P&I Clubs to push for rate despite low claims year: Lockton

Lockton thinks P&I Clubs will push for premium increases at renewal even though they have faced low claims this year and predicts that downgrades could continue amid falling investment returns, despite the broker feeling that ratings agencies may be jumping the gun. In its P&I market review, Lockton explains there has only been one confirmed pool claim and two preliminary notices in the 2022/2023 policy year so far, which marks a big improvement over the previous couple of years. However, Lockton says some P&I Clubs have chosen to treat the current policy year as an anomaly and will use this argument to still push for premium increases. Several of the leading P&I clubs have already said they will increases rates by more than 10%. “Whilst members’ budgets remain stressed, club solvency ratios will generally require a continuation of the rate increases seen during recent years of poor claims performance,” said Lockton’s head of marine Alistair Rivers. But he added that there is potential for premium returns if the current low claims trend continues, if inflation reduces and P&I clubs are able to recover from the investment losses incurred this year. Lockton’s reviews stresses that the P&I clubs have received much lower investment returns compared to previous years, reflecting the turbulent and volatile state of the global economy, geopolitics and indirect factors such as the drive towards clean energy. It predicts rating downgrades may well continue among the International Group of P&I Clubs this year if investment returns are the driving factor rather than overall solvency position. Rivers said S&P’s recent “surprise” downgrade of both the West and Swedish Club have caused “confusion” because their premium income has increased from the 2021/2022 policy year, the tonnage at both clubs has decreased and their reported investment losses for this financial year are only on paper. Rivers said this suggests these “downgrades may be premature”. “Whilst we do not have all the information that the regulators/rating agencies have when making the decision to downgrade, one cannot help but question the rationale, especially given the positive effects that the premium increases and 2022/2023 claims performance had had on the Clubs’ solvency capital ratios,” he added. Last year, nine of the 13 International Group of P&I Clubs received a negative outlook from ratings agency S&P. That was largely due to investment uncertainty, record low premiums and a deteriorating claims performance at the time. S&P downgraded its outlook on the London Club to negative from stable this week because of weak investment results and adverse prior year underwriting developments. Lockton also says in its review that if consolidation continues among P&C Clubs, it could create a two-tiered system of large, merged firms and then those that favoured independence and a minority share of the market. North P&I is set to merge with Standard Club to create mega firm North Standard in February next year.

P&I Clubs to push for rate despite low claims year: Lockton

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