An ambitious plan to launch a new protection and indemnity club has been hit by Brexit-related uncertainty.
The prospect of the UK being outside the European Union has led to a decision that it would be better to base the new venture in the German city of Hamburg rather than London.
However, efforts to create the Bristol P&I Club are continuing, with promoter Hugh Bryant insistent that the project has been only delayed rather than abandoned.
TradeWinds reported on Bryant’s efforts to launch a mutual for large blue-water tonnage early last year, with the venture still a concept rather than reality.
The idea is to create a traditional shipowner-controlled P&I mutual that would compete with the International Group clubs, rather than be another participant in the already overcrowded fixed premium market.
A number of insurance brokers have identified a gap in the market for a non-group mutual able to offer P&I cover for large ocean-going ships since the Bermuda Supreme Court ordered that the South of England Club be wound up in 2011.
“There is a super marketing opportunity for larger vessels and all the feedback we are getting is positive,” Bryant told TradeWinds.
He said the project is making progress, with many of the shipowners he has spoken to attracted to the concept.
Investors nervous
But Bryant added that he has “been very frustrated, as there is definitely a market opening”.
Brexit has made potential members and investors nervous about being involved in the launch of a UK-based venture.
“We are hearing very supportive noises but people are not putting their hands in their pockets," Bryant said. “It has been a year of taking two paces forward and one and seven-eighths back. But we now have all the background work done and the toolkit in place.”
He said the new P&I club could be in business within three to four months of getting finance in place and regulatory approval.
“I hated seeing 20 February pass by," he said. "But a soft launch in the middle of the year where you don’t have to be part of the mad throng could be a good way forward.”
So, what is the interest and potential membership of the new club?
“It is really difficult to predict until you see applications coming through the inbox," he said. "It wouldn’t be realistic to say we have 100 ships lined up ready to go, but I know who I am going to be calling once we have approval.”
Bryant said he is “not trying to break up happy marriages” in the P&I world, but even very large shipowners have vessels they feel could be better insured outside the International Group.
“I’ve said why not try a few ships with us and see how we compare? Shipowners are competition minded and like that approach,” he said.
Bryant, who turned 67 this week, is hopeful that now the focus has moved to Hamburg it will be easier to find investment backing, although the main source of funds is likely to come from involved shipowners at the launch.
The concept is that the club would be mainly financed by loan capital from the issue of bonds to members, rather than external capital.
The bonds would carry an attractive rate of interest and be repaid from funds generated by the club over the first five years of its life.
One of the challenges of launching a new insurance venture is the risk that there could be big early claims before reserves have been built up, so securing initial capital and sound reinsurance is essential.
Bryant is reluctant to talk about how much launch capital will be needed, but noted that the days when you could set up a P&I club in Bermuda with capital of $250,000 are long gone.
An EU-domiciled P&I club would have to meet Solvency II capital requirements and investment in a management structure.
“We want to set up a respectable, well-found club, with a traditional mutual structure," he said.
"We don’t want to get involved in a chase to the bottom, but provide a sustainable alternative to the International Group. There is no point in seeking sudden cheap advantage and then going bust in a couple of years.”
Hamburg is already home to the Hanseatic fixed premium P&I scheme and was the base for the Trampfahrt P&I club and successor Antra, which crashed in 2003.
