P&I Premiums Expected to be Under Pressure at 2016 Renewals, According to Willis
December 22 2015 - 5:27AM
Despite P&I Clubs announcing that they are trying to achieve on
average 2% increases in premium, ship owners with good records can
look forward to reductions in premiums for protection and indemnity
(P&I) insurance at the 2016 renewals, according to Willis Group
Holdings (NYSE:WSH), the global risk advisory, re/insurance
broking, and human capital and benefits firm.
“The International Group (IG) market has
announced an average general increase of around 2%, with two or
three clubs at zero, the majority around 2.5% and one club at 5%,”
noted Willis in its P&I Review 2015/16 report. “It is almost
certain however that market forces will prevail and lower actual
renewal results will be widely achieved. In the continuing
challenging shipping market, we expect ship owning members to be
pressing for the lowest renewal proposals in the 2016
renewals.”
The report also highlighted a generally positive
picture for P&I Clubs, noting that the International Group [of
P&I Clubs] is in the healthiest state in its history. “Claims
remain volatile and investment markets fragile, but a relative
slowdown in number of major claims has allowed the IG market to
make its first overall underwriting surplus since 2010.” This,
noted the report, is off the back of a 4% increase in total market
premiums and a 3% reduction in net incurred claims.
Willis has historically advocated for a decrease
in release calls – a one-time charge incurred by ship owners who
wish to be released from a P&I Club. Willis therefore welcomed
the continued decrease in average level of release calls from 10%
of total annual premium in 2012 to around 6.8% of total annual
premium today. However, Willis also noted that there is still room
for improvement.
“It is pleasing to note that releases have again
improved during 2015. This follows the pattern over the previous 6
years and the hope is that this trend will continue,” the report
stated. “With a near doubling of the free reserves in the market
since the last period of wide-spread unbudgeted calls, the market
should now be in a stronger position. In such an environment, there
still seems room for improvement on a 6.8% market average release
call level.”
Ben Abraham, Head of Willis’s
Marine division, said: “We are seeing the P&I market picking up
with the first surplus since 2010/11 and nine out of 13 clubs
reporting an increase in underwriting results. Nevertheless, the
industry faces challenges: investment market returns have reduced
compared to the previous year (down 2.9% from 3.7%), and claims
remain volatile. The 2016 renewals will likely prove contentious as
general increases come under pressure from ship operators looking
to reduce costs in challenging freight markets whilst a number of
underwriters sit on healthy underwriting surpluses.”
He added: “The reduction in average levels of
release calls highlighted by the Review is also encouraging. Over
the past decade Willis has advocated for a decrease, questioning
whether some clubs view release calls more as a commercial penalty
rather than calculating a reasonable estimate of future exposure.
We are now seeing some traction in this space as average release
call levels have come down to a reasonable level, though there is
still some room for improvement, within certain clubs.”
About WillisWillis Group
Holdings plc, is a leading global risk advisory, re/insurance
broking and human capital and benefits firm. With roots dating to
1828, Willis operates today on every continent with more than
18,000 employees in over 400 offices. Willis offers its clients
superior expertise, teamwork, innovation and market-leading
products and professional services in risk management and transfer.
Our experts rank among the world's leading authorities on
analytics, modelling and mitigation strategies at the intersection
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Notes to Editors
- P&I insurance is liability insurance for ship operators,
primarily provided by P&I Clubs.
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