Insurance broker Marsh took its issues with protection and indemnity clubs into an online debate, where it challenged managers from leading mutuals to ditch their tradition of general increases.
Marsh head of P&I Mark Cracknell — who has been critical of some long-standing P&I business practices — argued that the mutuals should only be assessing their members' rating based on individual claims performance and risk profile.
The broker argued that the clubs are far too rich to be hitting their members with an annual price hike.
Marsh outlined that the P&I clubs all have solvency levels well above statutory requirements, overly reserving for claims and have benefited from regular investment profits. It said a recent hike in expensive claims is simply in line with world fleet growth.
“Why do clubs have to hold so much capital?” Cracknell asked Britannia P&I’s chief underwriting officer Mike Hall.
Hall responded that the capital reserve levels are set by the shipowner boards, made up of successful shipping executives with a strong grasp of finances.
P&I club management is not pursuing a policy of hoarding members' cash, he insisted.
“We discuss the level of capital we hold with the board, and if we have too much, we give it back,” he said.
West of England chief executive Tom Bowsher said surplus capital had helped the club through a poor underwriting performance last year.
“We have target ranges for solvency, and we have that to smooth out volatility,” he said.
“We had a difficult year last year, but excess capital allowed us to get through that.”
Expensive claims
Gard group chief underwriting officer Bjornar Andresen said analysis shows that while expensive claims frequency remains steady, claims costs are rising.
“It is the increasing severity of costs that the clubs are paying for,” he said.
The P&I clubs argued that a general increase is the most transparent way for P&I clubs to set a target for increasing premium.
Steamship Mutual director Jonathan Andrews said that the general increase does not mean everyone will pay the same increase, but is a “starting point” for discussions based on individual member’s performance.
