2020 might well be the tipping point for shipping industry insurance costs, while market trends suggest that Clubs need to increase premiums, according to the latest report by international P&I insurance broker, P.L. Ferrari, a wholly owned subsidiary of re/insurance broker Lockton.
Over the last two years, global shipping industry insurance P&I claims have increased by almost 14%, or more than $350 million, says the report – which assesses the shipping sector’s 13 mutual P&I insurance Clubs over the last three financial years.
The report finds that premiums charged by the Clubs have actually reduced by almost 14%, or more than $370 million since 2016/2017 to $2.7 billion, while during the same period, claims have risen by 14.6% and costs incurred by the Clubs have jumped by more than 10%.
However, in spite of rising claims and higher costs incurred, Clubs have been able to continually offer favourable rates to members driven by record-levels of reserves, which has been achieved through a combination of improved investment returns and several years of claims, in both number and value, says the report.
“No P&I review over the last few years has failed to reference that premium and claims costs are not in balance and, therefore, all insurers are under increasing pressure to address this premium deficit.
“At some point over the past two years, most if not all Clubs have issued statements to the effect that the mutual market needed to increase premiums over the next one to five years to ensure financial stability. 2020 may be the year we see the resulting pressures materialising into concerted action,” said Alistair Rivers, Head of Marine & Transportation at Lockton Global.
According to the report, the current claims cycle has now reached a tipping point, with claims increasing in part as a result of the increased tonnage that the Clubs are covering, which jumped by 3.5% in 2018/2019 to $1.73 billion, versus the $1.68 billion in insured in 2017/2018. In 2019/2020, the report finds that Clubs have collectively insured $1.8 billion of tonnage, which points to further potential claims increases in 2020.
North P&I Club, the UK-based marine mutual liability re/insurer, announced recently that it is to set a general increase of 7.5% on P&I and FD&D premiums for the 2020/2021 policy year, in an effort to offset the suppression of rates and premium income.
