Non-pool versus pool reinsurance (part 4)

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 Swedish Club, UK P&I Club and West of England Club to one of those questions. Over coming days IMN will be printing the responses of P&I Clubs to other questions.

Q: There has been a proliferation of “non-pool” reinsurance purchasing in the commercial markets by the P&I clubs, originally to support the offshore industry and risks relating to oil production, but more lately also in response to the harsh contracting environment in which shipowners of many types now find themselves obliged to accept uneven contracts. Some argue that the pooling system would be a more efficient method of supporting the provision of the required extensions of normal P&I coverage, provided fair and appropriate premiums are charged. What is your position?

Swedish Club

Swedish Club said that the International Group members’ position was to be more inclusive than exclusive in terms of pooling. However, common denominators for sharing of risks on a mutual basis were to be determined. Unusual and bias clauses in uneven contracts were a reflection of the current state of shipping, i.e. oversupply of tonnage, the Club claimed. It said that the balance would be restored “once supply and demand find more even positions”.

UK Club

UK Club said that it supported a more inclusive approach to pooling provided that the pool payback mechanism was effective to ensure that fair and appropriate premiums were charged.

West Of England

West of England said that the pooling system had been at the heart of the extensive cover offered to shipowners by the clubs. It had been adjusted and amended over the years to take account of changing technology and shipping practices, as well as the evolution of conventions and other legal regimes. West of England said that the Group had always worked to be as inclusive as possible in the risks covered but said that this needed to be tempered by the requirement for there to be a degree of commonality of risk to maintain proper mutuality. West Of England said that it would be unwise to simply push every new risk on to the pool regardless. Nevertheless, said West of England ,”the clubs are aware of increasingly asymmetrical risks faced by many shipowners and are committed to keeping the pooling system under review to ensure that it remains as responsive as possible within the confines of mutuality.”