In broker Gallagher’s Marine P&I Market Update October 2020, ahead of the imminent renewal period, the company said that, despite the predicted Club increases, it was currently faced with travel restrictions and disruption, meaning that its regular client renewal meetings might be restricted, at least for the time being. However, it added that it had the capabilities to hold virtual meetings whilst keeping clients informed on all its marine updates via email, web and LinkedIn. “Despite the several global setbacks endured this year, coupled with a potentially unsteady winter, we feel fully prepared to exercise a comprehensive P&I renewal over the ensuing months”, Gallagher said.
Gallagher said that its annual review report in P&I was “well underway” and it aimed to distribute this in mid-October.
“Having seen the financial results, it is clear that underwriting performance is deteriorating, whilst cash reserves continue to rise”, said Gallagher, adding that “this market environment has been apparent for some years and we highlighted this problem at the time it became apparent, several years back”
Deciding on the solution was a different matter.
Gallagher said that a decisive time was approaching, especially considering the fact that S&P was becoming more concerned at combined ratios.
“Following our conversations during the summer, we hear much talk about double digit increases”, Gallagher said, adding that it was also possible that some might wish to buck this trend “as a demonstration of overall resilience, for competitive gain, or simply to draw headlines”.
Gallagher said that its priority was ensuring that its clients were treated fairly, resisting any unnecessary changes and increases to forthcoming renewals. “Additionally, we will request further cashback for loyal members on an individual basis, as a reward for their loyalty in what has become a ‘full on’ commercial and competitive environment”, the broker said.
Further evidence of this was provided with premium ratings being offered by Clubs for any new acquisitions. Gallagher said that, while this was good news for those in expansion mode looking to lock in competitive rates, what did it mean for “those stable members who have contributed to and therefore built up the financial platform which allows the Clubs to do so?”
Gallagher said it believed that this disparity raised a concern on the holistic underwriting criteria and management drivers of mutual associations.
The P&I system remained strong and unique, as had been evidenced by the recent case off Mauritius, where loss estimates that could arise to $1bn had hit the headlines. “On this basis, under the Pooling system, $90m will be shared amongst the Clubs”, said Gallagher, further observing that “perhaps the answer is for Clubs to underwrite to 100% combined ratios and make underwriters more accountable, with all Clubs to disclose their solvency comfort figures agreed between the managers and Directors?”
Any increase above such a figure could then be returned to members without question.
Gallagher said that, for this to work, “we would need full disclosure and transparency from all Clubs, stating these figures”.