Inflation and uncertain geopolitical landscape drive cautious P&I renewals

By Michael Jones

Feb 18 - (The Insurer) - Inflationary pressures and continued geopolitical uncertainty have resulted in a cautious mutual protection and indemnity renewal this year, a number of senior marine market sources told The Insurer.

• Most P&I clubs levying/targeting general increases between 5.0% and 7.5%

• Inflation and geopolitical factors raise operational and claims costs

• Investment yields to offset technical losses for many clubs, said sources

Nine P&I clubs levied or targeted general increases of between 5.0% and 7.5% at the renewals, which complete on February 20. One club, Gard, set an “average” general increase of 4.0% for the renewal.

Although Shipowners and Skuld set no general increase, both said increases on an individual basis would be made if required.

On its 5.0% general increase, Swedish Club managing director Thomas Nordberg told The Insurer : “The increase addresses negative pressures such as inflation and geopolitical factors. It also ensures that premium levels are more reflective of the current risk landscape.”

Global inflationary pressures have caused growing attritional claims, while P&I clubs' operational costs have increased in response to the complicated geopolitical environment.

Changing trade patterns as a result of Houthi attacks in the Red Sea was one example cited by sources.

Traffic through the Red Sea dropped by more than half in 2024 and was accompanied by a commensurate rise in activity around the Cape of Good Hope. This route adds 10-14 days to a trip.

The question of premium adequacy also comes in the context of a difficult pool claims environment in 2024 following two benign pool years in 2022 and 2023.

Gallagher said pool claims are expected to exceed $650 million in the 2024/25 underwriting year. Two marine market sources in the build-up to this year’s renewals affirmed that estimation.

In a comment to this publication, Steamship Mutual said: “The impact of the unusually high level of pool claims will have an impact on our results but the financial impact will be modest as compared with the overall surplus that we will report at year-end.”

Many clubs are expected to look to investment yields to subside technical losses from the “unusual” claims environment, said one senior marine market source.

Gallagher’s $650 million-plus pool claims estimate also includes the impact of the MV Dali ’s collision with Baltimore’s Francis Scott Key Bridge in March 2024, which is limited to $100 million.

The Baltimore bridge incident is likely to be the P&I market’s largest ever loss, but the vast majority of this will be shouldered by the reinsurance market.

While not directly impacting the renewal, rate increases from the International Group’s general excess of loss reinsurance program are entirely passed on to members.

Given this year’s increases were significant , particularly for container ships, multiple senior P&I market sources expressed concerns on the increased insurance costs faced by shipowners in an already inflationary environment.

This publication reached out to all 12 P&I clubs for contributions. American Club, Britannia and NorthStandard declined to comment.