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 American Club, Britannia and Gard to one of those questions. Over coming days IMN will be printing the responses of other P&I Clubs to this question.
Q: Do you consider the mutual P&I system has seen off the threat to its mainstream business that some thought might be presented by the growth of fixed premium P&I insurance capacity in recent years?
American Club said that, yes, for ocean-going, internationally-trading large vessels, the International Group system remained the most attractive option for the provision of P&I insurance, and had emphatically proved this point over the years.
However American said that there remained a place for fixed premium P&I amongst operators of smaller vessels in local and regional trades. This was particularly the case in certain parts of the world – generally low liability-risk areas – where a lower limit of cover and a fixed cost of insurance, unencumbered by the obligations of mutuality, remained a preferred option. The Club said that the success of its Eagle Ocean Marine facility in recent years “speaks eloquently to this assertion”.
Britannia Club said that fixed premium would remain a competitor to the mutual P&I system, although perhaps more focused on the small ships segment of the market. In the medium term, however, Britannia expected the mutual system to be more economical as there was no need to provide a profit/return on equity for capital providers. In addition, the mutual system allowed for greater flexibility on claims handling whilst setting the highest standards of service, which was difficult to replicate in a fixed premium facility.
Gard said that current excess capital in the insurance market meant that pricing was very competitive and poor shipping conditions meant that buyers were looking for the best possible prices. This combination, said Gard, meant that buyers would, of course, look at all possible solutions. Gard said that it was those choices that shaped the marketplace and its participants, and it was Gard’s job to make its mutual offering as robust as possible.