Protection and Indemnity (P&I) insurance, provided by a P&I Club, covers the third-party liability of a ship-owner. The International Group of P&I Clubs (the Group) is a cartel preventing one group Club from the premium competition with other group Clubs. The EU commission questions the Group's constraints on competition based on the anti-trust law. In order to demonstrate the impact of competition, in this research, the following tasks are accomplished to develop the competition theory of marine mutual insurance.;First, this research compares the marine mutual with classic mutuals and stock insurers. It is found that marine mutual insurance, i.e., P&I insurance, has certain particular characteristics that distinguish P&I Clubs from the classic mutuals.;Secondly, this study develops the pricing model of marine mutual insurance based on the theory of Pareto efficiency. The equilibrium contract reflects not only the fundamental principle of mutuality, but also the particular ways in which P&I Clubs differ from the classic mutuals.;Thirdly, given the exponential utility, the research derives the optimal Club size. This research rejects the findings of the previous studies on the size of mutual. The results show that: (a) when the per capita loss of a single Club is increasing along with the Club size, the welfare of an individual member might worsen as the Club size increases; and (b) neither freely competitive nor monopolistic markets can be formed in the P&I insurance market.;Fourthly, three competition strategies are discussed separately to verify that, in most cases, premium competition cannot benefit simultaneously the entered members and the primary members of the New Club. For each competition strategy, the research provides three criteria to help the stakeholders to identify their own advantages and make decision accordingly.;Finally, two P&I Clubs, North of England Club and Britannia Club, are taken as the examples to examine the proposals and criteria obtained through this research. The results reveal that Britannia Club has a competitive advantage when compared with North of England Club, but that none of the three competition strategies can be accepted by the New Club's primary members.
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