P&I Clubs’ Financial Results - Midsummer Highlights

A preliminary analysis of the International Group Clubs’ results for the 2023-24 policy year based on details available to date for each of the 12 Clubs.

Renewal Overview

The February 20th 2024 mutual renewal date passed largely without drama and the outcomes were clearly satisfactory for a market that has faltered in recent years due to geo-political crises and a big spike in high value pool claims. We estimate that the clubs collectively increased their renewing premiums by approximately 3% and this positive result was endorsed by early release of year end figures.

These showed that most clubs had returned to a positive Combined Ratio or at the lower end of the benchmark set by their individual boards. A return to the average for Pool Claims combined with positive investment returns meant clubs were able to bolster free reserves and anticipate a less negative view from Standard & Poors (the market rating agency). In further good news the IG Reinsurance contract was renewed at a discount to the previous year, allowing for a reduction in the tariff charges for the different vessel categories.

Drivers for current year

And the drivers for 2024 are unchanged and will be dominated by geo-political uncertainty and volatility. The disruption to trade, the perils of war activity, the byzantine complications of Sanctions, the Dark Fleet: all will continue to put pressure on ship owners and consequently their clubs. These macro drivers will be further debated at the joint Lockton P.L. Ferrari / Bimco conference in Genoa on September 12th.

On a more granular level the effects of the Baltimore Bridge catastrophe will also be relevant. Whilst fault and liability will take years to establish and settled there is little doubt that the ultimate claims will run into the billions. From a club retained risk perspective, in this case the Britannia, the impact will be controllable with the Pool sharing mechanism coming into effect. From a reinsurance perspective it is too early to say, not least, as we hear reports of reinsurers provisionally reserving amounts between $100m. up to policy limits. For more on this subject please read Jana Byron’s excellent article to be found on our website.

As we have discussed in previous newsletters and seminars Environmental Regulation and the focus on carbon emissions and indeed carbon trade will continue to impact the industry.

On a general basis we would like to flag two items of note.

In May, China P&I Club celebrated its 40th Anniversary with Lockton Marine being the keynote speakers. We wonder if an application to the IG for full membership might be forthcoming in the near future and, if so, we suspect the sentiment may be positive.

We would also highlight the ongoing concern and focus on crew mental health. Awareness is important but being proactive is critical. Many clubs have excellent helplines and support for crew and these initiatives must be encouraged and further resourced. We draw attention to the sobering Gard Club 2024 Crew Claims Report (published July 3rd and available on their website) which sadly shows that last year 11% of crew deaths were due to suicide.

So, what about renewal 2025? With the above in mind and caveating the fact that it very early in the mutual year to make predictions we would expect, absent “black swan” events, next renewal to bring modest general increase demands in the 5% range and some clubs giving capital returns to renewing members. We will be reporting regularly on market trends in forthcoming reports during the year.