The 150-year-old system of mutual protection and indemnity insurance is facing challenges from blockchain, cut-throat competition and financial pressures, according to a specialist P&I conference held in Piraeus.
The future of the industry was the headline topic at the annual International P&I Conference held at the Piraeus Marine Club last week.
And it was the advances in blockchain technology that were raised as a potentially existential threat to the current system.
Bjornar Andresen, chief underwriting officer at Gard — which works closely with Maersk that is developing a blockchain system through its captive insurance company — explained the technology comes with many advantages.
“It is based on full transparency and facts that can never be changed or altered. It is an important instrument for retail brokers to do better jobs for less money, and all the paper work disappears,” he said.
But he added the Maersk blockchain system is being developed for the hull and machinery market rather than P&I, and that ledger technology is unlikely to be applied to P&I under the current IGA system.
Yet, embracing digital data driven technology to improve the efficiency and accuracy of underwriting was noted as a key factor that will effect the future success of P&I clubs.
The Standard Club regional claims director Philip Stephenson said: “How each club decides to embrace technology will be the biggest differentiater in the next 10 years.”
Gard’s Andresen added there had been distinct differences emerging between clubs over the past decade in the way in which they approach risk.
“One thing that has been changing since 2010 is the underlying differences between clubs. We have an overlying umbrella [the IGA], which we all benefit from, but under that the differences between clubs are becoming more distinct on how much risk do you take.
"Some take more insurance risk and others more capacity risk, some have gone more into bulkers and others tankers, these are completely different markets.”
Competition between P&I clubs, he said, is even more “fierce” than the hull and machinery market, which has the reputation of being one of the most oversupplied markets in the insurance industry.
This heightened competition is coming at a time when the potential casualty claims costs are also rising rapidly for insurers.
The Standard Club's Stephenson pointed out that a catastrophic collision between two 20,000-teu containerships could land the International Group with a potential claim in excess of $4bn.
Risk exposure
Rising competition against a backdrop of increasing risk exposure suggests there will be more pressure for consolidation among clubs.
But Joe Hughes, chief executive of the American Club, one of the smaller P&I clubs in the International Group, suggested that the current structure of P&I insurance had shown remarkable resilience over its history and proven it can see off most of the challenges it has faced.
“The International Group is a tried and tested system that has shown it can rise to the challenge of these changes,” he said.
On the possibility of mergers he said “be careful what you wish for.” He said that shipowners’ needs required the diverse of range of clubs that are represented within the International Group. “There is virtue in having choice and diversity,” he said.
Chartworld Shipping chairman Lou Kollakis, who chaired the conference, suggested that it will be the reinsurance market’s appetite for covering the clubs with a higher risk profile that will determine which clubs survive.
“The reinsurers will decide how many clubs we have. If the reinsurers do not insure the smaller clubs then we will have fewer clubs,” he said.
The International P&I Conference is arranged by Maria Prevezanou head of P&I broker Evmar Marine Services and treasurer of Piraeus Marine Club.
