Norwegian marine insurer Gard recently announced it will return $36m to its members via discounted instalments split evenly between this policy year and next.

This generosity does not quite fit with the recent picture painted by protection and indemnity mutuals of a distressed industry that is running up huge underwriting losses and facing one of its most expensive claims years ever.

The International Group of P&I Clubs' pooled claims, which are shared between its 13 members, are running at about $400m, including individual club retention.

There are also four months of the policy year remaining, which are traditionally the most costly in terms of pool claims.

Gard may be the wealthiest club, but it is not immune to the industry’s problems.

Ratings agency Standard & Poor’s recently told Gard to improve its underwriting performance, which showed a $54m loss in the first six months of this policy year. S&P then adjusted the club’s outlook on its guilt edge A+ stable rating to "negative".

But Gard chief executive Rolf Thore Roppestad told TradeWinds that he is not ready to declare this year’s increase in claims as a long-term trend that requires emergency measures.

He said the club can still afford to help members struggling to cope with the coronavirus-hit shipping markets through the premium rebates.

“It is too early to say [whether] the pool situation is part of an increasing trend," he said. "There is a certain randomness to why the claims situation is as it is today.”

P&I market 'volatile'

“It shows that the P&I market is volatile and I am confident that the clubs will handle this period of higher claims.”

So far, Britannia is the only other P&I mutual to announce it is returning cash to members.

Roppestad believes the premium deficiency is part of a wider market imbalance that needs to be corrected gradually over the longer term.

He said Gard will be raising premiums gradually to address its underwriting losses but not shifting from its policy to run the business at a small loss, offset by income from other marine insurance streams.

It has not declared a general increase, but it will be seeking to raise premium through individual negotiations with members.

The 300,000-dwt Stellar Banner (built 2016) is one of a number of costly claims that are being shared between P&I clubs. Photo: Defesa Aerea e Naval

But brokers said Gard will find it easier to get through this crisis than many clubs.

Gard may have had an S&P outlook downgrade, but it is the only member of the International Group that has an A+ rating and is judged by higher standards.

More than $1.1bn in financial reserves

Gard has the most capital, with more than $1.1bn held in financial reserves. It also has a diverse business portfolio that is bringing in profits while the mutual P&I business goes through its current struggles.

One question is whether Gard will use its strength to grow by acquiring other P&I mutuals that are struggling.

However, Roppestad is clear that he does not want to act as a consolidator in the market.