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FOR IMMEDIATE RELEASE
LONDON - FEBRUARY 18, 2019 03:09 PM (EST)
Pricing is under pressure ahead of the February 20, 2019 deadline for the marine protection and indemnity (P&I) renewal for ship-owners. Competition in the sector remains strong, exacerbated by a growing fixed-premium market, according to a new special report by AM Best.
The P&I sector is dominated by the members of the International Group of P&I Clubs (International Group), which collectively insure approximately 90% of the world’s ocean-going tonnage. Of the 13 clubs, 12 have announced that they will not apply a general increase to P&I premium rates for the 2019/20 policy year. The Best’s Special Report, titled “P&I Clubs’ Balance Sheets Strong but Performance Under Pressure Amid Strong Competition”, also notes that no general increases were announced for the 2017 and 2018 renewals.
Mathilde Jakobsen, director of analytics, said: “As mutual insurers operating for the benefit of their members, the 13 principal clubs must balance the need to maintain their financial stability with the economic constraints of their membership. With free reserves across the International Group at a high level, bolstered by several years of positive earnings, balance sheets are strong and clubs are finding it difficult to justify general increases to members.”
AM Best expects that the free reserves of some clubs will be down when they report year-end February 2019 results. Strong investment performance has bolstered free reserves in recent years, but equity markets have been volatile over the 2018/19 reporting period, increasing the likelihood that exposed clubs will report overall investment losses for the year. For 2018/19, AM Best expects the clubs to return a combined underwriting loss as competitive market conditions due to overcapacity have continued to negatively impact call income.
Catherine Thomas, senior director, analytics, said: “Although there may have been some erosion of capital during the 2018/19 policy year, due in part to financial market volatility, AM Best believes that balance sheet strength remains strong and that the majority of the clubs have robust capital buffers.”
To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=282928 .
AM Best is a global rating agency and information provider with a unique focus on the insurance industry.