Clubs see tough conditions but claim resilience

Broker JLT asked all the P&I Clubs a number of questions for part of their annual review. Here is the response of four of them to the question: “How are the shipping market conditions affecting the club?”. The first five clubs’ responses were given last Friday and the second group’s was printed yesterday.

10) Steamship Mutual: Freight markets are very stressed in some sectors, in particular bulkers, containers and the offshore sector. That means that pricing is all the more important for shipowners. We are seeing lay-ups in the offshore sector. Fortunately the payment profile of our premium remains good and the club has experienced little in the way of bad debts.

11) Swedish Club: Of course we all know that it is a tough market out there for shipowners, and this has driven a shift in our portfolio. As dry cargo owners are selling ships – and some even going out of business – we are replacing tonnage with tankers and container ships. The good news for shipowners is that pricing at this moment is competitive, reflecting benign pool claims for the IG.

12) UK P&I: The concerns an underwriter might have when a particular shipping sector faces depressed earnings include (a) credit control, (b) claims caused by reduced training or maintenance and (c) losses arising from unfamiliar cargoes or ports. The club’s bad debt is less than one tenth of one percent, but there is no room for complacency and the financial strain on the whole market is all too evident. Reduced earnings reduce ship utilisation, which in turn results in a lower incidence of claims. As a result, on the UK Club claim’s frequency has fallen steadily through the poor market, although average claims values continue to rise. So far, we have not experienced an increase in maintenance related claims, but we have seen a small number of large claims where the primary cause has been crew inexperience and unfamiliarity with the cargo.

13) West Of England: We recognize just how poor trading conditions are for members – this year’s renewal for example coincided with the Baltic Dry Index at record low levels and there have only been limited, if any, improvements across most sectors since. The most obvious effect was for the club to set a zero general increase at renewal and to keep deductible increases as modest as possible in order to help our members without unduly eroding the financial strength of the Club. Otherwise we’re fortunate that the impacts have so far been limited. Although some members may find premium payments a concern in these freight markets the club has not seen an increase in bad debt provision and we work hard with members to assist them with payment terms as much as possible. We’ve also not seen any noticeable spike in claims which might be expected from a market downturn, due for example to a lack of spend on vessel maintenance.