The upcoming Protection and Indemnity (P&I) renewal is poised to be the most challenging in a decade as a result of difficult economic conditions for ship operators, poor underwriting results and some of the largest claims in history, according to Willis Global Marine, a division of Willis Group Holdings, a global insurance broker, in its annual P&I Market Review.
The P&I market results last year (2011/12) showed a 13 percent increase in incurred claims, a 5.9 percent underwriting loss and only a 2.9 percent investment return. Total market free reserves increased marginally (4 percent) but tonnage increased by 9 percent over the same period. The market is therefore larger, but proportionately slightly weaker than the previous reporting period.
Against this backdrop, 2011/12 has the dubious honour of registering the highest level of net paid and net incurred claims ever reported by the P&I market (2 percent and 8 percent higher than the previous record level in 2009/10).
Added to that, 10 out of the 13 P&I clubs reported underwriting losses. On a financial year basis in 2011/12, the largest individual P&I club combined ratio was 120 percent, the lowest was 85 percent. Neither of these extremes of underwriting deficit or surplus (respectively) should be sustainable in a mutual environment.
“With pressure on all sides, the 2013 renewal will likely present some of the hardest fought negotiations since the turn of the century,” explained Ben Abraham, global P&I practice leader in Willis Marine and author of the P&I Market Review.
“It is self-evident that ship operators are facing one of the most challenging economic periods in a generation. It is similarly obvious that the P&I market is not balancing its underwriting results. Added to this, the reinsurance market has been presented with the largest and third largest claims in the history of the International Group (IG). The final contributing factor to this ‘confluence of events’ is a fragile and lacklustre investment market that is likely to allow only meagre returns.”
He continued: “In such a challenging renewal environment, the choice of specialist broker is critical to ensure that best value is achieved from this unique market.”
Source: Willis Group Holdings
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