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Nine 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 2020-21 policy year, ratings agency A.M. Best Co. Inc. said Thursday in a report.
The general increases range from between 2.5% and 7.5%, which is a “fairly modest” level given the underwriting loss reported in 2018-19, Best said in the report.
“A large majority of the clubs have announced general increases for the 2020 renewal. This change in approach comes after more of the clubs reported poor results for the year ending February 2019,” Best said.
Rate increases are being driven by the erosion of premiums to unsustainable levels, an increase in the cost of pool claims, and recent volatility in financial markets, Best said.
The International Group reported an underwriting deficit of $305 million for the 2018-19 financial year including premium discounts and based on the combined accounts of the 13 clubs, Best said.
Claims incurred increased by 8% in 2018-19 after remaining at relatively low levels for three years, Best said.
The increasing size of vessels, an upward trend in shipowners’ liability limits, and technology advances allowing deep-water wreck removal are among the factors driving up claims costs, according to the report.
Still, some clubs — such as 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 but adjusting premium rates and terms based on individual member information, Best said.
The American Steamship Owners Mutual Protection & Indemnity Association Inc., based in New York, is also holding off on rate increases but has warned that rates are likely to increase overall given rising claims trends and lower investment prospects, Best said.
The American Club has also announced supplementary, unbudgeted calls of 22.5% and 17.5% for policy years 2016 and 2017 due to “sizable underwriting losses,” Best said.
“Over the past few years, renewals have become increasingly informed by analysis of individual loss records and risk exposures, with deductibles used to control exposures,” Best said in the report.