Insurance broker Aon says it is unlikely that blanket double-digit general increases, which were imposed on protection and indemnity mutuals in February, will be repeated at next year’s renewal.
Aon said the strict rating approach at February’s renewal will go some way to helping P&I clubs rebuild their balance sheets after years of underwriting losses.
Figures for the policy year ending in February 2022 show that 11 of the 13 P&I mutuals have already improved their combined ratio, a key indicator of underwriting performance. Three clubs — London P&I Club, Gard and Shipowners’ Club — reported an underwriting profit.
The improvement is based on rate increases at the 2021 renewal.
February’s rate increases will further contribute to making P&I rating levels more sustainable, and reduce the need for another costly renewal for shipowners next year, Aon predicts.
Covid-19-related crew claims, which were a major cause of underwriting losses, also appear to have eased this year.
“With the increases and changes in terms that the clubs achieved at the 20 February 2022 renewal, it can certainly be argued that underwriting should be balancing going forward,” Aon said.
“A 106% combined ratio from the Standard Club along with a 12.5% general increase, for example, may mean there is no need for further increases next year.”
The improvement in underwriting figures comes amid a fall in investment income, which the clubs have come to rely on over recent years to reduce underwriting losses.
Aon’s analysis indicates that the largest and richest clubs have benefited in terms of business growth from the difficulties in the P&I market.
‘Haves and have-nots’
There were tonnage gains at the February renewal at Gard, Britannia, Steamship Mutual and the UK P&I Club. The planned merger of North P&I Club and the Standard Club will also create a new industry leader in terms of the entered fleet.
“The gap between the haves and have-nots in the International Group appears to be widening,” Aon said.
But it gave a word of warning that discounting to win tonnage may come back to bite those clubs that have expanded.
“It’s clear that those clubs in the best financial position have attracted the most new business. Much of that new business will be for good reasons, including stability and service,” it said.
“However, some of the business brought in might be for reasons and at prices that will cause problems in the future.”