Ten of 13 mutual insurer marine protection and indemnity clubs that are part of the International Group of P&I Clubs will increase rates at the upcoming renewal for shipowners for the 2021-22 policy year, ratings agency A.M. Best Co. Inc. said Tuesday in a report.

The general increases, which range from 5% to 10%, are “modest” given the underwriting loss expected for 2020-21 and slightly above the previous year, Best said in the report.

General rate increases were attributed to the erosion of premiums to an unsustainable level, an increase in the cost of pool claims and financial market volatility, the report said.

However, as mutual insurers operating for the benefit of their members, the 13 clubs must balance the need to maintain their financial stability with the economic constraints of their membership, Best said.

“Due to the COVID-19 pandemic, commercial conditions for shipowners are even more challenging than in previous years, and with the current high level of free reserves across the International Group, a higher level of general premium increases may be difficult for clubs to justify to their members,” Best said in the report.

Three P&I clubs – Gard (P&I) Bermuda Ltd., U.K.-based The Britannia Steam Ship Insurance Association Ltd. and Norway-based Assuranceforeningen Skuld – are not applying a general increase this year in line with their usual practice, Best said.

Instead, premium rates and terms will be adjusted based on member-specific information.

The International Group reported an underwriting deficit of $400 million for the 2019-2020 financial year including premium discounts and based on the combined accounts of the 13 principal clubs, Best said. The combined ratio deteriorated to 114% from 110% the prior year.

Claims incurred rose by 7% in 2019-2020, following a 5% increase in the previous year and were above the five-year average, Best said.

The increasing size of vessels, an upward trend in shipowners’ liability limits and technological advances allowing deepwater wreck removal are among the factors driving up claims costs, according to the report.

For 2020-2021, Best expects the clubs to return another combined underwriting loss.

The cost of pooled claims was at a record high for the first half of the year, with additional claims in the second half, Best said.

“Year to date, pool claims costs appear to be higher than in 2019-2020, which was already a costly year for the pool,” Best said.

While the COVID-19 pandemic has not been a major driver of pool losses, clubs reported attritional passenger and crew claims related to the pandemic and three COVID-19-related claims for cruise vessels have hit the pool, the report said.

The pandemic may also have had an indirect impact as the shortage of experienced employees and higher levels of fatigue and stress, caused by a reduction in crew rotation and rest periods, “might have led to an increase in claims caused by crew errors,” Best said.

More insurance and risk management news on the coronavirus crisis here.