The West of England board has agreed to apply a 7.5% surcharge to all mutual protection and indemnity rates at the next policy renewal.

Further premium adjustments will be made to reflect individual members claims performance and risk profile.

The move comes as P&I clubs look for different ways to secure higher premium from members to address underwriting losses.

Steamship Mutual recently announced a traditional general increase where it has set a target to increase premium income. Britannia P&I has opted to raise rates purely through individual discussions with members.

And last year, the American Club applied a traditional supplementary call involving an additional call on members.

The West of England has opted instead to apply a fixed surcharge on its mutual members.

In common with all P&I clubs, the West of England has been hit by a massive increase in pooled insurance claims that it shares with the International Group of P&I Clubs members.

It is set to report an underwriting loss for the current policy year.

Chief executive Tom Bowsher said action is required to balance out underwriting performance in the longer term. The West of England’s free reserves are expected to fall this year although it retains a AAA capital rating.

In a note to members, Bowsher said the West of England’s board is concerned that “claims are increasing across the industry, with particular reference to the pool claims”.

He also expressed concerns that “premium levels have been steadily eroded to a point where they are no longer sustainable and the board’s long-term target of a combined ratio of 100% will not be met”.

For shipowners with non-mutual cover with the West of England, rates will be adjusted to reflect higher reinsurance costs.

In a more positive development, the West of England said that it had made an investment return of 2.9% , mounting to $19m at the half-way point of the current policy year, despite volatile investment markets. The mutual membership has also grown to 103m gt.

However, Bowsher said investment returns can no longer be relied on to support low premium levels.

“Investment return has subsidised this premium insufficiency in the last three years and the board noted that this level of investment return had been underpinned by a significant reduction in U.S. interest rates, which will not be repeatable,” he said.