Marine Protection & Indemnity
Small rate reductions possible for exemplary buyers
Insurers in the London Market currently show strong interest in underwriting good quality business even though negative macro-economic factors such as inflation and the potential for a recession suggest that premiums should increase. Insurers are torn between the need to keep underwriting discipline and the desire to grow their portfolios.
Notable claims
The Baltimore Bridge which collapsed on 26 March after being struck by container ship “Dali”, has the potential to become the largest claim in Marine Protection & Indemnity (P&I) history if the ship owner cannot enforce rights to limitation. Quantum possibly could be USD 3bn although there will be protracted legal and court activity lasting many years.
In addition, the collision between the Singapore-registered Hafnia Nile and the Ceres I took place on 19 July in the South China Sea causing a fire on both vessels. Hafnia is in discussion with the Maritime & Port Authority of Singapore (MPA) on a safe location to transfer Hafnia Nile’s cargo, and towage plans for repairs to be approved by MPA. Ceres is alleged to be part of dark fleet trading oil in/out of sanctioned countries. P&I insurance of Ceres I is unknown, and this is raising issues of recovery ability by “Hafnia Nile”.
Underwriting changes
Bart Mertens joins West of England (from Gard) as Chief Underwriting Officer.
The ongoing Baltimore Bridge legal issues continue but we do expect the group reinsurance programme to be affected by rises in the region of 15% at the 20 February 2025 renewal.
Outlook
Expected range in rate changes for the next 6 months for claims-free portfolios
P&I clubs are currently reporting positive combined ratios, strong investment returns and an increase in free reserves. As the Clubs are owned by their ship owner members there will be resistance to premium increases. Indeed, we can expect capital returns/dividends paid out by some Clubs.
The ongoing Baltimore Bridge legal issues continue but we do expect the group reinsurance programme to be affected by rises in the region of 15% at the 20 February 2025 renewal. Any increases would be in addition to general increases, albeit typically the reinsurance share is a low/small proportion of the total annual mutual premium.
Expected capacity change in the next 6 months for claims-free portfolios
Insurers are torn between the need to keep underwriting discipline and the desire to grow their portfolios.
Expected coverage change in the next 6 months for claims-free portfolios
Insuring conditions for P&I Clubs are not subject to the same insurance market fluctuations as the non-mutual insurance market.
Insurers in the London Market currently show strong interest in underwriting good quality business even though negative macro-economic factors such as inflation and the potential for a recession suggest that premiums should increase.
Emerging risks
Dark fleets are a big concern for the shipping industry in general and P&I insurers more specifically. Dark fleets threaten the environment, maritime safety, and the regulatory integrity of global trade.
Another source of potential risk for fleet owners is the European Union’s Emissions Trading System (EU ETS), which puts a price on climate change-inducing CO2 emissions, is pressuring fleet owners to upgrade ships and implement potentially insufficiently tested technologies, creating considerable financial uncertainty.
Furthermore, ship owners currently operate in a geopolitically and economically very volatile environment.
Renewal recommendations
We do not expect any P&I insurance increases for clients with claims low records for the past five years whilst clients with exemplary records could even expect small reductions. We do not recommend clients to change the market (Club) unless service levels are unsatisfactory.
For further information, please visit the Lockton Specialty page, or contact:
Stephen Hawke
Managing Director
E. stephen.hawke@locktonplferrari.com