Are P&I Clubs unduly in thrall to rating agencies, JLT asks Clubs (part 3)

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 Shipowners P&I Club, Skuld, Standard and Steamship to one of those questions. On Monday IMN will be printing the responses of remaining P&I Clubs to this question.

Q: Are the P&I clubs unduly in thrall to the ratings agencies? Holding a capital base equivalent to the AAA level of target capital as measured by one well-known ratings agency may be necessary for relatively small (in the context of the general insurance markets), “mono line” insurers to achieve A ratings, but some may feel this is too high a price to pay, especially as membership of the IG has been the traditional measure of acceptability so far as port authorities, banks and charterers, etc are concerned.

Shipowners’ Club

Shipowners said that it was certainly not “in thrall” to rating agencies, noting that its credit rating was one important element in providing confidence to members and the wider market with regards to the Club’s financial strength and stability. “We believe an overall A rating is of great comfort to our members, especially when considered in the light of our appropriately struck solvency ratio”, Shipowners’ Club said.

Skuld

Skuld said it believed that maintaining an “A” rating was vital to attract quality shipowners. With the influx of third party investors in shipping, the rating had become even more important, the insurer said.

Standard

Standard Club said that in a more regulated, Solvency II world, it was finding that more members (and counterparties of the club) were requiring their insurance to be with “A” rated insurers.

Steamship

Steamship said it was a fact that some shipowners and their banks required an “A” rating for their insurers. Some brokers used an “A”-level rating as a screening filter for candidates to be shortlisted for presentation to some shipowners. “Whether or not an A rating is a strategic objective for an individual club is a matter for that club’s board”, Steamship said.