The Swedish Club has announced it will avoid a general increase, meaning all but one of the 13 International Group of P&I Club members have said they will maintain premiums at the current level ahead of next year's renewals.
The club’s decision has left the West of England as the only mutual to raise its premium, despite widespread underwriting losses emerging across the International Group.
Premium income for all of the clubs has been shrinking as cheaply priced newbuildings replace higher-income older ships.
The mutuals have also seen a downturn in investment income amid a poor equity market, while claims for some clubs are also on the rise. North P&I Club announced a 110% combined ratio, and the Shipowners’ Club and UK P&I Club both reveal 106% combined ratios, while many others also saw underwriting fall into the red.
The West of England was one of the first to declare a general increase. Its decision to raise rates was expected to encourage others to follow but this has not been the case.
A combined $6bn in free reserves held by the International Group members is the main reason they have been able to put off a rate increase.
Current situation 'unworkable'
However, Swedish Club chief executive Lars Rhodin said the current situation, which he described as "unworkable", could not continue — and he hinted a rate rise could be on the way.
“In a number of shipping sectors, the market remains weak and we have a commitment to support members at this crucial point,” he said.
“At the same time, we must balance this with the fact that we have seen premium erosion for a number of years, to the extent there is a danger of the formula becoming unworkable. For the benefit of our members and the long-term future of the club, we need to ensure premiums remain in line with exposures. Claims inflation alone runs at a pace of 3%.”
Only two clubs — Britannia P&I and Steamship Mutual — felt their finances were strong enough to return cash to members.
Britannia P&I made a capital distribution of $10m, while Steamship Mutual carried out a 10% premium return to members for the 2018/2019 policy year.
Four clubs — Britannia P&I, North P&I Club, Standard Club and West of England — increased their deductibles.
Brokers polled by TradeWinds said that they expected market pressures would force many clubs to announce a general increase next year.
However, some brokers expressed the view that there are a few clubs such as Britannia P&I, Gard and the UK P&I Club that are in a strong enough financial position to continue to register underwriting losses and defer an increase for another year.
