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P&I rates fall by 2%-5% at renewals

Shipowners with loss-free accounts have received low-single-digit rate decreases on protection and indemnity (P&I) cover at general renewals for the 2018/19 policy year.

Underwriting sources told The Insurance Insider that while some loss-hit accounts saw "high profile" rate increases, the majority of shipowners obtained single-digit discounts on mutual calls for the forthcoming policy period.

A slight recovery in the dry bulk sector bolstered shipowners' confidence, helping to eke out decreases of between 2 percent and 5 percent across the 13 members of the International Group (IG).

Overall result

Reto Toggwiler, underwriting director at the London P&I club, said organic growth at the mutual was pleasing but that negotiations on loss-hit accounts had proved challenging.

"There were some extensive, and at times challenging, negotiations over rates and terms, especially in a relatively small number of cases where the loss records required particular attention," he said.

All 13 IG mutuals held general increases - the levies imposed to maintain sufficient funds - at 0 percent for the 2018/19 policy year.

The reduction in rates on individual accounts follows sustained pressure from shipowners and brokers to return excess capital.

Although significant differences exist in the way P&I clubs structure the collection of premiums, four mutuals have returned funds to members in the 2016/17 and 2017/18 policy years.

In November 2016 Steamship Mutual returned $25.8mn of premium to its members from the 2014/15 policy years.

The Standard Club followed suit, issuing a return call to members and owners of 5 percent for the 2016/17 policy year.

Britannia has returned $44.4mn since October 2016 and last year announced it would distribute an additional $10mn to members.

In early 2017 Gard returned $90mn in premium to club members after reporting a post-tax surplus of $215mn.

Speaking to The Insurance Insider, John Reilly, director of underwriting at The Standard Club, said P&I mutuals had come under increasing pressure from club members to prove their financial stability, something that was particularly evident during the 2018/19 renewals.

"Over the last few years conversations have become much more robust because shipowners have been struggling," he said.

The IG reported an increase in gross tonnage at renewals as the clubs fought to retain business in an increasingly competitive marine mutual market.

Six of the 13 IG members reported gross tonnage either holding steady or increasing.

Gross tonnage at the UK P&I club held steady at 139 million tonnes at February renewals, while gross tonnage at Gard increased by 8 percent to 207 million.

North reported gross tonnage of 195 million, while Skuld reported gross tonnage of 92 million.

Claims incurred per GTE
Premium rate vs general increase
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