Is there a case for the discontinuation of the IG Agreement? (part 2)

In its 2017 report on the P&I Clubs, broker Jardine Lloyd Thompson asked all of the clubs a list of questions. Here are the responses of Japan Club, London Club, North of England P&I Club and Shipowners’ P&I Club to one of those questions. Over coming days IMN will be printing the responses of other P&I Clubs to this question.

Q: Is there a case for the discontinuation of the International Group Agreement, the restriction on price competition between the IG clubs? It is argued by some that, in view of the significant increases in the attachment point of the pool IG itself, now $10m, the case for protecting the operation of the pooling system is outweighed by the need for pricing of mutual P&I insurance to reach a true market level. This, proponents argue, will expose inefficiencies and foster a market rationalisation that the failed merger between Britannia and UK Club might otherwise have heralded; to the benefit of P&I club members overall.

Japan Club

Japan Club noted that, at a recent meeting in Oslo, all the clubs reaffirmed the need for a set of rules such as the IGA to maintain the trust between them necessary for group pooling arrangements to operate. Japan Club said that price competition still existed even with the IGA and said that there were many benefits which shipowners gained from membership of an IG club, which had to be taken into account when considering pricing.

London Club

London Club noted that pooling delivered important benefits to shipowners; and the purpose and effect of the IGA was to support the efficient functioning of the pooling system. London Club said it believed that any discontinuation as referred to would be to the serious detriment of these arrangements and therefore did not see a case for it.

North of England

North of England said that all clubs recognized the need and benefit of the IGA or some set of rules to maintain the trust and co-operation between clubs, which was considered necessary for the operation of the Group pooling arrangements. It said that the many benefits that arose from membership of the IG had a concrete value to shipowners (including meeting shipowners’ certification requirements, providing guarantees to release ships from detention, collective reinsurance purchase, claims handling, loss prevention guidance and collective lobbying), all of which had to be taken into account when considering pricing. North said that it was a fallacy to suggest that the IGA eliminated price competition. On the contrary, it was designed as a very light restraint and members are generally adept at arranging their insurance affairs so as to ensure they generate competitive activity within the constraints of the IGA.”

Shipowners P&I Club

Shipowners’ Club said that there was no case for discontinuation of the IGA, although there always remained the need to ensure it was relevant and proportionate. While there remained an appetite internationally from shipowners, regulators, port authorities, flag states for maintaining the IG mutual P&I club structure then the IGA and pool remained “the glue that keeps it all together”, the Club said.