Shipowners are steeling themselves for steep increases in the cost of P&I (protection & indemnity) insurance. The latest leading P&I mutual to send a signal of what is ahead is the North P&I Club.
Describing 2021 as “one of the most challenging years on record,” the club’s latest pre-renewal report, published today, calls for “robust action” in the form of increasing mutual P&I rates at the forthcoming renewal to confront the challenge of mounting claims liabilities.
Rising International Group (IG) pool claim costs and a surge in COVID-19 related claims have resulted in the club seeking a 15% increase on P&I premium rates for the 2022/23 policy year. Alongside the 15% general increase on P&I premiums for the coming policy year—of which 7.5% is directly attributable to the costs of meeting the club’s contribution to the escalating value of IG pool claims—North’s Board of Directors has decided to apply a 7.5% general premium rating increase to all FD&D (Freight, Demurrage and Defense) risks.
“The escalating loss trend for claims across the maritime industry has intensified over the last few years, driven by the rapid and substantial increases in the third-party casualty costs that impact all shipowners,” says North’s pre-renewal report. “Coupled with the unusually high levels of pool claims, distortions caused by the COVID-19 pandemic are producing significant spikes in crew claims across the marine liability insurance sector. Our crew claims experience is approximately double the cost of a typical year. Whilst the pandemic is also driving inflationary pressures and ancillary costs across a wide range of claims liabilities, our underlying experience is broadly commensurate with our expectations.
“International Group pool claims are at unprecedented levels. At the half-year point, the claims for the 2021 policy year were higher still than 2020—itself a record year with the six-month claims cost running at nearly double that of any year in the preceding twenty. This is the cost of the complex and well-publicized incidents which the P&I system uniquely manages on behalf of shipowners. There is a growing consensus across the industry that, after experiencing similarly elevated levels of claims over the last four years, we must plan for the likelihood that these costs will not reduce in the immediate future.”
“The directors are confident that announcing a transparent general rating increase remains the most appropriate mechanism to communicate the Club’s overall budgetary requirements for the next policy year and is aligned with North’s principles of promoting fair and equitable mutuality within the P&I sector,” said Thya Kathiravel, Chief Underwriting Officer. “Each individual member’s renewal will, of course, still be negotiated and agreed upon based on a detailed review and assessment of specific performance, claims records and risk exposure.”
Paul Jennings, North’s chief executive, commented that “The International Group of P&I Clubs offers a unique system that has successfully managed several extraordinarily complex and challenging maritime casualties throughout the decades. In the current demanding marine insurance environment, I am confident that shipowners will understand the value and necessity of continuing to support and invest in the long-term sustainability of the P&I system.”