Fixed premium is a source of competition and diversification in Group Clubs: AM Best

While the mutual marine market continued to face competition from commercial insurers in the fixed premium market, in several cases the clubs had also begun to offer their own fixed-premium service, usually for owners of smaller ships, reports AM Best in its just published analysis of the P&I market.

“Offering fixed-premium cover is just one example of the P&I Clubs diversifying into risks that cannot be pooled”, said AM Best. It noted that there were a range of business models within the 13 Group Clubs. “with some clubs like Gard P&I and The Swedish Club writing substantial Hull and Energy (H&E) books and others, such as West of England and japan Ship Owners’ Mutual P&I Association, taking a more cautious approach to diversification”.

AM Best noted that diversification could be beneficial to stability in the technical account. “In years when the P&I account performs poorly, good results from the H&E account can compensate, and vice versa”. The agency also observed that being able to offer a broader range of products could strengthen relations with brokers and clients, while warning that “expansion outside P&I business can put member capital at risk, if growth is not accompanied by a prudent approach to underwriting”.