Insurance broker Gallagher has reviewed the state of the marine protection and indemnity (P&I) market ahead of the upcoming renewals, noting that it is a “turbulent time” for re/insurers in this sector.
The pandemic’s impact on the economy, international trade and safety of crew members has made it a very challenging year both for ship owners and the global marine sector, Gallagher reported.
Following tough 2018/2019 and 2019/2020 policy years, the COVID-19 outbreak has compounded these difficulties, as underwriting performance continues to be poor across almost all the Clubs this year.
According to Gallagher, the Clubs are presently underwriting to typical combined ratios of between 115 and 120%, with some significantly higher, and only Steamship Mutual managing a ratio at below 100%.
The trend has been further exacerbated by rapidly deteriorating pool loss experience, with losses of around $300 million so far – making it one of the worst years in the past decade, with the traditionally costly North Atlantic winter still to come.
At the start of the 2020- 21 policy year, the investment market was showing substantial valuation losses, but conditions have improved since then and the Clubs are showing modest net investment yields in the region of 2% to 2.5% as of September.
Investment markets, however, remain extremely volatile and Gallagher maintains that it is too early to predict where these will lie at the end of the 2020 policy year as the pandemic continues to unfold.
“What does this mean for renewals? No doubt, there will be a general increase to negotiate along with potential increases in deductibles. To what level will become more apparent as the year progresses,” Gallagher concluded.
“Clearly, we find ourselves in turbulent times and so it has never been more important for Members to engage the support of a specialist broker, who can help them achieve the best outcome possible at renewal.”
