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The financial condition of most protection and indemnity clubs is improving, and their reserves have grown dramatically from the dangerous levels of six years ago, according to a recent survey by rating agency Standard & Poor's Corp.

Rowena Potter, a director of S&P's insurance ratings service in London and a co-author of the report, said this healthy balance in unallocated reserves means P&I clubs have far greater flexibility in how they manage their "calls"-the practice of asking members for extra money to meet claims.

Ms. Potter also noted in the report a shift among shipowners moving to different clubs, which could put pressure on clubs losing members to make supplementary calls.

"The slow drift of quality owners moving to new clubs is likely to gain momentum in 1997," she said. As a result, S&P predicts weakened clubs may seek additional funds, she said.

While such shifts will enable some clubs to develop relatively stronger financial reserves and stable results, others will become more dependent on members putting up additional money as claims arise and possibly having to make a greater number of supplementary calls to make up shortfalls.

S&P's 1997 Marine Mutual Report ranks 16 P&I clubs that are members of the International Group of P&I Clubs, which has a reinsurance pooling arrangement, and two mutuals that do not belong to the International Group. The report assesses the perceived likelihood of the clubs having to make unexpected supplementary call on members to meet claims.

The number of clubs receiving S&P's highest rating of three flags has grown to eight from six. Three flags indicates S&P's assessment of a lesser than average need to make supplementary calls compared with the other clubs.

Five of the clubs also rated three flags last year: The Britannia Steam Ship Insurance Assn. Ltd., Assuranceforeningen Gard, The Standard Steamship Owners P&I Assn. (Bermuda) Ltd., The Standard Steamship Owners P&I Assn. Ltd., and the U.K. Mutual Steam Ship Assurance Assn. (Bermuda) Ltd.

The remaining three have moved up from the two-flag category: The London Steam-Ship Owners' Mutual Ins. Assn. Ltd., The Shipowners' Mutual P&I Assn. (Luxembourg) and The Swedish Club.

Six clubs merited the two-flag ranking, indicating S&P considers the likelihood of their needing to make a supplementary call on members as average. Five of the clubs already had the two-flag ranking: British Marine Mutual Ins. Assn. Ltd., The Japan Ship Owners' Mutual P&I Assn., Assuranceforeningen Skuld, The Steamship Mutual Underwriting Assn. (Bermuda) Ltd., and The West of England Ship Owners Mutual Ins. Assn. (Luxembourg). The the sixth club, the North of England P&I Assn. Ltd., had its ranking lowered to two flags from three flags, largely because it paid $43.3 million in gross claims in 1996, up from $27.1 million in 1995, S&P said.

The four clubs receiving a one-flag ranking, indicating S&P's assessment of a greater than average need in comparison with the other clubs to have to make a supplementary call, were unchanged from a year earlier. They are: American Steamship Owners P&I Assn. Inc., Liverpool & London Steamship P&I Assn. Ltd., Newcastle Protection & Indemnity Assn. and Ocean Marine Mutual P&I Assn. Ltd.

Copies of the 1997 Marine Mutual Report are available from S&P for $750 or 495 pounds. Contact Bernard O'Sullivan, Associate Director, S&P Insurance Ratings, London; 171-826-3666.