Broker Marsh Specialty believes three consecutive years of rate increases among protection and indemnity clubs is set to end as the market reaches a “tipping point”.
According to Marsh’s figures, a reduction in claims and increased premium has helped the leading seven P&I clubs improve their collective average combined ratio from a loss-making 108.4% in financial 2021 to a profitable 98.2% in 2022.
Only Britannia and the UK P&I Club reported loss-making combined ratios, in the latest year.
With improved underwriting balance sheets across the International Group of P&I Clubs, it seems less likely the clubs will again call for rate increases.
“This year’s results suggest that the P&I market may soon reach a price ‘tipping point’, with clubs less likely to apply a general increase than has been the case of late,” Marsh said.
“Instead, there appears to be an increasing possibility that flat renewals will be more common for the 2024 renewal season, with the potential for price softening leading up to the 2025 renewal season.”
One factor that has been suggested might be of concern for the future financials of P&I clubs is a deterioration in International Group of P&I Clubs’ prior year pooled claims.
Mark Cracknell, head of P&I at Marsh, told TradeWinds that it should not concern the P&I clubs.
“I think the important thing to say about the deterioration of pool claims is that a lot of it will fall on the reinsurers not on the pool itself, so the effect is probably not as bad as people might think,” Cracknell said.
Marsh described the newly merged NorthStandard as a “new market force”.
Ranking as the industry’s second-largest mutual, Marsh said NorthStandard has a “strong platform to build on” and will start to “offer members the tangible benefits they expected to materialise from the merger”.
