Marine protection and indemnity (P&I) insurers do face pricing pressure in the competitive and softened rate environment, but at the same time are benefiting from access to cheaper reinsurance, Standard & Poor’s (S&P) says.
The segment has also benefited from a lower claims experience in recent years, which has helped to ensure that pressure remained on marine reinsurance pricing and has now cascaded down to marine insurance pricing as well.
“The improved performance of the International Group of marine P&I insurers reflects lower claims,” explained S&P Global Ratings analyst Mark Nicholson. “Smaller, attritional claims have declined in frequency, and there have also been fewer large claims in recent years, although these are inherently volatile in both number and size.”
The availability of abundant and cheaper marine reinsurance, both through the recognised marine P&I reinsurance pool and also individually purchased by P&I clubs, has helped to enhance headline earnings for the insurers, S&P says.
The reinsurance pool and also the joint reinsurance treaty serve to buttress the P&I Clubs capital strength and improve their risk management, S&P believes, helping to ensure their ratings remain stable.
Use of marine reinsurance could become even more attractive for these P&I Clubs, as the future may not get any easier for them.
S&P says that it expects; “To see premiums fall in the coming 2017/18 financial year (ending Feb. 20, 2018, for most clubs). Nevertheless, we consider that while technical profitability may be thinner, pressure will primarily be on clubs’ earnings rather than their capital bases. We do not expect any rating actions, positive or negative, over 2017/18.”