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P&I leaders forecast rate rises after quiet renewal season

This year’s renewal round has been one of the most sedate in recent times, P&I club leaders reveal. But major claims on the International Group pool, thin margins and the impact of financial markets on investment income could see clubs ask members for higher premiums next year, they added

‘We are looking at renewing a similar amount of tonnage to what we had 12 months ago. A small amount of poorly performing business is being managed out of the club, and we are welcoming a few new members in,’ said Mark Collins of Standard Club

P&I CLUB leaders are predicting inflation-busting premium increases in the year ahead, breaking with the recent norm of zero general increases despite what appears to have been the quietest renewal season for some time.

The forecast comes amid widespread expectations that the cost of cover for hull and machinery and other marine lines is also set to rise — perhaps by double digit percentages — from levels that have seen many underwriters pull out of the market, citing unprofitability.

Owners can take some consolation insofar as their P&I bill will likely climb somewhat more modestly, perhaps in the order of 5%-10%.

While some major owners have yet to agree a deal ahead of the February 20 deadline, there remains scope for late surprises.

But one P&I club chief executive has already branded the 2019 round as “boring”, and the prospects for last-minute excitement seem limited.

Mark Collins, deputy director of underwriting at the Standard Club, said clubs have primarily been concerned about maintaining market share. To help that end, they have made themselves flexible in terms of pricing.

“The upshot is we are looking at renewing a very similar amount of tonnage to what we had 12 months ago. A small amount of poorly performing business is being managed out of the club, and we are welcoming a few new members in,” he said.

“I will be quite surprised if there is a huge number of big-name moves published tomorrow, but you never know. There are always one or two surprises out there.”

Mr Collins confirmed speculation that Standard has lost some Greek owners, attributing it to their resistance to price increases that were necessitated by their claims performance.

Meanwhile, improvements in back-year claims estimates is tending to cushion clubs from their technical underwriting results, he added.

“On a financial year basis, our performance looks fantastic this year, it’s exactly where you would want it to be, just below 100%,” he said. “There’s no immediate need from a financial perspective to really drive rates up. That said, the technical underwriting results in the market do point to a need for rates to increase.” 

Skuld chief executive Ståle Hansen said most members have opted to stay with their existing clubs, although there has been some growth for his club, with gains in Greece, the Far East and the US.

“Owners have done everything possible to negotiate a fair deal with their existing clubs, and there hasn’t been much deviation between clubs on what they have announced as a general increase, so the attractiveness of moving between the clubs has maybe not been there,” he said.

However, the market is hardening, with a number of large claims coming into the International Group pool at a time when margins remain thin. In addition, club investments are challenged by volatility in financial markets.

“It’s too early to say for next year, but I think we are talking single-digit increases. We need to observe developments.”

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