private insurance document. It is an official document issued or certified under the authority of a State Party.

Certificates issued in accordance with the Convention are intended to be recognised by other States Parties. IMO guidance has repeatedly emphasised that States should accept Bunkers Convention certificates issued by the competent authority of another State Party in accordance with the Convention.

This mutual-recognition system would be undermined if each port State could disregard a facially valid convention certificate merely because it preferred a different insurer or category of insurance provider.

International Group Membership Simplifies Verification

The fact that International Group membership is not legally mandatory does not mean that it is irrelevant. The IMO has developed guidance concerning the documentation used by insurers and financial-security providers to support the issuance of statutory certificates. Under that guidance, Blue Cards issued by International Group Clubs should generally be accepted where their authenticity can be verified through the relevant Club’s website. In the case of insurers or P&I providers outside the International Group, the certifying State should instead examine matters such as the provider’s financial standing and solvency to ensure that prompt and adequate compensation will be available to victims.

International Group membership thus functions as a recognised evidentiary shortcut. It provides a high level of standardised assurance and may considerably simplify the certification process. It does not follow, however, that cover issued outside the International Group is automatically inadequate. The IMO guidance expressly contemplates the acceptance of documentation from non-International Group insurers and P&I providers, subject to additional verification by the competent State authority. The correct distinction is therefore not between legally valid International Group insurance and legally invalid non-International Group insurance, but between insurance whose adequacy can be verified through an established simplified procedure and insurance whose adequacy requires a more detailed individual assessment.

The Effect of Sanctions on the P&I Market

Russia-related shipping has significantly complicated access to Western insurance and reinsurance markets. European, United Kingdom and United States sanctions impose extensive restrictions on the transport of Russian oil and on the provision of related services, including insurance and reinsurance. Certain services may remain permissible where the applicable oil-price-cap conditions and attestation requirements are satisfied. Even where insurance would not be prohibited as a matter of sanctions law, however, a P&I Club may decline or terminate cover because of its own sanctions-compliance policies, reinsurance arrangements or risk appetite. P&I Club guidance expressly warns that cover is unavailable for unlawful trading and may also be terminated where the provision of insurance could expose the Club to sanctions risks, including in circumstances where the underlying trade might otherwise be lawful.

The distinction between a legal prohibition and a commercial refusal is important. A Russian or Russia-related shipowner may be unable in practice to obtain cover from an International Group Club even though no rule of international maritime law requires the owner to use such a Club.

If the owner subsequently obtains liability insurance from another provider and the competent flag or certifying State issues the prescribed IMO certificates, the absence of International Group cover cannot, by itself, establish that the vessel lacks adequate insurance. Otherwise, a commercial market-access restriction would effectively be transformed into a substantive legal requirement that does not appear in the applicable IMO instruments.

The IMO’s Specific Guidance on Russian Insurers

The IMO has expressly addressed the effect of sanctions connected with the war in Ukraine on compulsory maritime insurance certificates. In April 2022, the IMO Legal Committee noted that sanctions might prevent insurers or financial-security providers from processing claims or making payments and could consequently lead to the cancellation of cover. It did not, however, conclude that insurance provided by Russian insurers was automatically invalid. Instead, it recommended that flag or certifying States issuing certificates on the basis of Russian insurance verify that the cover satisfies the applicable criteria and that port States encountering such certificates consult the issuing or certifying State, which remains responsible for ensuring the adequacy of the insurance.

That approach is significant because it establishes a procedure of verification and inter-State consultation rather than a presumption of automatic invalidity. Concerns regarding an insurer’s financial capacity, the enforceability of the policy or the practical ability to pay claims may legitimately be investigated, but they must be assessed on the basis of evidence. The mere fact that the provider is Russian, is not a member of the International Group or operates in a market affected by sanctions does not, by itself, establish that the cover is inadequate.

What Does “Adequate” Insurance Mean?

The concept of adequate liability insurance requires a substantive assessment. Relevant considerations may include whether the policy covers the liabilities prescribed by the applicable convention, whether the insured amount corresponds to the relevant liability limits, whether claimants have a direct right of action against the insurer and whether the policy remains effective for the relevant period. The insurer’s solvency, regulatory status, claims-paying record and access to sufficient financial resources may also be relevant. Sanctions may likewise affect the assessment where they would legally prevent the insurer from making payments to claimants or transferring funds to the jurisdictions in which compensation may become due.

The existence of formal State certificates is nevertheless a highly significant factor, since such certificates demonstrate that the competent authority has examined the insurance documentation and formally determined that the applicable convention requirements are satisfied. Although a certificate should not necessarily be regarded as irrebuttable, fraud, termination of cover, material misrepresentation or concrete evidence that claims cannot legally or financially be paid would be required to justify further investigation. Rejecting a State-issued certificate therefore requires more than a general preference for International Group insurance or an assumption that a smaller or non-Western insurer must be inadequate.

The Risk of Replacing the IMO Standard

The EU vessel-listing criterion expressly refers to irregular and high-risk shipping practices under IMO Resolution A.1192(33). That Resolution refers to the failure to maintain adequate liability insurance or other financial security; it does not refer to the absence of cover from an International Group P&I Club. If the Council were to treat International Group membership as a necessary condition, it would effectively add a requirement that neither the Resolution nor the underlying IMO conventions contain.

Such an approach would also fail to distinguish between the existence of insurance and the adequacy of the cover. A vessel may hold a policy described as “P&I insurance” without the coverage being sufficient or enforceable. Conversely, a vessel may hold effective and convention-compliant insurance from a provider outside the International Group. The legal assessment must therefore address the substance of the cover rather than the label or institutional affiliation of the provider. International Group membership may constitute strong evidence of adequacy, but its absence is not, without more, evidence of inadequacy.

The Issue Is Now Before the General Court

The relationship between International Group insurance and the EU shadow-fleet listing criterion is no longer merely theoretical.

A pending annulment action before the General Court expressly argues that IMO Resolution A.1192(33) requires adequate liability insurance but does not require that the insurance be provided by an International Group P&I Club.

As at 30 July 2026, no published judgment of the EU Courts appears to have determined whether the Council may infer inadequate insurance solely or predominantly from the absence of International Group cover.

The judicial clarification of this issue will be important. It will determine whether the Council must assess the actual insurance and statutory certification of each vessel or whether it may rely on broader market indicators when evaluating the adequacy of liability cover.

Conclusion

International Group P&I cover is the predominant standard in international shipping and offers substantial practical advantages. It is not, however, the only form of liability insurance recognised under the IMO framework. The applicable conventions require insurance or other financial security and establish a formal system in which competent State authorities verify the underlying cover and issue statutory certificates intended to be recognised internationally.

Non-International Group cover may warrant closer scrutiny. The insurer’s solvency, the scope and enforceability of the policy, sanctions-related payment restrictions and the validity of the statutory certificates are all legitimate matters for examination. Closer scrutiny, however, is not the same as automatic rejection. A vessel cannot properly be regarded as engaging in an irregular or high-risk shipping practice merely because its insurer does not belong to the International Group of P&I Clubs. The decisive question is not who issued the policy, but whether the vessel maintains adequate, effective and legally enforceable liability insurance or other financial security within the meaning of the relevant IMO instruments.

This article reflects the legal position and publicly available information as at 30 July 2026.

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Your contact person: Dr. Hendrik Müller-Lankow, German/EU lawyer