P&I clubs’ co-operation ‘helps shipping to be sustainable’
P&I is a resilient business model that has withstood crises and challenges over many decades, says IG chairman Paul Jennings. P&I clubs are learning to co-operate more closely as part of that resilience
Society’s demand that shipping does more to improve levels of safety at sea and environmental protection is an obligation, not a request, says North P&I chief
WHILE P&I clubs recognise the need to compete on price and service, they acknowledge there is a societal obligation to co-operate on issues of safety of life at sea and environmental protection.
Paul Jennings, chairman of the International Group of P&I clubs, says he is delighted there is more willingness to co-operate.
“It’s not a nice-to-have,” he tells Lloyd’s List, “it’s something we must do.”
In his capacity as chief executive at North P&I, he says: “We are putting aside what might be small competitive advantages from certain loss prevention initiatives and combining our knowledge for the benefit of shipping.”
Further, IG clubs have a huge database of liability issues that they are making progress towards sharing for the advantage of the wider marine industry.
Asked whether increasing co-operation could lead to a club seizing the opportunity to merge with or take over a rival, he observes that his own club, North, has been among the most active in this regard. There is certainly scope for this to happen, he says, although each of the 13 IG clubs offer different qualities.
The P&I sector stands out from much of marine insurance for the amount of interaction between shipowners and their insurance and risk management departments. The relationships that are formed are solid and long-lasting.
“A lot of shipowners stay with the same club for many years, some for generations. As fleets become larger, they have more than one P&I club.” Even so, the traditional relationships remain.
“We all need to be financially competitive and disciplined, while offering financial stability. But unlike in other areas of insurance and marine insurance, the relationship side with P&I clubs does have a value you don’t get elsewhere.”
It remains to be seen whether these traditional relationships will stand the testing of new generations who have different loyalties and drivers.
North’s acquisition trail began in the mid-1960s with its takeover of Neptune P&I, followed by Newcastle P&I in 1998 and Liverpool & London P&I in 1990. Its most recent acquisition was Sunderland Marine Mutual, which joined the fold in 2014.
Mr Jennings spent 13 years as a manager at Newcastle P&I club, moving across to what was North of England P&I as underwriting director, and was promoted in 2006 to deputy managing director. Three years later, he stepped up to managing director, becoming chief executive officer of North P&I in May 2018.
He has chaired the Reinsurance Sub-Committee of the International Group and was invited to become IG group chairman in November 2018.
Mutual insurance is remarkably resilient as a business model, he says. Despite celebrating its 160th anniversary this year, North is not the oldest of the clubs.
“As clubs, we have to help shipping to be sustainable, that is to enable shipping to deliver a sustainable industry to society,” he says. “Our role is contributing to the important areas of safety at sea and protection of the marine environment. That’s where we will be in five years.
“Clubs provide financial stability to facility trade. It’s impossible to enter a port without valid P&I cover. That’s not to say we are invaluable because we issue a piece of paper,” he stresses, it’s what the paper represents. “If there’s a problem, we will sort that problem out; we will respond to major casualties; we will contribute to safety and protection.”
He says he does not believe this model will change any time soon. Some of the elements of the model might change, such as the work with legislators and IMO, “making sure legislation is framed so we can respond on behalf of shipowners, and deal with casualties as they arise.”
The International group has observer status at the International Maritime Organization and is consulted, along with other organisations, when necessary.
“Our role is to achieve consensus, which is important in a global environment,” says Mr Jennings. “And to ensure that issues are dealt with in a consistent way.” Shipping will change, perhaps rapidly; it is up to P&I clubs to adapt.
There is little doubt that shipping is safer, in terms of large casualties and pollution, as a result of many improvements over the past 10 to 15 years.
Partly, Mr Jennings believes, P&I can take some credit for that as regards quality standards. Class, port state control, and others have also made a valuable contribution.
Greater levels of safer rarely grab the headlines, yet that has not been achieved without hard work.
“Shipping had a problem 15 years ago with ships being delivered to meet the needs of an expanding global economy, which led to a shortage of seafarers and officers promoted too quickly. The industry had to deal with that situation,” he says. “The supply chain for seafarers is good now, and oil majors have exacting standards.”
The impact of digitalisation on shipping and ships’ crews will increase, he accepts, although he is uncertain how prevalent autonomy will be for vessels trading globally. Again, it’s that societal pressure.
“I’m not sure how comfortable society will be with VLCCs loaded with two million barrels of oil floating around with no one in control on board. The IG has a working group looking at the impact of autonomous ships. It’s our view,” he adds, “that fully autonomous shipping is a number of years away.”
The current health crisis has come out of the blue and seems to have swept away the previous immediate issue, IMO 2020.
North was an early mover in creating a shared-information dashboard to provide club members with insight on the spread of the virus. This tracking tool has been updated through the local knowledge of between 700 and 800 correspondents on the quaysides of ports around the world.
This tool has been shared with members of all the IG clubs, which add their own local knowledge. GAC ship agency and Wilhelmsen Ship Management also contribute, while the global overview is provided from publicly available information from Johns Hopkins, the research university in Baltimore.
Mr Jennings thinks this initiative is unique in shipping; while much of the data can be found across the internet, a lot that is specific to shipping can only be found on this tracking tool.
It is an example of what can be achieved if data is shared more widely, although it cannot yet provide a solution for the toughest challenge thrown up by the coronavirus: how to repatriate ships’ crews and replace them with fresh crews. “Seafarers are key workers,” he emphasises. “We do need to find a solution.”
In spite of the virus, the environmental protection impetus behind the global sulphur cap continues. “Shipping gets a bad press; we know the industry accounts for about 3% of greenhouse gas emissions but we don’t say that 90% of all the goods we need are moved by ship. It is the environmentally friendly way of moving goods,” he says.
Like many leaders in shipping, Mr Jennings is seeking a way to encourage the industry to speak with a unified voice. Over the past five years, maritime organisations have been gathering together as a round table discussion group; the secretariat of the International Group of P&I clubs is regularly in contact with other organisations, and welcomes its inclusion as an IMO observer.
On the issue of seafarer repatriation, IG member clubs have supported the International Chamber of Shipping and the IMO, rather than go public with their own plea for governments to intervene on behalf of maritime key workers.
“Historically, shipping has been fragmented. However, we all see the benefits of co-operation; there could probably be more, but we are pulling in the same direction.,” says Mr Jennings.
He repeats the word ‘resilient’, not only for P&I insurance but also for shipping in turbulent times. It has survived many crises over the centuries and will survive this one.
“We have created a just-in-time society — which is fine in normal circumstances but becomes a problem when it’s interrupted,” he concludes. As society changes, shipping’s resilience will keep it aligned.