Marine insurance broker Aon is calling for full transparency from protection and indemnity insurers as they prepare to pass on an expected increase in their reinsurance costs to shipowners.
The International Group of P&I Clubs is currently renegotiating its two-year reinsurance contract, which covers claims over $100m and up to $3bn, in its pool claims system.
The negotiations are expected to result in a double-digit increase in reinsurance premium for the International Group.
The increase comes after likely calls on its reinsurance cover for the 20,388-teu Ever Given (built 2018), the 2,743-teu X-Press Pearl (built 2021), 203,000-dwt Wakashio (built 2007) and 7,700-ceu Golden Ray (built 2017).
Reinsurance costs make up a significant part of total P&I premium which will be set for shipowners at next February's policy renewal.
In its latest P&I report Aon said many shipowners are unclear about the way P&I reinsurance and claims costs are distributed.
Under the mutual system pool claims become part of a P&I clubs loss record, and impact on all its member's P&I rates.
"Pool costs make up a major part of a member’s loss record, with all clubs except the Shipowners Club showing them in the record in one form or another," Aon said.
"It is, therefore, key for members to understand how much of their premium is allocated to the pool and the percentage of the pool their club is liable for," it added.
"As the market hardens, we believe a greater understanding of how the clubs work and allocate costs is paramount to ensuring clients achieve a fair deal,” Aon added.
Aon cites the example of passenger ships. International reinsurance costs are also distributed by ship type, including passenger ships, oil tankers, bulk carriers and containerships.
Rates will differ among the ship types, depending on their risk profile and claims history.
Currently passenger ships pay the most per GT. But, during the pandemic, the passenger ship industry was out of action, while there have been no recent passenger ship incidents which required the International Group to call on its reinsurance cover.
"It should also be noted that no return was given by the International Group reinsurers during the 18 month pandemic and global shut down, a time where most cruise and passenger vessels were laid up with significantly reduced exposure above the pool.
"Therefore, whilst it seems unlikely any sector will be able to avoid some level of increase, we would expect those in the passenger sector to receive recognition of almost a decade of clean performance," Aon said.
