The London P&I Club is to make an unbudgeted supplementary call on its shipowner members covering the last three policy years, in an attempt to strengthen its capital position.
Two lossmaking years caused by soft rates and high claims — including its own retained claims and those shared under the International Group of P&I Clubs pool —appear to have forced the London mutual's hand.
The current underwriting deficit for the 2019/2020 policy year stands at $38.5m, and $31.9m for the 2020/2021 policy year.
London P&I board chairman John Lyras said: "The main cause of the deficits were an increase in the cost of claims from our mutual members and from members of other clubs via the International Group pool, during a period when a soft market saw rates reduce to very low levels indeed."
Over the next year London P&I members will be asked to pay 35% of the 2019/2020 estimated total call premium, 30% of the 2020/2021 policy year premium, and 35% of the 2021/2022 premium.
Broker Gallagher estimated that the move would in effect raise around one year's additional premium for the London P&I.
The club's free reserves remain well within the regulatory solvency requirements, but have fallen to $153.6m.
But the claims situation is not improving. London P&I also provided cover for the 2,743-teu X-Press Pearl (built 2021), which became a constructive total loss off Sri Lanka and is now the subject of an expensive wreck removal.
The current policy year is also expected to be another costly one for International Group pool claims.
"The measures set out in this circular will secure the club’s capital strength. Looking ahead, the board is determined to embed that position and ensure resilience through the delivery of sustainable underwriting results," Bilbrough said in a note to members London P&I managers.
Chief executive Ian Gooch said that the mutual would also taking measures make its business more efficient and robust, including building up its non-mutual marine insurance lines.
"There is also scope for change and efficiencies in the way we work, how and where – lessons have also been learnt from the conditions imposed by the pandemic about how we operate the club, which we expect to feed into a more flexible and agile approach across the business," Gooch said.
