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Twelve of 13 mutual insurer marine protection and indemnity clubs that are part of the International Group of P&I Clubs will not increase rates at the upcoming renewal for shipowners for the 2019-20 policy year, ratings agency A.M. Best Co. Inc. said Monday in a report.
However, the lack of general increases from most of the clubs does not necessarily mean that rates will not rise for poorly performing business at the 2019 renewal, Best said.
“Renewals in the sector are driven increasingly by analysis of individual loss records and risk exposure, with more clubs using deductibles to control exposure,” Best said in the report.
Overall competition remains strong, exacerbated by a growing number of insurers offering fixed-premium protection and indemnity coverage, Best said.
Shipowners are also looking to reduce costs, amid ongoing challenging commercial conditions, Best said in the report.
“With free reserves across the International Group at a high level, bolstered by several years of positive earnings, balance sheets are strong and clubs are finding it difficult to justify general increases to members,” Best reported.
The Luxembourg-based West of England Ship Owners Mutual Insurance Association was the only club to announce a 5% general increase in rates for 2019, amid rising claims, Best said.
Overall, the competitive market plus loss volatility and inflationary pressures on the cost of claims means that clubs are struggling to achieve underwriting profitability, Best said.
With interest rates still low and equity markets volatile, clubs need to increase their focus on underwriting discipline to maintain financial strength, the report said.
Meanwhile, the International Group’s general excess of loss reinsurance contract for the 2019-20 policy year was renewed with improving terms that resulted in rate reductions for all vessel types, Best said. Most elements of the group’s reinsurance remain unchanged, it said.
The protection and indemnity sector is dominated by the members of the London-based International Group of P&I Clubs, which collectively insure about 90% of the world’s oceangoing tonnage.
Ship insurer U.K. P&I Club plans to set up a subsidiary in the Dutch port city of Rotterdam to maintain access to the European Union post Brexit, Reuters reported. Andrew Taylor, chief executive of U.K. P&I Club, said that Thomas Miller and Co. Ltd., the insurer's manager, is also setting up a subsidiary in Rotterdam. The EU accounts for about 25% of U.K. P&I Club's operations.