Analysts at AM Best expect that with the cost of pooled claims at a record high for the first half of the year, protection & Indemnity (P&I) clubs are likely to return another combined underwriting loss in 2021/22.
For the third consecutive year, the majority of clubs have announced general increases ahead of the February 20, 2022 P&I renewal date for ship-owners, amid deteriorating claims experience.
The segment is currently dominated by the 13 members of the International Group of P&I Clubs (International Group), which collectively insure approximately 90% of the world’s ocean- going tonnage.
In advance of the February 2022 renewal deadline, nine clubs have announced that they will apply a general increase to P&I premium rates.
The other four, Britannia Steam Ship Insurance Association Holdings (Britannia P&I), Assuranceforeningen SKULD (Skuld), London Steam-Ship Owners’ Mutual Insurance Association (The London P&I Club) and Gard P&I (Bermuda) (Gard), have also announced similar actions to improve premium rates, referred to as minimum target adjustments, target increases or internal targets.
AM Best considers the level of general increases modest, given the underwriting loss expected for 2021/22, and expects that further rate adjustments will be needed to reach price adequacy.
As mutual insurers operating for the benefit of their members, the 13 clubs must balance the need to maintain their financial stability with the economic constraints of their membership.
Certain segments of the shipping industry, such as containers and bulk carriers, have recently started to benefit from a spike in the price of transport.
This is likely to ease the renewal process for clubs this year, with members having more funds to cope with rate adjustments.
Over the past few years, renewals have become increasingly informed by analysis of individual loss records and risk exposures, with deductibles used to control exposures.
AM Best notes that member-specific pricing adjustments are also carried out by clubs applying general increases.
