SK Shipping’s protection and indemnity (P&I) insurance providers have declared the company “free business”, opening the door for potentially the biggest move of this year’s renewals.
TradeWinds understands the decision was made after the South Korean shipping company, working together with broker Aon, attempted to secure better rates from its existing providers Britannia, the Standard Club and Steamship Mutual.
However under the International Group Agreement the clubs have now decided to declare the SK Shipping account “free business” opening it up to free competition between the 13 members of the International Group of P&I clubs.
Under the International Group Agreement shipping companies can be declared free business if they come under new commercial management.
South Korean private equity firm Hahn & Co bought a 76% share in SK Shipping in October last year and has since been attempting to improve its balance sheet including tackling insurance costs.
The prospect of winning SK Shipping’s business will test the resolve of P&I clubs to remain firm on rates during this year’s renewals.
The company’s fleet of 70 modern vessels including VLCCs, chemical tankers, LNG and LPG carriers will be attractive business for the clubs and could tempt them into cutting already soft premiums to win the business.
However, International Group clubs have been claiming that they are running at an underwriting loss and need to make see premiums improve rather than slide.
Brokers said that all the indications so far at this year’s renewal is that the clubs have been true to their word and are refusing to discount to keep business to protect premium income for the coming year.
One broker said: “This is turning out to be a very hard renewal. It always happens when the clubs decide against a general increase they have to be tough in renewal talks to stop their income falling. With the claims scenario turning against them in the New Year they have become even more determined to protect premium income,” he said.
SK Shipping is not the only account that is one the move because of new management. TradeWinds earlier reported the BW group’s takeover of Hafnia Tankers has encouraged the company to seek improved terms for the P&I coverage of their combined product tanker fleet.The renewal of P&I insurance contracts are settled on February 20th each year.
