Investment results more than offset sliding P&I underwriting returns in 2024/25

By Michael Jones

Feb 20 - (The Insurer) - Free reserves for the International Group of P&I Clubs are expected to reach record highs in 2024/25 after continued strong investment performance more than offset deteriorating underwriting returns, a number of protection and indemnity market commentators told The Insurer.

• Collective P&I underwriting loss between $250 million and $275 million, says Gallagher’s Vullo

• Record free reserves levels to be reported by clubs

• Investment performance of around $500 million to offset underwriting

Underwriting performance in 2024/25 deteriorated after claims exceeded expectations for most clubs, which two senior P&I market sources said was driven by an increase in the frequency of large claims and inflationary pressures.

“After a bad pool year, producing around $750 million worth of pool claims, we now await the 2025 club reporting season in the spring. We expect to see most of the clubs produce deficit figures on the combined ratios,” Gallagher Specialty's managing director for P&I Alex Vullo told The Insurer.

Vullo said some clubs will report 2024/25 combined ratios between 105% and 120%, while collective underwriting losses could range from $250 million to $275 million.

This difficult technical period was used by P&I clubs to push for rate increases close to the general increases laid out in October and November. Two senior P&I market sources said most clubs secured average premium increases of around half their general increase targets.

Rating agency AM Best, Gallagher’s Vullo and one senior P&I market source said that free reserves are still expected to reach record levels despite this deterioration in underwriting performance.

“Whilst it might be too early to tell, we are predicting around another $500 million investment returns – this would take the collective free reserve to $6.2 billion for the first time,” said Vullo.

AM Best said that good performance in the financial markets means the large majority of clubs will report significant investment income for 2024/25. This is expected to continue to contribute materially to clubs’ bottom lines.

Better-capitalised clubs have used member cash-backs to offset rate rises, a trend two marine market sources expected to continue into 2026.

“The adage of cash-rich and rate-poor continues – which hasn’t changed for 20 years – so nothing new there,” said Vullo.

During renewals there was little headline movement between clubs, which marine market sources said had continued a theme of clubs being much less aggressive in chasing new business in recent years.

A number of P&I clubs have published initial disclosures on the outcome of their February 20 renewal

Gard said 99.5% of its existing tonnage renewed on February 20, with gross tonnage increasing by 4.6% to 298 million.

UK P&I reported a small increase in market share, although its combined ratio for the 2024/25 period is expected to be above breakeven.