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 Japan Club, London Club, North of England P&I Club and Shipowners’ P&I Club 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?
Japan Club (which remains a purely mutual P&I operation, with no side fixed-premium business) said that fixed premium providers still threatened the business of IG clubs. Some owners chose fixed premium P&I insurance as they did not need the high limits of cover provided in the mutual system. “However, most owners continue to support the mutual P&I insurance system of providing cover”, Japan Club said.
London P&I Club said that its own experience was that the composition of the two markets had been and remained “quite distinct, with no material movement of business one way or another”. It said that the fixed premium products were generally of interest to owners (though not all owners) of smaller ships who had grown accustomed to such cover over many years.
North of England Club said that it was confident that its shareholders, the shipowner members, saw “the true value of the mutual P&I system”. The Club said that “the delivery of excellent levels of service from the IG P&I clubs, along with the benefits of the IG’s excess loss reinsurance programme and the pooling arrangement, means that shipowners can be confident that they are getting the very best insurance cover as well as value for money”.
North said that there was “an incredible level of competition amongst the IG clubs”, but that the IG also performed a very important role as a lobbying voice for the world’s shipowners on a variety of stages. North said that added to that was the certainty afforded by IG club-issued certification and the stability derived from the ready worldwide acceptance of IG club letters of undertaking, all of which allowed Member shipowners to trade their vessels in confidence.
Shipowners’ P&I Club said that it would be naive to think in the way suggested by JLT’s question, assering instead that “fixed commercial P&I solutions are here to stay.” Shipowners’ observed that for some owners it offered an alternative to a mutual product. The security offered was generally very strong and Shipowners’ said that it “could articulate for hours the benefits of mutuality vs. fixed” but that there would always remain an appetite for such cover for a certain sector of the market. The threat had not and would not go away, Shipowners’ said. Currently it was focused on the smaller vessel sector. “Consolidation must come at some point as rates in this sector are unsustainable. It is also possible that one or more of the fixed facilities might start to focus on larger tonnage”, the Club concluded.