Paul Jennings, the chairman of the International Group of P&I Clubs, admits that this policy year could turn out to be “one of the most expensive pool claims years on record” — but he is quick to put it into perspective.
While pool claims — those exceeding $10m that are shared between the International Group's 13 members — have been costly, Jennings said they have been few in number.
“It's interesting that at the halfway point there were only 10 pool claims over the $10m limit and they represent only a tiny amount of the 60,000 ships covered,” he said.
This story is part of a forthcoming special report on the protection and indemnity sector. Stay tuned for the full report in our weekly edition on 22 January.
But several pooled claims are threatening to eat into the International Group’s reinsurance cover, which kicks in on claims of more than $100m.
The general reinsurance market is hardening in response to general Covid-19 claims and the International Group is facing the prospect of a hike in its collective reinsurance bill, which makes up a sizeable chunk of a shipowner’s P&I premium.
However, chief executive Nick Shaw said the International Group’s decision to fix a two-year reinsurance deal means there will be no immediate change in reinsurance costs at the renewal in February.
He still hopes that this year’s pool claims might not be as bad as they threaten and that the next policy year may prove better.
The International Group's claims pool system has been reformed to reflect the recent high cost of containership casualties.
Boxships have been split off into their own sector so that other ship types are not impacted by their high claims costs.
The International Group is also lobbying the International Maritime Organization’s legal committee to develop a unified interpretation of a shipowner’s right to limit liability.
“It’s about providing reinsurers with certainty and the principle that the limitation of liability will be upheld except in exceptional circumstances,” Shaw said.
The International Group has been keen to get across the message that the pool claims system is not just about protecting shipowners and their insurers but national states and the victims of ship casualties.
Jennings cited the “vast resources” of casualty expertise available in the International Group when incidents happen. He said the group attempts to resolve casualty situations effectively and is not simply “trying to do it at the cheapest possible cost".
Shaw said the group's claims pool system is central to the industry’s sustainability.
“A robust insurance and reinsurance product will allow shipowners to trade around the world and help restore the marine environment and compensate the victims of marine incidents,” he said.
