At a brief glance, the 13 mutual members of the International Group of P&I Clubs would appear to show a group of marine insurers that all have remarkably similar business models.

But there is one club that stands out as uniquely different and, for the moment at least, appears to be dodging the difficulties that are blighting its rivals.

While many of the P&I mutuals are struggling with underwriting losses in the tens of millions of dollars, the Shipowners' Club kept its underwriting deficit to $900,000 in the first half of the year.

It has the lowest general increase in premium planned for the next renewal at just 5%. The figure includes the International Group's double-digit increases in reinsurance costs, which all the other clubs will charge on top of their general increases.

Is has also long done away with release calls — the charge shipowners usually have to pay to leave P&I clubs.

Chief executive Simon Swallow, who has been with the club since 1991, plays down the achievement — and is aware that, in the world of P&I, financial fortunes can change quickly.

Under the radar

"We always seem to go under the radar but we're quite happy, we trundle along doing our own thing," he said.

What makes the Shipowners' Club different is its focus on insuring small specialised ships on a mutual basis, which would normally be covered in the fixed premium market. It also has a significant fixed premium facility.

The Shipowners’ Club has more than 8,000 members, and covers 34,000 vessels. Despite the high numbers, the total size of the fleet amounts to 27.9m gt, making the average size of ships entered into the club about 820 gt. These are mostly bulkers, barges, tugboats, passenger ships and yachts.

Spotlight on the Shipowners' Club
  • Founded: 1855
  • Chairman: Philip Orme
  • Chief executive: Simon Swallow
  • Annual premium: $207m
  • Free reserves: $379.1m
  • Members: 8,182
  • Five years average combined ratio: 101.6%
Source: The Shipowners' Club

The focus on small ships begs the question of whether membership of the International Group is necessary.

Surely the Shipowners' Club is unlikely to have the sort of mega claim that requires the $3bn of cover available through the International Group reinsurance?

Swallow said it is wrong to assume small ships do not have big claims. The Shipowners' Club has already had an International Group pool claim this year.

"Our board sometimes ask, 'what are the advantages of us being a member of the International Group?'" he said. "So we go to the commercial market and do hypothetical research and look at the options of coming out of the group via a commercial reinsurance programme."

Best structure

So far the result has always been the same: it is better to stick with the International Group.

"We have some very high-profile members which are contractually required to show an International Group entry," he said. "And fundamentally, this is the best structure for sharing risks and the buying of collective reinsurance."

The large number of members means that the club does not have the regular contact with its shipowners that other clubs enjoy.

More than 90% of its business comes via brokers. Swallow candidly conceded that many shipowners buying its insurance might not even be aware that they are members of the Shipowners' Club.

"If you were to meet one and ask, 'who are you insured with for your P&I?', they might well say the name of their broker, Marsh or Gallagher [for example]," Swallow said.

No release calls

The Shipowners' Club also does not have release calls for its members. Almost all of the other International Group mutuals insist members pay a release charge — based on the club's previous year's claims — to join another club.

With more than 8,000 members, Swallow said it would simply be impractical to apply release calls.

"It would be an administrative nightmare," he said.

"If a member is unhappy, we don't want them to leave, but we don't want to tie them in either, even though it has worked against us a few times."

Swallow said, in his experience, most members move because of issues with service, so a lot of focus is placed on excelling in this area at the Shipowners' Club.

"Shipowners move, and they might move for cheaper premium, but fundamentally they move because they are not getting the service they want," he said.

"If they are dissatisfied with a way a claim is being handled that is when they will move, not because there is an increase of 5% or 10%. That is something that is clear, and something we are focused on."