Shipowners' rates increase by 15.55%, Aon calls for transparency in P&I insurance
The recent P&I insurance renewal saw shipowners’ rates increase by 15.55% and led to Clubs obtaining a record 96% of the originally advertised requirement of US$389m, according to Aon.
In its PLF P&I Post-Renewal Report 2008/9 Aon is calling for full transparency in how individual owners’ premiums are allocated.
According to Aon, P&I Clubs were looking to generate an additional US$389m to the expiring premium of US$2.4bn through a cross-market increase of 16.15%. They achieved a 13.58% rise or 84% of the requirement. In comparative terms, this marks an increase of achieved cash against original requirement of 54% and 67% for 2006 and 2007, respectively. Many shipowners opted for a higher deductible in return for a discounted renewal and factoring in the value of such term changes, the achieved result climbs to 15.55% and narrows the gap between advertised and achieved to 96%.
Stephen Hawke, executive director of Aon's marine team and chairman of Aon PLF, said: ‘If there was a Henry Moore style stoniness to the negotiations this was nothing as to the Edvard Munch like scream of the membership as shipowners gasped at the premium demands being made on even the most aesthetically pleasing of records.’
He added: ‘The US$560m of pool claims for 2006 gave a much greater justification to the rate increases and the current high pool claims environment is set to continue. As this will put further pressure on the premium base for next renewal, it may well be time for the International Group to address whether the current pooling system is sufficiently robust to cater for the modern trend of very high value claims and the demands of the future.’
‘This apparent imbalance in Clubs’ contributions to the pool in relation to claims history is having a distorting effect on the individual owner. So much of the premium that an owner now pays is actually earmarked, not for the owner’s own record or even for his Club’s own retention claims, but rather to pay for the costs of the pool and reinsurance.’
Aon said the 2008 renewal was further hampered by late renewal proposals by many clubs, compounded by the late release of the reinsurance tariffs announced at an overall increase of 10%. Since 1999, there has been a 167% increase for dirty tankers, a 178% increase for clean tankers, a 208% increase for dry cargo and a 543% for passenger vessels.
Hawke added: 'Announcing this essential component of the premium less than a month from renewal is just arrogant. The quoting of renewals ‘subject to any changes in reinsurance costs’ may be usual practice but that does not make it right. No other commercial sector would treat its buyers in this way: the member has an insurance budget and thus signing off renewal can only be done when all the premiums are known and internal authorisation gained.’
Aon concluded: ‘The renewal was also marked by an above average number of shipowners moving clubs, particularly amongst the high profile companies. The Britannia and Shipowners clubs appear to have taken the brunt of the defections, while the North of England, Gard and Standard made gains. Most clubs, however, preferred a broadly neutral tonnage position provided that the required increases were obtained on renewing tonnage.’