The first of the big 12 protection and indemnity clubs has announced an increase in premiums for its shipowner members next year, following a sharp rise in claims costs.
The 5% rise announced by Steamship Mutual, one of the financially stronger clubs, is in line with expectations for the February annual renewal as the insurance industry grapples with the impact of inflation and a larger number of bigger claims.
Steamship’s stance is likely to set the tone for other clubs, with plans expected in the coming weeks as they negotiate next year’s insurance costs with shipowners.
The move follows a rising number of pool claims in 2024 after two years of lower-than-expected casualties that have contributed to boosting the finances of P&I clubs across the board.
More than 10 pool claims of between $10m and $100m are expected this year, with costs shared between the 12 members of the International Group of P&I Clubs. Claims of up to $10m are shouldered by the individual clubs.
The costs have already outstripped claims in both 2023 and 2024 and signify a return to “more predictable territory”, according to Steamship chief executive Jonathan Andrews.
Pool claims this year included the loss of the 1,415-dwt Terranova (built 2002), covered by Steamship, which capsized in Manila Bay off the coast of the Philippines in July and led to a spill of industrial fuel oil that affected fishing communities and reached the shoreline. Most of the oil was recovered.
The main driver of the improving financial fortunes of P&I clubs has been strong investment results, with Steamship reporting a return of $77m since February.
The results backed up its best full-year investment returns for 20 years in the previous 12 months.
The club will now hand back $42m to members, taking the total to $156m over the past six years.
“It is hoped that these distributions will be a sustainable feature of our performance,” Steamship head of underwriting Gary Field said.
The rising premium is designed to ensure that claims can be covered in the 12 months from February 2025.
The 5% increase is a starting point, with some shipowners paying more or less depending on their claims record and the exposure of their fleets.
Andrews said that Steamship was in line to breakeven with its underwriting performance this year.
“If you take a six-year view, we had two years of pretty terrible losses that everyone was gloom and doom about — but that was immediately followed by two years with much less pool activity than we would expect on average,” he said.
“It’s the story of P&I being a very volatile area of the industry and the reason why the clubs exist in the first place.”
Andrews said that the club’s strong financial position meant that it had attracted increased tonnage, much of it from existing members who had added newly acquired vessels.
Owned tonnage was up 5.8% to 131.2m gt from February to September and was on track for double-digit growth by the end of the insurance year, he said.
In early October, insurance broker Aon said it expected the clubs to announce general increases of 5% to 7.5% during this round.
But it said that some of the financially weaker clubs would push for significantly higher increases during negotiations with members from outside of the best-performing shipping companies.
S&P Global Ratings said that the underwriting results of the clubs, which provide cover for about 87% of oceangoing shipping, were likely to worsen from the previous two years.
It said part-year results so far this year “do not give many reasons for optimism” with Skuld reporting $25.2m in claims, more than double the amount recorded for the same period last year.
“This uptick in claims is putting pressure on the sector’s performance and clouds the outlook for 2025,” it said.
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