Insurance broker Aon has warned that this policy year could end up being another expensive claims year for protection and indemnity insurers.
Last year was their most costly one in more than a decade, with the International Group of P&I Clubs notified of $478m in shared pool claims so far that exceed $10m.
According to Aon's casualty analysis in its latest P&I Bulletin, 2021 is already shaping up to be a challenging year.
The 20,388-teu Ever Given (built 2018) grounding in the Suez Canal has been the most high-profile claim and P&I liabilities could top $100m.
The 2,742-teu X Press Pearl (built 2020) fire off Sri Lanka has led to a $40m claim from the Sri Lankan government, but wreck-removal, pollution and salvage costs are expected to increase the bill further for its P&I insurer, London P&I Club.
Aon has also uncovered a series of offshore claims that it believes could hit P&I clubs in the pocket.
These include the capsizing of a Secor Marine liftboat — the 2,300-gt Seacor Power (built 2002) — off the coast of Louisiana, which claimed 13 lives. It is covered by Norwegian P&I club Skuld, which could be on the hook for wreck-removal and salvage claims.
Aon expects another costly claim from the 150,000-dwt tanker A Symphony (built 2001), which was hit by the 35,200-dwt multipurpose vessel Sea Justice (built 2005) while at anchor off Qingdao, China. The incident led to oil pollution.
Aon also mentions the sinking of the jack-up drilling rig Naga 7 off Malaysia, which requires a wreck-removal contract after owner Velesto Energy declared it a constructive total loss. The Naga 7 is entered with Skuld.
Finally, the sinking of the floating accommodation unit Papaa 305, which sank in a cyclone in the Arabian Sea claiming more than 70 lives in May, is another potentially large claim. The Papaa 305 is entered with Shipowners’ Club.
Aon said the signs are that P&I finances, and the International Group's reinsurance costs, will continue to be affected by high-cost claims.
“It is too early to predict how the 2021 year will develop. Still, all of these incidents point toward likely continued challenges for the clubs driven by large losses and further potential pressure on the group reinsurance,” Aon said.
Aon’s analysis of P&I clubs’ 2020 policy-year earnings reports indicates underwriting losses are on the rise. Aon’s figures suggest the clubs that have reported so far have an average combined ratio of 122%, compared with 117% in the previous year.
A combined ratio above 100% indicates a deficit.
Aon said the deteriorating financial performance of clubs added to the challenging claims picture, suggesting a further increase in P&I premiums at next February’s renewal and beyond.
“Whilst not wishing to talk up the market, undoubtedly, there is a strong chance we will see P&I rates continuing to rise over the coming years,” Aon said.
