The UK P&I Club has decided to join the growing list of protection and indemnity insurers diversifying into fixed premium marine insurance.
But while most P&I mutual insurers have had to painstakingly build up a portfolio of fixed premium work, the UK Club has been gifted a huge book of business by its third-party manager Thomas Miller.
The UK Club will provide the capital to support managing general agent Thomas Miller Specialty's combined fixed premium businesses, which include Hanseatic Underwriters, Lodestar Marine, Osprey Underwriting Agency and Navigators.
Insurance broker Tysers estimates the Thomas Miller Specialty book of business generates around $43m in premium annually, making it the third-largest fixed premium provider after market leader British Marine, with $98m, and Shipowners' Club, with $87m.
Thomas Miller has been buying up fixed premium businesses over the last few years to consolidate the market.
In effect, the UK Club's $534m in free reserves will provide the capital to support the fixed premium businesses, while the mutual also hedges its own risk through the reinsurance markets.
The UK Club steps in to replace US insurance giant AIG, which had previously provided capital.
Exciting development
"It's an exciting development for the club and it's a new thing for us," said UK Club chief executive Andrew Taylor. "We've not been into this kind of fixed premium P&I before, and it is a large book of business that Thomas Miller Specialty has brought together over a number of years."
Explaining the deal, Taylor said: "Thomas Miller Specialty will work to bring in business through the club which will reinsure itself into the market."
Taylor said the idea now is to run each of the fixed premium insurers under their current brand names. A consolidated fixed premium company under the UK Club is not planned at this stage.
"At the moment, the business will be kept separate, as it's useful to have separate branding between the mutual and the fixed, there are no plans to bring them together," Taylor said.
Some have questioned whether Thomas Miller Specialty should be seeking to profit from its management relationship and the financial resources of the UK Club, which is a not-for-profit mutual.
Taylor said the deal had the full approval of the UK Club's shipowner board, which has backed it as a diversification strategy for the club. He said the move provides clear financial benefits for both sides.
"I hope it will appeal to the market and work well with both sides," he said. "It will not mean the club is more fixed premium than mutual, the mutual will still be the core of the club, but it gives the club a real springboard into the fixed premium market."
He said that the business environment around fixed premium has been more stable than the mutual P&I business over recent years.
"Fixed premium has been more stable and is generating profits, that is part of the attraction of the business," he said.
The UK Club is not alone in using its capital reserves to support fixed premium projects. The American Club has fixed premium outfit Eagle Ocean Marine, North P&I Club has Sunderland Marine, while London P&I Club, West of England and others are offering fixed premium lines backed by their own capital.
Growth areas
Taylor said the move fits with the UK Club's growth into areas that are traditionally fixed premium.
The club has also been actively growing its charterers P&I business, which is another fixed premium line, and is also working in specialised sectors that are more suited to fixed premium than mutual cover.
"We have not been entirely mutual business, we have had growth on the charterers side, and good growth too," Taylor said.
"We're doing more around offshore and energy and renewables and we're excited about how we're being received in the market around those as well.
"So it’s more than just fixed premium, there are other things going on, and of course, the club is very closely linked with Thomas Miller, which itself is diversified. "
