P&I market continues to face considerable challenges

Premium increases between 5% and 15% expected: Aon report

Protection and Indemnity (P&I) clubs are expected to raise premium rates in 2014, according to a new Aon report.

The Aon 2013 P&I Review report predicts P&I clubs’ general increases at the 2014 renewal of between 5% and 15%.

According to the report, much of this is due to a challenging underwriting environment, a need for clubs to demonstrate ongoing financial stability in the face of ever increasing scrutiny from rating agencies, and sustaining the stringent capital requirements imposed on them by financial regulators.

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The report also highlights that only modest investment returns ranging from 2.5% to 7.8% were achieved across the 13 International Group P&I clubs for 2012/2013.

With clubs’ combined ratios ranging from 95% to 123% for the 2012/2013 policy year, P&I club boards, especially those of clubs that feature at the higher end of this range, will find it rather more difficult to agree to provide any of the ‘concessions’ offered at the 2013 P&I renewal, when deciding on their club’s requirements for the 2014 P&I renewal, states an Aon release.

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“Our data demonstrates that the P&I market continues to face considerable challenges,” said Simon Schnorr, executive director and head of P&I, Aon Marine Practice, in a press release.

“A lack of profitable underwriting, coupled with adverse claim conditions and the stringent solvency requirements faced by P&I clubs, means that we expect pressures to raise premium rates at the 2014 P&I renewal. This may also extend to the renewal of the International Group reinsurance, However, following the sizable increase applied in 2013, we would hope mitigating any increase will be at the forefront of the of the International Group’s mind when negotiating with their reinsurance underwriters especially as the shipping community continue to face economic headwinds.”

To read the full report click here. 

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