Broker JLT asked all the P&I Clubs a number of questions for part of their annual review. Here is the response of five of them to the question: “How are the shipping market conditions affecting the club?” The responses of the remaining eight clubs will be given over the next two days.
1) American Club’s Joe Hughes said that shipping market conditions were affecting the American Club – “as they no doubt are all others” – in several ways. First, through a continuing lack of premium pricing power, as the mutual system maintains its accommodation of shipowner financial stress through lower “baseline” rating, magnified by the related “churn effect”; secondly, through a comparatively high level of turnover in entries, as elevated levels of sales and disposals are matched by an increase in attachments; thirdly, and in positive fashion, through a lower frequency of claims, possibly due to an overall decline in ship utilization.
2) Britannia said that the long slump in shipping markets meant that all owners were under severe financial pressure and so were looking to save money wherever they could – including on their insurance costs. “This has resulted in clubs coming under intense pressure at renewal”, the club said. Britannia noted that, because it was a mutual it was important that it use its financial strength to “ease the pain” and ensure that costs are kept as low as possible.
3) Gard Bjornar Andresen of Gard said that, without doubt, it was a very difficult trading period for those in the maritime industries. It was unsurprising that shipowners and operators were looking carefully at their costs – and that there was considerable industry debate around the levels of premium required and the reserves held by clubs. “We constantly review these levels, and we work closely with our members to make sure that, together, we achieve the best outcome for them in both the long and short term”, he said.
4: Japan Club said that the number of vessels scrapped or sold abroad was increasing, as a result of which the club’s total tonnage, entered hit the wall.
On the other hand, claims had continued to be benign in terms of both number and amount. “In the circumstances, the association will support the members by providing high quality insurance services at a competitive and stable premium.”
5) London Steam-ship noted that there had been an uptick in the volume of scrapping and other disposals in the early part of the current year, although this had since reduced and was, to some degree, countered by second-hand purchases and entries. “The stressed markets inevitably put members under pressure, and the receivables position is something we monitor carefully.”