Lars Rhodin took the stage for the final time to orchestrate proceedings at the Swedish Club’s annual general meeting in Gothenburg last week.
The managing director is a popular figure in the world of protection and indemnity, and the event was attended by nearly all the chief executives of the other 12 members of the International Group of P&I Clubs.
At the AGM, Rhodin, who departs at the end of the year, reported to members that the Swedish Club had its worst underwriting performance in more than two decades with a combined ratio of 129%.
It was one of the club’s most difficult years since 2008, when he took over as managing director, only to face a global financial crisis.
Now the problem is that claims costs are soaring, due in part to the emergence of what he calls social inflation — the increased costs imposed by governments.
“Social inflation is a way of describing the attitude of the legislator,” he said. “In the US, they are giving much higher awards than in the past. If there is an injury or a casualty, there is no tolerance.”
He points to examples of excessive claims from states, such as the Suez Canal Authority’s $900m claim after last year’s grounding of the 20,388-teu Ever Given (built 2019).
“The claim had no correlation to the loss, it is what they wanted to have,” he said.
“In the end, they settled at a much lower level, but that says something about the attitude.”
Rhodin said he does not want to make excuses. It would be easy to blame recent poor results at P&I clubs on “black swan” events, such as Covid-19 and the Ukraine crisis, or the recent run of costly claims.
“It would be very easy to put across a lot of reasons if it had not been for this or that, but the fact is it happened,” he added.
He believes insurance managers should “expect the unexpected” and “manage it” through risk selection, underwriting and loss prevention.
Fortunately for the Swedish Club, he said claims and underwriting performance have normalised this year and results are improving. Despite the troubles of the P&I world, the club has maintained its S&P Global Ratings A- rating, which it achieved during Rhodin’s tenure for the first time two years ago.
The club is looking to the future by opening an office in Singapore. The addition of the latest outpost is testimony to its growing presence in Asia, which now makes up around half of its entered P&I tonnage.
The Swedish Club is among one of the smaller members of the International Group, with 92m gt under P&I cover. But Rhodin feels no pressure to follow the example of the North P&I Club and the Standard Club, which are merging.
Rhodin admitted that size can bring benefits, but in terms of solving the fundamental problem of cheap premium in the P&I market, it does not help.
“If you have difficult market conditions, you don’t solve that by combining. You will still have the same issues. Some say it may be different in P&I, but I take the view it is not different,” he said.
He is not keen on the approach that diversified business lines should subsidise discounted P&I rates. The Swedish Club is itself a diversified insurer, with hull and machinery, P&I and other insurance lines. But he said the goal of diversification should not be to provide P&I at discount.
“We want to balance each class over time. There have been times when hull supported P&I and P&I has supported hull, but we see it as a second leg to stand on, but we don’t openly say we will run P&I with a deficit,” he said.
Now Rhodin is looking forward to spending time at his holiday home, trying to improve his tennis game, and helping out in his voluntary role as deputy chairman of Sweden’s Sea Rescue Society.
In retirement, he can think back and consider that overall, the club management has made the right calls at the right times.
This year, the Swedish Club celebrates its 150th anniversary, and Rhodin reflected: “If you have been around for 150 years, you have done something right.”