Marine insurance broker Gallagher Specialty is anticipating lower-level protection and indemnity insurance rate increases, but shipowners may face the challenge of these rate hikes continuing for the next three years.

In its latest P&I review, Gallagher said that despite the improved underwriting performance of most mutual insurers it expected the market to remain firm.

The past two February renewals have seen double-digit increases for shipowners, with rises as high as 15%.

“Technical underwriting still needs to be monitored, which is why we believe that the market will continue to be firm, but predictable, in the next three years,” said Gallagher P&I practice leader Alex Vullo.

Gallagher said club managers are preparing for rises between 5% and 7.5% for the 2024 renewal in February.

The compound increase for shipowners over that region could range between 12.5% and 15%, with additional reinsurance increases also in prospect.

“The signs of a soft market are not quite there, however, the 2024 P&I renewal shouldn’t be a big headache for shipowners, and P&I renewals over the next three years will be more manageable,” he said.

P&I clubs still face certain financial challenges.

Although there have been significant rate increases over the three years, average rating levels have not yet reached the levels observed in 2016.

The technical underwriting of the clubs has also shown substantial improvement, approaching breakeven levels, but the seven-year average combined ratio Gallagher calculates is 118% — indicating a substantial deficit — compared with a 100% breakeven figure.

Gallagher predicts the larger clubs in the International Group of P&I Clubs should perform substantially better, offer the lowest rate increases and even return cash to member shipowners.

Capital redistribution

It said Gard, Steamship Mutual and Shipowners’ Club are likely to reward owners with a capital redistribution. The prediction was backed by Steamship Mutual, which announced it would return 7.5% of premium to renewing members.

As earlier reported by TradeWinds, Vullo has taken over the leadership of Gallagher’s P&I practice following the departure of Malcolm Godfrey.

Vullo said that Gallagher, which brokers around 10% of the global P&I business, is reviewing its approach.

“We have already started to re-look at the way we do things, with an immediate focus on producing better efficiencies, better market intelligence and modernisation using our historical data to benefit our clients and partners,” Vullo said.

“We ultimately want to create an environment that cultivates and attracts talent and also allows us to spend more quality time with our clients and partners, as well as the market.”