A fixed premium protection and indemnity association has been formed by insurers MS Amlin and Hydor to represent the interests of commercial marine P&I insurers.

Hydor energy and marine underwriter Liv Irene Loland has taken up the position of the chair of the newly formed Association of Commercial P&I Insurers (ACPII).

While mutual P&I insurers — which provide insurance to over 90% of the world’s ships — are represented by the International Group of P&I Clubs, purely commercial fixed premium P&I insurers do not have their own association.

Loland said that although there are only two founding members, it was important to progress long-running industry discussions and get the initiative off the ground, and then expand the membership.

She said that membership of ACPII will be limited to quality insurers with over $10m annual premium.

Potential members include heavyweights in the fixed premium market such as industry leader British Marine, Korea P&I Club and China P&I.

Loland said that many fixed premium insurers are frustrated that ship financiers, flag states and other maritime bodies often insist on insurance from one of the International Group’s 13 members — without recognising that there are alternatives in the commercial markets.

She said the ACPII could play a role in promoting commercial P&I insurance as an alternative to mutual P&I.

“This association has been formed to create a single voice towards the industry, particularly towards governmental bodies, flag states and banks, to positively influence these organisations on matters related to P&I insurance,” she said.

“The mutual clubs have for a long time been represented with a strong voice in all the maritime organisations. It is time that the independent fixed quality providers unite, and make sure that our voices our heard in the same forums and corridors, and that we can contribute in the discussion related to our industry,” she added.

The association could eventually offer fixed premium insurers the chance to contribute to discussions at the International Maritime Organization (IMO).

A pooled reinsurance structure, similar to that offered by the International Group of P&I clubs, could come up for discussion at some time in the future.

Close competition

The mutual P&I market and commercial fixed premium P&I markets are fundamentally different.

The mutual market is focused on large size ocean-going merchant vessels, while the fixed premium market tends to work with smaller and more specialised ships.

Fixed premium rates are determined on a purely commercial basis, while mutual P&I rates are strongly influenced by the financial performance of the mutual club.

However, the fixed premium and mutual sectors have found themselves competing more closely over recent years, as mutual P&I clubs have expanded aggressively into the fixed premium market in an attempt to grow their revenue streams.

North P&I Club recently established Sunderland Marine as a dedicated fixed premium provider while the American Club has been developing its fixed premium business through Eagle Ocean Marine.

The most recent challenge to commercial marine P&I insurers so far has come from the mutual UK P&I Club which is underwriting business for a group of fixed premium insurers which have been acquired by Thomas Miller Specialty.