NorthStandard will push for a 5% increase in premiums for protection and indemnity renewals in 2025 after recording an underwriting deficit due to a surge in major claims of more than $1m.
The second-largest of the 12 P&I clubs in the International Group said two conflicts and rerouting of vessels had led to an “abnormal” claims environment.
The club’s large claims of more than $1m have increased from five in the first six months of 2023 to 14 over the same period this year, it said in a pre-renewal report.
It is also expecting to submit five claims for the International Group’s pool, which shares the costs of casualties resulting in losses of $10m to $100m.
It reported two of the seven pool claims across the International Group in the first six months of the year.
“Whilst not unprecedented … it is nonetheless unusual and has pushed out the net combined ratio for the year,” said the club.
It expects the number of pool claims to return to an average of more than 20 a year.
The rising costs are projected to leave the club with a 110% combined ratio, despite a near 5% increase in premium income over the year. A combined ratio above 100% represents an underwriting loss.
Route changes
NorthStandard chair Cesare d’Amico said: “Changes in established navigational routes, two major international conflicts and other geopolitical challenges have created an abnormal claims environment, with incidents occurring in locations where the ships concerned would not normally trade.”
The conflicts in the Middle East and Ukraine have led to increased freight rates and resulted in ships and crews working harder.
Fewer demolitions and the increasing pace of newbuilding deliveries have put more pressure on crews, said the club, following a period of limited crew training during the Covid-19 pandemic, all of which contributed to the increased claims.
The club has had several large claims connected to the rerouting of vessels around the Cape of Good Hope to avoid Houthi attacks in the Red Sea.
Joint CEO Paul Jennings said the claims were linked to ships being exposed to harsher weather.
NorthStandard was the insurer for the 13,800-dwt bulker Ultra Galaxy (built 2008), which grounded in July off the coast of South Africa before breaking up in rough weather.
The club’s other source of income from investment returns is expected to grow by 6% during the year.
The increased investment returns will outweigh the underwriting losses and lead to a projected increase in free reserves from $803m to $832m. Free reserves are an indicator of financial strength.
The spike in claims follows unusually quiet years in 2022 and 2023 that put pressure on clubs to limit any premium rise.
Clubs have so far reported planned rises of between 4% and 6.5% for the year.
Clubs still to announce their plans for 2025 include American, the smallest member of the International Group, and Britannia, which provided cover for the 9,962-teu container ship Dali (built 2015) when it brought down a bridge in Baltimore, Maryland in March.
The Dali incident is likely to result in the most costly marine casualty.
A US court will decide if the shipowner and operator will limit their liability to about $43m, leaving other insurers and local authorities to pick up the rest of the bill.
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