“Rate rectification” from Skuld for 2022/23 policy year

The P&I Club part of Norway-based marine insurer Skuld is to apply to members a general increase in all but name, amid what it sees as a threat to Group Clubs’ agency ratings.

Standard & Poor’s has put several clubs on negative watch, stating that this was not so much because of individual clubs’ loss records as the increasing burden of Pool Claims.

Skuld’s Board of Directors met in Copenhagen on November 4th to discuss the upcoming P&I renewal for the policy year starting February 20th 2022.

Skuld noted that it had “long since abandoned the concept of a general increase and stands firmly with the principal of rating based on individual performance”. However it said that, “due to continued under-performance of the mutual portfolio and growing concern from the rating agencies in relation to the overall performance of the mutual P&I market, the Board sees a need for rate rectification at this coming renewal”.

As Skuld observed, the mutual portfolio is its backbone. Its performance had been underpinned by a strong level of performance from Skuld’s commercial portfolio, and Skuld’s diversification strategy had been a success and an important contributor to the mutuality. However, the performance of the mutual portfolio had deteriorated to such an extent that it was resulting in capital erosion, Skuld said.

The Club revealed that mutual rate adjustments at recent renewals had not been sufficient to cater for a significant increase in severity for pool and large claims. In addition, the negative effects of general inflation and Covid-19, such as increased costs due to repatriation, quarantine, and substitution of crew, were not reflected in current mutual rates. Skuld said that “the overall levels of global investment volatility and outlook of more modest returns highlight the need for securing a more balanced underwriting result for the club”.

For these reasons, Skuld has decided on:

  • A minimum market adjustment of 10% for all mutual P&I and FDD tonnage regardless of performance
  • Additional individual adjustments for members with challenging records
  • Adjustment of any changes in the International Group reinsurance rates

Skuld said that commercial P&I renewals would be subject to individual performance adjustments, with an additional focus on increased large and attritional claims exposures and increased reinsurance costs.

The release call for Policy Year 2022/23 was set to 15%, while previous years remained unchanged.

The applicable release calls are:

  • 2019/20        7.5%
  • 2020/21        10%
  • 2021/22        15%
  • 2022/23        15%