Advertise
Resources
Member, Beacon International Group, Ltd.
Protection and indemnity clubs should only seek single-digit rate increases from shipowners during the next renewal, despite unfavorable conditions in recent years, according to broker Aon Corp.
In its “P&I Mid-Term Review” released Thursday, Aon officials said P&I clubs need to improve underwriting discipline, rely less on investment income and push rate increases for specific accounts rather than for all shipowners.
The broker said clubs should keep general rates flat to 7.5% higher at 2010 renewals. The International Group of P&I Clubs sought an average general rate increase of 16.5% this year and 16.2% in 2008.
Of the 13 clubs in the International Group, Aon said seven this year have made unbudgeted supplementary calls, in which clubs ask for additional premiums for previous policy years that remain open due to the long-tail nature of liability insurance. The clubs were hit hard by stock market losses in 2008, Aon said, noting that the portfolios of many clubs were overexposed to equities and their subsequent move to cash and bonds was “too little too late.”
Two unfavorable claims years have added to clubs’ problems. 2006 was the worst year on record for pool claims—claims above $7 million that are paid from a pool of all 13 P&I clubs—and 2007 was the second-worst year. But Aon said those results were not driven by a particular trend, and high-value claims have dropped considerably in 2008 and 2009 so far. A drop in shipping activity because of the global economic downturn may further reduce claims volatility and should prompt more stable premiums, Aon said.
It is inexcusable that clubs have continued “to run underwriting deficits, while the comforting safety net of investment income had been rudely cut away,” Stephen Hawke, head of Aon’s marine liability team in London, said in a statement.