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 Skuld, Standard Club and Steamship Underwriting Association to one of those questions. Tomorrow IMN will be printing the responses of the remaining 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.
Marine insurer Skuld said that the IGA agreement played an important role in the P&I system, assisting members to maintain correct premium levels, and reducing volatility in the long run. However, Skuld said that the restraints of the IGA needed to be kept under constant review to ensure they reflected the realities of the current market, especially in view of other restraints on unsustainable underwriting, such as Solvency II and S&P ratings. Skuld said that,
with continued change in the shipping market and its ownership, the IGA had to adapt to future challenges and changes. It said that this was and would continue to be an ongoing discussion in the International Group, jointly with shipowners, the owners of the clubs. Skuld noted that the impact of the $10m retention had no direct impact on this discussion, since it merely followed the inflation of liabilities imposed under the marine legal system.
Standard said that “we agree there is a case to review the operation of the IGA.”
Steamship said that “the restrictive elements of the IGA need to be justified”. It said that increases in the retention level posed questions, adding that “we believe those questions need to be addressed and the Group will do so.”