Shipowners’ P&I Club will not impose general increase for 2019

There will be no general increase in premiums for Club members at Shipowners’, but the Club warned that premiums were now at “levels that are unsustainable in the longer term”.

The Club had a Combined Ratio of 106.4% in H1 to June 30th, representing an underwriting deficit of $6.17m. This represented a deficit marginally higher than budget, with claims in the year at a higher level than 2016 and 2017 and development of those years being slightly worse than anticipated. The Board noted that the 2018 position had been impacted by two claims in excess of $5m. The Board also noted that the quantum of claims reported by Clubs to the International Group through the Pooling mechanism was likewise higher than at the same stage in 2017. This led the Club to anticipate an underwriting deficit for the year, reflecting the decision to utilize investment income generated in 2016 and 2017 to subsidise the Underwriting position and hence to support Shipowners’ Club Members.

The Club’s year to date return on investments were lower than expected, leading to a total loss for the Club of $20.1m for the six months to June 30th. Q3 saw some paring back of H1 losses, but markets had continued to be volatile and the Club did not anticipate a sufficient improvement to eradicate the losses incurred during the first half.

For 2019 the Club expected to continue to see growth in tonnage and vessel numbers; there had been encouraging organic growth coupled with new enquiries. Claims were broadly expected to be in line with 2018.

“We nevertheless expect a small underwriting deficit in the 2019 financial year” Shipowners’ said.

At its recently held meeting the Board agreed to utilize the Club’s strong capital position to subsidize the underwriting position, essentially returning capital to Members by providing insurance at below cost. Therefore no General Increase for 2019 would be applied. This would be inclusive of any adjustment for reinsurance premiums.

The Club noted that, although it had not imposed a general increase since 2014, there had been recent widespread market commentary, from other clubs, brokers, regulators and the Lloyd’s market, that premiums were now “at levels that are unsustainable in the longer term” Increases were likely to be required in the near future to restore underwriting balance.