Knowledge Nugget | Bharat Maritime Insurance Pool and maritime chokepoints: Why do they matter for India?

Key Takeaways:

1. Briefing reporters after the Cabinet meeting, Union Information and Broadcasting Minister Ashwini Vaishnaw said, “A big factor of insurance, which the world understood during the West Asia conflict, is that insurers and reinsurers were not ready to insure the ships going to West Asia… In view of this, a decision has been taken to create a sovereign guarantee fund of Rs 12,980 crore to facilitate maritime insurance. It will cover all maritime risks including hull, machinery, cargo, P&I and war. Vessels with the India flag will be covered under this.”

2. An official statement issued after the Cabinet meeting stated: “The pool ensures that Indian trade continues to have access to affordable insurance for vessels carrying cargo from any international origin to Indian ports and vice-versa, even when transiting volatile maritime corridors.”

3. The “Government has approved formation of ‘Bharat Maritime Insurance Pool’ for Indian flagged or controlled vessels or vessels destined to or starting from India, backed by a sovereign guarantee. The pool would cover all maritime risks like hull and machinery, cargo, P&I and war risk,” the statement said.

4. “The policies will be issued by insurers that are Pool members, using the combined underwriting capacity of the Pool, which would be around Rs 950 crore. The Pool will help to manage liability insurance locally, tailored to Indian shipping conditions and regulatory requirements, develop specialized marine underwriting, claims management and legal expertise within India,” it said.

5. A Governing Body constituted for this pool would oversee the formation and functioning of the pool. 

6. “The rationale for providing a sovereign guarantee to the proposed domestic insurance entity is rooted in the objectives of strengthening self-reliance, sanctions resilience and ensuring greater sovereign control,” the statement said.

As the West Asia conflict continues, tensions remain high, with fears of further supply disruptions linked to the Strait of Hormuz. In this context, it becomes important to understand key maritime chokepoints.

Maritime chokepoints

A chokepoint is a narrow passage along a maritime trade route that is critical to ship movements. These chokepoints can be natural geographical features, such as straits or channels, or human-made waterways like the Suez Canal and the Panama Canal. A strait is a narrow stretch of water connecting two larger bodies of water. These chokepoints provide the shortest or most efficient trade routes between major ports, regions, or countries.

#1 The Strait of Hormuz: The Strait of Hormuz lies between Oman and Iran, linking the Persian Gulf with the Gulf of Oman and the Arabian Sea. It is between 48 and 80 km wide (35–40 kilometres at its narrowest point), with only a few kilometres available for actual shipping lanes.

#2 The Strait of Malacca: The Strait of Malacca lies between Malaysia, Singapore and Indonesia, linking the Indian Ocean with the South China Sea and the Pacific Ocean. This is one of the busiest shipping routes, with nearly 30 per cent of the world’s traded goods and 80 per cent of the oil – exported from the Gulf to the major Asian economies like China, Japan, and South Korea – passing through it.

— Experts note that only India and Malaysia have the practical maritime real estate around the Malacca Strait (as narrow as 1.5 nautical miles wide at the Phillip Channel). The mouth of the strait opens perilously close to the southern tip of India’s Andaman and Nicobar Islands.

#3 The Bab el-Mandeb Strait: The Bab el-Mandeb Strait between Africa and West Asia connects the Indian Ocean with the Red Sea through the Gulf of Aden. The narrow maritime chokepoint is 32 kilometers wide at its narrowest point. Around 4 million barrels of oil and nearly 12 percent of global trade pass through it daily.

Red Sea and Bab el-Mandeb. (Source: US Energy Information Administration)

#4 The Panama Canal: It connects two vast oceans i.e., Atlantic in the east and Pacific in the west shortening the maritime distance between New York and San Francisco by 13,000 km. The Canal has been built across the Panama Isthmus – a narrow strip of land connecting the continents of North and South America, and separating the Pacific and Atlantic Oceans – by the US. It is 72 km long and has a lock system to cross.

Route of the Panama Canal. (Source: X/@thepanamaCanal)

#5 The Suez Canal: It was built in 1869, linking the Mediterranean Sea with the Red Sea. The 193-km artificial sea-level waterway is the shortest route between the Atlantic Ocean and lands around the Indian and western Pacific Oceans. The Suez Canal is a crucial shortcut for journeys between Asia and Europe, negating the need to navigate around the Cape of Good Hope in Africa and thus cutting distances by up to 7,000 km.

uez Canal connects the Mediterranean Sea and the Indian Ocean, reducing the distance it took to travel from Europe to Asia via the South African coast route. (Express graphic, data via Reuters)

BEYOND THE NUGGET:  UN Convention on Laws of the Seas

1. UNCLOS is a comprehensive international law that lays down the broad frameworks for legitimate behaviour on, and use of, seas and oceans everywhere. It defines the rights and duties of nations regarding activities in the oceans and also addresses issues such as sovereignty, passage rights, and rights of exclusive economic usage. Demarcations of territorial waters and  Exclusive Economic Zones (EEZs) are a result of UNCLOS.

2. The territorial sea (TS) as per UNCLOS, is an area extending up to 12 nautical miles from the base of a country’s coastline.  A state has full sovereignty over the waters encompassed within the TS.

3. According to the UNCLOS, the Exclusive Economic Zone (EEZ) of a country extends from the baseline of its coast to 200 nautical miles (about 370 km) into the sea. A nation has exclusive rights to living and non-living resources in the waters and on the seabed within its EEZ.

4. UNCLOS sets the general principles for equitable access and usage of ocean resources, and protection and conservation of biodiversity and marine ecology. But it doesn’t specify how these objectives have to be achieved. This is where the High Seas Treaty comes in.

5. Notably, UNCLOS does not contain explicit provisions regulating the conduct of belligerent parties during armed conflict, as its primary focus is on peacetime governance. The US is not a signatory to UNCLOS. India signed the convention on December 10, 1982, and formally ratified it on June 29, 1995.

Post Read Questions

(1) With reference to the United Nations Convention on the Law of Sea, consider the following statements: (UPSC CSE, 2022)

1. A coastal state has the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles, measured from baseline determined in accordance with the convention.

2. Ships of all states, whether coastal or land-locked, enjoy the right of innocent passage through the territorial sea.

3. The Exclusive Economic Zone shall not extend beyond 200 nautical miles from the baseline from which the breadth of the territorial sea is measured.

Which of the statements given above are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

(2) Consider the following statements with reference to the Bharat Maritime Insurance Pool:

1. It is backed by a sovereign guarantee.

2. It covers only cargo-related risks in maritime trade.

3. It aims to reduce India’s dependence on foreign insurers and reinsurers.

4. It is applicable only to foreign-flagged vessels operating in Indian waters.

Which of the statements given above are correct?

(a) 1 and 2 only

(b) 1, 2 and 3 only 

(c) 1 and 3 only

(d) 1, 3 and 4 only

(Sources: Government nod for Rs 12,980-crore maritime insurance pool amid global shipping upheaval, Knowledge Nugget | International Maritime Laws, From Hormuz to Malacca: India’s stakes in global chokepoints)

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